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YSS CORP. ANNUAL INFORMATION FORM FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2019 Dated July 15, 2020
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YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

Sep 20, 2020

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Page 1: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

YSS CORP.

ANNUAL INFORMATION FORM

FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2019

Dated July 15, 2020

Page 2: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

TABLE OF CONTENTS

GLOSSARY ............................................................................................................................................ 1

CONVENTIONS ...................................................................................................................................... 4

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS .................................................... 5

NOTE ON COMMON SHARE CONSOLIDATION .................................................................................... 7

CORPORATE STRUCTURE ................................................................................................................... 7

Name, Address and Incorporation ........................................................................................................ 7 Intercorporate Relationships ................................................................................................................. 8

GENERAL DEVELOPMENT OF THE BUSINESS.................................................................................... 8

Three Year History ............................................................................................................................... 8 Financial Year Ended January 31, 2018 ............................................................................................ 8 11 Month Period Ended December 31, 2018 ..................................................................................... 8 Financial Year Ended December 31, 2019 ........................................................................................ 9

Recent Developments ........................................................................................................................ 11 COVID-19 ....................................................................................................................................... 11

Significant Acquisitions....................................................................................................................... 12

DESCRIPTION OF THE BUSINESS OF THE COMPANY ..................................................................... 12

General .............................................................................................................................................. 12 Cannabis Retail Operations ............................................................................................................ 13 Specialized Skill and Knowledge ..................................................................................................... 14 Proprietary Protection ..................................................................................................................... 14 Competitive Conditions ................................................................................................................... 15 Employees ..................................................................................................................................... 15

Reorganizations ................................................................................................................................. 15

INDUSTRY CONDITIONS ..................................................................................................................... 16

Canadian Regulatory Overview .......................................................................................................... 16 Summary of the Federal Cannabis Act and the Federal Regulations ............................................... 16 Alberta Cannabis Framework .......................................................................................................... 16 Saskatchewan Cannabis Framework .............................................................................................. 18 Ontario Cannabis Framework ......................................................................................................... 19

Canadian Recreational Cannabis Market............................................................................................ 20

RISK FACTORS .................................................................................................................................... 21

Risk Factors Generally Related to the Company................................................................................. 21 Impact of the COVID-19 Pandemic ................................................................................................. 21 Listing on the TSXV and the FSE .................................................................................................... 22 Volatile Common Share Price ......................................................................................................... 22 Additional Funding Requirements ................................................................................................... 22 Capital Lending Markets ................................................................................................................. 23 Issuance of Debt............................................................................................................................. 23 Dilution ........................................................................................................................................... 23 Third Party Credit Risk .................................................................................................................... 23

Page 3: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

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Political Uncertainty ........................................................................................................................ 23 Forward-Looking Information May Prove to be Inaccurate ............................................................... 24 Management of Growth .................................................................................................................. 24 Expansion into New Activities ......................................................................................................... 24 Risks Inherent in the Acquisition of Companies, Assets and Brands ................................................ 24 Breach of Confidentiality ................................................................................................................. 24 Intellectual Property ........................................................................................................................ 25 Conflicts of Interest ......................................................................................................................... 25

Risk Factors Related to the Company’s Retail-Focused Cannabis Business Strategy ......................... 25 Operation Licences, Permits and Authorizations ............................................................................. 25 Change in Cannabis Laws, Regulations and Guidelines .................................................................. 26 Cannabis Accessories .................................................................................................................... 26 Leases ........................................................................................................................................... 26 Competition .................................................................................................................................... 27 Reliance on Key Personnel ............................................................................................................. 27 Available Talent Pool ...................................................................................................................... 27 Customer Acquisition and Retention ............................................................................................... 27 Brand Risks .................................................................................................................................... 27 Unfavourable Publicity or Consumer Perception ............................................................................. 28 Commodity Taxes and Government Mark-Ups ................................................................................ 28 Supply of Cannabis Products .......................................................................................................... 29 Effects of Agricultural Industry......................................................................................................... 29 Limited Shelf Life Products ............................................................................................................. 29 Product Recalls .............................................................................................................................. 30 Product Liability .............................................................................................................................. 30 Operating Risk and Insurance Coverage ......................................................................................... 30 Safety and Health Regulations ........................................................................................................ 30 Limited Studies on the Effects of Cannabis, Cannabis Products and Cannabis Accessories ............ 31 Fraudulent or Illegal Activity by Employees, Contractors and Consultants ....................................... 31 Liability, Enforcement Complaints, etc............................................................................................. 31 Profitability of Cannabis Retail Outlets ............................................................................................ 31 Cybersecurity ................................................................................................................................. 32

DIVIDENDS ........................................................................................................................................... 32

DESCRIPTION OF SHARE CAPITAL .................................................................................................... 32

Common Shares ................................................................................................................................ 32 First Preferred Shares ........................................................................................................................ 33

MARKET FOR SECURITIES ................................................................................................................. 33

Trading Price and Volume .................................................................................................................. 33 Prior Sales ......................................................................................................................................... 33

ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER ........................................................................................................................................... 34

DIRECTORS AND OFFICERS .............................................................................................................. 34

Cease Trade Orders .......................................................................................................................... 35 Bankruptcies ...................................................................................................................................... 36 Penalties or Sanctions ....................................................................................................................... 36 Conflicts of Interest ............................................................................................................................ 36

Page 4: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

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LEGAL PROCEEDINGS AND REGULATORY ACTIONS ...................................................................... 37

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................................ 37

TRANSFER AGENT AND REGISTRAR ................................................................................................ 37

MATERIAL CONTRACTS ...................................................................................................................... 37

INTERESTS OF EXPERTS ................................................................................................................... 37

ADDITIONAL INFORMATION ............................................................................................................... 38

Page 5: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

GLOSSARY

Certain terms and abbreviations used in this Annual Information Form are defined below:

“ABCA” means the Business Corporations Act (Alberta), including the regulations made thereunder, in each case as now in effect and as may be amended or replaced from time to time;

“AGCO” means the Alcohol and Gaming Commission of Ontario;

“AGLC” means the Alberta Gaming, Liquor and Cannabis Commission;

“AIF” means this annual information form dated July 15, 2020 for the financial year ended December 31, 2019;

“Alberta Cannabis Act” means the Gaming, Liquor and Cannabis Act (Alberta) as now in effect and as may be amended from time to time;

“Alberta Regulations” means the Gaming, Liquor and Cannabis Regulations (Alberta) as now in effect and as may be amended from time to time;

“Alberta Subsidiary” has the meaning ascribed thereto in “Corporate Structure – Intercorporate Relationships”;

“Bill 26” means Bill 26, An Act to Control and Regulate Cannabis, passed by the Government of Alberta on November 30, 2017, which came into force on October 17, 2018, as may be amended from time to time;

“Bill 36” means Bill 36, An Act to enact a new Act and make amendments to various other Acts respecting the use and sale of cannabis and vapour products in Ontario, passed by the Government of Ontario on October 17, 2018, as may be amended from time to time;

“Board” means the board of directors of the Company;

“cannabis” means a plant that belongs to the genus Cannabis and anything referred to in Schedule 1 of the Federal Cannabis Act but does not include anything referred to in Schedule 2 of the Federal Cannabis Act;

“cannabis accessory” means (a) a thing, including rolling papers or wraps, holders, pipes, water pipes, bongs and vaporizers, that is represented to be used in the consumption of cannabis; or (b) a thing that is commonly used in the consumption of cannabis is deemed to be represented to be used in the consumption of cannabis if the thing is sold at the same point of sale as cannabis;

“cannabis product” means cannabis of only one of the classes set out in Schedule 4 to the Federal Cannabis Act, or a cannabis accessory that contains such cannabis, after it has been packaged and labelled for sale to a consumer at the retail level, but does not include: (a) cannabis that is intended for an animal; (b) a cannabis accessory that contains cannabis that is intended for an animal; or (c) a drug containing cannabis;

“CEBA Loans” has the meaning ascribed thereto in “General Development of the Business – Recent Developments – COVID-19”;

“Change of Business” means the transactions, including, without limitation: (i) the Private Placement; (ii) the appointment of a new management team and Board of the Company; (iii) entering into the administrative services agreement with Solo Liquor Stores Ltd.; and (iv) the name change of the Company to “Solo Growth Corp.”, which resulted in a “Change of Business” of the Company from that of a mining company to that of a cannabis company pursuant to the policies of the TSXV;

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“Common Shares” means the common shares in the capital of the Company;

“Company” means YSS Corp.;

“Consolidation” has the meaning ascribed to it in “Note on Common Share Consolidation”;

“COVID-19” means the 2019 novel coronavirus;

“Escrow Agreement” means the value security escrow agreement entered into between the directors and officers of the Company, as at January 2, 2019, and Computershare Trust Company of Canada, in its capacity as escrow agent;

“Escrowed Securities” means 7,066,500 Common Shares and 7,014,000 Warrants;

“Federal Cannabis Act” means the Cannabis Act (Canada) as now in effect and as may be amended or replaced from time to time;

“Federal Regulations” means the SOR 2018/144: Cannabis Regulations as now in effect and as may be amended or replaced from time to time;

“First Preferred Shares” means the first preferred shares in the capital of the Company;

“FSE” means the Frankfurt Stock Exchange;

“Governmental Entity” means: (a) any international, multinational, national, federal, provincial, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, commissioner, board, bureau, ministry, agency or instrumentality, domestic or foreign, including, for greater certainty, Health Canada, the AGLC, the AGCO, the OCRC, the SGLA and other applicable regulatory authorities with oversight of the cannabis industry and any business or operations within the cannabis industry generally; (b) any subdivision or authority of any of the above; (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; or (d) any stock exchange, including, for greater certainty, the TSXV and the FSE;

“Law” means, with respect to any Person, any and all applicable law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement, whether domestic or foreign, enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person or its business, undertaking, property or securities, and to the extent that they have the force of law, tariffs, directives, policies, guidelines, notices and protocols of any Governmental Entity, as amended, including, without limitation, all applicable federal, provincial, state, municipal, and local zoning, environmental, controlled substance laws and regulations, including, for greater certainty, the Federal Cannabis Act and the Federal Regulations, the Alberta Cannabis Act, the Alberta Regulations, the Saskatchewan Cannabis Act, the Saskatchewan Regulations, the Ontario Cannabis Laws, the Ontario Regulations, and other lawful requirements of any governmental or regulatory body, including, but not limited, to relevant permits and licences;

“Licensed Producer” means the holder of a federal licence issued by Health Canada pursuant to the Federal Cannabis Act authorizing the holder to cultivate, process and sell cannabis for recreational (non-medical) purposes and conduct related activities such as possession, transportation, storage, destruction, research and development and sale of bulk cannabis to other federal licence holders;

“Licensed Retail Store” means a cannabis retail establishment authorized to operate under a provincial licence, permit or authorization issued by a Governmental Entity pursuant to Laws, such as a Retail Licence, a Retail Permit or a Store Authorization issued by the AGLC, SLGA and AGCO, respectively, but does not include the OCRC;

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“Manager Licence” has the meaning ascribed thereto in “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework”;

“Name Change” has the meaning ascribed to it in “Corporate Structure – Name, Address and Incorporation”;

“New Cannabis Classes” has the meaning ascribed thereto in “Industry Conditions – Canadian Regulatory Overview – Summary of Federal Cannabis Act and the Federal Regulations”;

“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators;

“OCRC” means the Ontario Cannabis Retail Corporation, operating as Ontario Cannabis Store;

“Ontario Cannabis Laws” include the Ontario Control Act, Ontario Licence Act and the Ontario Retail Corporation Act;

“Ontario Control Act” means the Cannabis Control Act, 2017 (Ontario) as now in effect and as may be amended from time to time;

“Ontario Emergency Order (Business Closures)” means the O. Reg. 82/20: Order under Subsection

7.0.2(4) - Closure of Places of Non-Essential Businesses enacted March 24, 2020 pursuant to the Emergency Management and Civil Protection Act (Ontario) as now in effect and as may be amended from time to time;

“Ontario Emergency Order (Cannabis)” means the O. Reg. 128/20: Order under Subsection 7.0.2(4) of the Act - Pick Up and Delivery of Cannabis enacted April 7, 2020 pursuant to the Emergency Management and Civil Protection Act (Ontario) as now in effect and as may be amended from time to time;

“Ontario Licence Act” means the Cannabis Licence Act, 2018 (Ontario) as now in effect and as may be amended from time to time;

“Ontario Regulations” includes any and all regulations made under any of the Ontario Cannabis Laws, as applicable, as now in effect and as may be amended from time to time;

“Ontario Retail Corporation Act” means the Ontario Cannabis Retail Corporation Act, 2017 as now in effect and as may be amended from time to time;

“Ontario Subsidiary” has the meaning ascribed thereto in “Corporate Structure – Intercorporate Relationships”;

“Operator Licence” has the meaning ascribed thereto in “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework”;

“Options” means options to acquire Common Shares pursuant to the Stock Option Plan;

“Private Placement” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2018”;

“Red Deer Call Right” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019”;

“Red Deer Corporation” has the meaning ascribed thereto in “Corporate Structure – Intercorporate Relationships”;

Page 8: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

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“Retail Licence” means the applicable provincial licence(s), permit(s) and authorization(s) issued by a Governmental Entity pursuant to Laws granting the holder thereof the authority to purchase, possess, store and sell cannabis products and cannabis accessories for recreational use in accordance with applicable provincial and federal Laws;

“Retail Permit” means a cannabis retail permit issued by the SLGA;

“Rights Offering” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2018”;

“Saskatchewan Cannabis Act” means The Cannabis Control (Saskatchewan) Act as now in effect and as may be amended from time to time;

“Saskatchewan Regulations” means The Cannabis Control (Saskatchewan) Regulations as now in effect and as may be amended from time to time;

“Shareholders” means the holders of Common Shares;

“SLGA” means the Saskatchewan Liquor and Gaming Authority;

“Stock Option Plan” means the Company’s stock option plan that was most recently approved by Shareholders at the Company’s most recent Shareholders’ meeting;

“Store Authorization” has the meaning ascribed thereto in “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework”;

“Sweet Tree” means Sweet Tree Modern Apothecary Ltd.;

“Sweet Tree Acquisition” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019”;

“Sweet Tree Acquisition Agreement” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019”;

“Sweet Tree Swift Current Store” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019”;

“Swift Current Corporation” has the meaning ascribed thereto in “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019”;

“TSXV” means the TSX Venture Exchange;

“Unit” means the securities of the Company, each Unit consisting of one Common Share and one Warrant;

“Warrants” means warrants to purchase Common Shares; and

“YSS Academy” means the online interactive education, training, testing and learning management program for the Company’s staff.

CONVENTIONS

Unless otherwise indicated, references herein to “$” or “dollars” are to Canadian dollars. All financial information with respect to the Company has been presented in Canadian dollars in accordance with International Financial Reporting Standards. The information in this AIF is stated as at December 31, 2019, unless otherwise indicated.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this AIF may constitute forward-looking statements. These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors (including the impact of the COVID-19 pandemic on the Company and its business, financial condition and results of operations) that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this AIF should not be unduly relied upon by investors. These statements speak only as of the date of this AIF and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this AIF may contain forward-looking statements pertaining to the following:

• the COVID-19 pandemic, governmental responses thereto, the Company’s continuous monitoring thereof and measures in response thereto and the impact thereof on the global economy, the cannabis retail industry in general and the Company;

• the Company’s business strategy, including organic growth and strategic opportunities;

• the Company’s plans for future operations, including in Alberta, Saskatchewan and Ontario, and the respective timings thereof;

• exercising the Sweet Tree Call Right;

• completing the acquisition of the Swift Current Corporation and the repayment of the loan by the Swift Current Corporation;

• the use of proceeds of the Private Placement and the Rights Offering;

• treatment under governmental regulatory and taxation regimes;

• expectations regarding legislation and regulations relating to the sale of cannabis products and cannabis accessories;

• expectations regarding the proposed changes to the cannabis retail licensing processes in Ontario and Saskatchewan;

• the Company’s financial position and future prospects;

• the Company’s use of the funds from the CEBA Loans;

• the Company’s ability to withstand short-term challenges;

• the planning, construction, development, inspection, licensing or opening of the Company’s proposed retail stores, the timings thereof and delays relating thereto;

• expectations relating to the Company’s retail and customer experience and factors contributing thereto;

• the YSS Academy and the effects thereof;

• the Sweet Tree and YSS brands and the expansion thereof;

• intellectual property protection;

• expectations relating to diversified product offerings and enriched customer experience; and

• expectations as to the size and value of the recreational cannabis market in Canada, including the New Cannabis Classes and products relating thereto.

With respect to forward-looking statements contained in this AIF, the Company has made assumptions regarding, among other things:

• the COVID-19 pandemic, the impact thereof and the effectiveness of and compliance with the measures implemented by the Company in response thereto;

• success of the Company’s business strategy, including organic growth and strategic opportunities;

• executing on the Company’s plans for future operations in Alberta, Saskatchewan and Ontario, and the respective timings thereof;

Page 10: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

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• impact of increasing competition;

• timing and amount of capital expenditures;

• future operating costs;

• adoption of the open market licensing processes in Ontario and Saskatchewan and the respective timings thereof;

• availability of cannabis products and cannabis accessories and the distribution thereof by Governmental Entities and third parties, as applicable;

• changes to laws regarding the recreational use of cannabis and the impact on the Company’s business strategy;

• demand for cannabis products and cannabis accessories and corresponding forecasted increase in revenues;

• accuracy and reliability of data analytics;

• the size of the recreational cannabis market in Canada;

• the legislative and regulatory environments of the jurisdictions where the Company has and plans to have operations;

• ability to obtain, amend or renew necessary licences, permits and authorizations for the Company’s operations in a timely and cost-efficient manner;

• compliance with applicable Laws;

• conditions in general economic and financial markets;

• ability to obtain and maintain liability insurance on acceptable terms;

• ability of the Company and third parties to meet current and future obligations, including under the CEBA Loans;

• ability to obtain additional financing on satisfactory terms, if necessary.

• ability to obtain quality and diversified cannabis products and cannabis accessories that satisfy consumer demands, equipment, services and supplies in a timely manner;

• ability to obtain and maintain retail leases on acceptable terms;

• ability to attract and retain key personnel and customers;

• ability to provide an enriched customer retail experience and executed on the Company’s five fundamental pillars;

• effectiveness of the YSS Academy; and

• ability to protect intellectual property and mitigate cybersecurity risks.

The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this AIF:

• the COVID-19 pandemic, governmental responses thereto, measures taken by the Company in response thereto and the impact thereof on the global economy, capital markets, the cannabis retail industry and the Company;

• the Company’s obligations under the CEBA Loans;

• success of the operations of the Company;

• ability of the Company to execute its business strategy and future plans of operations;

• availability of cannabis, cannabis products and cannabis accessories;

• supply interruption or delays;

• timing or delays of permitting and licensing processes;

• federal, provincial and municipal government cannabis regulation and changes thereto;

• actions taken by Governmental Entities, including increases in taxes and changes in government regulations;

• development of Licensed Retail Stores including construction delays;

• increased competition for, among other things, capital, cannabis products, cannabis accessories, Retail Licences, development permits and authorizations, leases, services, customers and skilled personnel;

• risks related to product liability, product recalls and health and safety;

• labour costs, shortages and labour relations;

• timing and amount of capital and other expenditures;

Page 11: YSS CORP. · 2020. 7. 15. · yss corp. annual information form for the financial year ended december 31, 2019 dated july 15, 2020

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• the effect of any future litigation proceedings on the Company’s business;

• negative studies or reports published in relation to the use of cannabis, cannabis products or cannabis accessories;

• unfavourable publicity and consumer perception with respect to cannabis, cannabis products and cannabis accessories;

• third party credit risks;

• risks related to cybersecurity and intellectual property; and

• the other factors considered under “Risk Factors” below. The Company has included the above summary of assumptions and risks related to forward-looking information provided herein in order to provide investors with a more complete perspective on the Company’s current and future operations and such information may not be appropriate for other purposes.

Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained herein are expressly qualified by this cautionary statement. Except as required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking statements and readers should also carefully consider the matters discussed under the heading “Risk Factors” below.

The forward-looking statements or information contained herein are made as of the date hereof and the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

NOTE ON COMMON SHARE CONSOLIDATION

On June 17, 2019, the Company consolidated all of the Common Shares on the basis of one (1) post-consolidated Common Share for each six (6) pre-consolidated Common Shares (the “Consolidation”). Unless otherwise indicated, all references to the number of Common Shares and other securities of the Company and the prices thereto prior to the Consolidation date have been restated to reflect the Consolidation. As a result, restated figures may be slightly greater than or less than their pre-consolidated equivalent due to rounding.

CORPORATE STRUCTURE

Name, Address and Incorporation

The Company was incorporated under the Business Corporations Act (British Columbia) on September 8, 1987 as “Quattro Resources Ltd.” On July 31, 2001, the Company changed its name to “Aldershot Resources Ltd.” and the Common Shares commenced trading on the TSXV under the trading symbol “ALZ”.

In connection with the Change of Business, the Company changed its name to “Solo Growth Corp.” and continued from British Columbia into Alberta under the ABCA on January 4, 2019. The Common Shares commenced trading on the TSXV under the name “Solo Growth Corp.” and the stock symbol “SOLO” at market opening on January 7, 2019. The Common Shares commenced trading on the FSE under the stock symbols “WKN:A2PBMC” and “FSE:2LK” at market opening on April 11, 2019. On May 29, 2019, the Company changed its name to “YSS Corp.” (the “Name Change”) and the Common Shares commenced trading on the TSXV under the trading symbol “YSS” at market opening on June 4, 2019.

The Company is a reporting issuer in British Columbia and Alberta. The Company’s head office is located at 800, 138 – 4th Avenue S.E., Calgary, Alberta, T2G 4Z6. The registered office of the Company is located at Suite 4300, 888 – 3rd Street S.W., Calgary, Alberta, T2P 5C5.

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Intercorporate Relationships

As at the date hereof, the Company has three material wholly-owned subsidiaries: (i) YSS Cannabis Corp. (the “Alberta Subsidiary”), incorporated on May 4, 2018 under the ABCA; (ii) YSS Ontario Inc. (the “Ontario Subsidiary”), incorporated on December 23, 2019 under the Business Corporation Act (Ontario); and (iii) 2102012 Alberta Ltd. (the “Red Deer Corporation”), incorporated on March 1, 2018 under the ABCA.

In connection with the Name Change, the Alberta Subsidiary changes its name from “Solo Cannabis Corp.” to “YSS Cannabis Corp.” on May 29, 2019.

The Company acquired the Red Deer Corporation upon exercising the Red Deer Call Right on March 12, 2020.

GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History

On June 28, 2018, the Company completed a series of transactions pursuant to which it transitioned from a resource company to a corporation carrying on business in the cannabis sector.

Prior to the summer of 2018, the Company’s principal business was in the exploration and development of resource properties. Since June 28, 2018, the Company has been executing on a retail-focused cannabis business strategy.

Financial Year Ended January 31, 2018

The Company conducted an exploration program on the discovery project in Ontario (the “Gowganda Gold Project”), which the Company acquired an interest in pursuant to the option agreement it entered into with Transition Metals Corp. dated effective October 31, 2016 (the “Option Agreement”), until the fall of 2017, after which all operations ceased.

11 Month Period Ended December 31, 2018

On June 4, 2018, the Company and Transition Metals Corp. entered into an agreement to terminate the Option Agreement and the Company no longer has any rights with respect to the Gowganda Gold Project.

On June 28, 2018, the Company: (i) completed a non-brokered private placement for gross proceeds of $25.6 million (the “Private Placement”); (ii) appointed a new management team and the Board; and (iii) entered into an administrative services agreement with Solo Liquor Stores Ltd., which was terminated effective March 11, 2019. The proceeds from the Private Placement are being used to establish the Company’s retail cannabis business across Canada and build Licensed Retail Stores. See “Description of the Business of the Company – General” for more information.

Pursuant to the Private Placement, a total of 85,333,233 Common Shares and 19,496,666 Warrants were issued. The management team and the Board, together with additional subscribers identified by such persons, subscribed for a total of 19,496,666 Units at a price of $0.30 per Unit, each Unit consisting of one Common Share and one Warrant. The remaining subscribers subscribed for a total of 65,836,567 Common Shares at a price of $0.30 per Common Share. Each Warrant issued pursuant to the Private Placement entitles the holder to purchase one Common Share at a price of $0.30 for a period of five years and shall be exercisable for 1.5 Common Shares, provided that, at the time of exercise in respect of the additional 0.5 of a Common Share per Warrant, either: (i) the Common Shares are listed on the facilities of a recognized stock exchange (other than the TSXV); or (ii) the Common Shares are acquired for cash or for the securities of a company listed on a recognized stock exchange (other than the TSXV). The Warrants issued under the Private Placement have fully vested and become exercisable.

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On August 1, 2018, Theodore Zunich joined the management team as Vice President, Corporate Development.

On August 7, 2018, the Company changed its fiscal year ended from January 31 to December 31.

On December 18, 2018, the Company completed a rights offering (the “Rights Offering”). Pursuant to the Rights Offering, an aggregate of 16,502,952 Common Shares were issued at a price of $0.30 per Common Share, resulting in proceeds to the Company of approximately $5.0 million. Of such Common Shares, an aggregate of 2,166,769 were purchased by Shareholders who were directors or officers of the Company or identified by such persons. In addition to the Common Shares, such individuals were issued an aggregate of 2,166,769 Warrants in accordance with the prior arrangement for the issuance of such Warrants. Each Warrant issued under the Rights Offering entitles the holder to purchase one Common Share at a price of $0.30 for a period of five years. In the event the 20-day volume weighted average trading price of the Common Shares equals or exceeds $1.05, each Warrant shall be exercisable for 1.5 Common Shares, provided that, at the time of exercise in respect of the additional 0.5 of a Common Share per Warrant, either: (i) the Common Shares are listed on the facilities of a recognized stock exchange (other than the TSXV); or (ii) the Common Shares are acquired for cash or for the securities of a company listed on a recognized stock exchange (other than the TSXV).

As at December 31, 2018, the Company had completed construction on three stores in Alberta and was in the process of completing construction on four additional locations in Alberta.

Financial Year Ended December 31, 2019

On January 3, 2019, the TSXV granted final approval of the Company’s “Change of Business”. In connection with the Change of Business, the Company changed its name from “Aldershot Resources Ltd.” to “Solo Growth Corp.”, continued from British Columbia to Alberta under the ABCA and adopted its new bylaws, a copy of which can be found on the Company’s profile on SEDAR. The Common Shares commenced trading on the TSXV as a Tier 2 Life Sciences Issuer under the name “Solo Growth Corp.” and the trading symbol “SOLO” at the market opening on January 7, 2019. On March 12, 2019, Theodore Zunich was promoted to President and Chief Executive Officer of the Company and appointed to the Board. Concurrent with Mr. Zunich’s appointment, Pali Bedi resigned as President, Chief Executive Officer and a director of the Company and Jasbir Hans resigned as Vice President, Operations. On March 20, 2019, the Company entered into and closed a definitive agreement with respect to a call right (the “Red Deer Call Right”) on all the voting shares of the Red Deer Corporation operating a Licensed Retail Store in Red Deer, Alberta (“YSS Red Deer”) for aggregate cash consideration of $2.6 million. The Company also entered into a perpetual licensing agreement with the Red Deer Corporation to rebrand and operate YSS Red Deer under the YSS™ banner. The Company exercised the Red Deer Call Right on March 12, 2020, for no additional consideration, and in turn the Red Deer Corporation became a wholly-owned subsidiary of the Company. On May 29, 2019, at the Company’s meeting of Shareholders, Michael Stark did not stand for re-election and resigned as a director of the Company.

On May 29, 2019, the Company completed the Name Change.

On June 4, 2019, the Common Shares began trading on the TSXV under the Company’s new name “YSS Corp.” and new stock symbol “YSS”.

On June 13, 2019, the Company entered into and closed a definitive agreement (the “Sweet Tree Acquisition Agreement”) with respect to a call right (the “Sweet Tree Call Right”) on all the voting shares of Sweet Tree for aggregate consideration of $1.5 million cash and 22.5 million Common Shares, plus contingent consideration of up to an additional 8.97 million Common Shares. The Company also entered

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into a perpetual licensing agreement to rebrand and operate the stores under the YSS™ or Sweet Tree™ banner (together, with the Sweet Tree Call Right, the “Sweet Tree Acquisition”). On June 13, 2019, upon closing the Sweet Tree Acquisition, the Company paid $1.5 million cash and issued an aggregate of 4.5 million Common Shares in accordance with the terms of the Sweet Tree Acquisition Agreement. The Company may exercise the Sweet Tree Call Right in its sole and absolute discretion at any point in time for no additional consideration. As at June 13, 2019, Sweet Tree had: (i) two operating Licensed Retail Stores, Sweet Tree Calgary - Forest Lawn and Sweet Tree Calgary - Riverbend; (ii) two completed and inspected locations, in queue to receive Retail Licences from the AGLC, located in Calgary near the Sunridge Mall (“Sweet Tree Calgary - Sunridge”) and in High River (“Sweet Tree High River”); (iii) two unconstructed locations with development and building permits located in Calgary on 17th Avenue S.W. (“Sweet Tree - 17th Ave”) and in a shopping centre near the Douglas Glen neighbourhood; and (iv) one unconstructed location with a development and building permit located in Okotoks (“Sweet Tree Okotoks”). On June 13, 2019, in connection with the Sweet Tree Acquisition, Tony Balakas, Chief Executive Officer of Sweet Tree, was appointed as Vice President, Operations of the Company. On June 17, 2019, the Company completed the Consolidation.

In July 2019, the Company opened two additional Licensed Retail Stores: (i) Sweet Tree Calgary - Sunridge; and (ii) Sweet Tree High River. In accordance with the terms and conditions of the Sweet Tree Acquisition Agreement, the Company issued an additional aggregate of 9.5 million Common Shares in connection with the issuance of the Retail Licences for these Licensed Retail Stores. In August 2019, the Company opened five additional Licensed Retail Stores: (i) YSS Calgary - Woodbine; (ii) YSS Stony Plain; (iii) YSS Vermilion; (iv) YSS Vegreville; and (v) YSS Spruce Grove. In September 2019, the Company opened two additional Licensed Retail Stores: (i) YSS Lloydminster; and (ii) YSS Edmonton - NW Landing. On October 16, 2019, the Company executed a definitive agreement to acquire 102014474 Saskatchewan Inc. (the “Swift Current Corporation”), a privately-held company that was issued a Retail Permit from the SLGA for a retail store in Swift Current, Saskatchewan (the “Sweet Tree Swift Current Store”) for aggregate consideration of $675,000, payable at closing in cash, Common Shares or a mix of cash and Common Shares, at the sole discretion of the Company, plus additional consideration ranging from $475,000 to $675,000, payable in cash or Common Shares, based on the future cash flow of the Sweet Tree Swift Current Store. On December 6, 2019, the Company opened Sweet Tree Okotoks. In accordance with the terms and conditions of the Sweet Tree Acquisition Agreement, the Company issued an additional aggregate of 1.875 million Common Shares in connection with the issuance of the Retail Licence for Sweet Tree Okotoks. On December 12, 2019, the Government of Ontario released a framework that will, over time, transition cannabis retail in the province from a lottery system to an open market, with Store Authorizations expected to be issued commencing in April of 2020. The AGCO began accepting applications for Operator Licenses on January 6, 2020 and applications for Store Authorizations on March 2, 2020. The Company, under the Ontario Subsidiary, applied to the AGCO for an Operator License on January 15, 2020 and a Store Authorization on March 4, 2020. See “Recent Developments”, “Description of the Business of the Company – General” and “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework” for additional information. As at December 31, 2019, the Company operated 14 Licensed Retail Stores across Alberta and in Saskatchewan under the YSS™ and Sweet Tree™ brands.

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Recent Developments

In January 2020, the Company opened YSS 4th Ave and Sweet Tree Calgary - 17th Ave. In accordance with the terms and conditions of the Sweet Tree Acquisition Agreement, the Company issued an additional aggregate of 4.75 million Common Shares in connection with the issuance of the Retail Licence for Sweet Tree Calgary - 17th Ave. On January 15, 2020, Shahin Mottahed resigned as a director of the Company. On February 8, 2020, the Company opened YSS Grande Prairie (Gateway). On March 4, 2020, the Company, under the Ontario Subsidiary, applied to the AGCO for a Store Authorization in connection with its proposed retail location in Waterloo, Ontario. On March 12, 2020, the Company exercised the Red Deer Call Right for no additional consideration and as a result the Red Deer Corporation became a wholly-owned subsidiary of the Company. On March 13, 2020, the Ontario Subsidiary was issued an Operator License from the AGCO. In addition, members of the Company’s management team have also been issued Manager Licences from the AGCO. On April 7, 2020, in response to the COVID-19 pandemic, the Government of Ontario issued the Ontario Emergency Order (Cannabis), which permits holders of a Store Authorization to operate a Licensed Retail Store for the purposes of (i) allowing customers to pick up cannabis products (and any other products permitted to be sold at a Licensed Retail Store) and (ii) delivering such products directly to customers until July 22, 2020, unless the Ontario Emergency Order (Cannabis) is extended. Concurrently, on April 7, 2020, the AGCO announced it would temporarily pause issuing Store Authorizations during the period of the Ontario Emergency Order (Business Closures). Subsequently, on April 22, 2020, the AGCO announced that it will resume issuing Store Authorizations to stores that are complete, in compliance with the Ontario Emergency Order (Business Closures) and meet all regulatory requirements. On April 21, 2020, the Company launched an online ordering platform by way of click-and-collect, available through www.ysscorp.ca and www.sweettreecannabis.com, for the Company’s Licensed Retail Stores in Alberta and Saskatchewan. The click-and-collect platform enables prospective customers to browse and filter the Company’s inventory of cannabis products and cannabis accessories by each Licensed Retail Store and reserve cannabis products and cannabis accessories to be purchased and picked up by the customer at the selected Licensed Retail Store. Since May 19, 2020, as part of the Government of Ontario’s first stage of the province’s reopening framework, Licensed Retail Stores in Ontario have been be permitted to expand their retail operations to include in-person sales. On June 3, 2020, the Ontario Subsidiary completed its 15-day public notice period with respect to its Store Authorization application for the Company’s proposed retail location in Waterloo, Ontario. The Company intends to continue to pursue developing this proposed retail location once the order declaring a state of emergency in Ontario and certain restrictions imposed in response to the COVID-19 pandemic are lifted. See “Description of the Business of the Company – General” and “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework” for more information. COVID-19

The current COVID-19 pandemic has created an unprecedented operating environment for many businesses, including the Company. Cannabis retail has been deemed, and currently remains, an essential service and an allowable business service by the Government of Alberta and the Government of Saskatchewan, respectively. As at the date hereof, all of the Company’s Licensed Retail Stores remain open with reduced operating hours and the Company’s operations have not been materially disrupted. Notwithstanding the above, there can be no assurance that cannabis retail will remain an essential service

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and an allowable business service in the provinces of Alberta and Saskatchewan, respectively. Any governmental changes that require the Company to temporarily suspend its operations would negatively impact the Company’s business, financial condition and results of operations. The Company is closely monitoring the evolution of the COVID-19 pandemic with a focus on the jurisdictions in which the Company operates. Trust has always been one of the Company’s core business values and, now in the face of the COVID-19 pandemic, the Company has prioritized trust more than ever. The Company cares deeply about the safety and health of its employees, customers and partners and has taken responsible measures to protect the health and safety of its employees and customers at its Licensed Retail Stores. Such measures include: reorganizing physical layouts, including adding physical distancing markers; installing plexi-guards at point-of-sale locations; implementing additional health screening for employees and having additional personnel during peak hours to enforce physical distancing requirements; applying rigorous cleaning protocols; offering the click-and-collect ordering system, recommending the debt/credit tap payment method and removing tablets and cannabis sensory jars to minimize in-store interactions and exposure; and providing information to employees and customers regarding social distancing requirements, personal hygiene and self-isolation/quarantine if experiencing any cold or flu like symptoms. The Company will continue to assess and mitigate the risks of its business operations. Notwithstanding the above, there can be no assurance that the measures implemented by the Company have been and will be effective at protecting the health and safety of its employees and customers. The Company has, and plans to continue to, pursue optimization strategies, collaborate with landlords and monitor government sponsored assistance programs that may further solidify corporate stability during these unprecedented times. To help mitigate the economic impact of the COVID-19 pandemic, the Government of Canada established the Canada Emergency Business Account, which provides eligible businesses an interest-free, government-guaranteed loan to help cover non-deferrable operating costs as a result of the COVID-19 pandemic (the “CEBA Loan”). The CEBA Loan has an initial term that expires on December 31, 2020, throughout which, the CEBA Loan is non-interest bearing and has no principal payments. Principal repayments under the CEBA Loan can be voluntarily made at any time without fees or penalties and repaying the balance of the CEBA Loan on or before December 31, 2022 will result in loan forgiveness of 25%. If the CEBA Loan is not repaid by December 31, 2022, it will be extended for an additional 3-year term, bearing an interest rate of 5% per annum, with payments commencing January 31, 2023. The Company, through each of its subsidiaries, applied for and received CEBA Loans in the aggregate amount of $160,000. The funds from the CEBA Loans are being used to enhance the health and safety protection measures implemented at each of the Company’s Licensed Retail Stores. See “Risk Factors – Risk Factors Generally Related to the Company – Impact of the COVID-19 Pandemic”. Significant Acquisitions

The Company did not complete any significant acquisitions during its most recently completed financial year for which disclosure is required under Part 8 of NI 51-102.

DESCRIPTION OF THE BUSINESS OF THE COMPANY

General

The Company is executing on its vision of becoming a premier retailer and the trusted destination for cannabis in Canada. Since its launch in June of 2018, the Company has built a strategic portfolio of Licensed Retail Stores across Alberta and in Saskatchewan. Focusing initially on its existing operational markets in the provinces of Alberta and Saskatchewan, the Company intends to expand its operations in Saskatchewan and into Ontario and other Canadian markets.

The management team continues to focus on executing on strategic opportunities within the cannabis sector that will drive shareholder value. Such opportunities include accretive strategic acquisitions,

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partnerships and/or other ventures designed to supplement the Company’s organic growth profile. With a strong balance sheet, extensive relationship network and aligned management team, the Company is well positioned to withstand short-term challenges and capitalize on opportunities that may arise within the current landscape.

For more information, see “General Development of the Business – Three Year History – 11 Month Period Ended December 31, 2018”, “General Development of the Business – Three Year History – Financial Year Ended December 31, 2019” and “General Development of the Business – Recent Developments”.

Cannabis Retail Operations

The Company has developed a retail cannabis business across Alberta and in Saskatchewan by operating Licensed Retail Stores.

In Alberta, the Company operates 16 Licensed Retail Stores under the YSS™ and Sweet Tree™ brands. In addition, the Company has two proposed retail locations in Alberta, one of which the Company intends to begin construction on in the third quarter of 2020 and one of which the Company has deferred the construction of until later in 2020 due to the COVID-19 pandemic and the conditions of the capital markets.

In Saskatchewan, the Company operates the Sweet Tree Swift Current Store under the Sweet Tree™ brand. In addition to operating a bricks-and-mortar store, the Company intends to sell and deliver cannabis products and cannabis accessories online to adults in Saskatchewan through the Sweet Tree Swift Current Store. The Company anticipates further expanding its operations in Saskatchewan: (a) organically, as additional Retail Permits are issued by the SLGA; and (b) by pursuing strategic opportunities and acquiring existing Licensed Retail Stores and/or retailers. See “Industry Conditions – Canadian Regulatory Overview – Saskatchewan Cannabis Framework” for more information.

Prior to the COVID-19 pandemic, the Company was in the process of screening potential locations to supplement the lease the Company holds in Waterloo, Ontario. However, the Company has decided to delay its efforts in Ontario due to the COVID-19 pandemic. The Company intends to resume its efforts in Ontario, including developing its proposed retail location in Waterloo, Ontario, once the order declaring a state of emergency in Ontario and certain restrictions imposed in response to the COVID-19 pandemic are lifted. At such point, the Company’s initial strategy will be to identify and pursue at least three premier locations and, similar to the strategy deployed in western Canada, the Company will evaluate strategic partnerships and acquisition opportunities in Ontario as the market develops. See “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework” for more information.

The Company’s retail experience is built on its five fundamental pillars: convenience, value, selection, team, and above all else, trust.

• Convenience. Strategically located, both walkable and with parking, making it easier for people from the city to the suburbs and beyond to visit YSS and Sweet Tree Licensed Retail Stores, supporting customers’ desire to explore and discover cannabis on their own terms.

• Value. The Company believes in offering high-quality products at competitive prices. As its product line grows, the commitment to offering value for its customers’ dollars will stay the same.

• Selection. With extensive storage and detailed menus, the Company’s Licensed Retail Stores are designed to carry and offer a wide variety of products (also referred to as ‘stock keeping units’ or “SKUs”). As the cannabis industry grows, so will the product offering and demand for selection.

• Team. The Company believes that customer service is driven by the retention of engaging, responsible and cannabis-passionate employees. Combined with education provided through its unique YSS Academy, the Company will ensure the accuracy of knowledge held by its community of staff and encourage its customers to learn, aided by guidance from the Company’s employees.

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• Trust. The Company understands that consistency of a positive, independent retail experience will drive long-term customer loyalty and trust. The Company believes that Canadians want and deserve a cannabis retailer they can truly trust.

To ensure minors are not exposed to or do not have access to cannabis products, the Company follows a two-step age verification process at each of the Licensed Retail Stores, whereby staff are required to obtain valid identification and verify proof of age, at two points, when a person who appears to be under 25 years of age: (i) attempts to enter any of the Licensed Retail Stores; and (ii) attempts to buy any cannabis product or cannabis accessory. In addition, the Company also has age verification safeguards on its YSS and Sweet Tree websites.

Through the YSS Academy, the Company’s staff are trained to comply with applicable Laws, including, without limitation, matters relating to advertising, selling to minors, storage of cannabis products and limits on purchasing of cannabis products. The Company implements continuous staff training, including with respect to new cannabis products and cannabis accessories and techniques to maximize sales.

The Company purchases its cannabis products for future sales to customers in accordance with applicable Laws. All cannabis products are purchased directly or indirectly from Licensed Producers. In Alberta, the Company purchases its cannabis products from the AGLC, whereas in Saskatchewan, the Company purchases its cannabis products directly from Licensed Producers that have been authorized the SLGA. With respect to pricing, in Alberta, the AGLC sets the wholesale price for cannabis products purchased by the Company, conversely, in Saskatchewan, the wholesale price for cannabis products is determined through negotiations between the Company and the authorized Licensed Producers.

The Company also purchases its cannabis accessories for future sales to its customers in accordance with applicable Laws. The Company purchases all of its cannabis accessories for future sales to its customers in Alberta and Saskatchewan directly from manufacturers, distributors and wholesalers of the cannabis accessories. The pricing for cannabis accessories purchased for futures sales is determined through negotiation with manufacturers, distributors and wholesalers.

Specialized Skill and Knowledge

All aspects of the Company’s business require specialized skills and knowledge. Such skills and knowledge include, among other things, knowledge on cannabis, cannabis products and cannabis accessories, retail, consumer goods, customer service and the sale of recreational cannabis in Canada. The management team brings experience across the cannabis retail industry, capital markets, financial management and a strong commitment to deliver shareholder value by leveraging high-quality opportunities within the cannabis industry and the Company will continue to build out its team from an operative point of view, which may include the addition of individuals with strong retail operational experience. For more information, see “Directors and Officers”.

Proprietary Protection

The Company recognizes the importance of its retail brands on the Company’s success and its competitive position and the need to protect and enhance its value. The Company operates its Licensed Retail Stores under the YSS™ or Sweet Tree™ banner.

The YSS™ retail brand is rooted in exploration and discovery. The Company believes that discovery and exploration are a part of every human journey. Inspired by directional cues experienced in travel, the Company has created a brand that feels familiar and guiding. Elevating the design to create relevancy in its execution, but with a trusting longevity. Several of the Company’s Licensed Retail Stores in Alberta operate under the YSS brand, and the Company intends to expand the brand into Ontario and other provinces in 2020, subject to the order declaring a state of emergency in Ontario, certain restrictions imposed in response to the COVID-19 pandemic being lifted and the licensing process.

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The Sweet Tree™ retail brand caters more to the traditional cannabis culture, with a strong presence in Calgary and southern Alberta. With a focus on location and customer service, Sweet Tree aligns with YSS’ consumer strategy to offer customers a trusted retail experience. The Company will continue to establish Sweet Tree as a second retail brand based on target demographics.

The Company has pending trademark applications for “YSS” and the YSS design.

Sweet Tree has a registered trademark for “SWEET TREE MODERN APOTHECARY” and a pending trademark application for “SWEET TREE”. The Company will acquire the intellectual property rights of the Sweet Tree brand upon exercising the Sweet Tree Call Right for no additional consideration.

The Company also intends to pursue additional intellectual property registrations and analyse its unregistered intellectual property to determine whether there are additional opportunities for protection. The Company will periodically review its options with respect to the protection of its intellectual property.

See “Risk Factors – Risk Factor Generally Related to the Company – Intellectual Property”.

Competitive Conditions

The private retail cannabis industry is very competitive, and the Company anticipates increases in the level of competition in the Canadian cannabis industry as new participants enter the market. The principal aspects of competition include, among other things, obtaining Retail Licences and regulatory approvals, the availability of cannabis products and cannabis accessories, securing real estate locations and the ability to attract and retain key personnel and customers.

The Company believes that its significant competitors are other entities seeking multiple Retail Licences in multiple jurisdictions, which may have greater resources or longer operating histories. The Company also faces competition from vertically-integrated cannabis companies, existing retailers, government retailers, such as the AGLC and the OCRC, and the illegal market.

Notwithstanding the above, the Company believes that it differentiates itself through its diversified product offerings and enriched customer experience. In addition, the Company employs data analytics to determine demographics for proposed retail locations as well as consumer demands.

The Company believes that the experience of the management team has and will continue to be a competitive advantage in navigating the competitive cannabis retail marketplace. The Company’s management team and the Board is business first, with a view to profitability, strong corporate governance and essential business and operational controls. The Company believes that prudent capital management and operational efficiency are key to the success in any retail business where margins are critical for success and longevity.

See “Industry Conditions – Canadian Regulatory Overview – Alberta Cannabis Framework”, “Industry Conditions – Canadian Regulatory Overview – Saskatchewan Cannabis Framework”, “Industry Conditions – Canadian Regulatory Overview – Ontario Cannabis Framework” and “Risk Factors – Risk Factors Related to the Company’s Retail-Focused Cannabis Business Strategy”.

Employees

As at December 31, 2019, the Company had 114 employees. As at the date hereof, the Company has 129 employees.

Reorganizations

Other than as disclosed in “General Development of the Business – Three Year History – 11 Month Period Ended December 31, 2018”, there have been no material reorganizations of the Company within the three most recently completed financial years or completed during or proposed for the current financial year.

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INDUSTRY CONDITIONS

Canadian Regulatory Overview

Summary of the Federal Cannabis Act and the Federal Regulations

On June 18, 2018, the Government of Canada passed legislation, the Federal Cannabis Act, outlining the framework for the legalization of recreational use of cannabis, as well as laws to address drug-impaired driving, protection of public health and safety and prevent youth access to cannabis. Regulations to support the Federal Cannabis Act were also published in the Canada Gazette, Part II, on July 11, 2018. The Federal Cannabis Act and its regulations came into force on October 17, 2018 and adults are now able to purchase limited amounts of cannabis products from Licensed Retail Stores subject to provincial and municipal government restrictions. Federally-governed cannabis operations, including the production of cannabis for medical and recreational purposes, is no longer regulated by the Controlled Drugs and Substances Act (Canada) and the Access to Cannabis for Medical Purposes Regulations (Canada) has been repealed and concurrently restated as Part 14 of the Federal Regulations.

Pursuant to the Federal Regulations, cannabis products require plain packaging and must be labelled with mandatory health warnings, a standardized cannabis symbol and specific information about the product. The Federal Regulations also set out strict requirements with respect to logos, colours and branding.

The Federal Cannabis Act grants the provincial and municipal governments the authority to prescribe regulations regarding cannabis retail and distribution (including advertising), as well as the ability to alter some of the existing baseline requirements, such as increasing the minimum age for purchase and consumption. Provincial and territorial governments in Canada made varying announcements on the proposed regulatory regimes for the distribution and sale of cannabis for recreational purposes. For example, Saskatchewan and Manitoba have chosen a private sector model for distribution, whereas Alberta, British Columbia, Newfoundland and Labrador, Northwest Territories, Nunavut and Ontario have opted to pursue a hybrid approach of public and private sale and distribution.

On December 20, 2018, Health Canada launched its regulatory consultation for proposed amendments (the “Proposal”) to the Federal Regulations and the Federal Cannabis Act. Under the Proposal, “edible cannabis”, “cannabis extracts” and “cannabis topicals” (collectively, the “New Cannabis Classes”) would be added as three new classes of cannabis that would be permitted for sale under the Federal Cannabis Act. The Proposal also contained amendments to the Federal Regulations that established regulatory controls to address the public health and public safety risks associated with the New Cannabis Classes, including restrictions on ingredients and product composition, THC limits, packaging and labelling requirements, good production practices and record keeping requirements. Health Canada declared that the objective of the Proposal was to ensure that a strict regulatory framework was in place by no later than October 17, 2019, to address the unique public health and public safety risks posed by the New Cannabis Classes. On June 14, 2019 the Government of Canada announced its final amendments to the Federal Regulations with respect to the rules for the production and sale of the New Cannabis Classes.

On October 17, 2019, the Federal Regulations and Federal Cannabis Act were amended, and New Cannabis Classes became legal for production and sale in Canada.

The impact of these regulatory changes on our business is unknown, and the proposed regulatory changes and distribution models may not be implemented at all. See “Risk Factors”.

Alberta Cannabis Framework

On November 30, 2017, the Government of Alberta passed Bill 26, which contained the regulatory framework for recreational cannabis sales in Alberta. Bill 26 amended the Gaming and Liquor Act (Alberta) to become the Alberta Cannabis Act, which governs the purchase, distribution, sale and consumption of recreational cannabis in the province. Under the Alberta Cannabis Act, cannabis distribution in Alberta is carried out through a hybrid retail model under the oversight of the AGLC. The cannabis distribution

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framework in the Alberta Cannabis Act provides that private retailers are able to open Licensed Retail Stores in Alberta, such as those operated by the Company. However, online sales and home delivery of recreational cannabis is only available through an online website operated by the AGLC. Notwithstanding the above, Licensed Retail Stores in Alberta, such as those operated by the Company, are permitted to offer click-and-collect services, which allow customers to order products online to be purchased and picked up in-store.

On February 16, 2018, the Government of Alberta released the Alberta Regulations establishing regulations for the sale of recreational cannabis in Alberta, including the licensing of privately-owned Licensed Retail Stores. The Alberta Regulations stipulate, among other restrictions, that:

1. no one person can have more than 15% of Retail Licences in Alberta and no group of persons can have more than 15% of Retail Licences in Alberta where, in the opinion of the AGLC, Retail Licences are or would likely be subject to common control in any material respect;

2. cannabis retailers are required to hire individuals that are over eighteen years of age, have successfully completed training requirements set by the AGLC, and that have passed a criminal background check;

3. Licensed Retail Stores cannot be located within 100 meters of a provincial health care facility or a school;

4. Licensed Retail Stores cannot be open outside the hours of 10 a.m. and 2 a.m.;

5. Licensed Retail Stores must implement inventory tracking, count and sales systems and security measures, including alarms, video surveillance and secured product storage;

6. cannabis consumption at Licensed Retail Stores is prohibited;

7. cannabis suppliers and their representatives cannot offer, nor can retail cannabis licencees accept, perks such as loans, money, rebates, concessions, discounts, furnishings, storage equipment, fixtures, decorations, signs, supplies or anything of value; and

8. transfers of Retail Licences are prohibited, and any change in ownership of a Licensed Retail Stores business must be preapproved by the AGLC.

The Alberta Cannabis Act and the Alberta Regulations came into effect on October 17, 2018 concurrently with the legalization of recreational cannabis.

On November 21, 2018, in response to the national shortage of cannabis supply, the AGLC announced a temporary halt on accepting new applications for Retail Licences and issuing new Retail Licences. The AGLC also announced that it would continue to process current Retail Licence applications under existing standard procedures and would maintain a queue of approved applicants on a first-in, first-out basis for licensing once the halt was lifted. On May 30, 2019, the AGLC lifted the moratorium on accepting new Retail Licence applications and issuing new Retail Licences.

Since January 2020, the New Cannabis Classes and cannabis products relating thereto have been available to purchase at Licensed Retail Stores in Alberta.

Since February 2020, cannabis vape pens, cartridges and other vape products have been available to purchase at Licensed Retail Stores in Alberta. In February 2020, the Government of Alberta released its Budget 2020 Tax Plan, indicating that the government will implement a 20% tax on the retail sale price of vaping products. The tax will apply to: (i) all vaping devices (e.g., pens, open systems, pod and catridge devices, etc.) and related accessories; (ii) all e-liquids, including cannabis e-liquids; and (iii) other DIY vaping products (e.g., propylene glycol, vegetable glycerin, nicotine solutions, flavourings, etc.) sold for vaping.

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On March 27, 2020, in response to the COVID-19 pandemic, the Government of Alberta made several announcements affecting business, workplace and facility closures, including the immediate closure of all non-essential businesses. The Government of Alberta also released a list of essential services in the province, which included and continues to include, as at the date hereof, cannabis retail outlets, manufacturers and producers as well as warehouses, distributors and AGLC operations, as well as vape shops. Notwithstanding the above, there can be no assurance that cannabis retail will remain an essential service in Alberta and any governmental changes that require the Company to temporarily suspend or significantly change its operations in Alberta would negatively impact the Company’s business, financial condition and results of operations. The Company will continue to monitor the impact of the COVID-19 pandemic and the actions by Governmental Entities in response thereto as it relates to the impact on the development of the Company’s proposed retail locations in Alberta. See “Description of the Business of the Company – General” and “Risk Factors – Risk Factors Generally Related to the Company – Impact of the COVID-19 Pandemic” for additional information.

Saskatchewan Cannabis Framework

On January 8, 2018, the Government of Saskatchewan announced, among other things, that both the wholesale and retail of recreational cannabis products would be conducted by the private sector and regulated by SLGA.

On March 14, 2018, the Government of Saskatchewan released its regulatory framework for recreational cannabis. Concurrently, on March 14, 2018, the SLGA released details for its two-phase request for proposals (“RFP”) process for Retail Permits and informed the public that, at such time, there would be 51 Retail Permits available across 32 eligible communities in Saskatchewan. The first phase of the RFP process involved screening proponents for financial and sales and inventory tracking systems. All proponents that qualified entered the second phase of the RFP process, which was a lottery draw to select the successful proponents. The successful proponents had 45 days to begin the permitting application process and, as a condition to the Retail Permit, had to be operational by October 17, 2019.

The Saskatchewan Cannabis Act and the Saskatchewan Regulations came into effect on October 17, 2018 concurrently with the legalization of recreational cannabis. Pursuant to the Saskatchewan Cannabis Act and the Saskatchewan Regulations, in addition to operating a brick-and-mortar Licensed Retail Store, Retail Permit holders are permitted to sell cannabis products and cannabis accessories to customers through an online platform and to deliver such products to customers at their homes. In addition, holders of Retail Permits are permitted to purchase their cannabis products for their Licensed Retail Stores from: (i) Licensed Producers registered with the SGLA; (ii) other holders of Retail Permits issued by the SLGA; (iii) holders of cannabis wholesale permits issued by the SLGA; or (iv) wholesalers located outside of Saskatchewan registered with the SLGA.

On October 29, 2019, the Government of Saskatchewan announced that it will move forward with a phased-in open market system when allocating future Retail Permits. Since April 2020, the SLGA has accepted Retail Permit applications for proposed locations in communities with less than 2,500 people as well in communities that were previously identified as being eligible for Retail Permits but did not proceed. In addition, the Government of Saskatchewan announced that, commencing September 2020, the SLGA will begin accepting Retail Permit applications for proposed locations in all of the communities in Saskatchewan, however, municipalities are permitted to opt out of having Licensed Retail Store in their respective communities.

Since December 2019, the New Cannabis Classes, cannabis products relating thereto, cannabis vape pens, cartridges and other vape products have been available to purchase at Licensed Retail Stores in Saskatchewan and online through platforms operated by Licensed Retail Stores in Saskatchewan.

On March 25, 2020, in response to the COVID-19 pandemic, the Government of Saskatchewan announced that effective March 26, 2020, non-allowable business services will be unable to provide public-facing services. The Government of Saskatchewan released a list of business services that are allowed to continue operate during the COVID-19 response, which included and continues to include, as at the date

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hereof, stores selling cannabis products. Notwithstanding the above, there can be no assurance that cannabis retail will remain an allowable business service in Saskatchewan and any changes that require the Company to temporarily suspend or significantly change its operations in Saskatchewan would negatively impact the Company’s business, financial condition and results of operations. In addition, the COVID-19 pandemic, the impact thereof and the actions by Governmental Entities in response thereto have impacted and will continue to impact the Company’s plans to expand its operations in Saskatchewan. See “Description of the Business of the Company – General” and “Risk Factors – Risk Factors Generally Related to the Company – Impact of the COVID-19 Pandemic” for additional information.

Ontario Cannabis Framework

Ontario initially passed legislation in 2017 that contemplated distribution of recreational cannabis through a limited number of government stores controlled the OCRC, a Crown agency of the Government of Ontario. The provincial election in June 2018 brought into power a new government that immediately announced its plan to adopt a hybrid approach of public and private sale and distribution. Since its announcement, the Government of Ontario has been executing a tightly regulated private retail model for cannabis.

On October 17, 2018, the Government of Ontario passed Bill 36, pursuant to which the Ontario Control Act and the Ontario Retail Corporation Act were amended, and the Ontario Licence Act was enacted.

The OCRC is the exclusive distributor of cannabis products to Licensed Retail Stores in Ontario. In addition, prior to the issuance of the Ontario Emergency Order (Cannabis), the OCRC was the exclusive online retailer of cannabis products for delivery to customers in Ontario. Notwithstanding the above, Licensed Retail Stores in Ontario are permitted to offer click-and-collect services, which allow customers to order products online to be purchased and picked up in-store and, pursuant to the Ontario Emergency Order (Cannabis), private sector Licensed Retail Stores are also permitted to offer delivery services until July 22, 2020, unless the Ontario Emergency Order (Cannabis) is extended.

The Ontario Licence Act and its regulations came into force on November 16, 2018. The Ontario Licence Act establishes the licensing scheme for prospective Licensed Retail Stores in Ontario, which is administered by the AGCO. The AGCO has the authority to license, regulate and enforce the sale of recreational cannabis in Licensed Retail Stores in Ontario. Pursuant to the Ontario Licence Act and its regulations, in order to open and operate a Licensed Retail Store in Ontario, retailers must have: (i) a retail operator licence (“Operator Licence”), (ii) a retail store authorization (“Store Authorization”), and (iii) a cannabis retail manager licence (“Manager Licence”). An Operator Licence holder is permitted to operate one or more Licensed Retail Stores in Ontario, provided that a separate Store Authorization has been obtained for each Licensed Retail Store. Each Licensed Retail Store must have an individual that holds a Manager Licence, unless the retailer is a sole proprietor or is in a partnership with two or more individuals and will be both the licensed operator and performing the duties of the retail store manager for a particular Licensed Retail Store.

The AGCO intended to start accepting an unlimited number of applications for Operator Licences, Manager Licences and Store Authorizations on December 17, 2018. However, due to the national shortage of cannabis supply, the Government of Ontario introduced changes to the licensing process whereby Licensed Retail Stores would open in phases across Ontario.

On December 13, 2018, the Government of Ontario imposed a temporary limit of 25 Store Authorizations across five regions in Ontario and, as set out in Ontario Regulation 468/18 made under the Ontario Licence Act (“Ontario Regulation 468/18”), gave the AGCO the mandate to hold a lottery to determine who may apply for an Operator Licence tied to one of the 25 Store Authorizations. The lottery selection was completed on January 11, 2019 and the AGCO announced the 25 lottery entrants that were selected to submit applications for an Operator Licence and a Store Authorization to the AGCO.

On July 3, 2019, the Government of Ontario announced its plans for a second allocation of 50 Store Authorizations and the Ontario Regulation 468/18 was amended to reflect this new allocation. Of the 50 new Store Authorizations, 42 were allocated within each region of the province, to be selected by way of a

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lottery process, and eight were allocated to those who wished to operate a Licensed Retail Store on a First Nations reserve. On October 22, 2019, the Government of Ontario amended the Ontario Regulation 468/18 to allow for the authorization of up to 26 Licensed Retail Stores on First Nations reserves.

On July 31, 2019, the AGCO began accepting applications from applicants who wished to operate a Licensed Retail Store on a First Nations reserve. Applications had to include a resolution from the First Nations Band Council approving the location of the proposed store on their reserve. The opportunities to apply for a Store Authorization were allocated on a first come, first served basis.

On August 21, 2019 the AGCO announced the 42 lottery entrants that were selected to submit applications for an Operator Licence and a Store Authorization. Unlike the first lottery held by the AGCO, applicants who wished to participate in the second lottery had to meet pre-qualification requirements, including demonstrating they had the financial capacity to open a Licensed Retail Store and had secured suitable retail space that could be used for a Licensed Retail Store.

On December 12, 2019, the Government of Ontario released a framework that will, over time, transition cannabis retail in the province from a lottery system to an open market, and the related amendments to Ontario Regulation 468/18. The key amendments to Ontario Regulation 468/18 included, without limitation: (i) removing the restrictions on the total number of Store Authorizations permitted in Ontario and the regional distribution limits relating thereto, effective March 2, 2020; (ii) increasing the ability of Licensed Producers and its affiliates to participate in the retail market in Ontario; and (iii) phasing in limits on the number of Store Authorizations a holder of an Operator License and its affiliates can hold. As a result of such amendments, the AGCO modified its application process for cannabis retail licensing. The AGCO began accepting applications for Operator Licenses on January 6, 2020 and applications for Store Authorizations on March 2, 2020.

Since January 2020, the New Cannabis Classes, cannabis products relating thereto, cannabis vape pens, cartridges and other vape products have been available to purchase at Licensed Retail Stores in Ontario.

On April 7, 2020, in response to the COVID-19 pandemic, the Government of Ontario issued the Ontario Emergency Order (Cannabis), which permits holders of a Store Authorization to operate a Licensed Retail Store for the purposes of (i) allowing customers to pick up cannabis products (and any other products permitted to be sold at a Licensed Retail Store) and (ii) delivering such products directly to customers until July 22, 2020, unless the Ontario Emergency Order (Cannabis) is extended. Concurrently, on April 7, 2020, the AGCO announced it would temporarily pause issuing Store Authorizations during the period of the Ontario Emergency Order (Business Closures). On April 22, 2020, the AGCO announced that it will resume issuing Store Authorizations to stores that are complete, in compliance with the Ontario Emergency Order (Business Closures) and meet all regulatory requirements.

Since May 19, 2020, as part of the Government of Ontario’s first stage of the province’s reopening framework, Licensed Retail Stores in Ontario have been be permitted to expand their retail operations to include in-person sales. Notwithstanding the above, the COVID-19 pandemic, the impact thereof and the actions by Governmental Entities in response thereto have impacted and will continue to impact the Company’s plans to expand its operations into Ontario. See “Description of the Business of the Company – General” and “Risk Factors – Risk Factors Generally Related to the Company – Impact of the COVID-19 Pandemic” for additional information. Canadian Recreational Cannabis Market

Deloitte LLP has published three reports to date on the opportunity that legalizing cannabis presents to the Canadian economy. In its inaugural report in 2016, Recreational Marijuana, insights and opportunities (the “2016 Deloitte Report”), Deloitte LLP evaluated the total industry potential with a view to understanding public opinion, consumption trends and retail opportunity. The results of the 2016 Deloitte Report revealed that 22% of the Canadian adult population consumes cannabis recreationally on at least an occasional

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basis, with 7% consuming on a daily basis. A further 17% of Canadian adults showed some willingness to try cannabis if it were legal, suggesting that the total potential marketplace is close to 40% of the Canadian adult population.

In its second report in 2018, A society in transition, an industry ready to bloom (the “2018 Deloitte Report”), Deloitte LLP examined how cannabis consumption levels would change after legalization, what kinds of products customers would be interested in, and how and from where they’d be inclined to purchase. According to the 2018 Deloitte Report, the legal recreational cannabis market is expected to generate sales of up to $4.34 billion in 2019. The cannabis spend overall is also expected to rise by up to 58%, owing primarily to the fact that prices for legal products will be higher. Other notable findings in the 2018 Deloitte Report include:

(a) There is considerable interest in edible cannabis products as six out of 10 likely cannabis customers are expected to choose edible products.

(b) Current and likely cannabis customers are expected to purchase the majority of their products through physical retail locations, while about one-third will also buy products online through approved retailers’ websites.

(c) Legalization of recreational cannabis will create a new type of cannabis consumer who is older than today’s typical consumer (aged 35 to 54 versus 18 to 34), better educated (university or graduate school education versus high school or college education), less of a risk taker and likely to consume cannabis less frequently (less than once a month versus several times a week).

In its third report in 2019, Nurturing new growth: Canada gets ready for Cannabis 2.0 (the “2019 Deloitte Report”), Deloitte LLP broadened its research to better understand consumer sentiment on the legalization of the New Cannabis Classes and new products relating thereto. The results of the 2019 Deloitte Report estimate that the Canadian market for edibles and alternative cannabis products will be worth $2.7 billion annually, with cannabis extract-based products, including edibles accounting for $1.6 billion alone, and other significant opportunities deriving from cannabis-infused beverages ($529 million), topicals ($174 million), concentrates ($140 million), tinctures ($116 million) and capsules ($114 million).

The Company participates in the recreational cannabis market. However, no assurance can be provided that the Company will be able to continue to participate in the recreational cannabis market and service the market segments in which it may compete or establish or maintain profitability. See “Risk Factors”.

RISK FACTORS

Investors should carefully consider the risk factors set out below and consider all other information contained herein and, in the Company’s, other public filings before making an investment decision. The risks set out below are not an exhaustive list and should not be taken as a complete summary or description of all the risks associated with the Company’s business and the cannabis business generally.

Risk Factors Generally Related to the Company

Impact of the COVID-19 Pandemic

The Company’s business, financial condition and results of operations could be materially and adversely affected by the outbreak of epidemics, pandemics and other public health crises in geographic areas in which the Company has operations, suppliers, customers or employees, including the recent global outbreak of COVID-19. The COVID-19 pandemic, and actions that may be, or have been, taken by Governmental Entities in response thereto, have resulted in, and may continue to result in, among other things: increased volatility in financial markets; disruptions to global supply chains; labour shortages; reductions in trade volumes; temporary operational restrictions and restrictions on gatherings greater than a certain number of individuals, shelter in place declarations and quarantine orders, business closures and travel bans; an overall slowdown in the global economy; political and economic instability; and civil unrest.

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The COVID-19 pandemic, and responses thereto by Governmental Entities, have affected, and may continue to affect, cannabis retailers such as the Company. Such effects include, but are not limited to: restrictions on the number of customers and employees permitted in Licensed Retail Stores; government mandated temporary store closures; reduced operational hours or service methods; decreases in sales due to the economic conditions and loss of income of prospective customers; human resource challenges, such as reduced availability of experts and personnel and wage increases as a result of personnel choosing not to work in retail environments with high customer interaction; employee health and workforce productivity; increased insurance premiums; supply chain constraints and disruptions; and restrictions and delays and relating to construction and licensing, permitting and authorization processes. The Company has taken responsible measures to protect the health and safety of its employees and customers at its Licensed Retail Stores and will continue to assess and mitigate the risks of its business operations. Notwithstanding the above, there can be no assurance that the measures implemented by the Company have been and will be effective in protecting the health and safety of its employees and customers. As at the date hereof, cannabis retail has been deemed an essential service and an allowable business service by the Government of Alberta and the Government of Saskatchewan, respectively, and, as a result, all of the YSS and Sweet Tree Licensed Retail Stores remain open with reduced operating hours, despite widespread mandatory business closures in response to the COVID-19 pandemic. However, there can be no assurance that cannabis retail will remain an essential service and an allowable business service in the provinces of Alberta and Saskatchewan, respectively, and, as such, the Company may be required to temporarily suspend its operations until such mandatory business closures are no longer in effect. This would negatively impact the Company’s business, financial condition and results of operations.

The COVID-19 pandemic continues to rapidly evolve and the extent to which it may impact the Company’s business, financial condition and results of operations, as well as the Company’s future capital expenditures and other discretionary items, will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including: the geographic spread of the virus; the duration and extent of the pandemic, further actions that may be taken by Governmental Entities, including in respect of travel restrictions and business disruptions; the severity of the disease; and the effectiveness of actions taken to contain the virus and treat the disease.

Listing on the TSXV and the FSE

The Company must meet continuing listing requirements to maintain the listing of the Common Shares on the TSXV and the FSE. The inability to meet the continuing listing requirements could adversely affect the Company’s results of operations or financial condition.

Volatile Common Share Price

The price of the Common Shares is expected to be volatile and could be significantly impacted by governmental and regulatory regimes, community support for the recreational cannabis industry and other factors, including COVID-19. The Company cannot predict the results of its operations expected to take place in the future. The results of these activities will inevitably affect the Company’s decisions related to future operations and will likely trigger major changes in the trading price of the Common Shares.

Additional Funding Requirements

The Company’s current cash balance and future cash flow from its operations may not be sufficient to fund its ongoing activities at all times. From time to time, the Company may require additional financing in order to carry out its retail-focused cannabis business strategy. Failure to obtain such financing on a timely basis could cause the Company to forfeit its interest in certain properties, miss certain acquisition opportunities and reduce or terminate its operations. If the Company’s current cash balance and future cash flow from its operations is not sufficient to satisfy its capital expenditure requirements, there can be no assurance that additional debt or equity financing will be available to meet these requirements or available on favorable terms.

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Capital Lending Markets

As a result of recent economic uncertainties in the cannabis industry, the Company may have reduced access to bank debt and to equity. As future capital expenditures will be financed out of funds generated from operations, bank borrowings, if available, and possible issuances of debt or equity securities, the Company’s ability to fund future capital expenditures is dependent on, among other factors, the overall state of lending and capital markets and investor and lender appetite for investments in the cannabis industry, generally, and the Company’s securities in particular.

To the extent that external sources of capital become limited, unavailable or available only on onerous terms, the Company’s ability to invest and to maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be materially and adversely affected as a result.

Issuance of Debt

From time to time, the Company may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed partially or wholly with debt, which may increase the Company’s debt levels above industry standards. Neither the Company’s articles of incorporation nor its by-laws limit the amount of indebtedness that the Company may incur. The level of the Company’s indebtedness from time to time could impair the Company’s ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise. The Company’s ability to meet its debt service obligations will depend on the Company’s future operations which are subject to prevailing industry conditions and other factors, many of which are beyond the control of the Company. As certain of the indebtedness of the Company would bear interest at rates which fluctuate with prevailing interest rates, increases in such rates would increase the Company’s interest payment obligations and could have a material adverse effect on the Company’s financial condition and results of operations. Further, the Company’s indebtedness would be secured by substantially all of the Company’s assets. In the event of a violation by the Company of any of its loan covenants or any other default by the Company on its obligations relating to its indebtedness, the lender could declare such indebtedness to be immediately due and payable and, in certain cases, foreclose on the Company’s assets.

Dilution

The Company may make future acquisitions or enter into financings or other transactions involving the issuance of its securities which may be dilutive.

Third Party Credit Risk

The Company is, or may be, exposed to third party credit risk through the Company’s contractual arrangements with its current or future partners, marketers and other parties, including the Swift Current Corporation. The Company provided a loan to the Swift Current Corporation to fund the capital and operating expenditures of the Sweet Tree Swift Current Store. The amount outstanding under the loan is repayable by the Swift Current Corporation with the future operations of the Sweet Tree Swift Current Store and due in advance of the additional consideration payable by the Company in connection with the acquisition of the Swift Current Corporation. Management considers the collection risk of the loan receivable as low as it will be settled upon completing the acquisition of the Swift Current Corporation. Notwithstanding the above, in the event any third parties fail to meet their contractual obligations to the Company, such failures could have a material adverse effect on the Company and its cash flow from operations.

Political Uncertainty

To the extent that certain political actions taken in North America, Europe and elsewhere in the world result in a marked decrease in free trade, access to personnel and freedom of movement, it could have an adverse effect on the Company’s ability to market products internationally, increase costs for goods and services

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required for operations, reduce access to skilled labour and negatively impact business, operations, financial conditions and the market value of the Common Shares.

Forward-Looking Information May Prove to be Inaccurate

Investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking information or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate.

Management of Growth

The Company may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of the Company to manage growth effectively requires it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Company to deal with this growth could have a material adverse impact on its business, operations and prospects.

Expansion into New Activities

The operations and expertise of the Company’s management are currently focused on developing a sustainable retail cannabis business across Canada. In the future, the Company may acquire or move into new industries or new geographical areas, may acquire different cannabis related assets, and as a result may face unexpected risks or alternatively, significantly increase the Company’s exposure to one or more existing risk factors, which may in turn result in the Company’s future operational and financial conditions being adversely affected.

Risks Inherent in the Acquisition of Companies, Assets and Brands

The Company may from time to time elect to pursue strategic acquisitions to acquire technologies, brands, businesses, assets or intellectual property which it believes are complementary to its business and/or enter into strategic partnerships or joint ventures in order to leverage its position in the cannabis industry. While the Company intends to conduct substantial due diligence in connection with such acquisitions, there are risks inherent in any acquisition. Specifically, there could be unknown or undisclosed risks or liabilities associated with such companies which the Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company’s financial performance and results of operations.

Future acquisitions may expose the Company to potential risks, including risks associated with: (i) the integration of new operations, personnel and services; (ii) unforeseen or hidden liabilities; (iii) potential inability to generate sufficient revenue to offset new costs; (iv) the diversion of resources from the Company’s existing business and technologies; (v) the expenses of acquisitions; or (vi) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new security which could misappropriate proprietary information or cause interruptions in its operations. The Company may be required to increase its capital expenditures and other resources to protect against such security breaches or to alleviate problems caused by such breaches.

Breach of Confidentiality

While discussing potential business relationships or other transactions with third parties, the Company may disclose confidential information relating to the business, operations or affairs of the Company. Although confidentiality agreements are signed by third parties prior to the disclosure of any confidential information, a breach could put the Company at competitive risk and may cause significant damage to its business. The harm to the Company’s business from a breach of confidentiality cannot presently be quantified, but may be material and may not be compensable in damages. There is no assurance that, in the event of a breach

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of confidentiality, the Company will be able to obtain equitable remedies, such as injunctive relief, from a court of competent jurisdiction in a timely manner, if at all, in order to prevent or mitigate any damage to its business that such a breach of confidentiality may cause.

Intellectual Property

The Company may have certain proprietary intellectual property, including but not limited to trademarks, design-marks, trade names, brands, patents and proprietary processes. The Company relies on this intellectual property as well as the know-how of its employees and other proprietary information, and require certain employees, consultants, suppliers and counterparties to sign confidentiality agreements. In the event of a breach of these confidentiality agreements the Company may not have adequate remedies for such breaches. Outside parties may develop substantially equivalent proprietary information independently without infringing upon any proprietary technology or information. Additionally, outside parties may otherwise gain access to the Company’s proprietary information and make use of it in a competitive manner. Any loss of intellectual property, through the avenues listed above or otherwise, may affect the Company in a materially adverse manner.

Conflicts of Interest

Directors and officers of the Company may also be directors and officers of other companies involved in the retail cannabis industry, and conflicts of interest may arise between their duties as officers and directors of the Company and as officers and directors of such other companies.

In addition, the Company may also become involved in other transactions which conflict with the interests of its directors and officers who may from time to time deal with persons, firms, institutions or companies with which the Company may be dealing, or which may be seeking investments similar to those desired by the Company. The interests of these persons could conflict with those of the Company. In addition, from time to time, these persons may be competing with the Company for available investment opportunities. Conflicts of interest, if any, will be subject to the procedures and remedies available under applicable laws and the ABCA. In accordance with applicable laws, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company.

Risk Factors Related to the Company’s Retail-Focused Cannabis Business Strategy

Operation Licences, Permits and Authorizations

The recreational cannabis industry is in its early development stage and restrictions on sales and marketing activities imposed by Governmental Entities, various medical associations, other governmental or quasi-governmental bodies or voluntary industry associations may adversely affect the Company’s ability to conduct sales and marketing activities and could have a material adverse effect on the Company’s business, operating results or financial condition.

As at the date hereof, the Company has all the necessary licences, permits and authorizations it believes are necessary for the operation of its cannabis retail business. The Company will need additional licences, permits and authorizations in the future to achieve its intended operations and there is no guarantee that the Company will be able to obtain or maintain the necessary licences, permits and authorizations, or the Company may only be able to do so at great cost, to operate its retail business.

Obtaining, amending or renewing the necessary licences, permits and authorizations for the Company’s operations can be time-consuming and potentially involve numerous regulatory agencies, public hearings and costly undertakings on the Company’s part. The duration and success of the Company’s efforts to obtain, amend and renew licences, permits and authorizations are contingent upon many variables not within the Company’s control, including the interpretation of applicable requirements implemented by the relevant licensing authority. Any unexpected delays or costs associated with the licensing, permitting and authorization process could impede the ongoing or proposed operations of the Company. To the extent necessary licences, permits or authorizations are not obtained, amended or renewed, or are subsequently

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suspended or revoked, the Company may be curtailed or prohibited from proceeding with its ongoing operations or planned development and commercialization activities. Failure to comply with or to obtain the necessary licences, permits or authorizations could result in restrictions on the Company’s ability to operate in the cannabis industry, which could have a material adverse effect on the Company’s business.

Change in Cannabis Laws, Regulations and Guidelines

Activities in the retail cannabis industry are subject to a variety of laws, regulations and guidelines relating to the distribution, possession, sale, advertisement, packaging, health, safety, purchasing and consumption of cannabis products under a Retail Licence and the operation, physical structure and security of Licensed Retail Stores.

These laws and regulations are broad in scope, subject to evolving interpretations and may change in ways currently unforeseen by the Company. If any changes to such laws, regulations and guidelines occur, which are matters beyond the control of the Company, the Company’s future activities in the industry may incur significant costs in complying with such changes or it may be unable to comply therewith, which in turn may result in a material adverse effect on the Company’s business, financial condition and results of operation. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the Company’s business strategy and result in a material adverse effect on certain aspects of its planned operations.

Each of the Canadian provinces and territories is responsible for implementing its own legislation to regulate the sale of cannabis for recreational use. Provincial legislation may vary in material respects, including the minimum age to buy cannabis, cannabis products and cannabis accessories available for sale and whether cannabis will be sold by Governmental Entities, private Licensed Retail Stores or both. The governments of every Canadian province and territory are executing, to varying degrees, on the regulatory regimes for the distribution and sale of cannabis for recreational use announced by each jurisdiction. There is no guarantee that provincial legislation regulating the distribution and sale of cannabis for recreational use will be enacted according to all the terms announced by such provinces and territories, or at all, or that any such legislation, if enacted, will create the growth opportunities that the Company currently anticipates. Any of the foregoing could result in a material adverse effect on the Company’s business, financial condition and results of operations.

Federal and provincial cannabis legislation and regulations prohibit testimonials, lifestyle branding and packaging that is appealing to youth. The Company’s retail operations and future operating results may be hindered by the applicable regulations which restrict the sales and marketing activities of the Company and the cannabis industry, including restrictions on advertising, marketing and the use of logos and brand names. These regulations may limit the Company’s ability to compete for market share if it is unable to effectively market its products. If the Company is unable to effectively market its products, its intended retail operations and future operating results may be affected adversely.

Cannabis Accessories

The Company has introduced the sale of cannabis accessories, including vape pens, at its Licensed Retail Stores. Provinces in Canada vary in their regulation of vape pens for use in cannabis administration. While Alberta, Ontario and Saskatchewan governments all currently allow the sale of cannabis vape pens, cartridges and vape accessories by Licensed Retail Stores, any change in regulations resulting in the restriction of the sale of cannabis vape products could have a material adverse impact on the Company’s business and prospects.

Leases

The Company’s Licensed Retail Stores are located on property that is leased by the Company under long-term lease, or similar arrangements, in which the underlying land is owned by a third party. Under the terms of a typical lease, the lessee must pay rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. Unless the lease term is extended, the land,

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together with all improvements made, will revert to the owner of the land upon the expiration of the lease term. In addition, an event of default by the Company under the terms of the lease could result in a loss of the property should the default not be remedied in a reasonable period of time. The reversion or loss of such properties could have a material adverse effect on the Company’s business and operations.

Competition

The cannabis retail industry is highly competitive, with a large number of potential entrants competing for limited Retail Licences and available real estate locations, and current licensees competing for quality cannabis products. Additionally, there is potential that the industry will undergo consolidation, creating larger companies that may have increased geographic scope and larger economic scale. The Company faces intense competition from other companies, some of which can be expected to have more financial resources and marketing experience than the Company. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition and results of operations of the Company.

To remain competitive, the Company requires a continued high level of investment in hiring, training and retention of marketing, sales and customer service staff. The Company may not have sufficient resources to retain and train marketing, sales and customer service staff on a competitive basis, which could materially and adversely affect the business, financial condition and operating results of the Company.

The Company also faces competition from illegal cannabis dispensaries that are selling cannabis to individuals despite not having valid Retail Licences. Many illegal dispensaries are still in operation, providing the Company with additional competition.

Reliance on Key Personnel

The Company’s success depends largely on certain key personnel. The ability of the Company to retain qualified staff and obtain services in a timely and cost-efficient manner may have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. Currently, the Company does not have any key person insurance in effect. The contributions of the management team to the Company and the Company’s operations are of central importance. In addition, the competition for qualified personnel in the cannabis industry is intense and there can be no assurance that the Company will be able to continue to attract and retain all personnel necessary for the development and operation of the Company’s business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith of the management team.

Available Talent Pool

The Company’s cannabis retail business requires employing personnel with cannabis expertise. However, experienced talent in the marketing and sales of cannabis may be limited and there can be no assurance that the appropriate individuals will be available or affordable to the Company. Without adequate personnel and expertise, the implementation of the Company’s retail cannabis business may suffer.

Customer Acquisition and Retention

The Company’s success depends on its ability to attract and retain customers. There are many factors that impact the Company’s ability to attract and retain customers, including but not limited to the Company’s ability to continually supply and sell desirable and quality product. The Company’s failure to acquire and retain customers would have a material adverse effect on the business, financial condition and operating results of the Company.

Brand Risks

The Company’s success is dependent on, among other things, the value of the Company’s brands, and the failure to preserve their value and relevance could have a negative impact on the Company’s results of

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operations. The Company must preserve, enhance and leverage the value of the Company’s brands. Brand value is based in part on consumer tastes, preferences and perceptions on a variety of factors. Consumer acceptance of the Company’s brands may be influenced by or subject to change for a variety of reasons. For example, adverse publicity associated with the Company’s business practices may drive popular opinion against the Company’s brands. If the Company is unsuccessful in addressing any such adverse perceptions, the Company’s brands and results of operations may suffer.

Unfavourable Publicity or Consumer Perception

Management of the Company believes the cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy, quality of cannabis sold and perception of cannabis generally, including with respect to vaping and other forms of cannabis administration. Consumer perception of cannabis products and administration may be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the recreational cannabis industry 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 cannabis products and the business, results of operations, financial condition and cash flows of the Company. The Company’s dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the business, results of operations, financial condition and cash flows of the Company. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis products or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from customers’ failure to consume such products appropriately or as directed.

Further, the parties that the Company conducts business with may perceive that they are exposed to reputational risk as a result of the Company’s cannabis business activities. Affected relationships could include, without limitation, those with real estate personnel, marketers and bankers. For example, the Company may in the future have difficulty establishing or maintaining bank accounts or other business relationships with firms choosing to not invest in the cannabis industry. Failure to establish or maintain business relationships could have a material adverse effect on the Company.

Recent media reports and medical alerts by the federal government of Canada and the Centers for Disease Control and Prevention of the United States on vaping-related illnesses and other issues directly related to cannabis consumption could potentially create an inability to fully implement the Company’s business plan and may have a material adverse effect on the Company’s business, results of operations or prospects.

Target Market Difficult to Identify and Quantify

Because the cannabis industry is in a nascent stage, there is a lack of information about the size of the market, spending patterns, product preferences and various consumer traits and habits. There can be no assurance that the Company’s estimates and forecasts it uses for planning purpose are accurate or that the market size is sufficiently large for its business to grow as projected, which may negatively impact its financial results. A failure in the demand for cannabis products and cannabis accessories to materialize as a result of competition, technological change or other factors could have a material adverse effect on the Company’s business, results of operations and financial condition.

Commodity Taxes and Government Mark-Ups

Changes in tax rates or government mark‐ups and their corresponding effect on product pricing could affect the Company’s sales and/or earnings. If taxes or government mark‐ups increase and the Company

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increases prices by the full amount of the tax or the mark‐up, as the case may be, sales volumes could be adversely impacted. If the Company is not able to pass the full amount of the tax or mark‐up increase on to customers, then gross margins and earnings could be adversely impacted. In February 2020, the Government of Alberta released its Budget 2020 Tax Plan, indicating that the government will implement a 20% tax on the retail sale price of vaping products. There can be no assurance that governments will not change tax or mark‐up rates in the future.

Supply of Cannabis Products

Cannabis retailers are dependent on the supply of cannabis products from Licensed Producers. There can be no assurance that there will be a sufficient supply of cannabis available to the Company to purchase and to operate its business. Licensed Producers’ growing operations are dependent on a number of key inputs and their related costs, including raw materials and supplies. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact Licensed Producers and, in turn, the Company’s financial condition and operating results. Certain Licensed Producers’ growing operations require considerable energy, making these suppliers vulnerable to rising energy costs. Rising or volatile energy costs may adversely impact the business of these suppliers and their ability to supply products to the Company at a reasonable rate. Any inability of Licensed Producers to secure required supplies, energy and services, or failure to do so on appropriate terms, could have a materially adverse impact on the Company’s business, financial condition and operating results.

The Company is dependent on its suppliers’ licences, or ability to obtain additional licences, which are subject to ongoing compliance and reporting obligations. Failure of suppliers to comply with the requirements of the licences or any failure to obtain or maintain such licences could have a material adverse impact on the business, financial condition and operating results of the Company. There can be no guarantee that Health Canada will issue, extend or renew these licences or, if issued, extended or renewed, that they will be issued, extended or renewed on terms that are favourable to the Company’s suppliers and the Company. Should Health Canada not issue, extend or renew the licences or should Health Canada issue or renew licences on terms that are less favourable than the Company anticipated, the business, financial condition and results of the operations of the Company could suffer material adverse effects.

The facilities of the Company’s suppliers could be subject to adverse changes including but not limited to a breach of security, which could have a material adverse effect on the Company’s business, financial condition and prospects. Any breach of the security measures and other facility requirements, including any failure to comply with recommendations or requirements arising from inspections by Health Canada or other legal or regulatory requirements, could also have an impact on the Company’s suppliers’ ability to continue operating under their licences or the prospect of renewing their licences or on the Company’s ability or willingness to sell product sourced from a supplier, which may have an adverse effect on the Company.

Effects of Agricultural Industry

The business of certain of the Company’s suppliers of cannabis may be impacted by the inherent risks associated with cannabis as an agricultural product. The Company’s suppliers are subject to risks such as insects, plant diseases and varying weather conditions that can all affect the size and quality of the harvest of crops processed and sold by the Company’s suppliers. As such, significant fluctuations in the Company’s suppliers’ harvests may impact the Company’s ability to operate. High degrees of quality variance can also impact the ability of the Company to obtain and retain customers. There can be no assurance that the natural elements will not have a material adverse effect on the production of products by the Company’s suppliers, which may have a material adverse effect on the Company.

Limited Shelf Life Products

The Company holds goods in inventory that have a limited shelf life. Its inventory may reach its expiration date and not be sold. Although the Company manages its inventory, it may be required to write-down the value of its inventory from time to time. Any such write-down of inventory could have a material adverse effect on the Company’s business, financial condition and results of operations.

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Product Recalls

If any products produced by the Company’s suppliers are recalled for any reason, including but not limited to product defects such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure, the Company may be required to incur unexpected expenses relating to the recall and potentially any legal proceedings that may arise in connection with the recall. In addition, product recalls may require significant management attention and staff utilization. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory actions or lawsuits. Additionally, recalls of a supplier’s product may impact the reputation of that product and in turn the reputation of the Company could be damaged. A recall for any of the foregoing reasons could lead to a decreased demand and could have a material adverse effect on the operations and financial condition of the Company. Additionally, product recalls may lead to increased scrutiny of the operations by Health Canada or other regulatory agencies, requiring further management attention and potential legal fees and other expenses, which may have a material adverse effect on the Company.

Product Liability

The Company, as a seller of products designed to be consumed by humans, faces the inherent risk of exposure to product liability claims, regulatory action and litigation if the products it sells are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. The Company may be subject to various product liability claims, including that the products they sell caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances.

A product liability claim or regulatory action against the Company may result in increased costs to the Company, could adversely affect the Company’s reputation and could have a material adverse effect on the operations and financial condition of the Company. There can be no assurance that the Company or its suppliers will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage to protect against potential liabilities. The inability to obtain adequate coverage on reasonable terms or to otherwise protect against product liability claims could prevent or inhibit the commercialization of the Company’s products.

Operating Risk and Insurance Coverage

The Company maintains commercial general liability insurance and maintains insurance to protect the operations and inventory suitable for a retailer at each of the Company’s Licensed Retail Stores. While the Company believes its insurance coverage addresses all material risks that it is exposed to and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed to. In addition, no assurance can be given that such insurance will be adequate to cover the Company’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.

Safety and Health Regulations

The Company’s retail cannabis operations are subject to employee health and safety laws and regulations. The Company incurs ongoing costs and obligations related to compliance with employee health and safety matters. Failure to comply with health and safety laws and regulations may result in additional costs for corrective measures and penalties or in restrictions on the Company’s retail operations. In addition,

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changes in employee health and safety or other laws, including in response to COVID-19, more vigorous enforcement thereof or other unanticipated events could require extensive changes to the Company’s operations or give rise to material liabilities, which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Limited Studies on the Effects of Cannabis, Cannabis Products and Cannabis Accessories

Research into the viability, safety and efficacy of the use of cannabis, cannabis products and cannabis accessories remains in relatively early stages. Many of the alleged benefits of cannabis, and particularly cannabidiol products, are not universally agreed upon. There is a risk that future research and clinical trials could uncover negative conclusions regarding the use of cannabis products. Any adverse discovery in the viability, safety or efficacy in the use of cannabis products or cannabis accessories could adversely affect the Company’s business, financial conditions and results of operations.

Fraudulent or Illegal Activity by Employees, Contractors and Consultants

The Company may be exposed to risk that its employees, independent contractors or consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Company that violates government regulations, manufacturing standards, federal and provincial healthcare fraud and abuse laws and regulations, or laws that require true, complete and accurate reporting of financial information or data. It may not always be possible for the Company to identify and deter such misconduct by its employees and other third parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged lawsuits stemming from failure to be in compliance with such laws or regulations. If any such actions are instituted against the Company, and it is not successful in defending itself or asserting its rights, such actions could have a significant impact on the Company’s business, including imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings and curtailment of the Company’s operations, any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Liability, Enforcement Complaints, etc.

The Company’s participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions and inquiries by various Governmental Entities against the Company or its activities. Litigation, complaints and enforcement actions involving either the Company or its activities could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on the Company’s business, results of operations and financial condition.

Profitability of Cannabis Retail Outlets

The Company’s Licensed Retail Stores may not be profitable due to a number of factors. Due to the infancy of the cannabis industry, there is no established retail market price for cannabis products and cannabis accessories. The retail price for cannabis varies depending on the brand, strain, potency and form of cannabis product. The wholesale price at which recreational cannabis can be purchased by Licensed Retail Stores from the respective provincial government, its agent, or Licensed Producers, as applicable, is subject to numerous factors beyond the Company’s control, including supply of cannabis and quality cannabis products and cannabis accessories. An increase in the wholesale price or a decrease in the retail market price of cannabis products or cannabis accessories could adversely affect the Company’s business, financial condition, liquidity and results of operation. If any Licensed Retail Stores remain unprofitable for a prolonged period of time, the Company may decide to close these stores. The Company cannot assure that new Licensed Retail Stores opened by the Company will not fail. The closures of these stores could have a negative impact on the Company’s business and operating results.

Moreover, the Company may broaden new store activity to incorporate trade areas or store sites in which it will have little or no prior experience. The risks relating to building a customer base and managing

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development and operating costs may be more significant in some or all of these types of trade areas or store sites, which could have an unexpected negative impact on the Company’s proposed business. Opening Licensed Retail Stores in such areas may expose the Company to new challenges, including reliance on the strength of other companies, the potential that its stores are a poor fit for the non-traditional markets into which they enter and possible negative publicity regarding the Licensed Retail Stores or other locations in which they operate, each of which may cause a downturn in their business and in turn may have a negative impact on the Company’s business and operating results.

Cybersecurity

The Company’s information systems and any third-party service providers and vendors are vulnerable to an increasing threat of continually evolving cybersecurity risks. These risks may take the form of malware, computer viruses, cyber threats, extortion, employee error, malfeasance, system errors or other types of risks, and may occur from inside or outside of the respective organizations. Cybersecurity risk is increasingly difficult to identify and quantify and cannot be fully mitigated because of the rapid evolving nature of the threats, targets and consequences. Additionally, unauthorized parties may attempt to gain access to these systems through fraud or other means of deceiving third-party service providers, employees or vendors. The operations of the Company depend, in part, on how well networks, equipment information technology (“IT”) systems and software are protected against damage from numerous threats. These operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. However, if the Company is unable or delayed in maintaining, upgrading or replacing IT systems and software, the risk of a cybersecurity incident could materially increase. Any of these and other events could result in information system failures, delays and/or increases in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s operations and reputation.

Additional information on the risks, assumptions and uncertainties are found in this AIF under the heading “Special Note Regarding Forward Looking Statements” above.

DIVIDENDS

The Company has not declared or paid any dividends since incorporation. Any decision to pay dividends on the Common Shares or the First Preferred Shares, if issued, will be made by the Board on the basis of the Company’s earnings, financial requirements and other conditions existing at the relevant time.

DESCRIPTION OF SHARE CAPITAL

The Company is authorized to issue an unlimited number of Common Shares and an unlimited number of First Preferred Shares, issuable in series. As at the date hereof, there are 132,302,484 Common Shares, nil First Preferred Shares, 9,400,000 Options and 25,213,435 Warrants issued and outstanding. Of the 25,213,435 Warrants issued and outstanding: (i) 1,666,667 were issued in connection with the Company’s non-brokered private placement for gross proceeds of $600,000 on November 22, 2016, such Warrants being exercisable until November 22, 2021; (ii) 19,496,666 were issued pursuant to the Private Placement; (iii) 2,166,769 were issued pursuant to the Rights Offering; and (iv) 1,883,333 were issued to a strategic advisor in connection with the Sweet Tree Acquisition, such Warrants being exercisable until June 13, 2021.

Common Shares

Subject to the rights of holders of any other class, or series of any class, of shares of the Company to have separate meetings, holders of Common Shares are entitled to receive notice of and to attend all annual and special meetings of the shareholders of the Company and to one vote in respect of each Common Share held at such meetings. Holders of Common Shares are entitled to receive dividends if, as and when declared by the Board out of the assets of the Company in such amounts and payable in such manner as the Board may from time to time determine. Subject to the rights of holders of First Preferred Shares and any other class of shares of the Company entitled to receive dividends in priority to or concurrently with

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holders of Common Shares, the Board may in its sole discretion declare dividends on Common Shares to the exclusion of any other class of shares of the Company. In the event of the liquidation, dissolution or winding up of the Company or other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs, holders of Common Shares will, subject to the rights of holders of First Preferred Shares and any other class of shares of the Company entitled to receive assets of the Company upon such a distribution in priority to or concurrently with holders of Common Shares, be entitled to participate in the distribution. Such distribution will be made in equal amounts per share on all Common Shares at the time outstanding without preference or distinction.

First Preferred Shares

First Preferred Shares may at any time and from time to time be issued in one or more series. Subject to the following provisions, the Board may from time to time before the issue thereof fix the number of shares in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, each series of First Preferred Shares. First Preferred Shares are entitled to priority over Common Shares and all other shares ranking junior to First Preferred Shares with respect to the payment of dividends and the distribution of assets of the Company in the event of any liquidation, dissolution or winding up of the Company or other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs. First Preferred Shares of each series will rank on a parity with First Preferred Shares of every other series with respect to priority in the payment of dividends and in the distribution of assets of the Company in the event of any liquidation, dissolution or winding up of the Company or other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs.

MARKET FOR SECURITIES

Trading Price and Volume

Since June 4, 2019, the Common Shares have been trading on the TSXV under the symbol “YSS”. Prior thereto, the Common Shares were trading on the TSXV under the symbol “SOLO” commencing January 7, 2019 and the symbol “ALZ” prior thereto. The following table sets the price range and trading volume of the Common Shares in the Company’s most recently completed financial year, as reported by the TSXV:

Month High ($) Low ($) Volume

2019

January 0.42 0.27 3,407,060

February 0.54 0.30 11,986,500

March 0.45 0.33 11,854,000

April 0.42 0.36 7,697,390

May 0.39 0.30 6,171,500

June 0.36 0.27 3,649,670

July 0.42 0.24 6,704,360

August 0.40 0.32 4,304,770

September 0.35 0.27 2,476,230

October 0.29 0.18 3,233,050

November 0.25 0.15 6,471,840

December 0.19 0.15 2,545,860

Note:

(1) All numerical references in the table above are provided on a post-Consolidation basis.

Prior Sales

No securities of the Company that are outstanding but not listed or quoted on a marketplace were issued during the most recently completed financial year of the Company, except as follows:

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Issue Date Number and Type of

Securities Exercise Price per Security

June 13, 2019 1,883,333 Warrants $0.30 per Common Share

August 21, 2019 5,400,000 Options(1) $0.355 per Common Share

Note:

(1) Of such Options, 300,000 were surrendered for cancellation in connection with Shahin Mottahed’s resignation as a director of the Company on January 15, 2020.

ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER

The following table summarizes details of the Company’s securities of each class held in escrow or that are subject to a contractual restriction on transfer as of the date hereof:

Designation of Class Number of Securities

Held in Escrow Percentage of Class(1)

Common Shares 7,066,500 5.34%

Warrants 7,014,000 27.82%

Note:

(1) Based on 132,302,484 Common Shares and 25,213,435 Warrants issued and outstanding as of the date hereof.

The Escrowed Securities are subject to the Escrow Agreement which imposes a contractual restriction on transfers. Pursuant to the Escrow Agreement, the Escrowed Securities will be held in escrow and released in accordance with the schedule applicable under a Tier 2 Value Security Escrow Agreement.

DIRECTORS AND OFFICERS

The names, municipality of residence and principal occupation during the last five years of each of the directors and officers of the Company as of the date hereof are as follows:

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Name and Municipality of Residence

Principal Occupation During the Past 5 years

Director and/or Officer Since

Position(s) Presently Held

Theodore Zunich Calgary, Alberta

Principal, Investment Banking at Eight Capital (formerly Dundee Capital Markets) from December 2016 until July 2018. Prior thereto, Associate, Vice President of Dundee Capital Markets from August 2012 until December 2016.

March 12, 2019

(August 1, 2018)

President, Chief Executive Officer and Director

(formerly Vice President, Corporate Development)

Stephanie Bunch Calgary, Alberta

Vice President, Business Performance and Finance Lead, Mergers and Acquisitions of Centrica Energy (Direct Energy Marketing Limited) from May 2013 until September 2017.

June 28, 2018 Vice President, Finance and Chief Financial Officer

Tony Balakas Calgary, Alberta

Chief Executive Officer and co-founder of Sweet Tree since November 2017, a founding investor of Joi Botanicals, a Calgary-based Licensed Producer, since May 2016 and a co-founder of Gatsby Hospitality Group, which operates three restaurants and pubs in Calgary, since September 2009.

June 13, 2019 Vice President, Operations

Sanjib (Sony) Gill Calgary, Alberta

Partner at Stikeman Elliott LLP, a national law firm.

June 28, 2018 Corporate Secretary

Richard McHardy(1)(2) Calgary, Alberta

Executive Chairman of Spartan Delta Corp. (formerly, Return Energy Inc.) (TSXV:SDE) since December 2019. President and Chief Executive Officer of Spartan Energy Corp. from December 2013 until May 2018.

June 28, 2018 Director

Ron Hozjan(1)(2) Calgary, Alberta

Vice President, Finance and Chief Financial Officer of Aureus Energy Services Inc., commencing January 2020, and a director of Aloha Brands Inc. since April 2019. Vice President, Finance and Chief Financial Officer of Tamarack Valley Energy Ltd. (TSX: TVE) from June 2010 until January 2020.

June 28, 2018 Director

James Miller(1)(2) Calgary, Alberta

President of Boarder Capital Inc. since May 2013.

June 28, 2018 Director

Notes:

(1) Member of the Company’s audit committee.

(2) Member of the Company’s corporate governance and compensation committee.

As at the date hereof, the directors and officers of the Company, and their associates and affiliates, as a group, whether beneficial, direct or indirect, own 18,923,061 Common Shares, representing approximately 14.3% of the currently outstanding Common Shares.

The directors listed above will hold office until the Company’s next annual meeting of Shareholders or until his successor is elected or appointed.

Cease Trade Orders

No director or executive officer of the Company is, or within ten years prior to the date of this AIF has been, a director, a chief executive officer or a chief financial officer of any company (including the Company), that:

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(a) was subject to: (i) a cease trade order; (ii) an order similar to a cease trade order; or (iii) an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (collectively, an “Order”), that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or

(b) was subject to an Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Bankruptcies

No director, executive officer or, to the best of the Company’s knowledge, any shareholder holding a sufficient number of securities of the Company to affect materially control of the Company, is, or within ten years prior to the date of this AIF has been, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

No director or executive officer of the Company or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has, within the past ten years prior to the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such person.

Penalties or Sanctions

No director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in making an investment decision.

Conflicts of Interest

Certain of the directors and officers of the Company are also directors and/or officers of other reporting and non-reporting issuers, which may give rise to conflicts of interest. In accordance with corporate laws, directors who have an interest in a contract or a proposed contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors are required to act honestly and in good faith with a view to the best interests of the Company. Some of the directors of the Company have other employment or other business or time restrictions placed on them and accordingly, these directors of the Company will only be able to devote part of their time to the affairs of the Company. In particular, certain of the directors and officers are involved in managerial and/or director positions with other cannabis companies whose operations may, from time to time, provide financing to, or make equity investments in, competitors of the Company. Conflicts will be subject to the procedures and remedies available under the ABCA. The ABCA provides that in the event that a director has an interest in a contract or proposed contract or agreement, the director shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement unless otherwise provided by the ABCA. Except as disclosed herein, the Company is not aware of any existing or potential material conflicts of interest between the Company and any director or officer of the Company as of the date hereof.

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Mr. Gill, Corporate Secretary of the Company, is a partner of the national law firm Stikeman Elliott LLP, which law firm renders legal services to the Company.

Mr. Balakas, Vice President, Operations of the Company, is the Chief Executive Officer and a director of Sweet Tree and a shareholder of Sweet Tree.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

To the best of the Company’s knowledge, since the beginning of the most recently completed fiscal year, there have not been any legal proceedings to which the Company has been a party or of which any of its properties have been the subject matter, nor are any such proceedings known to the Company to be contemplated.

To the best of the Company’s knowledge, since the beginning of the most recently completed fiscal year, there have not been any penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority, nor have there been any other penalties or sanctions imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decisions, and the Company has not entered into any settlement agreements before a court relating to securities legislation or with a securities regulatory authority.

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as described below, to the best of the Company’s knowledge, there are no material interests, direct or indirect, of directors or executive officers of the Company, any shareholder who beneficially owns, or controls or directs, directly or indirectly, more than 10% of the outstanding Common Shares, or any known associate or affiliate of such persons, in any transaction within the three most recently completed financial years of the Company or during the current financial year which has materially affected, or is reasonably expected to materially affect, the Company.

In connection with the Sweet Tree Acquisition, the Company paid Astro 1 Holdings Ltd., a company Mr. Balakas holds a 60% interest in, $0.9 million cash at closing, and has issued Mr. Balakas, directly or indirectly, a total of 12,496,393 Common Shares as at the date hereof, all in accordance with the terms and conditions of the Sweet Tree Acquisition Agreement. Mr. Balakas and the Company were at arm’s length when the transaction was negotiated.

TRANSFER AGENT AND REGISTRAR

The Company’s transfer agent and registrar of the Common Shares is Odyssey Trust Company at its principal offices in Calgary, Alberta.

MATERIAL CONTRACTS

No material contracts entered into by the Company within the most recently completed financial year or before the most recently completed financial year are still in effect.

INTERESTS OF EXPERTS

There is no person or company whose profession or business gives authority to a statement made by such person or company and who is named as having prepared or certified a statement, report or valuation described or included in a filing, or referred to in a filing, made under NI 51-102 by the Company during, or related to, the year ended December 31, 2019 other than KPMG LLP, the auditors of the Company.

KPMG LLP are independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed in the relevant professional bodies in Canada and any applicable legislation or regulation.

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In addition, none of the aforementioned persons or companies, nor any director, officer or employee of any of the aforementioned persons or companies, is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or any associate or affiliate of the Company.

ADDITIONAL INFORMATION

Additional information relating to the Company can be found on SEDAR at www.sedar.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the Company’s information circular for the Company’s most recent Shareholders’ meeting that involved the election of directors. Additional financial information is contained in the Company’s consolidated financial statements and the related management’s discussion and analysis for the year ended December 31, 2019.