Tiny Ltd. - Regulatory Filings 2020

ISRACANN BIOSCIENCES INC.

(formerly Atlas Blockchain Group Inc.)

MANAGEMENT DISCUSSION AND ANALYSIS

For the Three and Six Month Periods Ended November 30, 2019

This Management Discussion and Analysis for Isracann Biosciences Inc. (formerly Atlas Blockchain Group Inc. hereinafter referred to “Isracann” or the “Company”) provides analysis of the Company’s condensed interim consolidated financial results for the three and six month periods ended November 30, 2019 and should be read in conjunction with the accompanying condensed interim consolidated financial statements and related notes for the three and six month periods ended November 30, 2019.

1.1 Date of Report

The following Management Discussion and Analysis (“MD&A”) focuses on significant factors that have affected Isracann Biosciences Inc. (formerly Atlas Blockchain Group Inc., herein after referred to as the “Company” or “Isracann” or the “Issuer”) performance and such factors that may affect its future performance. This MD&A should be read in conjunction with the Company’s condensed interim consolidated financial statements and related notes for the three and six month periods ended November 30, 2019 and the Company’s annual audited consolidated financial statements and related notes for the year ended May 31, 2019 which were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Unless otherwise noted, all currency amounts are in Canadian dollars. This MD&A is dated January 28, 2020.

Forward-Looking Information

Certain statements contained in this MD&A constitute forward-looking information and forward-looking statements (collectively, "forward-looking statements") pursuant to the applicable securities laws. All statements, other than statements of historical fact, contained in this MD&A are forward-looking statements, including, without limitation, statements regarding the future financial position, business strategy, proposed acquisitions, budgets, projected costs and plans and objectives of or involving the Company. The use of any of the words “anticipate”, “intend”, “continue”, “estimate”, “expect”, “may”, “will”, “plan”, “project”, “should”, “believe”, the negative of such terms and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forwardlooking statements. Examples of such statements include: (A) expectations regarding the Company’s ability to raise capital; (B) the intention to grow the business and operations of the Company; and (C) the use of available funds of the Company. 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. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the Company obtaining necessary financing; the economy generally; obtaining requisite licenses or governmental approvals to conduct business; the revenues from the Company’s business in the cannabis industry, if any revenues are obtained; consumer interest in the products of the Company; competition; and anticipated and unanticipated costs. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this MD&A. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the Issuer. Additional factors are noted under “Risk Factors” in this MD&A. The forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this MD&A are made as of the date of this MD&A and the Company does not undertake an obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

Management’s Responsibility for Financial Statements

The information provided in this MD&A, including the condensed interim consolidated financial statements, are the responsibility of management. In the preparation of these condensed interim consolidated financial statements, estimates are sometimes necessary to make a determination of the future values for certain assets or liabilities. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying condensed interim consolidated financial statements.

Management maintains a system of internal controls to provide reasonable assurance that the Company’s assets are safeguarded and to facilitate the preparation of relevant and timely information.

1.2 Overall Performance and Nature of the Business

Nature of Business

Effective October 7, 2019, the Company acquired Isracann Holdings Inc. and Cannisra Holdings Ltd. (the “Acquisition”) and completed a three old for one new share consolidation (the “Consolidation”), and changed its name to Isracann Biosciences Inc. On completion of the Acquisition the Company changed its business to focus on the production of medical cannabis in Israel and this Acquisition was approved by the Canadian Securities Exchange (“CSE”) under its policies as a fundamental change. The Company resumed trading on the CSE under the symbol IPOT on October 17, 2019 and under the symbol A491 on the Frankfurt Exchange on October 21, 2019. All figures herein are post-consolidation unless otherwise indicated

As at the date of this report, the Issuer has the following wholly-owned subsidiaries:

Name of Subsidiary	Jurisdiction of Incorporation	Shareholders and Interest held
Atlas Cloud Enterprises (2013) Ltd.	British Columbia	Isracann Biosciences Inc. (100%)
MKH Electric City Holdings, LLC	Washington	Isracann Biosciences Inc. (100%)
Isracann Holdings Inc.	British Columbia	Isracann Biosciences Inc. (100%)
Isracann Biosciences Capital Ltd.	Israel	Isracann Holdings Inc. (100%)
Isracann Development Ltd.	Israel	Isracann Biosciences Capital Ltd. (100%)
Isracann Agritech Ltd.	Israel	Isracann Biosciences Capital Ltd. (100%)
Isracann Administrative Services Ltd.	Israel	Isracann Biosciences Capital Ltd. (100%)
Cannisra Holdings Ltd.	Israel	Isracann Biosciences Inc. (99%)
Cannisra Crops Ltd.	Israel	Cannisra Holdings Ltd. (74%) Shlomo Nathan (26%)

Acquisition of Assets

On March 12, 2019, the Company entered into a Securities Exchange Agreement with Isracann Holdings Inc. (“Isracann Holdings”) which resulted in the acquisition of all the issued and outstanding shares of Isracann, a company incorporated in British Columbia, Canada. The transaction closed on October 7, 2019. Prior to closing the Company converted a $85,000 of principal under a convertible loan agreement, dated July 16, 2019 with Cannisra Holdings Ltd (“Cannisra”), which was converted into 99.9% ownership of the outstanding shares of Cannisra by the Company. Collectively, the acquisition of the shares of Isracann Holdings and Cannisra form the “Acquisition” as a combined transaction that was undertaken in substance to acquire the assets in Israel.

The Acquisition results in the Company having control of Cannisra and Isracann Holdings, including Isracann Holding’s subsidiaries Agritech Ltd., Isracann Development Ltd. and Isracann Administrative Services Ltd.

On January 27, 2019, Cannisra signed an agreement (the “Farm Agreement”) with a licensed farmer (the “Farmer”) in Nir, Israel to engage in greenhouse cannabis cultivation (the “Venture”). The Venture, Cannisra Crops Limited (“CCL”), is set up so that the Farmer holds a 26% ownership interest and Cannisra holds a 74% ownership interest. Pursuant to the Farm Agreement, Cannisra and the Farmer will mutually establish a cannabis cultivation operation.

Isracann Holdings and Cannisra do not meet the criteria of a business under IFRS 3 Business Combinations, and therefore the Company has accounted for the Acquisition as the acquisition of assets using IFRS guidance for asset acquisitions, under which identifiable assets acquired and liabilities assumed are measured at carrying amounts based on their relative fair values at the acquisition date, no goodwill is recognized, acquisitionrelated costs are capitalized, and deferred tax assets or liabilities arising from the assets acquired and liabilities assumed are not recognized as a result of the initial recognition exemption.

As consideration for all of common shares issued and outstanding of Isracann Holdings, the Company issued 46,680,000 common shares with an estimated fair value of $0.51 per share for a total amount of $23,806,800. The fair value of the shares issued was estimated based on the closing share price of the non-brokered private placement financing completed by the Company on September 30, 2019 at a post-consolidation price of $0.51 per share.

Included in 46,680,000 shares are 2,300,000 shares issued by Isracann Holdings to the eligible finders. As consideration for acquisition-related services, including legal costs and finder's fees, the Company paid $281,374 and issued 2,300,000 common shares with a fair value of $0.51, determined based on the fair value of the services received. The Company also has to issue 500,000 shares upon commencement of the construction of its proposed cannabis growth facility in Israel. The Company has not recognized the value of this share payment at October 7, 2019 or November 30, 2019 as it has not been made yet, and the timing of the issuance of these shares is a future event that cannot be reasonably determined yet.

As part of the Acquisition, the Company agreed to replace Isracann Holdings’ existing share-based payment awards, resulting in additional purchase consideration with an estimated fair value of $14,206,440, comprised of $13,046,040 in estimated fair value of 28,000,000 share purchase warrants and $1,160,400 in estimated fair value of 4,000,000 stock options. The average fair value of 4,000,000 Isracann Holdings stock options of $0.29 per option was determined using the Black-Scholes option pricing model with the following weighted average assumptions: a 1.58 year expected life; share price at the grant date of $0.51 (post share consolidation by Isracann Biosciences ); an exercise price of $0.51 (post share consolidation by Isracann Biosciences); 124% volatility; risk free interest rate of 1.45%; and a dividend yield of 0%. Volatility is calculated based on the changes in historical stock prices over the expected life of the options. The average fair value of 28,000,000 Isracann warrants of $0.47 was determined using the Black-Scholes option pricing model with the following weighted average assumptions: a 1.46 year expected life; share price at the grant date of $0.51 (post share consolidation by Isracann Biosciences); an exercise price of $0.05 (post share consolidation by Isracann Biosciences); 124% volatility; risk free interest rate of 1.45%; and a dividend yield of 0%. Volatility is calculated based on the changes in historical stock prices over the expected life of the warrants.

In May, April and August 2019, Isracann Biosciences entered into three bridge loan agreements with Isracann Holdings in the aggregate principal amount of $650,000. The loans were forgiven upon closing of the Acquisition and included in the total consideration paid by Isracann Biosciences.

Prior to closing the Company advanced $85,000 under a convertible loan agreement to Cannisra, which was converted into 99.9% ownership of the outstanding shares of Cannisra by the Company. Upon receipt of $85,000, Cannisra transferred this amount to the Farmer in order for the Farmer to pay for certain outstanding obligations for the permits. $85,000 paid to the Farmer was included in the total consideration paid by Isracann Biosciences.

As a result of the Acquisition, the Company obtained binding agreements over cannabis cultivation license rights in the form of preliminary breeding and cultivation license, design permits and related intangible assets. The Company allocated $39,157,233 to these assets upon completion of Acquisition. The Company is currently is the process of transferring of the cannabis license rights held by the Farmer to Cannisra Crops Ltd.

The following chart illustrates the intercorporate relationships that exist as of the date of the MD&A:

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Upon completion of Acquisition the following changes to the Officers and the Board of Directors occurred:

Charlie Kiser, CEO of Atlas Blockchain Group resigned and Darryl Jones (previously CEO of Isracann Holdings Ltd.) was appointed as a President and CEO of Isracann.

Yana Popova was re-appointed as a CFO, Corporate Secretary and Director Dr. Irit Arbel was appointed as an independent Director Sean Bromley was re-appointed as a Director Desmond Balakrishnan was appointed as a Director

Isracann Overview of Business

The principal business carried on by the Company, through its operating subsidiaries, will be medical cannabis cultivation to provide products to the Israeli medical cannabis market. The Company may consider exporting medical cannabis products to Germany when the Israeli government begin granting medical cannabis export permits, which the Israeli government has advised to occur in early 2020. There is no guarantee that the Israeli government shall begin issuing medical cannabis export permits on the timeline anticipated, or at all.

The Issuer intends to build four greenhouses (the “Isracann Facilities”). Phase I involves the build out of two Isracann Facilities that total 115,000 square feet. Phase II involves another two Isracann Facilities that total 115,000 square feet. Each of the Isracann Facilities is 57,500 square feet with an estimated annual production capacity of 5,750 kg of dried cannabis flower. The Isracann Facilities will be built to comply with the Israeli Medical Cannabis Good Agricultural Practices and Good Security Practices.

MKH Electric City Holdings LLC (“MKH”)

During the year ended May 31, 2018, the Company acquired all the issued and outstanding shares of MKH Electric City Holdings, LLC for USD$300,000 (CDN$388,440).

The Company has completed renovations of the facility to become a dedicated five-megawatt (5.0 MW) cryptocurrency mining operation. The Company is working with the Grant County Public Utility District which has undertaken an application prioritization process to manage the energization schedule. The Company has completed the application and is waiting to be informed of the scheduled date. As at the date of this report, the Company does not have a clear date of when the power will be provided to the facility.

While working on the facility renovation and waiting for electricity, the Company entered into a private colocated hosting arrangement with an industry partner and commenced operation of 1,000 ASIC S9 miners. As at the date of this report, the mining operation has been suspended due to adverse market conditions, increase in bitcoin network mining difficulty and volatility in the price of bitcoin.

At the time of this report, the Company does not have a clear plan in regards to the disposition or any future activities in regards to the facility.

Atlas Cloud Enterprises (2013) Ltd.

The Company’s subsidiary Atlas Cloud Enterprises (2013) Ltd is in the business of providing co-location and back-up/redundancy IT and telecom equipment, and cloud computing, to small and medium businesses in Western Canada.

Atlas Cloud Enterprises (2013) also provides committed space to start-up and growth IT companies, providing desks, chairs, high-speed internet, meeting rooms, relevant workshops and other office infrastructure required by such companies to grow and compete in the information technology sector.

1.3 Selected Annual Information

N/A

1.4 Results of Operations

During the three-month period ended November 30, 2019, the Company recorded a comprehensive loss of $2,604,176 (November 30, 2018 - $3,135,829) or $0.04 per share (2018 - $0.03 per share).

Revenue:

Recorded revenue of $212,434 (2018 – loss of $120,473) an increase of $332,907. The significant change in revenues was caused by the difference between fair value loss in digital assets in the prior comparable period and revenue from digital assets mined.

Expenses:

Total operating expenses for the three-month period ended November 30, 2019 were $2.8m (November 30, 2018 - $2.5m)

a) Amortization and depreciation of $57,468 was recorded during the three-month period ended November 30, 2019 (2018 - $187,740). This decrease of $130,272 was due to the depreciation on 1,000 ASIC miners in the prior comparable period that were fully impaired during the year ended May 31, 2019. This is a non-cash expense.
b) Consulting fees in the amount of $408,777 was recorded during the three-month period ended November 30, 2019 (2018 - $303,170). This increase of $105,607 was mainly due to the use of specialists in the cannabis industry to advise the Company on the acquisition and advancement of Isracann Biosciences operations.
c) Office facilities and administration services decreased from $225,613 for the three-month period ended November 30, 2018 to $163,881 during the current three-month period, a decrease of $61,732. This decrease was mainly due to the decrease in administrative services due to the suspension of Bitcoin mining operations in the prior comparable period.
d) Office and sundry expenditures increased from $66,239 for the three-month period ended November 30, 2018 to $218,488 for the current three-month period. This increase was mainly due to the initial start-up expenditures in order for Isracann Biosciences to become operable.
a) Property and operating expenses decreased from $243,886 for the three-month period ended November 30, 2018 to $34,514 during the current three-month period, a decrease of $209,372. This decrease in costs was associated with the utility expenditures relating to the Company’s digital currency mining facilities in Grant County in the prior comparable three-month period.
e) Professional fees decreased from $209,986 for the three-month period ended November 30, 2018 to $149,037 for the three-month period ended November 30, 2019, a decrease of $60,859. This decrease was mainly due to the legal fees required to complete the acquisition of Isracann Biosciences which were capitalized.
f) Stock-based compensation for the three-month period ended November 30, 2019 was $672,580 as compared to $151,700 in the prior period. During the three-month period ended November 30, 2019, the Company granted 3,500,000 stock options to entice and retain key personnel for the acquisition and development of Isracann Biosciences. This is a non-cash expense.
g) Transfer agent and shareholder information increased from $57,635 for the three-month period ended November 30, 2018 to $117,033 for the current three-month period, an increase of $59,398. This increase for the current period is mainly due to the costs associated with the 3 old for 1 new share consolidation, the issuance of shares for the $10M financing and the issuance of shares for the Isracann acquisition.

During the six-month period ended November 30, 2019, the Company recorded a net loss and comprehensive loss of 3.6m (November 30, 2018 - $8.5m) or $0.06 per share (2018 - $0.07 per share).

Revenue:

Recorded revenue of $318,265 (2018 - $440,105) a decrease of $121,840. Digital assets mined during the six-month period ended November 30, 2019 generated $nil (November 30, 2018 - $892,148) in cryptocurrency mining revenues before the mining operations were suspended in December 2018.

Expenses:

Total operating expenses for the six-month period ended November 30, 2019 were $3.9m (November 30, 2018 - $5.0m)
a) Amortization and depreciation of intangible assets, equipment and leasehold improvements totaling $162,955 as compared to $629,294 for the six-month period ended November 30, 2018. This decrease of $466,339 was due to the depreciation of the 1,000 ASIC miners that were used to generate $892,148 in bitcoin revenues for the comparable prior six-month period ended November 30, 2018. Amortization and depreciation are a non-cash expenditure.
b) Office and sundry costs increased from $135,677 for the six-month period ended November 30, 2018 to $341,446 for the six-month period ended November 30, 2019, an increase of $205,769. This increase is due mainly to the asset acquisition.
c) Property operating expenses decreased from $461,187 for the six-month period ended November 30, 2018 to $73,465 for the six-month period ended November 30, 2019, a decrease of $387,722. This decrease in due to suspension of digital currency mining.
d) Promotion and advertising decreased from $1,194,220 for the six-month period ended November 30, 2018 to $975,423 for the current six-month period. This decrease is mainly due to the suspension of marketing and advertising initiatives while the Company was halted due as required by the CSE for its Change of Business into the cannabis industry.
e) Stock-based compensation for the six-month period ended November 30, 2018 was $982,554 as compared to $715,193 in the current six-month period. This is a non-cash expense which is attributable to the number of incentive stock options granted and vested during the period and the assumptions used for the Black-Scholes pricing model.

Overall, the Company’s expenses decreased in relation to the comparable prior period due to the suspension of operations of a crypto-currency mining business in December 2018.

1.5 Summary of Quarterly Results

The following table presents a summary of unaudited quarterly financial information for the last eight consecutive quarters:

consecutive quarters:
	Fiscal 2020			Fiscal	2019		Fiscal	2018
	Q2 Nov. 30, 2019 $	Q1 Aug. 31, 2019 $	Q4 May 31, 2019 $	Q3 Feb. 28, 2019 $	Q2 Nov. 30, 2018 $	Q1 Aug. 31, 2018 $	Q4 May 31, 2018 $	Q3 Feb. 28, 2018 $
Total revenues Operating expenses Administrative expenses Amortization Stock-based compensation Net loss before other item and comprehensive income	212,434 34,514 2,037,032 57,468 672,580 2,589,160	105, 487 38,951 893,115 57,143 42,613 974,335	530,027 43,844 1,053,194 120,605 81,522 819,500	164,827 120,775 919,323 39,067 96,637 1,010,975	510,949 243,886 1,874,343 187,740 151,700 1,946,720	560,578 217,301 1,096,834 441,554 830,854 1,985,603	806,800 360,727 896,085 320,525 (164,123) 538,698	107,148 103,605 1,723,796 157,473 2,041,634 3,919,360
Basicloss pershare	0.04	0.00	0.03	0.03	0.06	0.06	0.09	0.12

An increase in expenses in professional fees and transfer agent and shareholder information during the second quarter of fiscal 2020, is due to the change of business to focus on production of cannabis. The Company also granted 3.5 million incentive stock options with a deemed value of $646,661.

During the first quarter of fiscal 2019, the Company recorded $487,339 in Bitcoin mined included in total revenues of $560,578. Stock-based compensation of $830,854 was recognized in relation to the granting of 6,125,000 incentive stock options. Consulting fees of $362,845 was recorded for technical consultants to assist with the operations of the Company’s digital currency mining business.

During the fourth quarter of fiscal 2018, the Company recorded $742,519 in bitcoin mined included in total revenues of $806,800. Property operating expenses associated with the increase in revenues was $360,727 and amortization of $320,525 was recorded on equipment used to earn income.

During the third quarter of fiscal 2018 stock-based compensation of $2,041,634 was recognized in relation to the granting of 2,375,000 incentive stock options allowing it to entice and retain key personnel to acquire, develop and maintain its cryptocurrency operations. This is a non-cash expense.

1.6 Liquidity and Capital Resources

At November 30, 2019, the Company had working capital of $11.2 million (May 31, 2019 – $4.2 million, excluding restricted cash of $10.2 million). Cash held at November 30, 2019 was $8.5 million compared to $4.2 million at May 31, 2019.

During the six-month period ended November 30, 2019, the Company experienced cash outflows of $5.8 million (November 30, 2018 – $3.5 million) from operating activities.

Investing activities reduced cash by $615,153 (November 30, 2018 – $366,054). These cash outflows were incurred for advancement of its licenses and intangible assets and in the prior comparable period for the purchase plant and equipment upgrades required for its cryptocurrency mining services facility.

Overall, cash increased by $4.3 million for the six-month period ended November 30, 2019, as compared to a decrease of $3.9 million in the prior comparable period.

As at November 30, 2019, the Company has the following financial obligations:

Accounts payable	< 1 year $ 1 – 3 years $ Total $
	749,960 - 749,960

As at November 30, 2019, the Company’s subsidiary Atlas Cloud Enterprises (2013) Ltd is committed to a tenyear operating lease for its 7,400 square foot office with a short-term lease liability of $119,149. The term of the lease is until November 2024 with an option to renew for an additional ten-year term.

The Company has been dependent upon external financings to fund activities. In order to carry out planned and further capital expenditures and pay for administrative costs, the Company may spend its existing working capital and seek to raise additional funds as needed.

The Company is not subject to any externally imposed capital requirements.

1.7 Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements to which the Company is committed.

1.8 Transactions between Related Parties

All related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All amounts either due from or due to related parties other than specifically disclosed are non-interest bearing, unsecured and have no fixed terms of repayments.

a) Related party transactions with directors, subsequent and former directors and companies and entities over which they have significant influence over

Consulting fees Professional fees	THREE MONTH PERIOD ENDED NOVEMBER 30, SIX MONTH PERIOD ENDED NOVEMBER 30, 2019 $ 2018 $ 2019 $ 2018 $
	111,500 100,736 141,500 238,342 (501) - 11,865 -

b) Key management compensation

Management/Consulting and short- term benefits Share-based payments	THREE MONTH PERIOD ENDED NOVEMBER 30, SIX MONTH PERIOD ENDED NOVEMBER 30, 2019 $ 2018 $ 2019 $ 2018 $ 106,251 100,736 153,365 238,342 599,494 132,568 621,329 782,747

c) Prepaid expenses - As of November 30, 2019, companies with directors in common were advanced $2,660 (May 31, 2019 - $5,250) for rent and consulting fees.
d) Accounts payable - As of November 30, 2019, former directors and a company with director in common were owed $146,180 (May 31, 2019 - $104,528).
e) Office facilities and administrative services – As of November 30, 2019, the Company incurred $21,500 (November 30, 2018 – $18,000) in office facilities and administrative services expenditures related to Fred Stearman, a former director of the Company.
f) Property operating expenses – As of November 30, 2019, the Company incurred $21,500 (November 30, 2018 – $18,000) in property operating expenses related to Fred Stearman, a former director of the Company.

1.9 Second Quarter

Second quarter financial results differ significantly from prior periods due to the following:

the Company prepared and submitted all regulatory filings required to acquire Isracann Holdings Inc.

1.10 Critical Accounting Estimates

The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and contingent liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal year are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

The following are the estimates and assumptions that have been made in applying the Company’s accounting policies that have the most significant effect on the amounts in the consolidated financial statements:

(i) Impairment of non-financial assets

Impairment exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. Recoverable amounts are also sensitive to assumptions about the future usefulness of in-process development and the related marketing rights. At May 31, 2019, management concluded that the Bitcoin Mining Equipment and Building and Leasehold Improvement in MKH are impaired (Note 7 of the condensed interim consolidated financial statements ).

(ii) Income taxes

Uncertainties exist with respect to the interpretation of evolving tax regulations relating to digital assets, changes in tax laws, and the amount and timing of future taxable income. The Company has not recognized the value of any deferred tax assets in its statements of financial position.

The Company recognizes the tax benefit from an uncertain tax position only if it is probable that the tax position will be sustained based on its technical merits. The Company measures and record the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s estimated liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when additional information becomes available. The Company’s liability for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with our various filing positions. Although the Company believes that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect our effective income tax rate and income tax provision.

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits

by taxing authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

There is uncertainty regarding the taxation of cryptocurrency and the Internal Revenue Service (IRS) may assess the Company differently from the position adopted. In addition, there is uncertainty with regards to sales tax implications of cryptocurrency transactions.

(iii) Fair value measurement of broker warrants

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date on which they are granted. Estimating fair value for broker warrants requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires the determination of the most appropriate inputs to the valuation model including the expected life of the broker warrants, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for broker warrants are disclosed in Note 6.

1.11 Changes in Accounting Policies including Initial Adoption

The International Accounting Standards Board has issued some new standards and amendments that will be effective in the coming years. The listing below is of standards, interpretation and amendments issued which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective. The impact on the Company is currently being assessed.

The following new accounting standard was adopted by the Company on June 1, 2019:

IFRS 16 Leases

In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The adoption of this new standard has resulted in the Company recognizing a rightof-use asset and related lease liability in connection with all former operating leases except for those identified as lowvalue or having a remaining lease term of less than 12 months from the date of initial application. The following table reconciles the Company’s operating lease obligations at May 31, 2019, as previously disclosed in the Company’s consolidated financial statements, to the lease obligations recognized on initial application of IFRS 16 at June 1, 2019.

16 at June 1, 2019.
Operating lease commitments at May 31, 2019	$	588,270
Discounted using the incremental borrowing rate at June 1, 2019		(137,057)
Lease liabilities recognized at June 1,2019	$	451,213

1.12 Financial Instruments and Risk Management

(a) Categories of Financial Instruments

		Book value	Fair Value
November 30, 2019		$	$
Cash		8,517,423	8,517,423
Accounts receivable		8,512	8,512
Accounts payable		749,960	749,960
May	31, 2019	$	$
Cash		4,177,863	4,177,863
Cash - restricted		10,152,760	10,152,760
Accounts receivable		16,419	16,419
Accounts payable		1,039,331	1,039,331

The fair value of the Company’s cash, restricted cash, accounts receivable, and accounts payable approximates their carrying value as at November 30, 2019 because of the demand nature or short-term maturity of these instruments.

Financial instruments that are measured at fair value on a recurring basis are classified at one of three levels within a fair value hierarchy according to the relative reliability of the inputs used to estimate their values. The three levels of the hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices that are observable
Level 3: Inputs that are not based on observable market data

The Company’s only financial instrument measured at fair value on a recurring basis is cash which is classified as level 1 of the fair value hierarchy.

(b) Financial risk management objectives and policies

The risks associated with the Company’s financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

i) Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its cash and accounts receivable. The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for accounts receivables. The management measures the expected credit loss based upon historic default rate of customers and estimates the credit loss over the expected life of accounts receivables. As at August 31, 2019, the impairment allowance relating to trade and other receivables was $nil.

ii) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company seeks to ensure there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company's holdings of cash. As at November 30, 2019, the Company had a cash balance of $8,517,423 (May 31, 2019 - $4,177,863) to settle current liabilities of $1,657,469 (May 31, 2019 - $1,039,331).

Other MD&A Requirements

Disclosure of Outstanding Share Capital

Authorized: Unlimited common shares without par value

Balance, May 31, 2019 Issued shares for cash: Shares issued for non-brokered private placement Warrants exercised Share issue costs Share issue costs – broker warrants Shares issued for acquisition Balance, November 30, 2019	SHARE CAPITAL NUMBER AMOUNT ($)
	38,314,888 $ 11,743,643 19,823,944 10,110,311 4,690,662 1,526,543 - (362,817) (172,817) 46,680,000 23,806,800
	109,509,494 $ 46,651,883

During the six-month period ended November 30, 2019, the Company completed a 3 old for 1 new share consolidation and issued common shares as follows:

On January 14, 2019, the Company closed the first tranche of the non-brokered offering consisting of 30,588,235 units at $0.17 per subscription receipt for a total amount of $5,200,100. Each subscription receipt entitles the holder to receive, upon satisfaction of certain escrow release conditions, and without payment of additional consideration, one unit in the capital of the Company. Each unit will be comprised of one common share of the Company and one purchase warrant. Each warrant will entitle the holder thereof to acquire one common share of the Company at $0.34 for two years following the date of issuance. The Company will pay eligible finders a cash commission in the aggregate of approximately $224,893 on the Offering within the amount permitted by the policies the CSE. In addition, 1,322,909 non-transferable broker’s warrants will be issued to eligible finders to purchase an aggregate of 1,322,909 common shares of the Company.

On May 21, 2019, the Company closed the second tranche of the non-brokered offering consisting of 28,883,596 units at $0.17 per subscription receipt for a total amount of $4,910,211. Each subscription receipt entitles the holder to receive, upon satisfaction of certain escrow release conditions, and without payment of additional consideration, one unit in the capital of the Company. Each unit will be comprised of one common share of the Company and one purchase warrant. Each warrant will entitle the holder thereof to acquire one common share of the Company at $0.34 for two years following the date of issuance. The Company will pay eligible finders a cash commission in the aggregate of $137,822 on the Offering upon satisfaction of certain escrow release conditions. In addition, 760,034 non-transferable broker’s warrants will also be issued to eligible finders to purchase an aggregate of 760,034 common shares of the Company at the price of $0.34 per share.

The aggregate net proceeds from the offering will be used for development of cultivation facilities and to provide general working capital.

Please refer to Subsequent Events Note 11 in the condensed interim consolidated financial statements for the six-month period ended November 30, 2019 for subsequent share transactions.

As at the date of this MD&A, 124,927,281 common shares are issued and outstanding.

Share Purchase Warrants

The Company may issue share purchase warrants to acquire its common shares either in combination with share offerings, or on a stand-alone basis to its consultants and advisors. The terms of warrants issued are determined by the Company’s Board of Directors.

The continuity of warrants for the period ended November 30, 2019 and year ended May 31, 2019 is summarized below:

Balance, May 31, 2019 Issued Exercised Expired Balance, November 30, 2019	WEIGHTED AVERAGE NUMBER OF EXERCISE WARRANTS PRICE
	29,686,468 1.20
	48,518,216 0.46 (3,690,662) 0.24 (12,020,448) 0.24
	62,493,574 0.86

The following table summarizes the warrants outstanding and exercisable at November 30, 2019:

NUMBER OF	EXERCISE
WARRANTS	PRICE	EXPIRY DATE
13,835,644	$0.51	January 13, 2020
139,714	$0.51	January 13, 2020
20,518,216	$1.02	September 30, 2021
28,000,000	$0.05	February 1, 2021
62,493,574

As at November 30, 2019, the weighted average remaining contractual life of all warrants outstanding was 1.17 years (May 31, 2019 – 0.47 years).

During the period ended November 30, 2019, the Company received CSE approval for the repricing of 13,835,644 warrants expiring on December 13, 2019, and 139,714 warrants expiring on December 15, 2019 (the “Warrants”). The exercise price changed from $2.25 to $0.51 per share. The Company has also extended the exercise date of the Warrants to January 13, 2020.

Please refer to Subsequent Events Note 12 in the condensed interim consolidated financial statements for the six-month period ended November 30, 2019 for subsequent warrant transactions.

Stock Options

The Company adopted an incentive stock option plan (the “Option Plan”) which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with CSE requirements, grant to directors, officers, employees and technical consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares. Such options will be exercisable for a period of up to 10 years from the date of grant. Vesting terms will be determined at the time of grant by the Board of Directors.

In connection with the foregoing, the number of common shares reserved for issuance to any technical consultant will not exceed two percent of the issued and outstanding common shares in any twelve-month period. The number of common shares reserved for issuance to individuals providing investor relation services will not exceed two percent of the issued and outstanding common shares in any twelve-month period. Further, these options must vest over twelve months with a maximum of one quarter of the options vesting in any threemonth period. Options may be exercised no later than 30 days following cessation of the optionee’s position with the Company, provided that if cessation of office, directorship or technical consulting arrangement by reason of death, the option may be exercised within a maximum period of one year after such death. Subject to the expiry date of such option.

During the six-month period ended November 30, 2019, stock-based compensation in the amount of $715,193 (November 30, 2019 - $982,554) was recognized on the issuance and vesting of stock options to directors, officers and consultants.

The continuity of stock options for the period ended November 30, 2019 and year ended May 31, 2019 is summarized below:

Balance, May 31, 2018 Cancelled Forfeited Granted Balance, May 31, 2019 Granted Balance, November 30, 2019	WEIGHTED AVERAGE NUMBER OF EXERCISE OPTIONS PRICE
	1,525,000 $2.82 (891,667) $3.00 (500,000) $3.00 2,041,667 $1.20
	2,175,000 $1.17 7,500,000 $0.51
	9,675,000 $0.66

The following table summarizes the stock options outstanding and exercisable at November 30, 2019:

NUMBER OF OUTSTANDING	OPTIONS EXERCISE PRICE EXPIRY DATE EXERCISABLE
133,333 2,041,667 4,000,000 3,500,000 9,675,000	133,333 $0.75 September 5, 2024 1,791,667 $1.20 June 21, 2023 4,000,000 $0.51 March 29, 2021 3,100,000 $0.51 November 7, 2021 9,025,000

As at November 30, 2019, the weighted average remaining contractual life of all options outstanding was 2.07 years (May 31, 2019 – 4.13 years).

Internal Controls Over Financial Reporting

National Instrument 52-109 requires the CEO and CFO to certify that they are responsible for establishing and maintaining internal control over financial reporting (“ICFR”) for the Company and that those internal controls have been designed and are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. The CEO and CFO are also responsible for disclosing any changes to the Company’s internal controls during the most recent period that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting

Based on a review of its internal control procedures at the end of the period covered by this MD&A, management believes its internal controls and procedures are appropriately designed and were operating effectively as at November 30, 2019.

Disclosure Controls

Management is also responsible for the design and operation of disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company’s certifying officers. The Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the design and effectiveness of the Company’s disclosure controls and procedures as of the date of this report and have concluded that these controls and procedures are effective.

Subsequent Events

Subsequent to November 30, 2019, the Company:

Issued 13,570,734 common shares for the exercise of 13,570,734 warrants at $0.05 per share for total proceeds of $678,537, which resulted in a transfer from share-reserve to share capital of 6,323,012.
Issued 1,791,053 common shares for the exercise of 1,791,053 warrants at $0.51 per share for the total proceeds of $913,427 which resulted in a transfer from share-based payment reserve to share capital of $3,498,377.
Issued 56,000 shares and 56,000 broker warrants for a finder’s fee for the $0.17 (pre-consolidation) subscription receipt financing that were erroneously omitted at the time of closing the financing

Directors and Officers

The Directors and Officers of the Company are:

Darryl Jones, President and CEO Yana Popova, CFO, Corporate Secretary and Director Dr. Irit Arbel, Director Sean Bromley, Director Desmond Balakrishnan, Director Israel Moseson, COO Matthew Chatterton, Vice President of Operations

Conflicts of Interest

Certain officers and directors of the Company are officers and/or directors of, or are associated with other venture companies. Such associations may give rise to conflicts of interest. The directors are required by law, however, to act honestly and in good faith with a view to the best interests of the Company and its shareholders and to disclose any personal interest which they may have in any material transaction which is proposed to be entered into with the Company and to abstain from voting as a director for the approval of any such transaction.

Risks and Uncertainties

The business of Isracann is subject to certain risks and uncertainties inherent in the cannabis industry, and to issuers conducting operations outside of North America. Prior to making any investment decision regarding the Company, investors should carefully consider, among other things, the risk factors set out below.

While this MD&A has described the risks and uncertainties that management of Isracann believe to be material to the Company’s business, it is possible that other risks and uncertainties affecting the Company’s business will arise or become material in the future.

If the Company is unable to address these and other potential risks and uncertainties following the completion of the Transaction, its business, financial condition or results of operations could be materially and adversely affected. In this event, the value of the Company Shares could decline and an investor could lose all or part of their investment.

The following is a description of the principal risk factors that will affect the Company as of the date hereof:

(A) Risks Related to the Issuer’s Business

New Business Area and Geographic Market, and the Issuer’s Ability to Implement the Business Strategy in this Area or Market

The Issuer’s growth strategy is dependent upon expanding its product and service offerings into a new business area or a new geographic market. There can be no assurance that the new business area and geographic market will generate the anticipated clients and revenue. In addition, any expansion into a new business area or geographic market could expose the Issuer to new risks, including compliance with applicable laws and regulations, changes in the regulatory or legal environment; different customer preferences or habits; adverse exchange rate fluctuations; adverse tax consequences; differing technology standards or end-user requirements and capabilities; difficulties staffing and managing foreign operations; infringement of third-party intellectual property rights; adapting its products for new markets; difficulties collecting accounts receivable; or difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner.

When Israeli government begins granting medical cannabis export permits, the Issuer intends to apply for such permit to export medical cannabis to Germany. However, until such time export permits are granted, the Issuer expects that all of its future revenue will be derived from its business operations in Israel. Execution of this business strategy is subject to a variety of risks, including operating and technical problems, regulatory uncertainties and possible delays.

The growth and expansion of the Issuer’s business is heavily dependent upon the successful implementation of the Issuer’s business strategy. There can be no assurance that the Issuer will be successful in the implementation of its business strategy. These factors could cause the Issuer’s expansion into a new business area or into Israel to be unsuccessful or less profitable or could cause the Issuer’s operating costs to increase unexpectedly or its sales to decrease, any of which could have a material adverse effect on the Issuer’s prospects, business, financial condition or results of operations. In addition, there can be no assurance that laws or administrative practices relating to taxation, foreign exchange or other matters in Israel within which the Issuer intends to operate will not change. Any such change could have a material adverse effect on the Issuer’s business, financial condition and results of operations.

New Industry and Market

The cannabis industry and market are relatively new in Israel, and this industry and market may not continue to exist or grow as anticipated or the Issuer may ultimately be unable to succeed in this new industry and market. The licensed producers are operating in a relatively new cannabis industry and market. The licensed producers are subject to general business risks, as well as risks associated with a business involving an agricultural product and a regulated consumer product. The Issuer holds a controlling interest in an applicant to be a licensed cultivation and breeding facility in Israel. Within Israel, the Issuer intends to sell and market its cannabis products. To this extent the Issuer needs to build brand awareness in this industry, and in the markets in which it operates through significant investments in its strategy, its production capacity, quality assurance, and compliance with regulations. These activities may not promote the Issuer’s brand and products as effectively as intended, or at all. Competitive conditions, consumer tastes, patient requirements and spending patterns in this new industry and market are relatively unknown and may have unique circumstances that differ from existing industries and markets. There are no assurances that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management's expectations and assumptions. Any event or circumstance that affects the medical cannabis industry and market could have a material adverse effect on the Issuer’s business, financial condition and results of operations.

Reliance on Licenses and Authorizations

The Issuer’s ability to grow, store and sell cannabis in Israel is dependent on the Issuer’s ability to sustain and/or obtain the necessary licenses and authorizations by certain authorities in Israel. The impact of the compliance regime, any delays in obtaining, or failure to obtain or keep the regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on the business, results of operations and financial condition of the Issuer.

The licenses and authorizations are subject to ongoing compliance and reporting requirements and the ability of the Issuer to obtain, sustain or renew any such licenses and authorizations on acceptable terms is subject to changes in regulations and policies and to the discretion of the applicable authorities or other governmental agencies in Israel and potentially in other foreign jurisdictions. Failure to comply with the requirements of the licenses or authorizations or any failure to maintain the licenses or authorizations would have a material adverse impact on the business, financial condition and operating results of the Issuer.

Although the Issuer believes that it will meet the requirements to obtain, sustain or renew the necessary licenses and authorizations, there can be no guarantee that the applicable authorities will issue these licenses or authorizations. Should the authorities fail to issue the necessary licenses or authorizations, the Issuer may be

curtailed or prohibited from the production and/or distribution of cannabis or from proceeding with the development of its operations as currently proposed and the business, financial condition and results of the operation of the Issuer may be materially adversely affected.

There is no assurance that the Isracann Facilities will operate as intended or that the projected revenues will be achieved.

The Issuer’s initial state of its business operation is to obtain its permit and licenses to construct its initial Isracann Facility. However, the Issuer has yet to complete construction of any Isracann Facilities. Accordingly, this component of the Issuer’s business plan is subject to considerable risks, including:

there is no assurance that the Isracann Facilities will achieve the intended cannabis production rates;
the costs of constructing and operating the Isracann Facilities may be greater than anticipated and the Issuer may not be able to recover these greater costs through increases in cannabis production;
the potential distribution or manufacturer partners who have indicated a willingness to purchase our cannabis products may withdraw if our first crop of cannabis plant is not harvested by the anticipated timeline; and
the revenues from the sales of the cannabis products may be less than anticipated.

Change of Cannabis Laws, Regulations, and Guidelines

Cannabis laws and regulations are dynamic and subject to evolving interpretations which could require the Issuer to incur substantial costs associated with compliance or alter certain aspects of its business plan. It is also possible that regulations may be enacted in the future that will be directly applicable to certain aspects of the Issuer’s business. The Issuer cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on the Issuer’s business. Management expects that the legislative and regulatory environment in the cannabis industry in Israel and internationally will continue to be dynamic and will require innovative solutions to try to comply with this changing legal landscape in this nascent industry for the foreseeable future. Compliance with any such legislation may have a material adverse effect on the Issuer’s business, financial condition and results of operations.

Public opinion can also exert a significant influence over the regulation of the cannabis industry. A negative shift in the public’s perception of the cannabis industry could affect future legislation or regulation in different jurisdictions, including in Israel and other European countries that Issuer plans to distribute its cannabis products.

Uncertain Demand for Cannabis and Derivative Products

The legal cannabis industry in Israel is at an early stage of its development. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of medicinal cannabis are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal 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 medicinal 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 medicinal cannabis and on the business, results of operations, financial condition and cash flows of the Issuer. Further, adverse publicity reports or other media attention regarding cannabis in general, or associating the consumption of medicinal cannabis with illness or other negative effects or events, could have such a material adverse effect. Public

opinion and support for medicinal cannabis use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. The Issuer’s ability to gain and increase market acceptance of its business may require substantial expenditures on investor relations, strategic relationships and marketing initiatives. There can be no assurance that such initiatives will be successful and their failure to materialize into significant demand may have an adverse effect on the Issuer’s financial condition.

Product Liability

As a distributor of products designed to be ingested by humans, the Issuer faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused bodily harm or injury. In addition, the sale of the Issuer’s products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Adverse reactions resulting from human consumption of the Issuer’s products alone or in combination with other medications or substances could occur. The Issuer may be subject to various product liability claims, including, among others, that the Issuer’s products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side effects or interactions with other substances. A product liability claim or regulatory action against the Issuer could result in increased costs, could adversely affect the Issuer’s reputation with its clients and consumers generally, and could have a material adverse effect on the results of operations and financial condition of the Issuer. There can be no assurances that the Issuer will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of the Issuer’s potential products.

Product Recalls

Distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labelling disclosure. If any of the Issuer’s products are recalled due to an alleged product contamination or for any other reason, the Issuer could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. The Issuer 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 the Issuer has detailed procedures in place for testing its products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if the Issuer’s products are subject to recall, the reputation of the Issuer could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for the Issuer’s products and could have a material adverse effect on the results of operations and financial condition of the Issuer. Additionally, product recalls may lead to increased scrutiny of the Issuer’s operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses.

Regulatory Compliance Risks

Achievement of the Issuer’s business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining all regulatory approvals, where necessary, for the sale of its products. The Issuer may not be able to obtain or maintain the necessary licenses, permits, quotas, authorizations or accreditations to operate its business, or may only be able to do so at great cost. The Issuer cannot predict the time required to secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that may be required by local governmental authorities.

The officers and directors of the Issuer must rely, to a great extent, on the Issuer’s Israeli legal counsel, local consultants retained by the Issuer and its management team in Israel, including its COO and Chief Agronomist, in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Issuer’s business operations, and to assist the Issuer with its governmental relations.

The Issuer will also rely on the advice of local experts and professionals in connection with any current and new regulations that develop in respect of banking, financing and tax matters in Israel. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices in Israel are beyond the control of the Issuer and may adversely affect its business.

The Issuer will incur ongoing costs and obligations related to regulatory compliance. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. The Issuer may be required to compensate those suffering loss or damage by reason of its operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to the Issuer’s operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the Issuer.

Retention and Acquisition of Skilled Personnel

The loss of any member of the Issuer’s management team, could have a material adverse effect on its business and results of operations. In addition, the inability to hire or the increased costs of hiring new personnel, including members of executive management, could have a material adverse effect on the Issuer’s business and operating results. The expansion of marketing and sales of its products will require the Issuer to find, hire and retain additional capable employees who can understand, explain, market and sell its products. There is intense competition for capable personnel in all of these areas and the Issuer may not be successful in attracting, training, integrating, motivating, or retaining new personnel, vendors, or subcontractors for these required functions. New employees often require significant training and in many cases, take a significant amount of time before they achieve full productivity. As a result, the Issuer may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses issued in connection to equity awards, and may lose new employees to its competitors or other companies before it realizes the benefit of its investment in recruiting and training them. In addition, as the Issuer moves into new jurisdictions, it will need to attract and recruit skilled employees in those new areas.

Risks Inherent in an Agricultural Business

The Issuer’s business involves the growing of cannabis, which is an agricultural product. The occurrence of severe adverse weather conditions, especially droughts or floods is unpredictable, may have a potentially devastating impact on agricultural production, and may otherwise adversely affect the supply of cannabis. Adverse weather conditions may be exacerbated by the effects of climate change and may result in the introduction and increased frequency of pests and diseases. The effects of severe adverse weather conditions may reduce the Issuer’s yields or require the Issuer to increase its level of investment to maintain yields. Additionally, higher than average temperatures and rainfall can contribute to an increased presence of insects and pests, which could negatively affect cannabis crops. Future droughts could reduce the yield and quality of the Issuer’s cannabis production, which could materially and adversely affect the Issuer’s business, financial condition and results of operations.

The occurrence and effects of plant disease, insects and pests can be unpredictable and devastating to agricultural operations, potentially rendering all or a substantial portion of the affected harvests unsuitable for sale. Even when only a portion of the production is damaged, the Issuer’s results of operations could be

adversely affected because all or a substantial portion of the production costs may have been incurred. Although some plant diseases are treatable, the cost of treatment can be high and such events could adversely affect the Issuer’s operating results and financial condition. Furthermore, if the Issuer fails to control a given plant disease and the production is threatened, the Issuer may be unable to adequately supply its customers, which could adversely affect its business, financial condition and results of operations. There can be no assurance that natural elements will not have a material adverse effect on production.

Supply of Cannabis Seeds

If for any reason the supply of cannabis seeds is ceased or delayed, the Issuer would have to seek alternate suppliers and obtain all necessary authorization for the new seeds. If replacement seeds cannot be obtained at comparable prices, or at all, or if the necessary authorizations are not obtained, the Issuer’s business, financial condition and results of operations would be materially and adversely affected.

Limited Operating History

The Issuer was previously in the business of cloud computing and Bitcoin mining. Upon completion of the Transaction, the Issuer continued the business of Isracann Holding. As a result, the Issuer has a limited operating history in the cannabis commercial cultivation space upon which its business and future prospects may be evaluated. The Issuer will be subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its operating goals. In order for the Issuer to meet its future operating requirements, the Issuer will need to be successful in its growing, marketing and sales efforts of its cannabis products. Additionally, where the Issuer experiences increased sales, the Issuer’s current operational infrastructure may require changes to scale the Issuer’s business efficiently and effectively to keep pace with demand, and achieve long-term profitability. If the Issuer’s products are not accepted by new partners, the Issuer’s operating results may be materially and adversely affected.

Managing Growth

In order to manage growth and changes in strategy effectively, the Issuer must: (a) maintain adequate systems to meet customer demand; (b) expand sales and marketing, distribution capabilities, and administrative functions; (c) expand the skills and capabilities of its current management team; and (d) attract and retain qualified employees. While it intends to focus on managing its costs and expenses over the long term, the Issuer expects to invest its earnings and capital to support its growth, but may incur additional unexpected costs. If the Issuer incurs unexpected costs it may not be able to expand quickly enough to capitalize on potential market opportunities.

Legal and Regulatory Proceedings

From time to time, the Issuer may be a party to legal and regulatory proceedings, including matters involving governmental agencies, entities with whom it does business and other proceedings arising in the ordinary course of business. The Issuer will evaluate its exposure to these legal and regulatory proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have an adverse impact on the Issuer’s financial results.

The Issuer’s participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by third parties, other companies and/or various governmental authorities against the Issuer. Litigation, complaints, and enforcement actions involving the Issuer could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on the Issuer’s future cash flows, earnings, results of operations and financial condition.

Insurance Coverage

The Issuer’s production is, in general, subject to different risks and hazards, including adverse weather conditions, fires, plant diseases and pest infestations, other natural phenomena, industrial accidents, labour disputes, changes in the legal and regulatory framework applicable to the Issuer and environmental contingencies.

The Issuer’s insurance may cover only part of the losses it may incur and does not cover losses on crops due to drought or floods. Furthermore, certain types of risks may not be covered by the policies that the Issuer may holds. Additionally, any claims to be paid by an insurer due to the occurrence of a casualty covered by the Issuer’s policies may not be sufficient to compensate the Issuer for all of the damages suffered. The Issuer may not be able to maintain or obtain insurance of the type and amount desired at a reasonable cost. If the Issuer were to incur significant liability for which it were not fully insured, it could have a materially adverse effect on the Issuer’s business, financial condition and results of operations.

Inter-company Transfers of Funds

As the Issuer's operations will be carried on through its subsidiaries, it will be dependent on cash flows from its subsidiaries. The Issuer is not currently subject to or aware of any limitations on the repatriation of funds from the subsidiaries in Israel. The Issuer will develop a cash management system to provide for the flow of funds between the Issuer and the subsidiaries. It is expected that such a system will provide for:

the structuring and documentation of fund transfers as loan arrangements, capital investments and/or management services arrangements between relevant entities;
internal approval process by the controller and the general manager at the subsidiary level, and for certain transactions exceeding the subsidiary’s authority limits, by the Issuer’s CFO; and
compliance with internal procedures and applicable local regulations.

If any issues arising with the repatriation of funds it may have an adverse effect on the Issuer.

Changes in Corporate Structure

Israeli cannabis licenses are granted on a non-transferable, non-exchangeable and non- assignable basis. Any breach of this restriction may give rise to unilateral termination of the license by the governmental authority.

Israeli authorities require notice and disclosure of any change at or above 5% of the equity of a licensed company. Prior approval is required for such changes. Notwithstanding the above, Israeli laws do not provide for specific regulations or restrictions regarding the effects of a change in control, modification of the corporate structure, issuance of shares, or any changes in holders or final beneficiaries of cannabis licenses.

Emerging Market Risks

Emerging market investment generally poses a greater degree of risk than investment in more mature market economies because the economies in the developing world are more susceptible to destabilization resulting from domestic and international developments. All of the Issuer’s operations are in Israel. While Israel’s credit rating is current “-AA”, it has a history of geopolitical instability and crises including those related to terrorism. Although there is no current major political instability in Israel, this could be subject to change in the future and could adversely affect the Issuer’s business, financial condition and results of operations.

Global Economy

Financial and securities markets in Israel are influenced by the economic and market conditions in other countries, including other emerging market countries in the Middle East. Although economic conditions in these countries may differ significantly from economic conditions in Israel, international investors’ reactions to developments in these other countries, may substantially affect capital inflows into the Israeli economy, and the market value of securities of issuers with operations in Israel.

Economic downturn or volatility could have a material adverse effect on the Issuer’s business, financial condition and results of operations. In addition, weakening of economic conditions could lead to reductions in demand for the Issuer’s products. For example, its revenues can be adversely affected by high unemployment and other economic factors. Further, weakened economic conditions or a recession could reduce the amount of income customers are able to spend on the Issuer’s products. In addition, as a result of volatile or uncertain economic conditions, the Issuer may experience the negative effects of increased financial pressures on its clients. For instance, the Issuer’s business, financial condition and results of operations could be negatively impacted by increased competitive pricing pressure, which could result in the Issuer incurring increased bad debt expense. If the Issuer is not able to timely and appropriately adapt to changes resulting from a weak economic environment, its business, results of operations and financial condition may be materially and adversely affected.

Additional Risks Relating to Doing Business Internationally

The Issuer may be subject to risks generally associated with doing business in international markets when it expands into the international markets, specifically Germany. Several factors, including legal and regulatory compliance and weakened economic conditions in any of the international jurisdictions in which the Issuer may do business could adversely affect such expansion and growth.

Additionally, if the Issuer enters into new international jurisdictions, such entries would require management attention and financial resources that would otherwise be spent on other parts of the business.

International business operations expose the Issuer to risks and expenses inherent in operating or selling products in foreign jurisdictions. In addition to the risks mentioned elsewhere, these risks and expenses could have a material adverse effect on the Issuer’s business, results of operations or financial condition and include without limitation:

adverse currency rate fluctuations;
risks associated with complying with laws and regulations in the countries in which the Issuer intends to sell its products, and requirements to apply for and obtain licenses, permits or other approvals and the delays associated with obtaining such licenses, permits or other approvals;
multiple, changing and often inconsistent enforcement of laws, rules and regulations;
the imposition of additional foreign governmental controls or regulations, new or enhanced trade restrictions or non-tariff barriers to trade, or restrictions on the activities of foreign agents, and distributors;
increases in taxes, tariffs, customs and duties, or costs associated with compliance with import and export licensing and other compliance requirements;
the imposition of restrictions on trade, currency conversion or the transfer of funds or limitations on the Issuer’s ability to repatriate non-Canadian and/or non-Israeli earnings in a tax effective manner;
the imposition of Canadian, Israeli and/or other international sanctions against a country, company, person or entity with whom the Issuer may do business that would restrict or prohibit the Issuer’s business with the sanctioned country, company, person or entity;

downward pricing pressure on the Issuer’s products in the Issuer’s international markets, due to competitive factors or otherwise;
laws and business practices favouring local companies;
political, social or economic unrest or instability;
expropriation and nationalization and/or renegotiation or nullification of necessary licenses, approvals, permits and contracts;
greater risk on credit terms, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
difficulties in enforcing or defending intellectual property rights; and
the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less attractive or more difficult.

Governments in certain foreign jurisdictions intervene in their economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on doing business, price controls, import controls, currency remittance, income and other taxes, royalties, the repatriation of profits, foreign investment, licenses and approvals and permits.

The Issuer’s international efforts may not produce desired levels of sales. Furthermore, the Issuer’s experience with selling products in Israel may not be relevant or may not necessarily translate into favourable results if it sells in other international markets. If and when the Issuer enters into new markets in the future, it may experience different competitive conditions, less familiarity by customers with the Issuer’s brand and/or different customer requirements. As a result, the Issuer may be less successful than expected in expanding sales to new international markets. Sales into new international markets may take longer to ramp up and reach expected sales and profit levels, or may never do so, thereby affecting the Issuer’s overall growth and profitability. To build brand awareness in these new markets, the Issuer may need to make greater investments in legal compliance, advertising and promotional activity than originally planned, which could negatively impact the expected profitability of sales in those markets.

(B) Risks Related to Reliance on Israeli Subsidiaries

Potential Political, Economic and Military Instability in Israel

The Issuer’s material operations are located in Israel. Consequently, the Issuer is dependent upon Israel’s economic, political and military conditions. As a result, the Issuer’s business, financial position and results of operations may be affected by the general conditions of the economy, price instabilities, currency fluctuations, inflation, interest rates, regulation, taxation, social instabilities, political unrest and other developments in or affecting Israel, over which the Issuer has no control. In the past, Israel has experienced periods of weak economic activity and deterioration in economic conditions. The Issuer cannot assure that such conditions will not return or that such conditions will not have a material adverse effect on the Issuer’s business, financial condition or results of operations.

Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its neighbors. Terrorist attacks and hostilities within Israel; the hostilities between Israel and Hezbollah and between Israel and Hamas; the conflict between Hamas and Fatah; as well as tensions between Israel and Iran, have also heightened these risks, including extensive hostilities in November 2012 and from July to August 2014 along Israel’s border with the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Israel. There can be no assurance that attacks launched from the Gaza Strip will not reach our facilities, which could result in a significant disruption of our business. In addition, there are significant

ongoing hostilities in the Middle East, particularly in Syria and Iraq, which may impact Israel in the future. Any hostilities involving Israel, a significant increase in terrorism or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could materially adversely affect the Issuer’s operations. Ongoing and revived hostilities or other Israeli political or economic factors could have a material adverse effect on the Issuer’s business, operating results and financial condition.

It is unknown as to how the volatile climate currently hinders Israel’s international trade relations and whether they still may limit the geographic markets where the Issuer can operate. Any resumption of hostilities involving Israel or threatening Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could have a material adverse effect on the Issuer’s operations albeit that there is no direct evidence of this having been the case over the past conflicts. Security and political instability in the Middle East and Israel in particular may harm the Issuer’s business. Any armed conflicts or political instability in the region, including acts of terrorism or any other hostilities involving or threatening Israel could have a negative effect on business conditions and could make it more difficult for the Issuer to conduct its operations in Israel and/or increase its costs and adversely affect its financial results. Furthermore, some neighbouring countries, as well as certain companies and organizations continue to participate in a boycott of Israeli firms and others who do business with Israel or with Israeli companies. However, generally this is not the case with the major corporations in the industry that deal with Israel. Restrictive laws, policies or practices directed towards Israel or Israeli businesses could have an adverse impact on the expansion of the Issuer’s business.

The Issuer’s operations could be disrupted by the absence for significant periods of one or more of its senior management, key employees or a significant number of other employees because of military service. Israeli male under the age of 45 are obliged to perform military reserve duty, which accumulates annually from several days to up to two months in special cases and circumstances. The length of such reserve duty depends, among other factors, on an individual’s age and prior position in the military. In addition, if a military conflict occurs, these persons could be required to serve in the military for extended periods of time. Any disruption in the Issuer’s operations as the result of military service by key personnel could harm its business.

Crime and Business Corruption Risk

The Issuer and its personnel are required to comply with applicable anti-bribery laws, including the Canadian Corruption of Foreign Public Officials Act , as well as local laws in all areas in which the Issuer does business. These, among other things, include laws in respect of the monitoring of financial transactions and provide a framework for the prevention and prosecution of corruption offences, including various restrictions and safeguards. However, there can be no guarantee that these laws will be effective in identifying and preventing money laundering and corruption. While corruption does not appear to be institutionalized and businesses can largely operate and invest in Israel without interference from corrupt officials, there is evidence that corruption exists in Israel. The failure of the Israeli government to fight corruption or the perceived risk of corruption could have a material adverse effect on the local economies. Any allegations of corruption or evidence of money laundering in Israel could adversely affect the ability of Israel to attract foreign investment and thus have a material adverse effect on its economy which in turn could have a material adverse effect on the Issuer's business, results of operations, financial condition and prospects. Moreover, findings against the Issuer, the directors, the officers or the employees of the Issuer, or their involvement in corruption or other illegal activity could result in criminal or civil penalties, including substantial monetary fines, against the Issuer, the directors, the officers or the employees of the Issuer. Any government investigations or other allegations against the Issuer, the directors, the officers or the employees of the Issuer, or finding of involvement in corruption or other illegal activity by such persons, could significantly damage the Issuer's reputation and its ability to do business and could have a material adverse effect on its financial condition and results of operations.

Operational Risks

Operations in Israel are subject to risk due to the potential for social, political, economic, legal and fiscal instability. The government in Israel faces ongoing problems including but not limited to inflation, unemployment and inequitable income distribution. In addition, Israel experiences terrorist-related violence, a prevalence of kidnapping activities and civil unrest in certain areas of the country. Such instability may require the Issuer to suspend operations on its properties. Although the Issuer is not presently aware of any circumstances or facts which may cause the following to occur, other risks may involve matters arising out of the evolving laws and policies in Israel, any future imposition of special taxes or similar charges, as well as foreign exchange fluctuations and currency convertibility and controls, the unenforceability of contractual rights or the taking or nationalization of property without fair compensation, restrictions on the use of expatriates in the Issuer’s operations, or other matters.

Operations in Hebrew

As a result of the Issuer conducting its operations in Israel, the books and records of the Issuer, including key documents such as material contracts and financial documentation are principally negotiated and entered into in the Hebrew language and English translations may not exist or be readily available.

Enforcement of Judgments

The Issuer was continued under the laws of the Province of British Columbia, however all of its assets are located outside Canada. As a result, investors may not be able to effect service of process within Canada upon the Issuer’s potential future Israeli directors or officers or enforce against them in Canadian courts judgments predicated on Canadian securities laws. Likewise, it may also be difficult for an investor to enforce in Canadian courts judgments obtained against these persons in courts located in jurisdictions outside Canada. As a result, shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the Board or controlling shareholders than they would as public shareholders of a Canadian company.

Difficulty Enforcing Canadian Law Against an Israeli Company

All of the Issuer’s material non-cash assets, are located outside of Canada. Therefore, a judgment obtained against the Issuer, including a judgment based on the civil liability provisions of the Canadian securities laws, may not be collectible in Canada and may not be enforced by an Israeli court. It also may be difficult to effect service of process on a foreign individual in Canada or to assert Canadian securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of Canadian securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not Canadian law is applicable to the claim. If the Canadian law is found to be applicable, the content of applicable Canadian law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against the Issuer or the Issuer in Israel, it may be difficult to collect any damages awarded by either a Canadian or a foreign court.

Non-Operating Parent Corporation Structure

The Issuer is a non-operating parent corporation that will hold assets and carry on its business through Holdings, its wholly-owned subsidiary. The Issuer will control Holdings through its ownership of Holdings’ securities which will entitle it to elect the directors of Holdings (which entitlement the Issuer will exercise) and the directors may then appoint the officers of Holdings. To the extent that there are risks inherent in having a

subsidiary hold assets and carry on business, the Issuer will mitigate those risks by implementing an effective system of corporate governance, internal controls over financial reporting, and disclosure controls and procedures that will apply at all levels of the Issuer. These systems will be overseen by the board of directors of the Issuer and will be implemented by the Issuer’s senior management. As a wholly-owned subsidiary, Holdings is controlled by the Issuer as a matter of corporate law. The Issuer will be entitled to appoint and dismiss directors of Holdings and the directors have the authority to appoint and dismiss officers of Holdings. Accordingly, the directors and officers of Holdings will ultimately be accountable to the management of the Issuer and the Issuer will have complete control over Holdings.

(C) Risks Related to Financial and Accounting

Access to Capital

The Issuer makes, and will continue to make, substantial investments and other expenditures related to acquisitions, research and development and marketing initiatives. Since its incorporation, the Issuer has financed these expenditures through offerings of its equity securities. The Issuer will have further capital requirements and other expenditures as it proceeds to expand its business or take advantage of opportunities for acquisitions or other business opportunities that may be presented to it. The Issuer may incur major unanticipated liabilities or expenses. The Issuer can provide no assurance that it will be able to obtain financing on reasonable terms or at all to meet the growth needs of its operations.

Negative Cash Flow for the Foreseeable Future

The Company has a no history of earnings or cash flow from operations. The Company may not generate material revenue or achieve self-sustaining operations in the next year, if at all. To the extent that the Company has negative cash flow in future periods, the Company may need to allocate a portion of its cash reserves to fund such negative cash flow.

The Company’s failure to raise additional capital necessary to expand the Company’s operations and invest in the Company’s business could reduce the Company’s ability to compete successfully

The Company may require additional capital in the future to support on-going operations, to undertake capital expenditures or to undertake acquisitions or other business combination transactions. Due to the early stage of the industry in which the Company operates, the Company expects to face additional competition from new entrants. To become and remain competitive, the Company requires research and development, marketing, sales and client support. The Company may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations of the Company. The Company may not be able to obtain additional debt or equity financing on favorable terms, if at all. If the Company raises additional equity financing, the shareholders of the Company may experience significant dilution of their ownership interests, and the per-share value of the Company’s securities could decline. Moreover, any new equity securities the Company issues could have rights, preferences and privileges senior to those of holders of Company’s existing securities. If the Company engages in debt financing, the Company may be required to accept terms that restrict its ability to incur additional indebtedness and force it to maintain specified liquidity or other ratios. If the Company needs additional capital and cannot raise or otherwise obtain it on acceptable terms, it may not be able to, among other things:

develop or introduce service enhancements to customers;
continue to expand the Company’s development, sales and marketing and general and administrative functions;
acquire complementary technologies or businesses;
expand the Company’s operations;
hire, train and retain employees; or
respond to competitive pressures or unanticipated working capital requirements.

Market for Securities and Volatility of Share Price

There can be no assurance that an active trading market in the Issuer’s securities will be established or sustained. The market price for the Issuer’s securities could be subject to wide fluctuations. Factors such as announcements of quarterly variations in operating results and acquisition or disposition of properties, as well as market conditions in the industry, may have a significant adverse impact on the market price of the securities of the Issuer. The stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of particular companies.

Foreign Sales and Currency Fluctuations

The Issuer’s functional currency is denominated in Canadian dollars. The Issuer currently expects that sales will be denominated in Israeli new shekels and may, in the future, have sales denominated in the currencies of additional countries in which it establishes operations or distribution. In addition, the Issuer incurs the majority of its operating expenses in Israeli new shekels. In the future, the proportion of the Issuer’s sales that are international may increase. Such sales may be subject to unexpected regulatory requirements and other barriers. Any fluctuation in the exchange rates of foreign currencies may negatively impact the Issuer’s business, financial condition and results of operations. The Issuer has not previously engaged in foreign currency hedging. If the Issuer decides to hedge its foreign currency exposure, it may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets. In addition, those activities may be limited in the protection they provide the Issuer from foreign currency fluctuations and can themselves result in losses.

Estimates or Judgments Relating to Critical Accounting Policies

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. the Issuer bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, as provided in the notes to the Isracann Holdings Annual Financial Statements and the Annual Financial Statements, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. The Issuer’s operating results may be adversely affected if the assumptions change or if actual circumstances differ from those in the assumptions, which could cause the Issuer’s operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the share price of the Issuer. Significant assumptions and estimates used in preparing the financial statements include those related to the credit quality of accounts receivable, income tax credits receivable, share based payments, impairment of non-financial assets, fair value of biological assets, as well as revenue and cost recognition.

OTHER INFORMATION

Other information relating to the Company may be found on the Company’s website located at https://isracann.com/, the SEDAR website located at www.sedar.com and the CSE website located at thecse.com.

BY ORDER OF THE BOARD

Isracann Biosciences Inc.

(formerly Atlas Blockchain Group Inc.)

“ Darryl Jones ”

CEO and Director January 28, 2020

AI assistant

Tiny Ltd. — Regulatory Filings 2020

47831_rns_2020-01-28_14b8961a-59f9-4c74-87d6-fb7ebe01cb6d.pdf

ISRACANN BIOSCIENCES INC.

MANAGEMENT DISCUSSION AND ANALYSIS

1.1 Date of Report

Forward-Looking Information

Management’s Responsibility for Financial Statements

1.2 Overall Performance and Nature of the Business

Nature of Business

Acquisition of Assets

Isracann Overview of Business

MKH Electric City Holdings LLC (“MKH”)

Atlas Cloud Enterprises (2013) Ltd.

1.3 Selected Annual Information

1.4 Results of Operations

Revenue:

Expenses:

1.5 Summary of Quarterly Results

1.6 Liquidity and Capital Resources

1.7 Off-Balance Sheet Arrangements

1.8 Transactions between Related Parties

1.9 Second Quarter

1.10 Critical Accounting Estimates

(i) Impairment of non-financial assets

(ii) Income taxes

(iii) Fair value measurement of broker warrants

1.11 Changes in Accounting Policies including Initial Adoption

1.12 Financial Instruments and Risk Management

i) Credit Risk

ii) Liquidity Risk

Other MD&A Requirements

Disclosure of Outstanding Share Capital

Share Purchase Warrants

Stock Options

Internal Controls Over Financial Reporting

Disclosure Controls

Subsequent Events

Directors and Officers

Conflicts of Interest

Risks and Uncertainties

(A) Risks Related to the Issuer’s Business

New Business Area and Geographic Market, and the Issuer’s Ability to Implement the Business Strategy in this Area or Market

New Industry and Market

Reliance on Licenses and Authorizations

There is no assurance that the Isracann Facilities will operate as intended or that the projected revenues will be achieved.

Change of Cannabis Laws, Regulations, and Guidelines

Uncertain Demand for Cannabis and Derivative Products

Product Liability

Product Recalls

Regulatory Compliance Risks

Retention and Acquisition of Skilled Personnel

Risks Inherent in an Agricultural Business

Supply of Cannabis Seeds

Limited Operating History

Managing Growth

Legal and Regulatory Proceedings

Insurance Coverage

Inter-company Transfers of Funds

Changes in Corporate Structure

Emerging Market Risks

Global Economy

Additional Risks Relating to Doing Business Internationally

(B) Risks Related to Reliance on Israeli Subsidiaries

Potential Political, Economic and Military Instability in Israel

Crime and Business Corruption Risk

Operational Risks

Operations in Hebrew

Enforcement of Judgments

Difficulty Enforcing Canadian Law Against an Israeli Company

Non-Operating Parent Corporation Structure

(C) Risks Related to Financial and Accounting

Access to Capital

Negative Cash Flow for the Foreseeable Future

The Company’s failure to raise additional capital necessary to expand the Company’s operations and invest in the Company’s business could reduce the Company’s ability to compete successfully

Market for Securities and Volatility of Share Price

Foreign Sales and Currency Fluctuations

Estimates or Judgments Relating to Critical Accounting Policies

OTHER INFORMATION

BY ORDER OF THE BOARD

Tiny Ltd. Regulatory Filings 2020