The following significant unobservable inputs, all of which are classified as level 3 on the fair value hierarchy, were used by management as part of this model:

·Estimated selling price – calculated as the weighted average historical selling price for all strains of hemp sold by the Company, which is expected to approximate future selling prices 

·Stage of growth – represents the weighted average number of weeks out of the 15 week growing cycle that biological assets have reached as of the measurement date 

·Yield by plant – represents the expected number of grams of finished hemp inventory which are expected to be obtained from each harvested hemp plant 

8

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

·Post-harvest costs – calculated as the cost per gram of harvested hemp to complete the sale of hemp plants post harvest, consisting of the cost of direct and indirect materials and labour related to labelling and packaging 

The following table quantifies each significant unobservable input, and also provides the impact a 10% increase/decrease in each input would have on the fair value of biological assets.

The Company accretes fair value on a straight line basis according to stage of growth.  As a result, a hemp plant that is 50% through its 15 week growing cycle would be ascribed approximately 50% of its harvest date expected fair value (subject to wastage adjustments).

The Company’s biological assets consist of approximately 670,000 plants as at June 30, 2020.  The continuity of biological assets is as follows:

The Company’s estimates, by their nature, are subject to changes that could result from volatility of market prices, unanticipated regulatory changes, harvest yields, loss of crops, changes in estimates and other uncontrollable factors that could significantly affect the future fair value of biological assets.

These estimates include the following assumptions:

(a)Selling prices are determined by estimating the Company’s expected average selling price and mix of product strains; 

(b)Cost incurred and remaining costs to complete were estimated by calculating the average production costs up to the point of harvest over the total production period; 

(c)The percentage of costs incurred for each stage of plant growth; 

(d)The stage of plant growth at which point of harvest is determined; 

(e)Costs to sell and other fulfillment costs were determined by estimating the Company’s average cost per pound; and 

(f)Expected yields of harvested plants are estimated and risk adjusted at each stage of growth. 

9

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

LIQUIDITY AND CAPITAL RESOURCES

The Company has a history of operating losses and of negative cash flow from operations.  The Company will remain reliant on capital markets for future funding to meet its ongoing obligations.

The Company’s ability to continue operations is dependent on management’s ability to secure additional financing.  Management is actively pursuing such additional sources of financing, and there can be no assurance it will be able to secure additional financing required for its operations.  Accordingly, these factors indicate material uncertainties that may cause significant doubt as to the Company’s ability to continue as a going concern.

As at June 30, 2020, the Company had working capital of $47,893,519 (2019 - working capital deficiency of $16,071,433), consisting of cash in the amount of $2,599,154 (2019 - $1,378,687), prepaid expenses of $447,755 (2019 - $124,140), accounts receivable of $2,196,476 (2019 - $1,463,388), biological assets of $8,635,812 (2019 - $Nil), inventory of $12,022,264 (2019 - $Nil), current portion of loans receivable of $44,852,544 (2019 - $36,504,397), net of accounts payable and accrued liabilities of $6,803,649 (2019 - $1,334,370), contingent liabilities of $14,889,600 (2019 - $Nil), convertible debenture of $Nil (2019 - $17,597,600), lease liabilities of $71,531 (2019 - $Nil) and credit facility of $Nil (2019 - $36,610,075)

The Company believes that the current capital resources are not sufficient to pay overhead expenses for next twelve months and is currently seeking additional funding to fund its overhead expenses and its continuous search for other business opportunities.  The Company will continue to monitor the current economic and financial market conditions and evaluate their impact on the Company’s liquidity and future prospects.

As at June 30, 2020, the shareholders’ equity of $149,579,014 (2019 - $52,437,424) consisted of common shares of $104,174,967 (2019 - $61,366,160), convertible series I preferred shares of $3,664,799 (2019 - $Nil), convertible series II preferred shares of $63,399,626 (2019 - $Nil), contributed surplus of $11,380,862 (2019 - $5,748,889), cumulative translation adjustment of $1,922,925 (2019 - $Nil) and deficit of $34,964,165 (2019 - $14,677,625).

As at June 30, 2020, there is no commitment for capital expenditures.

CONTRACTUAL OBLIGATIONS

As of June 30, 2019, the Company lease for office space in Toronto expires on September 2, 2020.  The Company’s future total monthly rental payments for the leased premises is approximately $71,531.

OUTSTANDING SHARE DATA

a)Authorized Share Capital: unlimited common shares without par value. 

b)Issued and Outstanding as at June 30, 2020; 

a.151,421,866 common shares (2019 – 80,962,182), 

b.3,181,250 convertible series I preferred shares (2019 – Nil) 

c.112,040,549 convertible series II preferred shares (2019 – Nil) 

Common Shares

10

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

On April 24, 2020, as a result of the completion of the reverse takeover transaction, the Company issued 23,464,462 common shares to holders of Tidal common shares.

On April 24, 2020, as a result of the completion of the reverse takeover transaction, the Company issued 7,381,000 common shares to finders.

On April 30, 2020, the Company issued 429,375 common shares pursuant to the exercise of 429,375 warrants for gross proceeds of $343,500.

On May 25, 2020, the Company issued 187,500 common shares pursuant to the exercise of 187,500 warrants for gross proceeds of $150,000.

On June 8, 2020, the Company issued 975,000 common shares pursuant to the exercise of 975,000 stock options for gross proceeds of $487,500.

On June 10, 2020, the Company issued 13,500,000 common shares pursuant to High Times Licensing Agreement.

On June 10, 2020, the Company issued 1,800,000 common shares to finder pursuant to High Times Licensing Agreement.

On June 30, 2020, the Company issued 2,339,200 common shares to investor to settle outstanding advances of $5,848,000.

Convertible Series I Preferred Shares

On April 24, 2020, as a result of the completion of the reverse takeover transaction, the Company issued 3,181,250 convertible series I preferred shares to Tidal shareholders.

Convertible Series II Preferred Shares

On April 24, 2020, the Company issued 101,345,349 to holders of MichiCann convertible series II preferred shares pursuant to Amended Agreement of the reverse takeover transaction.

On April 24, 2020, as a result of the completion of the reverse takeover transaction, the Company issued 7,381,000 convertible series II preferred shares to finders.

On June 8, 2020, the Company issued 975,000 convertible series II  preferred shares pursuant to the exercise of 975,000 stock options for gross proceeds of $487,500.

On June 30, 2020, the Company issued 2,339,200 convertible series II preferred shares to investor to settle outstanding advances of $5,848,000 at a deemed price of $2,50 per unit.

Warrants

During the year ended December 31, 2018, the Company issued 595,430 finders’ warrants with an exercise price of $1.00 per common share of the Company for a period of two years. During the six months ended June 30, 2020, the Company issued 1,186,711 warrants related to the reverse takeover transaction and 4,500,000 special warrants related to the 1251881 B.C. Ltd. acquisition. No warrants were issued during the six months ended 2019.

11

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

Warrant transactions and the number of warrants outstanding are summarized as follows:

The following warrants were outstanding at June 30, 2020:

Options

On January 11, 2020, the Company granted 271,429 stock options to an employee of the Company.  These options vest 12.5% on April 11, 2020, 12.5% on July 11, 2020, 12.5% on October 11, 2020, 12.5% on January 11, 2021, 12.5% on April 11, 2021, 12.5% on July 11, 2021, 12.5% on October 11, 2021 and the remaining 12.5% on January 11, 2022.

On April 1, 2020, the Company granted 161,250 stock options to employees of the Company.  These options vest 8.3% on July 1, 2020, 8.3% on October 1, 2020, 8.3% on January 1, 2021, 8.3% on April 1, 2021, 8.3% on July 1, 2021, 8.3% on October 1, 2021, 8.3% on January 1, 2022, 8.3% on April 1, 2022, 8.3% on July 1, 2022, 8.3% on October 1, 2022, 8.3% on January 1, 2023 and 8.3% on April 1, 2023.  These stock options have an exercise price of $1.00 and expire on April 1, 2025.

12

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

During the six months ended June 30, 2020, the Company recognized $1,275,228 (2019 - $2,425,730) in share-based compensation under graded vesting.

Options transactions and the number of options outstanding are summarized are as follows:

The following options were outstanding and exercisable at June 30, 2020:

13

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

FINANCIAL AND OTHER INSTRUMENTS

The Company’s financial assets and liabilities consist of cash, accounts receivable, loans receivable, call option, accounts payables and accrued liabilities, convertible debentures, and bridge financing.

Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s condensed interim statements of financial position as at June 30, 2020 and December 31, 2019 as follows:

14

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values.  The three levels of the fair value hierarchy are:

·Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities 

·Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, and 

·Level 3 – valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). 

On January 4, 2019, the Company entered a Put/Call Option Agreement with PharmaCo.  The call option is financial instrument measured at fair value through profit or loss.  As at June 30, 2020, the fair value of the call option was determined to be $19,828,224 (December 31, 2019 - $19,547,757).  During the period ended June 30, 2020, the Company recorded revaluation of call option of $1,420,001 (2019 - $2,008,403).  

The fair values of other financial instruments, which include accounts payable and accrued liabilities and loans receivable, approximate their carrying values due to the relatively short-term maturity of these instruments.

(a)Credit Risk 

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and loans receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits. The Company is exposed to significant credit risk on its loans receivable. The carrying amount of financial assets represents the maximum credit exposure.

(b)Foreign Exchange Rate 

The Company has cash and loans receivable denominated in US dollars and, as a consequence, the financial results of the Company’s operations as reported in Canadian dollars are subject to changes in the value of the Canadian dollar relative to the US dollar. Therefore, exchange rate movements in the US dollar can have a significant impact on the Company’s operating results due to the translation of monetary assets.

At June, 2020, a 5% (2019 – 4%)  strengthening (weakening) of the Canadian dollar against the US dollar would have increased (decreased) the Company’s net income/loss by approximately $368,000 (2019 - $2,064,000)

(c)Interest Rate Risk 

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. Interest earned on cash and cash equivalents is at nominal interest rates, and therefore the Company does not consider interest rate risk to be significant.

As at June 30, 2020, the interest rate on loans receivable and convertible debentures is fixed based on the contracts in place. As such, the Company is exposed to interest rate risk to the extent of these financial assets and liabilities.

(d)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 manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities.

15

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

As at June 30, 2020, the Company had a cash balance of $2,599,154 (December 31, 2019 - $1,378,687) available to apply against short-term business requirements and current liabilities of $22,860,486 (December 31, 2019 - $55,542,045). All of the liabilities presented as accounts payable and accrued liabilities are due within 90 days of June 30, 2020.

CREDIT FACILITY

On January 10, 2020, the existing facility was amended (the “Amended Facility”) pursuant to an amended and restated agreement between the Lender, the Company (as guarantor) and PharmaCo, RWB Illinois, Inc. (“RWB”) and MAG (collectively as borrowers).

The Amended Facility increased the facility limit to USD $49,750,000 in the aggregate of which USD $27,000,000 was to refinance the existing facility and USD $22,750,000 was used to complete the MAG acquisition and for general corporate and operating purposes.

The obligations under the Amended Facility are due and payable on the earlier of:

a)the termination date (being July 10, 2021 subject to the right of the Borrowers to extend the termination date by paying a 1% fee for two additional six-month periods for a total of 30 months); and  

b)the acceleration date (being the earlier of the date of an insolvency event or that a demand notice is delivered pursuant to the terms of the Amended Facility).    

In respect of the advance made by the Lender to the Borrowers under the Facility, the Borrowers agreed to pay the Lender:

a)Interest at the prime rate plus 12% per annum calculated and compounded monthly, payable monthly in arrears on the last day of each month; and 

b)A work fee equal to $1,492,500 (the “Amended Work Fee”) (paid by the Company) 

LOAN PAYABLE

The Company’s loan payable consists of a loan with a commercial lender acquired with the acquisition of Mid-American Growers, Inc. The principal of USD $1,676,000 bears interest at 1% per annum. The Company is required to make monthly repayments of USD $89,335 until April 6, 2022 at which point the loan will be fully repaid. As of June 30, 2020 $1,095,706 of the loan is payable within 12 months and is classified as a current liability on the condensed interim statements of financial position. The remaining $1,441,118 payable is classified as a non-current liability.

SIGNIFICANT ACCOUNTING POLICIES

The following outlines use of estimates and judgements in the preparation of these condensed interim consolidated financial statements, and significant accounting policies of the Company which have not been included in the Company’s annual audited consolidated financial statements for the year ended December 31, 2019:

While the Company’s biological assets are within the scope of IAS 41 Agriculture, the direct and indirect costs of biological assets are determined using an approach similar to the capitalization criteria outlined in IAS 2 Inventories.  They include the direct cost of seeds and growing materials as well as other direct costs such as utilities and supplies used in the growing process.  Indirect labour for individuals involved in the growing and quality control process is also included, as well as depreciation on production equipment and overhead costs.  Direct and indirect costs of biological assets are capitalized based on

16

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

standard costing as they are incurred and they are all subsequently recorded within the line item ‘cost of sales’ in profit or loss in the period that the related product is sold.  The variance between amount capitalized based on standard costing and actual costs is recorded within the line item ‘cost of sales’ in profit or loss in the period that related costs are incurred.  Unrealized fair value gains/losses on growth of biological assets are recorded in a separate line on the face of the consolidated statements of comprehensive loss.  Biological assets are measured at their fair value less costs to sell on the consolidated statements of financial position.

Inventory

The direct and indirect costs of inventory initially include the fair value of the biological asset at the time of harvest.  They also include subsequent costs such as materials, labour and depreciation expense on equipment involved in packaging, labeling and inspection.  All direct and indirect costs related to inventory are capitalized as they are incurred and they are subsequently recorded within ‘cost of sales’ in profit or loss at the time hemp is sold, except for realized fair value amounts included in inventory sold which are recorded as a separate line on the face of the consolidated statements of comprehensive loss.  Inventory is measured at lower of cost or net realizable value on the consolidated statements of financial position.

Revenue recognition

The Company follows the following steps for accounting for revenue from contracts with customers:

(1)Identify the contract with customer 

(2)Identify the performance obligation(s) 

(4)Allocate the transaction price to the performance obligation(s) 

(5)Recognize revenue when/as performance obligations(s) are satisfied 

Revenue from the direct sale of hemp to customers for a fixed price is recognized when the Company transfers control of the goods to the customer at the point of sale and customer has paid for the goods.  

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements requires the Company to select from possible alternative accounting principles, and to make estimates and assumptions that determine the reported amounts of assets and liabilities at the balance sheet date and reported costs and expenditures during the reporting period.  Estimates and assumptions may be revised as new information is obtained, and are subject to change.  The Company’s accounting policies and estimates used in the preparation of the consolidated financial statements are considered appropriate in the circumstances, but are subject to judgments and uncertainties inherent in the financial reporting process. In preparing these MD&A, management has made significant assumptions regarding the circumstances and timing of the transactions contemplated therein, which could result in a material adjustment to the carrying amount of certain assets and liabilities if changes to the assumptions are made.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are consistent with those disclosed in the notes to the consolidated financial statements for the year ended December 31, 2019.

17

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

IFRS 16 Leases

The Company adopted IFRS 16 Leases (“IFRS 16”) effective January 1, 2019. This new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. The new standard introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease. The main features of the new standard are as follows:

·An entity identifies as a lease a contract that conveys the right to control the use of an identified asset for a period in exchange for consideration. 

·A lessee recognizes an asset representing the right to use the leased asset, and a liability for its obligation to make lease payments. Exceptions are permitted for short-term leases and leases of low-value assets.  

·A lease asset is initially measured at cost, and is then depreciated similarly to property, plant and equipment. A lease liability is initially measured at the present value of the unpaid lease payments. 

·A lessee presents interest expense on a lease liability separately from depreciation of a lease asset in the statement of profit or loss and other comprehensive income. 

·A lessor continues to classify its leases as operating leases or finance leases, and to account for them accordingly. 

·A lessor provides enhanced disclosures about its risk exposure, particularly exposure to residual-value risk. 

The new standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Company reviewed its operations and noted no material impact on the adoption of IFRS 16.

18

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

RELATED PARTY TRANSACTIONS

Key management compensation

Key management personnel include the directors and officers of the Company. Key management compensation consists of the following:

i)$179,250 (June 30, 2019 - $Nil) of salaries were accrued to Brad Rogers, the Company’s Chief Executive Officer. 

ii)$69,562 (June 30, 2019 - $Nil) of salaries were paid to David Quinn, the Company’s former Chief Financial Officer. 

iii)$98,950 (June 30, 2019 - $27,000) of consulting fees,  $17,850 was paid to Executive Management Solutions Ltd., a company controller by director of the Company, and $81,000 was accrued to Marchese Design Inc., a company controlled by a director of the Company. 

There were no post-employment benefits, termination benefits or other long-term benefits paid to key management personnel for the six months ended June 30, 2020 and 2019.

Related party liabilities

The following amounts are included in accounts payable and accrued liabilities as at June 30, 2020 and December 31, 2019:

Amounts due to related parties have no stated terms of interest and/or repayment, and are unsecured.

OFF-BALANCE SHEET ARRANGEMENTS

The Company did not enter into any off-balance sheet arrangements during the period.

19

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

OUTSTANDING SHARES DATA AS OF REPORT DATE:

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The information provided in this report, including the consolidated financial statements, is the responsibility of Management.  In the preparation of these statements estimates are sometimes necessary to make a determination of 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 consolidated financial statements.

Risks

The investment in the common shares must be regarded as highly speculative due to the proposed nature of the Company’s business and its present stage of operations.  

There can be no assurance that an active and liquid market for the Company’s common shares will develop and an investor may find it difficult to resell the common shares.

CONTROLS AND PROCEDURES

The Chief Executive Officer ("CEO") and Chief Financial Officer (“CFO”) are responsible for designing internal controls over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with IFRS. The design of the Company’s internal control over financial reporting was assessed as of the date of this MD&A.

Based on this assessment, it was determined that certain weaknesses existed in internal controls over financial reporting. As indicative of many small companies, the lack of segregation of duties and effective risk assessment were identified as areas where weaknesses existed. The existence of these weaknesses is to be compensated for by senior management monitoring, which exists. The officers will continue to monitor very closely all financial activities of the Company and increase the level of supervision in key areas. It is important to note that this issue would also require the Company to hire additional staff in order to provide greater segregation of duties. Since the increased costs of such hiring could threaten the Company’s financial viability, management has chosen to disclose the potential risk in its filings and proceed with increased staffing only when the budgets and workload will enable the action. The Company has attempted to mitigate these weaknesses, through a combination of extensive and detailed review by the CEO of the financial reports.

20

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

OUTLOOK

Although current management has demonstrated its ability to raise funds in the past, with the current financial market conditions and global economic uncertainty, there can be no assurance they will be able to do so in the future.  The financial results and discussion do not include the adjustments that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

Letter of intent with Platinum Vape

On July 21, 2020, the Company entered a letter of intent (“LOI”) with various entities operating under the Platinum Vape umbrella (“PV”). On August 31, 2020, the LOI was superseded by a securities purchase agreement (“Securities Purchase Agreement”). Under the terms of the Securities Purchase Agreement, the Company will acquire all of the issued and outstanding shares of PV for consideration is as follows:

·USD $7,000,000 in cash paid on closing; 

·USD $13,000,000 in cash paid 120 days after the closing date;  

oUSD $7,500,000 paid on PV achieving revenue of USD $80,000,000; 

oUSD $7,500,000 paid on PV achieving revenue of USD $90,000,000; and 

oUSD $10,000,000 paid on PV achieving revenue of USD $100,000,000.  

Notice of Exercise for PharmaCo

Growing and sales agreement with 39 Industries, LLC

On July 24, 2020, the Company entered a growing and sales agreement (“G&S Agreement”) with 39 Industries, LLC (“39 Hemp”). Under the terms of the G&S Agreement 39 Hemp with provide deliveries of Purple Goliath Hemp Seeds (the “Seeds”) throughout 2020 to 2022. The Company will cultivate the seeds and harvest and process or leave unprocessed the resulting hemp plants from the Seeds.

21

Red White & Bloom Brands Inc.

(Formerly Tidal Royalty Corp.)

Management’s Discussion and Analysis

For the six month period ended June 30, 2020

Amended and Restated

Partnership agreement with Avicanna Inc.

On August 11, 2020, the Company entered a distribution agreement with Avicanna Inc. (“Avicanna”). Under the terms of the distribution agreement, the Company will obtain the right to be the exclusive distributor of Avicanna’s ‘Pura H&W’ branded cosmetic products and also have the right to purchase Avicanna’s cosmetic products for distribution. As consideration for the distribution agreement, the Company shall pay Avicanna an upfront licensing fee of USD $250,000 along with minimum purchase requirements as follows:

·Year 2: 50,000 units 

·Year 3: 100,000 units 

·Year 4: 120,000 units 

·Year 5: 160,000 units 

Bought deal financing agreement

On August 25, 2020, the Company entered into an underwriting agreement with PI Financial Corp. and Eight Capital (the “Underwriters”) to act as co-lead underwriters, on behalf of a syndicate of underwriters, pursuant to which the underwriters will purchase, on a bought-deal basis, units of the Company. Under the terms of the underwriting agreement, the Company will sell 29,000,000 units at a price of $0.75 per unit for aggregate gross proceeds of $21,750,000. Each unit shall consist of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $1.00 per share for a period of 24 months.

In connection with Offering, the Company has granted the Underwriters an option, exercisable in whole or in part at any time for a period of 30 days following the closing date of the offering, to increase the offering by up to an additional 4,350,000 units for additional gross proceeds of up to $3,262,500 for total aggregate gross proceeds of $25,012,500, assuming the full exercise of the over-allotment option.

The Company has agreed to pay a cash commission of 6.0 per cent of the gross proceeds of the offering and will issue to the underwriters compensation options equal to 6.0 per cent of the aggregate number of units sold under the offering. The compensation options will be exercisable into units of the company at a price per compensation option equal to the offering price for a period of 24 months from the closing of the offering.

Convertible debenture

OTHER INFORMATION

Additional information about the Company is available on SEDAR at www.sedar.com.

22