TRICHOME FINANCIAL CORP. CSE FORM 2A LISTING …

TRICHOME FINANCIAL CORP.

CSE FORM 2A

LISTING STATEMENT

December 2, 2019

CANNABIS IS ILLEGAL UNDER U.S. FEDERAL LAW AND THE ENFORCEMENT OF RELEVANT LAWS IS A SIGNIFICANT RISK.

From time to time, Trichome Financial Corp. may derive a portion or a substantial portion of its revenues from loans or other financial products with, or hold warrants or shares in, entities involved in the cannabis industry in certain states of the United States, which industry is illegal under United States federal law.

The United States federal government regulates drugs through the Controlled Substances Act, 21 U.S.C. § 811 (the “CSA”), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under United States federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. The United States Food and Drug Administration (“FDA”) has not approved marijuana as a safe and effective drug for any indication.

State laws regulating cannabis are in direct conflict with the CSA, which makes cannabis use and possession federally illegal in the United States. Although certain states authorize medical or recreational cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under U.S. federal law. The Supremacy Clause of the United States Constitution establishes that the United States Constitution and federal laws made pursuant to it are paramount and in case of conflict between U.S. federal and state law, the U.S. federal law shall apply.

On January 4, 2018, U.S. Attorney General Jeff Sessions issued a memorandum to U.S. district attorneys, which rescinded previous guidance from the U.S. Department of Justice specific to cannabis enforcement in the United States, including the Cole Memorandum (as defined herein). With the Cole Memorandum rescinded, U.S. federal prosecutors have been given discretion in determining whether to prosecute cannabis related violations of U.S. federal law.

There is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to medical and/or adult-use cannabis (and there can be no assurance as to the timing or scope of any such potential amendments), there is a risk that U.S. federal authorities may enforce current U.S. federal law. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, and if Trichome Financial Corp. has made loans or established financial products with entities involved in the U.S. cannabis industry, Trichome Financial Corp.’s business, results of operations, financial condition and prospects would be materially adversely affected. See Section 17 of this Listing Statement – Risk Factors for additional information on this risk.

In light of the political and regulatory uncertainty surrounding the treatment of U.S. cannabis-related activities, including the rescission of the Cole Memorandum discussed above, on February 8, 2018 the Canadian Securities Administrators published a staff notice (Staff Notice 51-352 (Revised)) setting out the Canadian Securities Administrators’ disclosure expectations for specific risks facing issuers with cannabis-related activities in the United States. Staff Notice 51-352 (Revised) confirms that a disclosure-based approach remains appropriate for issuers with U.S. cannabis-related activities. Staff Notice 51-352 (Revised) includes additional disclosure expectations that apply to all issuers with U.S. cannabis- related activities, including those issuers that provide goods and services to third parties involved in the U.S. cannabis industry or have indirect involvement in the cultivation and distribution of cannabis.

The U.S. Customs and Border Protection Agency (“CBP”) has stated that Canadians who invest in the cannabis sector risk a lifetime ban on travel to the U.S. The CBP will continue to apply long-standing U.S. federal laws and regulations that treat cannabis as a banned substance and participants in the cannabis industry as drug traffickers who are inadmissible into the U.S. Although some U.S. states have eased marijuana laws, the U.S. continues to maintain a federal prohibition that applies at the border. In July 2018, a venture-capitalist from Vancouver, British Columbia who had invested more than $100,000 into U.S.

cannabis companies was denied entry to the U.S. and barred from future entry as his investments were deemed to be assisting and abetting in the illicit trafficking of drugs. If Trichome Financial were to make an investment or offer products or services to entities engaged in the U.S. cannabis industry, shareholders of Trichome Financial may risk a lifetime ban on travel to the U.S.

TABLE OF CONTENTS

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1. GENERAL ......................................................................................................................... 1

1.1 Effective Date of Information ................................................................................ 11.2 Cautionary Note Regarding Forward-Looking Information .................................. 11.3 Market and Industry Data ...................................................................................... 21.4 Currency Presentation and Certain References...................................................... 21.5 Accounting Principles ............................................................................................ 21.6 Glossary ................................................................................................................. 2

2. CORPORATE STRUCTURE ........................................................................................... 6

2.1 Corporate Name and Head and Registered Office ................................................. 62.2 Jurisdiction of Organization ................................................................................... 62.3 Intercorporate Relationships .................................................................................. 62.4 Fundamental Changes ............................................................................................ 72.5 Non-Corporate Issuers and Issuers Incorporated Outside of Canada .................... 7

3. GENERAL DEVELOPMENT OF THE BUSINESS........................................................ 7

3.1 General Development of Business of Trichome Financial .................................... 73.2 Significant Acquisitions and Dispositions ........................................................... 123.3 Trends, Commitments, Events or Uncertainties .................................................. 13

4. NARRATIVE DESCRIPTION OF THE BUSINESS ..................................................... 15

4.1 General ................................................................................................................. 154.2 Asset-Backed Securities....................................................................................... 244.3 Mineral Projects ................................................................................................... 244.4 Oil and Gas Operations ........................................................................................ 24

5. SELECTED CONSOLIDATED FINANCIAL INFORMATION .................................. 24

5.1 Annual Information .............................................................................................. 245.2 Quarterly Information .......................................................................................... 265.3 Dividends ............................................................................................................. 265.4 Foreign GAAP ..................................................................................................... 26

6. MANAGEMENT’S DISCUSSION AND ANALYSIS .................................................. 26

7. MARKET FOR SECURITIES ........................................................................................ 26

8. CONSOLIDATED CAPITALIZATION......................................................................... 26

9. OPTIONS TO PURCHASE SECURITIES ..................................................................... 27

10. DESCRIPTION OF THE SECURITIES ......................................................................... 35

10.1 General Description of Capital Structure ............................................................. 35

TABLE OF CONTENTS(continued)

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10.2 Debt Securities ..................................................................................................... 3610.3 Other Securities .................................................................................................... 3610.4 Modification of Terms ......................................................................................... 3610.5 Other Attributes ................................................................................................... 3710.6 Prior Sales ............................................................................................................ 3710.7 Stock Exchange Price .......................................................................................... 37

11. ESCROWED SECURITIES ............................................................................................ 38

12. PRINCIPAL SHAREHOLDERS .................................................................................... 38

13. DIRECTORS AND OFFICERS ...................................................................................... 39

13.1 Name, Municipality of Residence, Occupation and Security Holdings .............. 3913.2 Terms of Directorship .......................................................................................... 4013.3 Ownership of Common Shares ............................................................................ 4013.4 Board Committees ............................................................................................... 4113.5 Principal Occupation of Directors and Officers ................................................... 4113.6 Corporate Cease Trade Orders or Bankruptcies .................................................. 4113.7 Penalties and Sanctions ........................................................................................ 4213.8 Settlements ........................................................................................................... 4213.9 Personal Bankruptcies .......................................................................................... 4213.10 Conflicts of Interest.............................................................................................. 4313.11 Management ......................................................................................................... 43

14. CAPITALIZATION ........................................................................................................ 46

14.1 Fully Diluted Share Capital ................................................................................. 4614.2 Convertible Securities .......................................................................................... 4814.3 Other Listed Securities ......................................................................................... 48

15. EXECUTIVE COMPENSATION ................................................................................... 48

16. INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS .......................... 51

17. RISK FACTORS ............................................................................................................. 51

17.1 General ................................................................................................................. 5117.2 Risk Factors Resulting in Securityholder Liability .............................................. 72

18. PROMOTERS.................................................................................................................. 72

19. LEGAL PROCEEDINGS ................................................................................................ 72

19.1 Legal Proceedings ................................................................................................ 7219.2 Regulatory Actions .............................................................................................. 72

TABLE OF CONTENTS(continued)

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20. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ........................................................................................................... 72

21. AUDITORS, TRANSFER AGENTS AND REGISTRARS ........................................... 73

21.1 Auditors................................................................................................................ 7321.2 Transfer Agent ..................................................................................................... 73

22. MATERIAL CONTRACTS ............................................................................................ 73

23. INTEREST OF EXPERTS .............................................................................................. 73

23.1 Names of Experts ................................................................................................. 7323.2 Interests of Experts .............................................................................................. 73

24. OTHER MATERIAL FACTS ......................................................................................... 73

25. FINANCIAL STATEMENTS ......................................................................................... 74

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1. GENERAL

1.1 Effective Date of Information

Unless otherwise indicated, all information in this Listing Statement is given as of December 2, 2019.

1.2 Cautionary Note Regarding Forward-Looking Information

This Listing Statement includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws. All information, other than statements of historical facts, included in this Listing Statement that address activities, events or developments that Trichome Financial Corp. (“Trichome Financial” or “TFC”) expects or anticipates will or may occur in the future, including such things as future business strategy, competitive strengths, goals, expansion and growth of Trichome’s business, operations, plans and other such matters is forward-looking information. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes, among others, information regarding: statements relating to the business and future activities of, and developments related to, Trichome Financial after the date of this Listing Statement; statements based on the audited and unaudited financial statements of Trichome Financial; the success of investment activities; expectations for other economic, business, regulatory and/or competitive factors related to Trichome Financial, the investees or the cannabis industry generally; the expansion potential for the business and operations of various investees; the anticipated timing for the receipt of licences by certain investees; the regulatory regime for the distribution and sale of cannabis for medical and adult-use purposes in each province and territory in Canada and elsewhere; the business objectives and milestones of Trichome Financial; the principal uses of available funds, including the funds to be used for anticipated investments; and other events or conditions that may occur in the future.

Readers are cautioned that forward-looking information and statements are not based on historical facts but instead are based on reasonable assumptions and estimates of management of Trichome Financial at the time they were made and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Trichome Financial to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, risks relating to the diversion of management attention; interim restrictions on the business of Trichome Financial; the requirements of being a reporting issuer; lack of control over the operations of the investees; compliance with laws; changes in laws, regulations and guidelines; business strategy; risks inherent in strategic alliances; risks associated with divestment; competition; dependence upon key management personnel; operations in the United States; foreign investments; limited operating history; liquidity and additional financing; difficulty to forecast; fluctuations in cannabis prices; reputational risks to third parties; management of growth; equity price risk; anti-money laundering laws and regulation risks; security over underlying assets; unknown defects and impairments; challenging global financial conditions; credit and liquidity risk; litigation; hedging risk; cybersecurity risks; risks related to dividend payments; classification as a passive foreign investment company (“PFIC”); reliance on investee licences; reliance on investee facilities; operating risks for the investees; ability to forecast each investee’s production;

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competitive conditions for the investees; the ability of the investees to acquire customers; constraints on the investees’ ability to market products; risks inherent in an agricultural business; wholesale price volatility; product recalls by the investees; product liability risks for the investees; reliance by each investee on key input; reliance of each investee on supplier and skilled labour; intellectual property risks; the investees’ vulnerability to rising energy costs; and transportation risks associated with the delivery of product by the investees. Although Trichome Financial has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. Additional factors are noted under Item 17 – Risk Factors. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Forward-looking statements are made as of the date given and Trichome Financial does not undertake any obligation to revise or update any forward-looking statements other than as required by applicable law.

1.3 Market and Industry Data

This Listing Statement includes market and industry data that has been obtained from third party sources, including industry publications. Trichome Financial believes that its industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, Trichome Financial has not independently verified any of the data from third party sources referred to in this Listing Statement or ascertained the underlying economic assumptions relied upon by such sources.

1.4 Currency Presentation and Certain References

Unless otherwise indicated, all references to “$” in this Listing Statement refer to Canadian dollars.

Where the context requires, references in this Listing Statement to “Trichome Financial” shall be deemed to include Trichome Financial Corp., one of the amalgamating corporations in the Amalgamation. See Item 2 – Corporate Structure – Jurisdiction of Organization.

1.5 Accounting Principles

All financial information in this Listing Statement is prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

1.6 Glossary

The following is a glossary of certain terms used in this Listing Statement. Words importing the singular, where the context requires, include the plural and vice versa and words importing any gender include all genders.

“180 Smoke” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

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“2018 Farm Bill” means the United States Agriculture Improvement Act of 2018, as amended.

“22 Capital” means 22 Capital Corp., a corporation incorporated under the OBCA and one of the amalgamated corporations in the Amalgamation.

“22 Capital Escrow Agreement” means the escrow agreement dated April 6, 2017 among 22 Capital, TSX Trust Company and certain former securityholders of 22 Capital pursuant to which the securities owned by such persons are held in escrow in accordance with the requirements of the TSXV.

“Adjustment Events” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – New Equity Incentive Plans.

“Amalco Escrow Agreement” means the escrow agreement dated October 4, 2019 among Trichome Financial, AST Trust Company (Canada) and certain securityholders of Trichome Financial pursuant to which the securities owned by such persons are held in escrow in accordance with the requirements of the TSXV.

“Amalgamation” has the meaning ascribed thereto in Item 2 – Corporate Structure – Jurisdiction of Organization.

“Amalgamation Agreement” has the meaning ascribed thereto in Item 2 – Corporate Structure – Jurisdiction of Organization.

“ATB Financial” has the meaning ascribed thereto in Item 4 – Narrative Description of the Business – General – Competitive Conditions and Position.

“BlissCo” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“BlissCo Facility” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“BlissCo Mortgage” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“Board” means the board of directors of Trichome Financial, as constituted from time to time.

“Cannabis Act” means the Cannabis Act (Canada), as amended, including all regulations promulgated thereunder.

“CBD” means cannabidiol.

“CGS” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“CGS Facility A” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

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“CGS Facility B” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“Class A Preference Shares” means the Class A Preference Shares in the capital of Trichome Financial, as constituted from time to time.

“Class A Preference Shares, Series 1” means the Class A Preference Shares, Series 1 in the capital of Trichome Financial, as constituted from time to time.

“Common Shares” has the meaning ascribed thereto in Item 2 – Corporate Structure – Corporate Name and Head and Registered Office.

“CPC” means a corporation: (a) that has been incorporated or organized in a jurisdiction in Canada; (b) that has filed and obtained a receipt for a preliminary CPC prospectus from one or more of the securities commissions in Canada in compliance with Policy 2.4 – Capital Pool Companies of the TSXV Manual; and (c) in regard to which the Final Exchange Bulletin has not yet been issued.

“CSA Staff Notice 51-352” means Staff Notice 51-352 (Revised) – Issuers with U.S. Marijuana-Related Activities of the Canadian Securities Regulators dated February 8, 2018.

“CSE” means the Canadian Securities Exchange.

“Dividend Share Units” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – New Equity Incentive Plans.

“Final Exchange Bulletin” means the TSXV bulletin issued following closing of a Qualifying Transaction and the submission of all required documentation and that evidences the final TSXV acceptance of a Qualifying Transaction.

“Financing” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“IT” has the meaning ascribed thereto in Item 17 – Risk Factors – General – Risks Relating to the Business of Trichome Financial.

“JWC” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“Key Personnel” has the meaning ascribed thereto in Item 17 – Risk Factors – General – Risks Relating to the Business of Trichome Financial.

“Legacy Equity Incentive Plan” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – Legacy Equity Incentive Plan.

“OBCA” means the Business Corporations Act (Ontario), as amended, including all regulations promulgated thereunder.

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“OCN” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“OCN Investor Rights Agreement” has the meaning ascribed thereto in Item 3 – General Development of the Business – General Development of Business of Trichome Financial.

“Option” means a stock option entitling the right thereof the right to acquire a Common Shares, as described in Item 9 – Options to Purchase Securities.

“Option Plan” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – New Equity Incentive Plans.

“Origin House” means CannaRoyalty Corp. (d.b.a. Origin House).

“PFIC” has the meaning ascribed thereto in Item 1 – General – Cautionary Note Regarding Forward-Looking Information.

“PRSU” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – New Equity Incentive Plans.

“PSU” means a performance share unit entitling the holder thereof the right to acquire a Common Shares, as described in Item 9 – Options to Purchase Securities.

“Qualifying Transaction” means the business combination involving 22 Capital and Trichome Financial Corp. that resulted in a reverse take-over of 22 Capital by Trichome Financial Corp. pursuant to the Amalgamation, which constituted the “qualifying transaction” of 22 Capital in compliance with Policy 2.4 – Capital Pool Companies of the TSXV Manual.

“RSU” means a restricted share unit entitling the holder thereof the right to acquire a Common Shares, as described in Item 9 – Options to Purchase Securities.

“Share Units” has the meaning ascribed thereto in Item 9 – Options to Purchase Securities – New Equity Incentive Plans.

“THC” means delta-9-tetrahydrocannabinol.

“Trichome Financial” means, as the context requires, Trichome Financial Corp., one of the amalgamating corporations in the Amalgamation, or Trichome Financial Corp., the amalgamated corporation resulting from the Amalgamation.

“Trichome Financial Cannabis GP” has the meaning ascribed thereto in Item 2 – Corporate Structure – Intercorporate Relationships.

“Trichome Financial Cannabis LP” has the meaning ascribed thereto in Item 4 – Narrative Description of the Business – General – Business of Trichome Financial.

“Trichome Financial Cannabis Manager” has the meaning ascribed thereto in Item 2 – Corporate Structure – Intercorporate Relationships.

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“TSX” means the Toronto Stock Exchange.

“TSXV” means the TSX Venture Exchange.

“TSXV Manual” means the TSXV Corporate Finance Manual.

2. CORPORATE STRUCTURE

2.1 Corporate Name and Head and Registered Office

This Listing Statement has been prepared with respect to Trichome Financial in connection with its application to list its common shares (the “Common Shares”) on the CSE.

The head office of Trichome Financial is located at 150 King St. W., Suite 200, Toronto, Ontario M5H 3T9 and the registered office of Trichome Financial is located at 79 Wellington St. W., Box 270, TD South Tower, Toronto, Ontario M5K 1N2.

2.2 Jurisdiction of Organization

Trichome Financial is organized pursuant to articles of amalgamation under the OBCA dated October 4, 2019.

Pursuant to the terms of an amalgamation agreement dated as of November 13, 2018, as amended on January 30, 2019, April 5, 2019, May 27, 2019, August 12, 2019 and August 30, 2019 (the “Amalgamation Agreement”), Trichome Financial and 22 Capital amalgamated on October 4, 2019 to form Trichome Financial (the “Amalgamation”).

Since the Amalgamation, Trichome Financial has not amended its constating documents.

2.3 Intercorporate Relationships

As set forth in the following chart, Trichome Financial has the following two direct, wholly-owned subsidiaries:

Notes:

1. Trichome Financial Cannabis Private Credit GP Inc. (“Trichome Financial Cannabis GP”) was incorporated under the OBCA pursuant to articles of incorporation dated May 31, 2019. The authorized capital of Trichome Financial Cannabis GP consists of an unlimited number of common shares, of which one such common share is issued and outstanding and held by Trichome Financial.

Trichome Financial Corp.

Trichome Financial Cannabis Private Credit

GP Inc.

Trichome Financial Cannabis Manager Inc.

100% 100%

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2. Trichome Financial Cannabis Manager Inc. (“Trichome Financial Cannabis Manager”) was incorporated under the OBCA pursuant to articles of incorporation dated May 31, 2019. The authorized capital of Trichome Financial Cannabis Manager consists of an unlimited number of common shares, of which one such common share is issued and outstanding and held by Trichome Financial.

2.4 Fundamental Changes

This section is not applicable to Trichome Financial.

2.5 Non-Corporate Issuers and Issuers Incorporated Outside of Canada


3. GENERAL DEVELOPMENT OF THE BUSINESS

3.1 General Development of Business of Trichome Financial

Trichome Financial is a specialty finance company focused on providing tailored credit-based capital solutions to the cannabis industry. With few traditional lenders currently servicing the cannabis industry and high cost public or private equity the most conventional funding source, Trichome Financial seeks to gain a first-mover advantage and become a leading provider of credit and liquidity. See Item 4 – Narrative Description of the Business.

General Development of Trichome Financial’s Business

On March 12, 2018, Trichome Financial completed a non-brokered private placement offering of 1,320,000 common shares at a price of $0.25 per share for aggregate proceeds of $330,000.

On May 9, 2018, Trichome Financial provided credit financing to 2360149 Ontario Inc. (d.b.a 180 Smoke) (“180 Smoke”), a leading Canadian online and retail vaporizer products company. 180 Smoke has 23 stores in its network including 15 locations in the Greater Toronto Area and one location in Buffalo, New York. 180 Smoke generates revenue through its network of retail locations, an online direct-to-consumer website, business-to-business distribution, eJuice manufacturing, and a franchising program. All of 180 Smoke’s channels exclusively sell vaporizer and nicotine-related products, herbal vaporizer products and parts. 180 Smoke’s brand is centred around reducing the harm and negative health impacts caused by tobacco. Trichome Financial, along with Origin House, entered into a credit agreement with 180 Smoke to provide up to $2.5 million in the form of a secured term facility with an initial tranche of $500,000, split evenly between Trichome Financial and Origin House. The loan paid interest at 10% per annum, payable annually and in-kind, with a 12-month maturity, extendable by two one-year periods at 180 Smoke’s request. In addition, 858,951 warrants were issued by 180 Smoke to Trichome Financial, exercisable for three years from the date of issuance at an exercise price of $0.3871. 180 Smoke deployed the proceeds of the loan for retail network growth capital and general corporate purposes. On August 29, 2018, Trichome Financial, along with Origin House, provided an additional second tranche of credit financing to 180 Smoke in the amount of $350,000, split evenly between both lenders. Concurrent with the deployment of the second tranche, 180 Smoke issued 601,266 warrants to Trichome Financial, exercisable for three years from the date of issuance at an exercise price of $0.3871. On February 20, 2019, Origin House acquired all of the issued and outstanding

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shares of 180 Smoke for total consideration of $25 million in cash and shares of Origin House, plus up to $15 million in earn out payments in shares of Origin House. Upon closing of the transaction, the warrants of 180 Smoke were extinguished and the interest on the loans was forgiven. In connection with closing of the transaction, Trichome Financial was repaid in full by Origin House and realized a gain for the three-month period ended March 31, 2019 in the amount of $136,562 in respect of the loan to 180 Smoke. In addition, Trichome earned $45,000 in due diligence fees from Origin House in connection with the transaction. The credit agreement with 180 Smoke and all obligations under the credit agreement have been terminated.

On September 5, 2018, Trichome Financial completed a non-brokered private placement offering of 3,171,301 Class A Preference Shares at a price of $4.73 per share for aggregate gross proceeds of approximately $15,000,000. In connection with the private placement, Trichome Financial paid a cash finder’s fee of approximately $160,000 to certain finders. In conjunction with the private placement, Trichome Financial entered into an investor rights agreement (the “OCN Investor Rights Agreement”) with Paskwayak NAC Investment Limited Partnership (“OCN”). The Class A Preference Shares automatically converted into common shares of Trichome Financial on a one-for-one basis immediately prior to consummation of the Amalgamation. Pursuant to the terms of the OCN Investor Rights Agreement, OCN has the right to nominate a director to the Board as long as it owns at least 3.5% of the issued and outstanding Common Shares and the right to appoint an observer of the Board as long as it owns at least 2% of the issued and outstanding Common Shares. In addition, OCN has a right of first offer on the syndication by Trichome Financial of its portfolio investments. The OCN Investor Rights Agreement will automatically terminate if at any time OCN ceases to hold at least 2% of the issued and outstanding Common Shares.

On March 1, 2019, Trichome Financial provided credit financing to James E. Wagner Cultivation Corporation (“JWC”), a licensed producer of cannabis whose common shares are listed on the TSXV. Trichome Financial entered into a loan agreement with JWC to provide $3.5 million in the form of a senior-secured term loan (the “JWC Loan”). Trichome Financial has advanced the full $3.5 million under the JWC Loan, which bears interest at a rate of 9.25% per annum, payable in a bullet payment on the maturity date of February 19, 2021, and was issued with an original issue discount and set-up fee. In addition, Trichome Financial was issued 291,667 warrants to purchase shares of JWC at a price per share of $0.80. JWC is deploying the proceeds of the JWC Loan to purchase certain equipment and fund improvements for Phase 1 and 2 of the constructions of its second cannabis cultivation facility.

On March 18, 2019, Trichome Financial closed a lending arrangement with C.G.S. Foods Inc. (“CGS”), a private retail cannabis license holder in Ontario, Canada. The lending arrangement consisted of a revolving credit facility of up to $1,000,000 (“CGS Facility A”) and a term loan for up to $1,000,000 (“CGS Facility B”). The initial investment consisted of a $750,000 draw under CGS Facility A and $500,000 draw under CGS Facility B for a total investment of $1,250,000. The proceeds under CGS Facility A were to be used for the purchase of inventory. Funds drawn under CGS Facility A bore interest monthly, at a rate of 1.8% per month. CGS Facility A is terminated at the option of CGS after the six-month anniversary of the close date, or if certain lending limits are not reached. CGS Facility A had a two-year term and repayments over the course of the term of the agreement were based on a margining calculation against CGS’ inventory. The proceeds under CGS Facility B were to be used for leasehold improvements, operating costs and working capital items. Funds drawn under CGS Facility B bore interest annually at a rate of 8.5%

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per annum, unless CGS elected to forego monthly payments, for a pre-determined quarter, at which point the term loan bore interest at a rate equivalent to 12.0% per annum for the elected period. Upon closing of CGS Facility B, $500,000 was advanced to CGS, with up to $500,000 in increments no less than $100,000 to be advanced at the discretion of Trichome Financial within one year of the close date. CGS Facility B was due upon maturity on March 15, 2021. In consideration for CGS Facility B, CGS issued to Trichome Financial a total of $500,000 in warrants with an exercise price based on a $6,500,000 enterprise value, subject to downward adjustments in certain cases, of CGS. In the event that Trichome Financial advanced a second tranche under CGS Facility B, Trichome Financial would have received additional warrants based on a dollar amount equal to the advance. In the event that no additional amount was advanced under CGS Facility B, Trichome Financial would be entitled to $250,000 in additional warrants one year following the closing of CGS Facility B. On July 12, 2019, CGS elected to repay principal of $500,000 against the outstanding balance on CGS Facility A. On September 10, 2019, the remaining principal balance under Facility A was repaid in full. On September 17, 2019, the remaining principal balance of $500,000 under Facility B was repaid in full. The credit agreement with CGS and all obligations under the credit agreement have been terminated and Trichome Financial received an additional entitlement to $250,000 in additional warrants for no additional consideration.

On May 14, 2019, Trichome Financial entered into an agreement to provide a $4.5 million trade finance facility (the “BlissCo Facility”) and a $1.5 million mortgage loan (the “BlissCo Mortgage”) to Bliss Co Holdings Ltd. (“BlissCo”). The BlissCo Facility provided BlissCo with up to $4.5 million in funds, drawn at its option, against qualifying receivables and purchase orders. Funds drawn under the BlissCo Facility mature 12 months from issuance with an option to extend for an additional 12 months. Qualifying receivables under the BlissCo Facility were subject to a factoring facility fee of 2.25% per month on the gross amount outstanding (calculated daily) and purchase orders were subject to a fee of 3.25% per month on the gross amount outstanding (calculated daily). Obligations under the BlissCo Facility were secured by a first lien on accounts receivable and inventory of BlissCo and a second lien on all other current and future tangible and intangible assets and equity interests of BlissCo. The BlissCo Mortgage bore interest at a rate of 8.5% per annum, was for a term of 12 months with an option to extend for an additional 12 months and was secured by a first-ranking perfected security interest in the assets of BlissCo. The BlissCo Mortgage was guaranteed by Blissco Cannabis Corp., an operating subsidiary of BlissCo. Upon close, $1.3 million was advanced under the BlissCo Mortgage. On July 15, 2019, the BlissCo Facility and BlissCo mortgage were paid out in full in connection with a change of control of BlissCo and the agreements were terminated.

On July 31, 2019, Trichome Financial closed a $5.5 million senior secured term loan (“MYM Loan”) to MYM Nutraceuticals Inc. (“MYM”) to finance cannabis projects in Canada and Colombia and hemp projects in Canada and the United States and to provide working capital for general corporate purposes. The first tranche of $3.0 million was advanced on closing. The $2.5 million balance of the MYM Loan will be advanced upon the satisfaction of certain conditions by MYM. The MYM Loan has a term of 12 months and may be extended for an additional six months at Trichome Financial’s discretion. The MYM Loan bears interest at a rate of 12% per annum, payable monthly in cash out of a pre-established interest reserve account. MYM will also pay a standby fee of 6% per annum, payable monthly in cash on the second tranche until it is drawn or cancelled. In consideration for advancing the initial tranche of the MYM Loan, Trichome

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Financial received at closing (i) a set-up fee (ii) an original issue discount, and (iii) 4,000,000 warrants to purchase common shares of MYM, exercisable at any time prior to June 10, 2022 at an exercise price of $0.30 per share. Trichome Financial shall receive an additional 1,000,000 warrants, on the same terms as those already issued, upon closing of the second tranche. The MYM Loan is secured by a perfected first lien on all current and future tangible and intangible assets of MYM and an assignment of all material contracts and licenses. The MYM Loan has been guaranteed by each of MYM’s direct and indirect wholly-owned subsidiaries and each of the entities of which MYM is a majority shareholder.

On August 20, 2019, Trichome Financial entered into a loan agreement (the “Good Buds Loan Agreement”) to provide a $2,350,000 senior secured term loan (the “Good Buds Loan”) to Good Buds Company International Inc. (“Good Buds”) to finance the expansion of the Good Buds’ existing indoor facility and the development of its recently licensed outdoor cultivation operation. The Good Buds Loan bears interest at the rate of 11.5% per annum, payable monthly in cash, with the first 12 months of interest being funded out of a pre-established interest reserve account. The loan will mature on September 1, 2020. Good Buds has the right to prepay all, but not less than all, of the Good Buds Loan prior to the maturity date, subject to a prepayment premium equal to the lesser of (a) 6 months’ interest payable on the Good Buds Loan and (b) the aggregate amount of interest owing on the Good Buds Loan for the balance of its remaining term as of the date of the prepayment. In consideration for providing the Good Buds Loan, Trichome Financial will receive (i) a set-up fee, (ii) an original issue discount, and (iii) 950,000 non-assignable warrants, exercisable any time prior to the date which is 3 years from the closing date, at a price per share of Good Buds equal to the lesser of (1) $0.60 and (2) the lowest price below $0.60 at which Good Buds issues common shares or securities convertible into common shares from the closing date to the expiry date of the warrants. The Good Buds Loan is guaranteed by each direct and indirect wholly owned subsidiary organized under Good Buds.

On November 6, 2019, Trichome Financial amended and restated its loan agreement with JWC to provide JWC with an incremental $4,000,000 two-tranche loan (the “JWC Supplemental Loan”), for a total commitment to JWC of $7,500,000. Proceeds from the JWC Supplemental Loan will be used to finance the remaining construction and capital expenditures related to phases 2C and 3 of JWC’s Manitou Facility and for working capital requirements. The JWC Supplemental Loan bears interest at the rate of 9.25% per annum, payable monthly in cash, with part of the interest being funded out of a pre-established interest reserve account. Both tranches of the loan will mature on November 6, 2021. The first tranche of the JWC Supplemental Loan in the amount $2,850,000 was advanced on the closing date and the second tranche of $1,150,000 will be advanced upon the achievement by JWC of certain milestones. JWC has the right to prepay the JWC Supplemental Loan (as well as the JWC Loan described above) in whole or in part prior to the maturity date, at a prepayment price equal to the face value of the amount being prepaid, multiplied by a factor of 1.075, which shall decline (from 1.075 to 1.00) on a pro-rated basis for each month during which such amount would have remained outstanding. In consideration for providing the first tranche of the JWC Supplemental Loan, Trichome Financial received (i) a set-up fee, (ii) an original issue discount, (iii) 984,208 common shares of JWC and (iv) 1,696,385 common share purchase warrants, exercisable any time prior to November 6, 2021 at a price per share of JWC equal $0.42. In consideration for providing the second tranche of the JWC Supplemental Loan, Trichome Financial shall receive (i) a set-up fee, (ii) an original issue discount, (iii) additional common shares of JWC equal to 14.87% of the amount of the second tranche, divided by the closing price

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per common share of JWC on the last trading day preceding the date of advance of the second tranche, and (iv) common share purchase warrants equal to 25.63% of the amount of the second tranche, divided by the closing price per common share of JWC on the last trading day preceding the date of advance of the second tranche, with each warrant exercisable any time prior to November 6, 2021 at a strike price equal to 105% of the closing price per common share of JWC on the last day preceding the date of advance of the second tranche. The JWC Supplemental Loan is guaranteed by each direct and indirect wholly owned subsidiary organized under JWC.

On April 25, 2019, August 16, 2019 and October 4, 2019, respectively, Trichome Financial completed three tranches of non-brokered private placement offering of an aggregate of 7,849,707 subscription receipts at a price of $2.10 per subscription receipt for aggregate gross proceeds of approximately $16.5 million (the “Financing”). On October 4, 2019, each subscription receipt automatically converted into common shares of Trichome Financial on a one-for-one basis. In connection with the Financing, Trichome Financial paid a cash fee to Primary Capital Inc. representing 2% of the gross proceeds raised from the sale of the subscription receipts. In addition, Trichome Financial paid a finder’s fee to certain brokers of 5% of the gross proceeds of certain sales of the subscription receipts.

Amalgamation

Prior to the Amalgamation, 22 Capital was a “capital pool company” incorporated for the purpose of identifying and evaluating businesses or assets with a view to completing a “Qualifying Transaction” in compliance with Policy 2.4 – Capital Pool Companies of the TSXV Manual. Until completion of a Qualifying Transaction under the policies of the TSXV, 22 Capital was not permitted to carry on any business other than the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction.

On October 2, 2018, Trichome Financial entered into a letter of intent with 22 Capital with respect to the combination of their respective businesses. The letter of intent was subsequently superseded by the Amalgamation Agreement. On July 4, 2019, the shareholders of each of 22 Capital and Trichome Financial passed special resolutions approving the Amalgamation.

Completion of the Amalgamation on October 4, 2019 constituted 22 Capital’s Qualifying Transaction. In connection with the Amalgamation, Trichome Financial became a reporting issuer in the Provinces of British Columbia, Alberta and Ontario, and the Common Shares were listed and posted for trading on the TSXV under the trading symbol “TFC”.

Trichome Financial Cannabis Private Credit LP

Trichome Financial expects to officially launch the Trichome Financial Cannabis Private Credit LP (the “Fund”) and raise funds with a target size of $50 - $75 million. The purpose of the Fund is to: i) provide high net worth investors, family offices and institutions in Canada and abroad with an alternative structure through which to participate in Trichome Financial’s investment mandate; ii) provide additional capital to pursue investment in the cannabis and hemp industries and iii) provide Trichome Financial with recurring management fee revenue as well as a share of the profits of the Fund. The investment objective of the Fund will be substantially similar to that of Trichome Financial: the Fund will invest in secured and other loan transactions to companies

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operating in the cannabis, hemp, CBD and ancillary industries. The Fund will target returns through a blend of contractual cash flows, equity kickers and other performance bonuses. Trichome Financial, as well certain members of its management and board of directors, have committed to invest between $1 - $2 million directly into the Fund.

Trichome Financial Cannabis GP will be the general partner of the Fund and Trichome Financial Cannabis Manager will be the manager of the Fund. The structure chart for Trichome Financial, the Fund, Trichome Financial Cannabis GP and Trichome Financial Cannabis Manager is as follows.

In it anticipated that in most instances, Trichome Financial and the Fund will co-invest in loan opportunities during the term of the Fund. Accordingly, Trichome Financial and the Fund have enacted policies in the Fund’s partnership agreement to address general and specific issues related to conflicts of interest and the allocation of investment opportunities between Trichome Financial and the Fund.

3.2 Significant Acquisitions and Dispositions

Other than as described above, no significant acquisitions or significant dispositions have been completed by Trichome Financial during its last three completed financial years or are currently contemplated.

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3.3 Trends, Commitments, Events or Uncertainties

The Cannabis Act received royal assent on June 21, 2018 and came into force on October 17, 2018. The Cannabis Act outlines the framework for the legalization of adult-use cannabis in Canada. Pursuant to the Cannabis Act, individuals over the age of 18 are permitted to purchase fresh cannabis, dried cannabis, cannabis oil, and cannabis plants or seeds and to possess 30 grams of dried cannabis, or the equivalent amount in fresh cannabis or cannabis oil. The Cannabis Act also permits households to grow a maximum of four plants. This limit applies regardless of the number of adults that reside in the household. In addition, the Cannabis Act provides provincial and municipal governments the authority to prescribe regulations regarding retail and distribution, as well as the ability to alter some of the existing baseline requirements, such as increasing the minimum age for purchase and consumption of cannabis.

In connection with the Cannabis Act, the Canadian federal government introduced new penalties under the Criminal Code (Canada), including penalties for the illegal sale of cannabis, possession of cannabis over the prescribed limit, production of cannabis beyond personal cultivation limits, taking cannabis across the Canadian border, giving or selling cannabis to a youth and involving a youth to commit a cannabis-related offence. Provincial and territorial governments in Canada have made varying announcements on the regulatory regimes for the distribution and sale of cannabis for adult-use purposes. For example, Québec, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and the Northwest Territories have chosen a government-owned and -operated model for distribution, whereas Saskatchewan and Newfoundland & Labrador have opted for a private sector approach. Ontario, Alberta and British Columbia have announced plans to pursue a hybrid approach of public distribution and private or public/private sale.

The federal regulatory regime under the Cannabis Act provides for the issuance of cultivation licences for standard cultivation, micro-cultivation, industrial hemp cultivation and nursery cultivation, licences for standard processing and micro-processing, and sales licences for medical or non-medical use. In addition, the regime includes personnel and physical security obligations. Further, all cannabis products must be packaged in a tamper-evident and child-resistant manner and product labels must contain specified product information, such as the name of the processor who packaged the products, product lot number, and THC/CBD content.

In addition, federal regulations include packaging and labeling restrictions for cannabis products, intended to minimize appeal to children and youth, protect against accidental consumption and ensure consumers are informed of the potential risks and harms of cannabis. Specifically, labeling and branding restrictions require plain packaging, including a standardized cannabis symbol on every label; mandatory health warning messages (including specifics regarding size, placement and appearance); a limit of only one brand element, aside from the brand name; no other image or graphic; backgrounds need to be a single, uniform colour; use of fluorescent or metallic colours is prohibited; labels and packaging cannot have any coating or embossing; and no inserts can be included.

Edibles, cannabis extracts and cannabis topicals are also permitted for sale. Amendments to the regulations under the Cannabis Act came into force on October 17, 2019 to permit the production and sale of these additional classes of cannabis by holders of federal licences specific for these

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product classes. The earliest date that the new classes of cannabis products will be available for sale is December 16, 2019.

Trichome Financial, as a lender to the legal cannabis industry in Canada, has assessed the cannabis regulatory regime from the perspective of secured debt financing and has noted a gap in the regulatory scheme as it applies to the ability of lenders to secure collateral, including regulated assets and regulatory licences themselves. In the event of a default, it is currently unclear how or if a lender would be able to realize on its security because it is unclear whether security can be taken in the relevant cannabis licences themselves, whether cannabis licences may be transferred in such circumstances, and whether a lender could take possession of regulated collateral. Canadian cannabis regulations are silent on these topics, and accordingly there can be no assurance that a lender in the cannabis industry will be in a position to enforce security in regulated assets or regulatory licences. Trichome Financial continues to monitor market practice and legal developments in this area. Trichome Financial seeks to mitigate risks on its loan portfolio through a variety of methods other than the taking of security interests in regulated assets and regulatory licenses, such as by taking security over non-regulated assets and the shares of subsidiaries which may be the holder of licenses. With respect to the taking and enforcement of security on regulated assets and regulatory licenses, Trichome Financial intends to work closely with legal counsel and regulators and participate in creating sensible market practice; however, there can be no assurance as to when or if these matters will be clarified and a sensible market practice develop.

Trichome Financial currently has no investment in any company located outside of Canada. However, from time to time, Trichome Financial may consider extending loans to or establishing other financial products with entities that are directly or indirectly involved in the U.S. cannabis industry or provide products or services to entities directly or indirectly involved in the U.S. cannabis industry, in each case in states where such activities are legal. The emergence of the legal cannabis sector in the United States, both for medical and adult-use, has been rapid as more states adopt regulations for its production and sale. However, cannabis remains illegal under U.S. federal law and is a Schedule I substance under the U.S. Controlled Substances Act (the “CSA”). The Department of Justice defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.” The U.S. Food and Drug Administration has not approved cannabis as a safe and effective drug for any indication.

Unlike in Canada, which has federal legislation uniformly governing the cultivation, distribution, sale and possession of medical marijuana under the Cannabis Act, marijuana is largely regulated at the state level in the United States.

However, state laws regulating cannabis are in direct conflict with the CSA, which makes cannabis use and possession federally illegal in the United States. Although certain states and territories of the U.S. authorize medical or recreational cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under U.S. federal law under any and all circumstances under the CSA. Although Trichome Financial would conduct thorough due diligence to determine whether any proposed investee is compliant with applicable state law regulating cannabis, such compliance may neither absolve Trichome Financial and its subsidiaries of liability under United States federal law, nor provide a defense to any U.S. federal proceeding which

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may be brought against Trichome Financial or its subsidiaries. As a result of this federal illegality, any such investment may be subject to additional risks relating to a potential lack of enforceability of contracts and secured interests and lack of availability of certain legal regimes relevant to debtors and creditors such as federal insolvency and bankruptcy regimes.

If Trichome Financial were to offer products or services to or hold securities of entities involved in the U.S. cannabis industry, Trichome Financial may be considered to have “marijuana-related activities” as defined in Canadian Securities Administrators Staff Notice 51-352 (Revised) – Issuers with U.S. Marijuana-Related Activities. In accordance with Staff Notice 51-352 (Revised), if at any time Trichome Financial offers such products or services or holds such securities, Trichome Financial will evaluate, monitor and reassess this disclosure, and any related risks, on an ongoing basis and supplement its public disclosure, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding marijuana regulation. At present, no portion of either the assets or liabilities or the revenues and costs described in Trichome Financial’s financial statements for the six months ended June 30, 2019 are associated with U.S. “marijuana-related activities”. Trichome Financial has sought legal advice regarding potential exposure and implications arising under U.S. federal law in connection with any U.S. “marijuana-related activities”. Because Trichome Financial currently has no such activities, as of the date hereof Trichome Financial has not sought or obtained legal advice regarding compliance with cannabis state regulatory frameworks. Trichome Financial would not be prepared to hold securities of or provide products or services to entities which are, to the knowledge of Trichome Financial, not in compliance with applicable state licensing requirements and regulatory frameworks.

Risks relating to the U.S. cannabis industry and other risks associated with Trichome Financial’s business are described in Section 17 – Risk Factors.

Trichome Financial is not currently aware of any other trends, events or uncertainties that reasonably can be expected to have a material effect on its business, financial condition or results of operations, other than as described in this Listing Statement. However, there are significant risks associated with Trichome Financial’s business, as described in Item 17 – Risk Factors. Please also see Item 1 – General – Cautionary Note Regarding Forward-Looking Information.

4. NARRATIVE DESCRIPTION OF THE BUSINESS

4.1 General

Business of Trichome Financial

Trichome Financial is a specialty finance company focused on providing tailored credit-based capital solutions to the Canadian and legal international cannabis industry. With few traditional lenders currently servicing the cannabis industry and high cost public or private equity the most conventional funding source, Trichome Financial seeks to gain a first-mover advantage and become a leading provider of credit and liquidity to companies engaged in the legal cannabis industry.

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Trichome Financial targets investments with the following market participants: licensed producers, applicants in the late state of the licensed producer application process, hardware and ancillary product manufacturers, extraction companies, processors, consumer and packaged goods companies, real estate owners, retail networks, media platforms and technology companies. Trichome Financial intends to target investments in Canada, the United States and other legal jurisdictions. Each investment that Trichome Financial makes is structured as a secured loan secured by assets, cash flow or enterprise value collateral of the investee. Trichome Financial also seeks operating covenants in the loan agreements with respect to such investments. Trichome Financial generally earns its return on capital through a combination of: (i) contractual interest payments, (ii) structuring and related fees, and (iii) upside optionality via equity kickers, loan convertibility, bonus payments and potential penalty payments.

The following table sets out Trichome Financial’s investments to date. See Item 3 – General Development of the Business.

Investee Committed

Capital Contrib-

uted Capital Term Interest

Rate Upside Optionality Security Sub-

Industry

180 Smoke(1) $1,250,000 $425,000

1 year (extendable by up

to 2 years)

10% per annum (PIK)

1.33x warrant coverage

General security

agreement, second lien

Retail

JWC $3,500,000 $3,500,000 2 years 9.25% per

annum 291,667 warrants

General security

agreement, first lien

Licensed Producer

CGS(2) $2,000,000

$1,250,000

(Facility A - $750,000,

Facility B - $500,000)

2 years

Facility A

1.80% per month

Facility B

8.50% - 12% per annum

Trichome Financial received warrants to acquire a minimum

of 10.3% of the outstanding shares of

CGS

General security


Licensed Ontario Private

Cannabis Retailer

BlissCo(3) $6,000,000 $1,300,000


to 1 year)

Accounts Receivable2.25% per

month

Purchase Orders

3.25% per month

Mortgage8.5% per annum

N/A

Accounts Receivable

and Purchase Orders General security

agreement, first lien on

accounts receivable, second lien on all other

PAP Mortgagefirst lien

Licensed Producer

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Investee Committed

Capital Contrib-

uted Capital Term Interest

Rate Upside Optionality Security Sub-

Industry

Good Buds $2,350,000 $2,350,000 1 year 11.5% per

annum 950,000 warrants

General security


Licensed Producer

MYM $5,500,000 $3,000,000


to 6 months)

12% per annum, with 6% standby

fee on second

tranche until drawn or cancelled

5,000,000 warrants (4,000,000 of which have been received,

with the balance payable on funding

of the second tranche)

General security

agreement, first lien,

and assignment

of all material contracts

and licenses

Licensed Producer Applicant

JWC $4,000,000 $2,850,000 (Tranche 1)

2 years 9.25% per

annum

984,208 common shares and 1,696,385 warrants. Additional shares and warrants

(14.87% and 25.63% of Tranche 2 amount respectively), payable on closing of Tranche

2, priced at a 5% premium to the

closing share price onthe date prior to

issuance

General security


Licensed Producer

Notes:

(1) Trichome Financial’s investment in 180 Smoke has been repaid in full and all obligations under the credit agreement with 180 Smoke have been terminated.

(2) Trichome Financial’s investment in CGS has been repaid in full and all obligations under the CGS Facility A and CGS Facility B have been terminated.

(3) Trichome Financial’s investment in BlissCo has been repaid in full and all obligations under the BlissCo Facility and the BlissCo Facility have been terminated.

Trichome Financial may manage capital pools, including through the creation of separate investment fund vehicles. If Trichome Financial manages such capital pools, it is expected that Trichome Financial’s revenue from such capital pools would be derived from fees for managing investment capital for third parties, which fees may include the right to an interest in the underlying investments on a carried basis, as well as potentially through direct investment by Trichome Financial into some or all of such capital pools. These third-party capital pools would be deployed using the same strategy used for the investment of Trichome Financial’s capital and may participate in existing investments and/or co-invest with Trichome Financial in future investments. The quantum of fees for the management of such capital pools and policies respecting the relationship between Trichome Financial and such capital pools would be established in negotiation of the documentation establishing such capital pools. Investment through the capital pools may be attractive to certain categories of investors due to tax attributes and other factors. To date, the only such investment fund vehicle that Trichome Financial has formed is Trichome

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Financial Cannabis Private Credit, LP (“Trichome Financial Cannabis LP”), a limited partnership formed under the laws of the Province of Ontario. Trichome Financial Cannabis GP is the general partner of Trichome Financial Cannabis LP. Trichome Financial is currently seeking investment commitments into Trichome Financial Cannabis LP. No limited partner has yet invested. Pursuant to Trichome Financial Cannabis LP’s limited partnership agreement, Trichome Financial Cannabis LP will pay the applicable management fees to Trichome Financial Cannabis Manager. In accordance with the terms of a management services agreement, Trichome Financial Cannabis Manager will pay such management fees to Trichome Financial in exchange for the provision of certain services by Trichome Financial to Trichome Financial Cannabis Manager.

Business Objectives

The primary business objectives of Trichome Financial over the next 12 months are to i) deploy Trichome Financial’s available capital into a portfolio of attractive secured loans to participants in the global cannabis and CBD markets in accordance with Trichome Financial’s investment mandate, and (ii) to launch the Trichome Financial Cannabis Private Credit LP.

Significant Events or Milestones

The principal milestones that must occur during the 12-month period following the date of this Listing Statement for the business objectives described above to be accomplished are as follows:

Milestone Target Date Estimated Cost

Transaction costs related to deployment of Capital

September 30, 2020 $900,000

Launch Trichome Financial Cannabis Private Credit LP

December 31, 2019 $500,000

Other than as described in this Listing Statement, to the knowledge of management, there are no other particular significant events or milestones that must occur for Trichome Financial’s business objectives described above to be accomplished. However, there is no guarantee that Trichome Financial will meet its business objectives or milestones described above within the specific time periods, within the estimated costs or at all.

Available Funds and Principal Purpose of Funds

The pro forma working capital position of Trichome Financial as of June 30, 2019, after giving effect to the Amalgamation, as if it had been completed on that date, was approximately $19.6 million. This amount reflects the combined working capital of Trichome Financial and 22 Capital.

It is Trichome Financial’s intention to use these funds over the next 12 months as set out below.

Principal Purpose Budgeted Expenditures

Anticipated Secured Loan Investments All available funds less expenses below, and cash reserve.

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Transaction costs related to deployment of Capital $900,000

Launch Trichome Financial Cannabis Private Credit LP

$500,000

Salaries, benefits, and discretionary bonuses $1,640,000

Professional, audit, and legal fees $440,000

Insurance $130,000

Rent $65,000

Administrative, travel, marketing and other $125,000

There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary for Trichome Financial to achieve its objectives. Trichome Financial may also require additional funds in order to fulfill its expenditure requirements to meet existing and new business objectives and expects to either issue additional securities or incur debt to do so. There can be no assurance that additional funding required by Trichome Financial will be available, if required. It is anticipated that the available funds will be sufficient to satisfy Trichome Financial’s objectives for the forthcoming 12-month period. The amounts shown in the table above are estimates only and are based on the information available to Trichome Financial as of the date of this Listing Statement.

Principal Products and Services

Trichome Financial is a specialty finance company focused on providing tailored credit-based capital solutions to the Canadian and legal international cannabis industry. Its products are financial and include secured loans, factoring facilities and inventory financing. From time to time, Trichome Financial may offer consulting or advisory services in tandem with its products. The primary markets for Trichome Financial’s products are among participants in the cannabis industry, including licensed producers, applicants in the late state of the licensed producer application process, hardware and ancillary product manufacturers, extraction companies, processors, consumer and packaged goods companies, real estate owners, retail networks, media platforms and technology companies. None of Trichome Financial’s revenues for the two most recently completed financial years for such products were derived from sales or transfers to joint ventures of which Trichome Financial is a participant or to entities in which Trichome Financial has an investment accounted for by the equity method, sales or transfer to controlling shareholders, or sales or transfers to investees.

Production and Sales

Trichome Financial performs in-house loan origination, including identification of loan candidates, due diligence, and deal structuring and has assembled an executive and lending team with financial and industry expertise in order to execute its business plan.

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Proprietary Protections

As a lender and financial services provider, intangible properties such as copyrights, franchises, licenses, patents and software are not as important to the future success of Trichome Financial as they may be to issuers in other lines of business. However, Trichome Financial believes that certain intangible properties, such its brand name, circulation lists, subscription lists and trademarks will be important to the future success of Trichome Financial.

Seasonality

Trichome Financial’s business activities are not driven by any particular calendar seasonality. Rather, it may be driven to a greater extent by the business cycle as well as the state of the capital markets broadly, and the capital markets for cannabis companies in particular. While Trichome Financial may profitably deploy capital in all parts of the business cycle and in any capital markets environment, in general its business is inversely correlated to the capital markets environment. In times of negative market environment, the level of activity for Trichome Financial increases, as do the returns that it may be able to earn.

Economic Dependence and Changes to Contracts

Trichome Financial’s business is not substantially dependent on any specific contract. Therefore, the renegotiation or termination of any of Trichome Financial’s contracts during the next 12 months would not be expected to have a material effect on Trichome Financial’s business.

Environmental Protection

Trichome Financial does not expect that there will be any financial or operational effects as a result of environmental protection requirements on its capital expenditures, profit or loss, or the competitive position of Trichome Financial in the current financial year or in future years.

Employees

Trichome Financial has six employees.

Foreign Operations

Trichome Financial does not currently conduct business outside of Canada. However, it may consider such business in the future.

The legal and regulatory requirements with respect to the cultivation and sale of cannabis in foreign countries in which Trichome Financial may invest, as well as local business culture and practices, are different from those in Canada. Prior to commencing investment in any new country, Trichome Financial, in partnership with its legal counsel, consultants and partners, would conduct legal and commercial due diligence in order to ensure that it and its officers and directors gain a sufficient understanding of the legal, political and commercial framework and specific risks associated with operating in such jurisdiction. If it were to make any such foreign investment, Trichome Financial would seek to work with respected and experienced local partners who can help Trichome Financial understand and navigate the local business and operating environment, language and

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cultural differences. In consultation with its advisors, Trichome Financial would take steps it deems appropriate in light of the level of investment it expects to have in each country to ensure the management of risks and the implementation of necessary internal controls.

As of the date hereof, Trichome Financial does not engage in any “U.S. marijuana-related activities” as defined in CSA Staff Notice 51-352.

The 2018 Farm Bill federally legalized the cultivation of hemp for the production of CBD and other cannabinoids. As a result, Trichome Financial may consider investing in the United States in fully legal hemp operations or other operations that are fully legal after the implementation of the 2018 Farm Bill, including the reform by the applicable state of its own controlled substances legislation and implementation by such state of a regulatory oversight program for the hemp industry in its state that is approved by the U.S. Department of Commerce.

Competitive Conditions and Position

There are a number of lenders that have been active in the cannabis lending sector including ATB Financial, BMO Financial Group, Alterna Savings and Credit Union Ltd., Meridian Credit Union Ltd. and Farm Credit Canada, alternative lenders such as Bridging Finance Inc. and mortgage lenders including Romspen Mortgage Investment Fund, as well as hedge/credit funds, family offices and high net worth individuals. In addition to direct competitors, there are several indirect competitors, a group that Trichome Financial broadly defines as providers of cannabis-focused capital and providers of opportunistic risk capital. In the former category, such competitors may include venture and streaming companies such as Canopy Rivers Inc. and Auxly Cannabis Group Inc., real estate entities providing sale/leaseback capital, merchant banks such as Quinsam Capital Corporation, cannabis focused equity funds and exchange-traded funds, and retail investors in the cannabis capital markets. In the latter category, such competitors may include equity/convertible debenture hedge funds and distressed debt funds that pursue a broad array of capital deployment strategies.

As the cannabis industry matures, Trichome Financial expects to see both an increase in the number of providers of capital as well as greater segmentation among those providers. Trichome Financial believes that the Canadian chartered banks will become more active as lenders, but in the near- and medium-term, only for the larger entities and employing an approach that is more risk-averse compared to Trichome Financial. Traditional lending credit standards are such that Canadian chartered banks will be seeking to lend exclusively to cash flowing entities with a history of profitability, something that few operators can demonstrate today. Regulatory concerns surrounding both cannabis and banking in general (including with respect to Basel III requirements) suggest that banks will not be the largest competitive threat to Trichome Financial.

In terms of the direct competitive environment, management of Trichome Financial believes that, at present, Trichome Financial may be the only opportunistic cannabis-focused specialty lending group. While management does not expect that this circumstance will endure, it views having a first-mover advantage as a key competitive strength both in terms of originating new investment opportunities, developing valuable intellectual capital and raising capital. By far the most active traditional lender in this sector has been ATB Financial, which we believe has a cannabis credit book of approximately $250 million.

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Although further competition is expected to emerge over time, management believes that Trichome Financial’s exclusive focus on the sector, origination and due diligence capabilities, and consequently the range of opportunities it would consider underwriting set it apart from the other alternative lenders mentioned above and other lenders that may emerge.

However, there are significant risks associated with Trichome Financial’s business that may cause such competitive outlook to change. See Item 17 – Risk Factors.

Lending Operations, Investment Policies and Investment Restrictions

While the nature and timing of Trichome Financial’s investments depend, in part, on available capital at any particular time and the investment opportunities identified and available to Trichome Financial, Trichome Financial has implemented an investment selection policy that guides its investment process.

Trichome Financial focuses on originating and structuring tailored credit-based capital solutions to the cannabis industry in Canada and other legal jurisdictions. It seeks to take advantage of an industry need for credit and liquidity where there is limited access to traditional bank, high yield, or mezzanine capital. In doing so, Trichome Financial seeks to earn attractive risk-adjusted rates of returns on its invested capital. Simultaneously, Trichome Financial seeks to preserve capital through secured credit structures where returns are driven by contractual cash obligations by borrowers as well as through warrants, shares, and other performance-based payments.

Trichome Financial’s investment strategy is to provide credit-based solutions to companies operating in the cannabis sector and related verticals. The overriding principle that guides the strategy is minimization of risk and maximization of return potential. Trichome Financial focuses on companies that require capital for:

completing projects that have been substantially funded and completed to date;

expanding existing operations;

working capital, including for receivables and inventory;

facilitating mergers and acquisitions; and

a use of proceeds that is complex, time-sensitive or restricted by market conditions.

In executing its investment strategy, Trichome Financial completes comprehensive due diligence processes encompassing business, operational, financial, technical and legal due diligence. Trichome Financial’s stringent underwriting process considers:

how advanced the borrower is in executing its business plan, including key milestones achieved and amount of equity capital raised;

the quality and integrity of the management team and sponsors;

licensing and regulatory matters;

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the value of hard assets, including real estate, equipment and other items;

the serviceability of obligations based on future cash flows, including repayment by the borrower on or before the maturity date;

consideration of the strategic value of the business being underwritten;

an adequate security package that underpins the collateral package, including the expected liquidity thereof;

jurisdictional considerations with respect to enforceability of the security package, including local bankruptcy and insolvency legislation, lender rights as a secured party and the overall rule of law;

appropriate positive, negative and financial covenants; and

refinancing scenarios upon maturity.

Trichome Financial generally assesses borrowers’ management experience/integrity, financial health, forecasts, business plans, capacity, products, customers, contracts, competitive advantages/disadvantages, and other pertinent factors when assessing credit risk. On certain loans, interest is paid upfront by the borrower, in addition to a set-up fee and original issue discount, in order to reduce credit risk.

In addition to due diligence and the factors above, Trichome Financial generally obtains approval from its Board of Directors for lending arrangements. Trichome Financial generally considers collateral of the underlying businesses, including property, plant and equipment, inventory and receivables, in structuring its investments and managing credit risk. Trichome Financial actively monitors financial results of the underlying businesses regularly against the underlying business plans and industry trends.

Trichome Financial’s borrowers are concentrated within the Canadian cannabis industry. However, Trichome Financial diversifies credit risk by lending to companies that operate in different geographic regions, as well as different sectors within the Canadian cannabis market such as cultivation, extraction, and retail. Trichome Financial plans to increase its geographic diversification through loans to cannabis companies within the United States.

The nature and timing of Trichome Financial’s investments depend, in part, on available capital at any particular time and the investment opportunities identified and available to Trichome Financial. Trichome Financial intends to continue building a diverse portfolio of loans across the value chain, although the composition of such portfolio will vary over time depending on a number of factors, including: end market demands that affect the growth of any part of the value chain; performance of financial markets that might affect capital availability; competition from other lenders; regulatory changes or developments; development of legal international cannabis markets; and macro- and micro-economic factors impacting the cannabis industry, among others. Given the host of factors influencing the investment process, it is difficult to predict exactly how Trichome Financial’s portfolio will evolve over time.

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Bankruptcy and Receivership

Trichome Financial has not been the subject of any bankruptcy or any receivership or similar proceedings against Trichome Financial or any of its subsidiaries or any voluntary bankruptcy, receivership or similar proceedings by Trichome Financial or any of its subsidiaries, since inception or within the current financial year.

Material Restructuring

Except for the Amalgamation, Trichome Financial has not been subject to any material restructuring transaction since inception and is not proposing to undertake a material restructuring transaction during the current financial year.

Social and Environmental Policies

Trichome Financial does not have any social or environmental policies in place that are fundamental to its operations.

4.2 Asset-Backed Securities

Trichome Financial does not have any asset-backed securities.

4.3 Mineral Projects

Trichome Financial does not have any mineral projects.

4.4 Oil and Gas Operations

Trichome Financial does not have any oil and gas operations.

5. SELECTED CONSOLIDATED FINANCIAL INFORMATION

5.1 Annual Information

Trichome Financial

The following table sets out certain selected financial information of Trichome Financial for the periods indicated. Such information is derived from and should be read in conjunction with Trichome Financial’s (i) audited financial statements as at and for the years ended December 31, 2018 and 2017 and the notes thereto, which are attached to this Listing Statement as Schedule “A”.

Year ended December 31, 2017 (audited) ($ in thousands)


Summary Operating Results

Interest revenue - 22,534

Operating expenses - 1,738,886

Other expenses - 495,988

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Net operating income (loss) - (1,716,352)

Net income - (2,212,340)

Total comprehensive income (loss) - (2,212,340)

Basic loss per share - (1.09)

Diluted loss per share - (1.09)

Balance Sheet Data

Cash - 13,810,095

Total assets 5,000 14,274,943

Total liabilities - 15,458,690

Shareholders’ deficit (equity) 5,000 (1,183,747)

Trichome Financial declared no cash dividends during the years ended December 31, 2018 or 2017.

Trichome Financial

Trichome Financial was formed as a result of the Amalgamation and therefore does not have historical financial statements prepared on a consolidated basis. The following table sets out certain selected financial information of Trichome Financial as at June 30, 2019, presented on a pro forma basis giving effect to the Amalgamation and the Financing as if they had been completed as at June 30, 2019. Such information is derived from and should be read in conjunction with Trichome Financial’s (i) unaudited financial statements as at and for the six months ended June 30, 2019 and 2018 and the notes thereto, which are attached to this Listing Statement as Schedule “D” and (ii) pro forma financial statements as at and for the six months ended June 30, 2019, which are attached to this Listing Statement as Schedule “C”.

Six months ended Juned 30, 2019 (pro forma) ($ in thousands)

Summary Operating Results

Interest revenue 281,064

Operating expenses 1,592,108(1)

Other expenses 783,324

Net loss and comprehensive loss (2,094,368)

Balance Sheet Data

Cash 20,022,385

Total assets 29,770,193

Total liabilities 1,035,867

Shareholders’ deficit (equity) 28,734,326

Note: (1) $64,049 of this amount relates to 22 Capital’s operating expenses.

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5.2 Quarterly Information

Trichome Financial was not a reporting issuer for the eight most recently completed quarters ending at the end of the most recently completed financial year, and has not prepared quarterly financial statements for such period.

5.3 Dividends

There are no restrictions in Trichome Financial’s articles or elsewhere which could prevent Trichome Financial from paying dividends. Trichome Financial does not contemplate paying any dividends on any of the Common Shares in the immediate future, as it anticipates investing all available funds to finance the growth of Trichome Financial. The Board will determine if, and when, to declare and pay dividends in the future from funds properly applicable to the payment of dividends based on Trichome Financial’s financial position at the relevant time. After payment to the holders of the Class A Preference Shares of the amount or amounts to which they may be entitled, the holders of the Common Shares shall be entitled to receive any dividend declared by the Board.

5.4 Foreign GAAP


6. MANAGEMENT’S DISCUSSION AND ANALYSIS

Trichome Financial’s annual management’s discussion and analysis for the years ended December 31, 2018 and 2017 are attached to this Listing Statement as Schedule “B” and for the six months ended June 30, 2019 and 2018 as Schedule “E”.

7. MARKET FOR SECURITIES

The Common Shares are listed for trading on the TSXV under the trading symbol “TFC”. Trichome Financial intends to list the Common Shares on the CSE upon acceptance of its application in connection with this Listing Statement and to de-list the Common Shares from the TSXV upon listing on the CSE.

8. CONSOLIDATED CAPITALIZATION

The following table sets forth the consolidated capitalization of Trichome Financial as at the date of this Listing Statement, which reflects the Amalgamation and the Financing:

Description Amount

Authorized Amount outstanding as at date

of this Listing Statement

Common Shares Unlimited 25,074,831(4)(5)

RSUs(1)

20% of the issued and outstanding Common Shares, less other outstanding

equity incentives 2,060,304

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Description Amount

Authorized Amount outstanding as at date

of this Listing Statement

PSUs(2)


equity incentives 630,000

Options(3)


equity incentives 85,209

(1) Each RSU is a right granted to a plan participant to acquire a fully-paid and non-assessable Common Share, which right becomes vested, if at all, subject to the attainment of time vesting conditions and the satisfaction of any other conditions to vesting as determined by the Board. See Item 9 – Options to Purchase Securities.

(2) Each PSU is a right granted to a plan participant to acquire a fully-paid and non-assessable Common Share, which right becomes vested, if at all, subject to the attainment of performance vesting conditions during a performance period and the satisfaction of any other conditions to vesting as determined by the Board. See Item 9 – Options to Purchase Securities.

(3) Each Option is exercisable for one Common Share. As at December 31, 2018, 15,000 Options were issued and outstanding and exercisable at an exercise price of $1.58. An additional 70,208 were issued to the shareholders of 22 Capital Corp. in connection with the reverse takeover and are exercisable an exercise price of $1.42 See Item 9 – Options to Purchase Securities.

(4) 7,849,707 Common Shares were issued pursuant to the Financing.

(5) All issued and outstanding Class A Preference Shares, Series 1 were automatically converted into common shares of Trichome Financial immediately prior to consummation of the Amalgamation.

Trichome Financial has no loan capital outstanding.

A detailed breakdown of the capital structure of Trichome Financial is provided in Item 14 – Capitalization.

9. OPTIONS TO PURCHASE SECURITIES

The purpose of Trichome Financial’s incentive plans is to attract, retain and motivate directors, officers and employees by providing them with the opportunity to acquire a proprietary interest in Trichome Financial.

Legacy Equity Incentive Plan

Prior to completion of the Amalgamation, Trichome Financial had an equity incentive plan (the “Legacy Equity Incentive Plan”) in place, which is part of a legacy compensation program pursuant to which directors, officers and employees of Trichome Financial were granted Options, RSUs and/or PSUs. All currently outstanding legacy RSUs and PSUs vest (if at all) within two years from the date of the grant and all currently outstanding legacy Options are exercisable within three years from the date of the grant. The time vesting conditions in respect of each legacy RSU and the performance vesting conditions in respect of each legacy PSU were determined by the Board at the date of the grant. The exercise price of each legacy Option was determined by the Board at the date of the grant.

No additional awards will be granted under the Legacy Equity Incentive Plan, but legacy Options, RSUs and PSUs previously granted under the plan remain outstanding in accordance with their terms and continue to be governed by the provisions of the Legacy Equity Incentive Plan. Following completion of the Amalgamation, such legacy Options, RSUs and PSUs are exercisable to acquire Common Shares.

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Prior to completion of the Amalgamation, 22 Capital had 1,000,000 options outstanding, which were exercisable to acquire common shares of 22 Capital. Following completion of the Amalgamation, such legacy Options were consolidated on a 14.24347:1 basis. As a result, 70,208 legacy Options remaining outstanding and are exercisable to acquire Common Shares.

New Equity Incentive Plans

Following completion of the Amalgamation, Trichome Financial established the following new equity incentive plans: (i) a performance and restricted share unit plan (the “PRSU Plan”) and (ii) a stock option plan (the “Option Plan”).

PRSU Plan

The purpose of the PRSU Plan is to attract, retain and motivate employees, directors, officers and consultants of Trichome Financial by granting to them: (i) RSUs and/or (ii) PSUs (collectively with RSUs and Dividend Share Units, the “Share Units”).

Administration and Eligibility

The PRSU Plan is administered by the Board, provided that the Board may delegate its administrative powers under the PRSU Plan to a compensation committee of the Board. Employees, directors, officers and consultants of Trichome Financial and its designated affiliates are eligible to participate in the PRSU Plan.

Shares Subject to the PRSU Plan and Participation Limits

The maximum number of Common Shares that are available for issuance under the PRSU Plan is 20% of the issued and outstanding Common Shares, less the number of Common Shares reserved for issuance under Trichome Financial’s other security-based compensation arrangements from time to time. 20% of the issued and outstanding Common Shares as of the date of adoption of the PRSU Plan is 5,014,966 Common Shares. If any Share Units granted under the PRSU Plan expire, terminate or are cancelled for any reason without being settled, the Common Shares underlying such Share Units will be available for subsequent issuance under the PRSU Plan. As of the date hereof, 2,060,304 RSUs and 630,000 PSUs have been granted under the PRSU Plan.

The aggregate number of Share Units granted: (i) to any one eligible participant together with any options or other awards granted to such eligible participant under Trichome Financial’s other security-based compensation arrangements, within any one-year period, cannot exceed 5% of the issued and outstanding Common Shares, subject to obtaining requisite disinterested shareholder approval; (ii) any one eligible participant who is a consultant together with any options or other awards granted to such eligible participant under Trichome Financial’s other security-based compensation arrangements, within any one-year period, cannot exceed 2% of the issued and outstanding Common Shares; and (iii) to all eligible participants that are retained to provide “Investor Relation Activities” (as defined in the TSXV Manual) together with any options granted to such eligible participants under Trichome Financial’s other security-based compensation arrangements, cannot exceed 2% of the issued and outstanding Common Shares, within any one-year period.

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RSUs and PSUs

An RSU is a right granted to a participant to acquire a fully-paid and non-assessable Common Share, which right generally becomes vested, if at all, subject to the attainment of time vesting conditions and the satisfaction of such other conditions to vesting, if any, as may be determined by the Board. PSUs are similar to RSUs, but their vesting is, in whole or in part, conditioned on the attainment of specified performance metrics as may be determined by the Board.

The terms and conditions of grants of RSUs or PSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date and other terms and conditions with respect to the awards, will be set out in the participant’s grant agreement. In the case of PSUs, the performance-related vesting conditions may be based on financial or operational performance of Trichome Financial, individual performance criteria or otherwise, which may be measured over a specified period. The Board may at any time permit the vesting of any or all Share Units, provided that the Board may not, in any case, authorize the settlement of a Share Unit beyond the expiry date.

Subject to the achievement of the applicable vesting conditions, on the settlement date of an RSU or PSU, Trichome Financial will issue from treasury the number of Common Shares covered by the RSUs or PSUs and related Dividend Share Units.

Dividend Share Units

When dividends are paid on Common Shares, additional share units (“Dividend Share Units”) will automatically be granted to each participant who holds Share Units on the record date for such dividends. The number of Dividend Share Units to be credited to a participant is determined by multiplying the aggregate number of Share Units held by the participant on the relevant record date by the amount of the dividend paid by Trichome Financial on each Common Share, and dividing the result by the fair market value of the Common Shares on the dividend payment date. Dividend Share Units are subject to the same vesting conditions applicable to the related RSUs or PSUs.

Termination of Employment

If a participant resigns, dies or his or her employment or services is terminated without cause, all unvested Share Units held by the participant on the participant’s termination date will automatically terminate and be forfeited for no consideration and any vested Share Units will be settled as soon as practicable following the termination date.

If a participant’s employment or services is terminated for cause, all Share Units held by the participant on the participant’s termination date, whether vested or unvested, will automatically terminate and be forfeited for no consideration.

Change of Control

If a participant’s employment or services is terminated without cause on or within 24 months following a Change of Control (as defined under the PRSU Plan), all Share Units held by the participant on the participant’s termination date will immediately vest and any performance

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vesting conditions applicable to such Share Units will be evaluated based on performance determined by the Board. The vested Share Units will be settled as soon as practicable following the termination date.

Additionally, in the event of a Change of Control, the surviving, successor or acquiring entity may assume any outstanding Share Units or substitute similar awards for the outstanding Share Units. If they do not, or if the Board otherwise determines, Trichome Financial will give written notice to all participants advising that the PRSU Plan will be terminated effective immediately prior to the Change of Control and all RSUs (and related Dividend Share Units) and a specified number of PSUs (and related Dividend Share Units) will be deemed to be vested and will be settled immediately prior to the termination of the PRSU Plan. The number of PSUs which are deemed to be vested will be determined by the Board having regard to the level of achievement of the performance vesting conditions prior to the Change of Control.

Adjustments

In the event of any stock dividend, stock split, combination or exchange of shares, merger, amalgamation, arrangement, consolidation, reclassification, spin-off or other distribution (other than normal cash dividends) of Trichome Financial’s assets to its shareholders, or any other change in the capital of Trichome Financial affecting Common Shares (collectively, “Adjustment Events”), the Board will make such proportionate adjustments, if any, as the Board deems appropriate to reflect such change (for the purpose of preserving the value of the Share Units), with respect to: (i) the number or kind of shares or other securities reserved for issuance pursuant to the PRSU Plan; (ii) the number or kind of shares or other securities subject to any outstanding Share Units; (iii) the number of Share Units held by participants; and (iv) the vesting of PSUs; provided, however, that no adjustment will obligate Trichome Financial to issue or sell fractional securities.

Amendment or Discontinuance

The Board may, without notice and without shareholder approval, amend, modify, change, suspend or terminate the PRSU Plan, or any portion thereof, or any Share Units granted pursuant to the PRSU Plan as it determines appropriate; provided, however, that no amendment, modification, change, suspension or termination of the PRSU Plan or any Share Unit may materially impair any rights of a participant or materially increase any obligations of a participant under any Share Unit, or any rights pursuant thereto, previously granted to the participant without the written consent of the affected participant, unless the Board determines such adjustment is required or desirable in order to comply with any applicable securities laws or stock exchange requirements.

Notwithstanding the above, the Board is able to make certain amendments to the PRSU Plan or to any Share Unit without seeking shareholder approval, including: housekeeping amendments; amendments to clarify existing provisions of the PRSU Plan that do not have the effect of altering the scope, nature and intent of such provisions; amendments necessary to comply with the provisions of applicable law or the rules, regulations and policies of any security exchange on which the Common Shares are then listed; amendments necessary for Share Units to qualify for favourable treatment under applicable tax laws; amendments to the vesting provisions of the PRSU Plan or any Share Units; and amendments necessary to suspend or terminate the PRSU Plan.

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However, the following types of amendments cannot be made without obtaining shareholder approval:

revise the eligible participants to whom Share Units may be granted under the PRSU Plan;

increase the number of Common Shares reserved for issuance, except pursuant to the Adjustment Events;

revise the limitation under the PRSU Plan on the number of Share Units that may be granted to any one person or any category of persons;

change the maximum term of Share Units or extend the term of a Share Unit beyond its original expiry date;

revise the expiry and termination provisions of the PRSU Plan;

permit Share Units to be transferable or assignable other than for normal estate settlement purposes;

permit awards, other than RSUs and PSUs, to be granted under the PRSU Plan; and

delete or reduce the range of amendments which require shareholder approval.

Assignment

Except as required by law or as permitted by the Board, the rights of a participant under the PRSU Plan are not transferable or assignable.

Option Plan

The purpose of the Option Plan is to attract, retain and motivate employees, directors, officers and consultants of Trichome Financial by granting to them Options to purchase Common Shares.

Administration and Eligibility

The Option Plan is administered by the Board, provided that the Board may delegate its administrative powers under the Option Plan to a compensation committee of the Board. Employees, directors, officers and consultants of Trichome Financial and its designated affiliates are eligible to participate in the Option Plan.

Shares Subject to the Option Plan and Participation Limits

The maximum number of Common Shares that are available for issuance under the Option Plan cannot exceed 20% of the number of issued and outstanding Common Shares less the number of Common Shares reserved for issuance under Trichome Financial’s other security-based compensation arrangement from time to time. If any Options granted under the Option Plan expire, terminate or are cancelled for any reason without being exercised in the form of Common Shares

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issued from treasury, the Common Shares underlying such Options will be available for subsequent issuance. As of the date hereof, 85,209 Options have been granted under the Option Plan.

The aggregate number of Options granted: (i) to any one eligible participant together with any options or other awards granted to such eligible participant under Trichome Financial’s other security-based compensation arrangements, within any one-year period, cannot exceed 5% of the issued and outstanding Common Shares, subject to obtaining requisite disinterested shareholder approval; (ii) any one eligible participant who is a consultant together with any options or other awards granted to such eligible participant under Trichome Financial’s other security-based compensation arrangements, within any one-year period, cannot exceed 2% of the issued and outstanding Common Shares; and (iii) to all eligible participants that are retained to provide “Investor Relation Activities” (as defined in the TSXV Manual) together with any options or other awards granted to such eligible participants under Trichome Financial’s other security-based compensation arrangements, cannot exceed 2% of the issued and outstanding Common Shares, within any one-year period.

Options

The exercise price for Options is determined by the Board, which may not be less than the fair market value of a Common Share on the date the Option is granted. The Board determines when an Option will become vested and may determine that the Option will become vested in installments and may make vesting of the Option conditional on the achievement of performance targets. The Board may at any time permit the vesting of any or all Options held by the participant in the manner and on the terms authorized by the Board.

Options must be exercised within a period fixed by the Board that may not exceed 10 years from the date of grant, provided that if the expiry date falls during a blackout period, the expiry date will be automatically extended until 10 business days after the end of the blackout period.

In order to facilitate the payment of the exercise price of the Options, the Option Plan has a cashless exercise feature. The participant may elect to receive (i) an amount in cash equal to the cash proceeds realized upon the sale of the Common Shares underlying the Options by a securities dealer in the capital markets, minus the aggregate exercise price, any applicable withholding taxes and any transfer costs charged by the securities dealer, (ii) a number of Common Shares that is equal to the number of Common Shares underlying the unexercised Options, minus the number of Common Shares sold by a securities dealer in the capital markets as required to realize cash proceeds equal to the aggregate exercise price, any applicable withholding taxes and any transfer costs charged by the securities dealer, or (iii) a combination of (i) and (ii). Options can also be exercised by payment in full of the aggregate exercise price and any applicable withholding taxes.

Termination of Employment

If a participant resigns or his or her employment or services is terminated without cause, all unvested Options held by the participant on the participant’s termination date will automatically terminate and be forfeited for no consideration. The participant may, within 90 days after the participant’s termination date, or such shorter period as is remaining in the term of the Options,

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exercise the participant’s vested Options. At the end of such 90-day period or such shorter period as is remaining in the term of the Options, the unexercised Options will automatically terminate and be forfeited for no consideration.

If a participant’s employment or services is terminated for cause, all Options held by the participant on the participant’s termination date, whether vested or unvested, will automatically terminate and be forfeited for no consideration.

If the participant ceases to be employed or engaged because of the participant’s death, all unvested Options held by the participant on the participant’s termination date will automatically terminate and be forfeited for no consideration. The participant’s personal legal representatives may within 12 months, or such shorter period as is remaining in the term of the Options, exercise the participant’s vested Options. At the end of such 12-month period or such shorter period as is remaining in the term of the Options, the unexercised Options will automatically terminate and be forfeited for no consideration.

Change of Control

If a participant’s employment or services is terminated without cause on or within 24 months following a Change of Control (as defined under the Option Plan) and before the expiry of the participant’s Options, all unvested Options held by the participant on the participant’s termination date will immediately vest. The participant may within 12 months after the participant’s termination date, or such shorter period as is remaining in the term of the Options, exercise all Options held by the participant on the participant’s termination date. At the end of such 12-month period or such shorter period as is remaining in the term of the Options, the unexercised Options will automatically terminate and be forfeited for no consideration.

Additionally, in the event of a Change of Control, the surviving, successor or acquiring entity may assume any outstanding Options or substitute similar options for the outstanding Options. If they do not, or if the Board otherwise determines, Trichome Financial will give written notice to all participants advising that the Option Plan will be terminated effective immediately prior to the Change of Control and all Options will be deemed to be vested and will expire immediately prior to the termination of the Option Plan.

Adjustments

In the event of any Adjustment Event, the Board will make such proportionate adjustments, if any, as the Board in its discretion deems appropriate to reflect such change (for the purpose of preserving the value of the Options), with respect to: (i) the number or kind of shares or other securities reserved for issuance pursuant to the Option Plan; (ii) the number or kind of shares or other securities subject to any outstanding Options; and (iii) the exercise price of any outstanding Options; provided, however, that no adjustment will obligate Trichome Financial to issue or sell fractional securities.

Amendment or Discontinuance

The Board may, without notice and without shareholder approval, amend, modify, change, suspend or terminate the Option Plan, or any portion thereof, or any Options granted pursuant to the plan

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as it determines appropriate; provided, however, that no amendment, modification, change, suspension or termination of the Option Plan or any Option may materially impair any rights of a participant or materially increase any obligations of a participant under any Option, or any rights pursuant thereto, previously granted to the participant without the written consent of the affected participant, unless the Board determines such adjustment is required or desirable in order to comply with any applicable securities laws or stock exchange requirements.

Notwithstanding the above, the Board is able to make certain amendments to the Option Plan or to any Option without seeking shareholder approval, including: housekeeping amendments; amendments to clarify existing provisions of the Option Plan that do not have the effect of altering the scope, nature and intent of such provisions; amendments necessary to comply with the provisions of applicable law or the rules, regulations and policies of any securities exchange on which the Common Shares are then listed; amendments necessary for Options to qualify for favourable treatment under applicable tax laws; amendments to the vesting provisions of the Option Plan or any Options; and amendments necessary to suspend or terminate the Option Plan. However, the following types of amendments cannot be made without obtaining shareholder approval:

revise the eligible participants to whom Options may be granted under the Option Plan;

increase the number of Common Shares reserved for issuance, except pursuant to the Adjustment Events;

revise the method for determining the exercise price of Options;

reduce the exercise price of an Option, except pursuant to the Adjustment Events;

revise the limitation under the Option Plan on the number of Options that may be granted to any one person or any category of persons;

change the maximum term of Options or extend the term of an Option beyond the original expiry date (subject to a blackout period);

revise the expiry and termination provisions of the Option Plan;

permit Options to be transferable or assignable other than for normal estate settlement purposes;

permit awards, other than Options, to be granted under the Option Plan; and

delete or reduce the range of amendments which require shareholder approval.

Assignment

Except as required by law or as permitted by the Board, the rights of a participant under the Option Plan are not transferable or assignable.

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Outstanding Options Held by Officers, Directors and Employees

The following table summarizes the Options outstanding as at September 30, 2019 held by the persons indicated below:

Category of Option Holder

Number of Common

Shares under Option Grant Date

Expiry Date

Exercise Price

Market value of the Common Shares as at

September 30, 2019

All executive officers and past executive officers of Trichome Financial as a group and all directors and past directors of Trichome Financial who are not also executive officers as a group

- - - - -

All executive officers and past executive officers of all subsidiaries of Trichome Financial as a group and all directors and past directors of those subsidiaries who are not also executive officers of the subsidiary as a group, excluding individuals referred to in the row above

- - - - -

All other employees and past employees of Trichome Financial as a group

15,000 April 25,

2018 April 25,

2028 $1.58 $2.10

All other employees and past employees of subsidiaries of Trichome Financial as a group

- - - - -

All consultants of Trichome Financial, as a group

- - - - -

10. DESCRIPTION OF THE SECURITIES

10.1 General Description of Capital Structure

Trichome Financial is authorized to issue (i) an unlimited number of Common Shares, (ii) an unlimited number of Class A Preference Shares, issuable in series and (iii) 5,000,000 Class A Preference Shares, Series 1. See Item 14 – Capitalization for a breakdown of share capital. As at the date hereof, there are 24,367,981 Common Shares issued and outstanding and nil Class A Preference Shares or Class A Preference Shares, Series 1 issued and outstanding.

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Common Shares

Holders of Common Shares are entitled to vote at all meetings of shareholders of Trichome Financial except meetings at which only the holders of the Class A Preference Shares as a class or the holders of one or more series of the Class A Preference Shares are entitled to vote, and are entitled to one vote at all such meetings in respect of each Common Share held. After payment to the holders of the Class A Preference Shares of the amount or amounts to which they may be entitled, the holders of the Common Shares are entitled to receive any dividend declared by the Board and to receive the remaining property of Trichome Financial upon dissolution.

There are no pre-emptive rights, no conversion or exchange rights, no redemption, retraction, purchase for cancellation or surrender provisions, no sinking or purchase fund provisions, no provisions permitting or restricting the issuance of additional securities or any other material restrictions, and there are no provisions which are capable of requiring a security holder to contribute additional capital attached to the Common Shares.

Class A Preference Shares

The Class A Preference Shares may be issued at any time or from time to time in one or more series at the discretion of the Board. The Class A Preference Shares of each series shall rank on a parity with the Class A Preference Shares of every other series with respect to dividends and return of capital in the event of a liquidation, dissolution or winding-up of Trichome Financial. The Class A Preference Shares are not entitled to vote at any meeting of the shareholders of Trichome Financial except as required by applicable law.

Class A Preference Shares, Series 1

The Class A Preference Shares, Series 1 have the attributes of the Class A Preference Shares. In addition, holders of the Class A Preference Shares, Series 1 were entitled to require Trichome Financial to redeem all or a part of their Class A Preference Shares, Series 1, if Trichome Financial had not completed a liquidity event on or before September 5, 2019, for a price equal to 108% of the purchase price of the Class A Preference Shares, Series 1. All of the outstanding Class A Preference, Series 1 converted into common shares in connection with the completion of the Amalgamation.

10.2 Debt Securities

Trichome Financial has no debt securities outstanding.

10.3 Other Securities


10.4 Modification of Terms


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10.5 Other Attributes


10.6 Prior Sales

During the 12-month period preceding the date of this Listing Statement, Trichome Financial has issued the following securities:

Date Number of Securities(1)

Issue/Exercise Price Per Security(1)

Aggregate Issue Price

September 18, 2017 3,000,000 Trichome Financial Common Shares $0.00167 $5,000.00

March 12, 2018 3,960,000 Trichome Financial Common Shares $0.083 $330,000.00

April 25, 2018 15,000 Trichome Financial Options $1.577 N/A

May 7, 2018 630,000 Trichome Financial PSUs $0.083 - $1.577 N/A

May 7, 2018 720,000 Trichome Financial RSUs $0.083 - $1.577 N/A

September 5, 2018 9,513,903 Trichome Financial Preferred Shares $1.577 $15,000,253.73

September 5, 2018 600,000 Trichome Financial RSUs(2) $1.577 N/A

October 1, 2018 180,000 Trichome Financial RSUs $1.577 N/A

November 13, 2018 120,000 Trichome Financial RSUs $1.577 N/A

December 18, 2018 15,300 Trichome Financial RSUs $1.577 N/A

January 14, 2019 120,000 Trichome Financial RSUs $1.577 N/A

February 5, 2019 30,000 Trichome Financial RSUs $1.577 N/A

April 25, 2019 3,927,904 Subscription Receipts $2.10 $8,248,598.40

August 16, 2019 512,888 Subscription Receipts $2.10 $1,077,064.80

October 4, 2019 7,849,707 Subscription Receipts $2.10 $16,484,384.70

October 10, 2019 70,208 Trichome Financial Options(3) $0.79 N/A

October 10, 2019 435,000 Trichome Financial RSUs $1.42 $617,700.00

Notes:

(1) The numbers of securities in this table are presented to give effect to the one to three share split of Trichome Financial’s securities that occurred in the course of the Amalgamation on October 10, 2019.

(2) 159,999 RSUs of this grant will not vest and were cancelled upon the resignation from Trichome’s board of directors of Brent Cox and Afzal Hasan.

(3) Issued in connection with reverse take-over of 22 Capital Corp. These options expire April 4, 2020.

10.7 Stock Exchange Price

The Common Shares have been listed and posted for trading on the TSXV under the trading symbol “TFC” since October 10, 2019. The following table sets forth the market price ranges and trading volumes of the Common Shares on the TSXV for the periods indicated, as reported by the TSXV:

Month High ($) Low ($) Close ($) Volume

October 2019 $1.80 $1.00 $1.02 296,594

November 2019 $1.10 $0.70 $0.82 478,844

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In connection with this Listing Statement Trichome Financial has applied to list the Common Shares on the CSE and after such listing intends to delist the Common Shares from the TSXV.

11. ESCROWED SECURITIES

The following table lists the names of the securityholders of Trichome Financial who hold escrowed securities as at November 22, 2019, which shares are subject to the provisions of, as applicable, the Amalco Escrow Agreement or the 22 Capital Escrow Agreement. 6,538,403 securities are held in escrow under the Amalco Escrow Agreement. One-third of the securities subject to the Amalco Escrow Agreement shall be released from escrow on each of the dates that are six, 12 and 18 months after October 8, 2019. 215,888 securities are held in escrow under the 22 Capital Escrow Agreement. One-third of the securities subject to the 22 Capital Escrow Agreement shall be released on each of the dates that are six, 12 and 18 months after October 8, 2019.

Designation of Class Held in Escrow(1) Number of Securities Held in Escrow Percentage of

Class

Common Shares 5,134,291 28.73%

RSUs 1,147,500 55.7%

PSUs 472,500 75.0%

Options - -%

Notes:

(1) The escrow agent under the 22 Capital Escrow Agreement is TSX Trust Company and the escrow agent under the Amalco Escrow Agreement is AST Trust Company (Canada).

All holders of securities subject to either the Amalco Escrow Agreement or the 22 Capital Escrow Agreement must obtain CSE consent to transfer such securities, other than in specified circumstances set out in the respective escrow agreements.

Where securities subject to escrow are to be held by an entity that is not an individual (such as a holding company, for example), the CSE will generally require that the securities of such entity be placed in escrow or that all beneficial owners of such entity sign an undertaking to the CSE, in which they agree not to transfer their securities in such entity without the consent of the CSE. In addition, the directors and senior officers of such holding entity must sign undertakings not to permit or authorize any issuance of securities or transfer of securities that could reasonably result in a change of control of the entity.

12. PRINCIPAL SHAREHOLDERS

To the knowledge of the directors and officers of Trichome Financial, other than as set out in the following table, no person beneficially owns, directly or indirectly, or exercises control or direction over, voting securities carrying more than 10% of the voting rights attached to any class of voting securities of Trichome Financial.

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Name of Shareholder Number of Common Shares

Owned

Percentage of Issued and Outstanding Common Shares

Owned

Origin House(1) 5,769,132 23.0%(2)

711394 N.B. Inc.(3) 2,857,143 11.4%(4)

(1) Origin House is the registered and beneficial owner of the Common Shares indicated above.

(2) Origin House owns 20.7% of the Common Shares on a fully-diluted basis.

(3) 711394 N.B. Inc. is wholly-owned by Elsipogtog First Nation. 711394 N.B. Inc. is the registered and beneficial owner of the Common

Shares indicated above.

(4) 711394 N.B. Inc. owns 10.3% of the Common Shares on a fully-diluted basis.

13. DIRECTORS AND OFFICERS

13.1 Name, Municipality of Residence, Occupation and Security Holdings

The following table lists the names, municipalities of residence of the directors and executive officers of Trichome Financial, their positions and offices held with Trichome Financial, their principal occupations during the past five years and the number of securities of Trichome Financial that are beneficially owned, directly or indirectly, or over which control or direction can be exercised by each.

Name, Municipality of Residence and Position with

Trichome Financial

Principal Occupations During Last Five

Years

Date of Appointment as

Director or Officer

Common Shares Owned,

Beneficially Owned or Controlled

Percentage Ownership of Common

Shares

Michael Ruscetta Toronto, Ontario Chief Executive Officer and Director

Investment executive May 7, 2018 318,000 1.27%

Karl Grywacheski Ottawa, Ontario Chief Financial Officer

Chartered Professional Accountant, Chartered

Accountant

Director Corporate Finance, Origin House

Manager, Deloitte LLP

September 25, 2019

__ 0.00%

Kevin Jarrett Toronto, Ontario Vice President, Investments

Investment executive December 17, 2018 120,000 0.48%

Daniel Cohen Toronto, Ontario Vice President & General Counsel and Corporate Secretary

Investment executive August 6, 2019 __ 0.00%

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Name, Municipality of Residence and Position with

Trichome Financial

Principal Occupations During Last Five

Years

Date of Appointment as

Director or Officer

Common Shares Owned,

Beneficially Owned or Controlled

Percentage Ownership of Common

Shares

Timothy Diamond Oakville, Ontario Director

Business executive February 1, 2018 __ 0.00%

Marissa Lauder Freelton, Ontario Director

Chartered Professional Accountant, Chartered

Accountant

CFO

January 31, 2018 50,739 0.20%

Marc Lustig Vancouver, British Columbia Director

Business executive May 18, 2018 300,000 1.20%

Jonathan Page Vancouver, British Columbia Director

Scientist and business executive

January 31, 2018 __ 0.00%

Christian Sinclair(1)

Opaskwayak, Manitoba Director

Business executive November 13, 2018

__ 0.00%

Howard Steinberg Delray Beach, Florida, USA Director

Investor January 14, 2019 __ 0.00%

(1) Christian Sinclair is the representative director for OCN, which owns 1,884,000 Common Shares, representing approximately 7.5% of the issued and outstanding Common Shares.

13.2 Terms of Directorship

The term of office of the directors expire on the date of the next annual general meeting of the shareholders of Trichome Financial. See the table in section 13.1 above for the periods during which each director of Trichome Financial has served in such capacity.

13.3 Ownership of Common Shares

See the table in section 13.1 above for information as to Common Shares beneficially owned, directly or indirectly, or over which control or direction is exercised. Such information is based upon information furnished to Trichome Financial by its directors and executive officers as at the date hereof. The directors and executive officers of Trichome Financial hold an aggregate of

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788,739 Common Shares, representing approximately 3.15% of the issued and outstanding Common Shares.

13.4 Board Committees

The Audit Committee of the Board of the Issuer consists of:

Marissa Lauder (Chair of the Audit Committee)

Tim Diamond

Howard Steinberg

The Compensation Committee of the Board of the Issuer consists of:

Marc Lustig (Chair of the Compensation Committee)

Michael Ruscetta

Howard Steinberg

13.5 Principal Occupation of Directors and Officers

The principal occupations of each of Tim Diamond, Marissa Lauder, Marc Lustig, Christian Sinclair, Jonathon Page, and Howard Steinberg is acting as a director or officer of companies other than Trichome Financial.

Tim Diamond’s principal occupation is acting as the Chief Executive Officer of Whitehall Apartments, an Ontario-based residential property management firm.

Marissa Lauder’s principal occupation is acting as Executive Vice President, Chief Financial Officer and Corporate Secretary of Street Capital Group Inc. and Street Capital Bank of Canada, a Canadian residential mortgage lender.

Marc Lustig’s principal occupation is acting as the Chief Executive Officer of Origin House, a cannabis brands and distribution company operating across key markets in the U.S. and Canada with a focus on California.

Christian Sinclair’s principal occupation is acting as Onekanew (Chief) of the Opaskwayak Cree Nation in Manitoba.

Jonathon Page’s principal occupation is acting as the Chief Science Officer of Aurora Cannabis Inc., a Canadian cannabis company.

Howard Steinberg’s principal occupation is acting as the Chief Executive Officer of MYM Nutraceuticals Inc., a cannabis and hemp cultivation company.

13.6 Corporate Cease Trade Orders or Bankruptcies

No director or officer of Trichome Financial or a shareholder holding a sufficient number of securities of Trichome Financial to affect materially the control of Trichome Financial, is, or

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within 10 years before the date of this Listing Statement has been, a director or officer of any other issuer that, while that person was acting in that capacity:

(a) was the subject of a cease trade or similar order, or an order that denied the other issuer access to any exemptions under Ontario securities law, for a period of more than 30 consecutive days;

(b) was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;

(c) 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; or

(d) 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.

13.7 Penalties and Sanctions

No director or officer of Trichome Financial, or a shareholder holding a sufficient number of Trichome Financial’s securities to affect materially the control of Trichome Financial, has been subject to:

(a) any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; or

(b) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision.

13.8 Settlements


13.9 Personal Bankruptcies

No director or officer of Trichome Financial or a shareholder holding a sufficient number of securities of Trichome Financial to affect materially the control of Trichome Financial, or a personal holding company of any such person has, within the 10 years before the date of this Listing Statement, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with

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creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or officer.

13.10 Conflicts of Interest

There are potential conflicts of interest to which some of the directors and officers of Trichome Financial may be subject in connection with the operations of Trichome Financial. Some of the directors and officers of Trichome Financial are engaged in and will continue to be engaged in corporations or businesses which may be in competition with the search by Trichome Financial for businesses or assets in order to execute on its business plan. Accordingly, situations may arise where some of the directors and officers of Trichome Financial will be in direct competition with Trichome Financial. Conflicts, if any, will be subject to the procedures and remedies as provided under the OBCA. See Item 17 – Risk Factors.

13.11 Management

The following is a brief description of the key management of Trichome Financial.

Except in the case of Michael Ruscetta, none of these management personnel have entered into non-disclosure or non-competition agreements with Trichome Financial.

Daniel Cohen (Age: 44) – Vice President & General Counsel

Mr. Cohen has nearly 15 years of investment experience in secured credit, restructurings, distressed debt workouts, and M&A, as well as fund management and operations. Prior to joining Trichome Financial on a full-time basis, Mr. Cohen served as a consultant to Origin House and Trichome Financial, where he provided guidance and assistance on transaction execution. Prior to serving as a consultant, Mr. Cohen was the Vice President & General Counsel and a director of Renvest Mercantile Bancorp Inc., which provided short term, high yield secured debt financing to public and private companies in the resource sector through the Cayman Islands-based Global Resource Fund. Mr. Cohen is a graduate of the MBA/LLB Joint Program at the Schulich School of Business and Osgoode Hall Law School and was called to the bar of Ontario in 2004 after articling at a preeminent securities litigation boutique in Toronto. Mr. Cohen expects to devote 100% of his working time to Trichome Financial.

Timothy Diamond (Age: 51) - Director

Mr. Diamond brings to Trichome Financial over 25 years of entrepreneurial and managerial experience across asset management, merchant banking, and venture investing including founding, building and successfully exiting several companies. He has particular experience in guiding rapidly expanding businesses in the financial services sector. From 2009 to 2013, he led, grew and sold Nova Potash Corporation, a mining company with property in Ethiopia, and Basis Medical Technologies, Inc., an international medical device business. In 2007, he seeded and assisted Street Capital Financial Corporation, a Canadian mortgage origination company that was sold in 2011 to Council Corporation, a public company based in Toronto. From 1995 to 2004, he co-founded and led the sale of Triax Capital Corp., Skylon Capital Corp. and Venture Link Capital Corp., all Canadian-based mutual fund wholesalers. Mr. Diamond holds a B.A. from the University of

44

Western Ontario. Mr. Diamond is a member of Trichome Financial’s audit committee and is independent of Trichome Financial.

Karl Grywacheski, CPA, CA (Age: 31) - Chief Financial Officer

Mr. Grywacheski has nearly a decade of accounting and finance experience. He has significant experience in the legal cannabis sector, both in Canada and the United States, through roles at Deloitte and Origin House. Mr. Grywacheski is a Chartered Professional Accountant and Chartered Accountant. Mr. Grywacheski has had roles at Origin House as Director of Corporate Finance, and was previously a manager at Deloitte. He has been involved in M&A, equity transactions, and debt transactions totaling well over $1 billion. Mr. Grywacheski expects to initially devote approximately 33% of his working time to Trichome Financial.

Kevin Jarrett (Age: 31) - Vice President, Investments and Corporate Secretary

Mr. Jarrett joined Trichome Financial in December 2017 after working as VP, Investments at Grenville Strategic Royalty Corp. (now Flow Capital Corp), a publicly traded royalty investor making investments in North American late stage venture and early stage growth companies. Mr. Jarrett spent six years and co-led due diligence and transactional execution efforts on over $60 million in royalty investments at Grenville. Mr. Jarrett initially joined Origin House to lead the launch of Trichome Financial while assisting Origin House’s business development team with transactions related to its U.S. portfolio. Prior to working at Grenville, Mr. Jarrett served as an analyst at Quantum Leap Asset Management, where he helped to lead the underwriting, execution and monitoring of the Quantum Leap Mortgage Investments portfolio of residential real estate assets within the Greater Toronto Area. Mr. Jarrett expects to devote 100% of his working time to Trichome Financial.

Marissa Lauder (Age: 49) - Director

Ms. Lauder is the Executive Vice President, Chief Financial Officer and Corporate Secretary of Street Capital Group Inc. (TSX: SCB) and Street Capital Bank of Canada. She is a seasoned financial executive with more than 18 years of experience in the financial services sector in Canada. Ms. Lauder was an executive at Home Trust Company for six years where she held executive positions in both Finance and Risk Management. Ms. Lauder also spent over five years at the Office of the Superintendent of Financial Institutions of Canada as a senior advisor in the regulation sector contributing to the development of local and international regulatory policy for accounting, capital and disclosure. She earned her CPA, CA designation while working in Ernst and Young’s Toronto Financial Services office and holds a Bachelor of Commerce degree from the University of Toronto. Ms. Lauder is the Chair of Trichome Financial’s audit committee and is independent of Trichome Financial.

Marc Lustig (Age: 45) - Director

Mr. Lustig is the founder and Chief Executive Officer of Origin House. He began his professional career in the pharmaceutical industry at Merck & Co. In 2000, he started his capital markets career in institutional equity research in the Life Sciences sector at Orion Securities. For the next 14 years, Mr. Lustig worked as a senior producer at GMP Securities L.P. and as Head of Capital Markets at Dundee Capital Markets before becoming Principal at KES 7 Capital. Mr. Lustig founded

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Cannabis Royalties & Holdings Corp. in early 2015. Mr. Lustig is the Chair of Trichome Financial’s compensation committee and is independent of Trichome Financial.

Jonathan Page (Age: 50) - Director

Dr. Page is Chief Scientific Officer of Aurora Cannabis and the Co-Founder of Anandia Labs, which provides industry-leading analytical testing services including potency, pesticides, microbes and terpenes to licensed producers and patients. Anandia Labs was recently acquired by Aurora Cannabis. Mr. Page received his PhD from the University of British Columbia (1998) then undertook postdoctoral training in Munich and Halle, Germany (1998 to 2003). Mr. Page followed his time at the University of British Columbia by directing a lab at the National Research Council’s Plant Biotechnology Institute from 2003 to 2013.

Michael Ruscetta (Age: 50) - Chief Executive Officer and Director

Mr. Ruscetta has over 20 years of direct investing experience in public and private equities, credit, distressed situations and various corporate restructurings across many industry sectors. Mr. Ruscetta is currently Chief Executive Officer of Trichome Financial. Prior to joining Trichome Financial, Mr. Ruscetta founded and managed the RCM Special Situations Fund and led the Canada Special Situations Group (CSSG) at Goldman Sachs Canada. Previously, he served as Managing Director at Amaranth Advisors (Canada) ULC and Director at CIBC Merchant Banking. Mr. Ruscetta expects to devote 100% of his working time to Trichome Financial and has entered into a non-competition and non-disclosure agreement with Trichome Financial. Mr. Ruscetta is a member of Trichome Financial’s compensation committee and is not independent of Trichome Financial.

Christian Sinclair (Age: 48) - Director

Onekanew Sinclair is a well-regarded member of the Opaskwayak Cree Nation and co-chair of Manitoba’s Northern Economic Development Strategy. He currently serves on the board of National Access Cannabis (TSXV: META), in which the Opaskwayak Cree Nation is both a significant shareholder and lender. Since 2002, he has worked with Indigenous groups across Canada and the United States, focused on corporate development for major natural resource projects related to hydro, mining, oil and gas. Onekanew Sinclair is well-connected and highly regarded by the First Nations communities throughout Manitoba and Canada, linking together development and partnerships with Indigenous and non-Indigenous communities.

Howard Steinberg, CFA (Age: 53) - Director

Mr. Steinberg brings more than 25 years of experience in private credit, private equity and real estate investing, having served as a Managing Director of Fortress Investment Group, President of The Rose Corporation, Senior Vice President at GE Capital, and Managing Director with RBC Capital Partners. Currently, Mr. Steinberg serves as the Chief Executive Officer and Executive Vice Chairman of the board of MYM Nutraceuticals. Mr. Steinberg is a member of Trichome Financial’s audit committee and compensation committee and is independent of Trichome Financial.

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14. CAPITALIZATION

14.1 Fully Diluted Share Capital1

The following table sets forth the number of Common Shares outstanding on a non-diluted and fully-diluted basis:

Issued Capital

Number of Securities

(non-diluted)

Number of Securities

(fully-diluted) % of Issued

(non-diluted)

% of Issued

(fully diluted)

Public Float

Total outstanding (A) 25,074,831 27,850,344 100% 100%

Held by Related Persons or employees of Trichome Financial or Related Person of Trichome Financial, or by persons or companies who beneficially own or control, directly or indirectly, more than a 5% voting position in Trichome Financial (or who would beneficially own or control, directly or indirectly, more than a 5% voting position in Trichome Financial upon exercise or conversion of other securities held) (B)

11,415,947 11,415,947 46% 41%

Total Public Float (A-B) 13,658,884 16,434,397 54% 59%

Freely-Tradeable Float

Number of outstanding securities subject to resale restrictions, including restrictions imposed by pooling or other arrangements or in a shareholder agreement and securities held by control block holders (C)

5,134,291 6,754,291 20% 24%

Total Tradeable Float (A-C) 19,940,540 21,096,053 70% 76%

1 Subject to refreshed range reports.

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Public Securityholders (Registered)

Size of Holding Number of Holders Total Number of Securities

1-99 securities - -

100 – 499 securities - -


1,000 – 1,999 securities 8 36,133

2,000 – 2,999 securities 9 58,271

3,000 – 3,999 securities 25 287,116

4,000 – 4,999 securities 12 154,696

5,000 or more securities 120 13,122,668

TOTAL: 13,658,884

Public Securityholders (Beneficial)


1-99 securities 6 205

100 – 499 securities 37 9,573

500 – 999 securities 8 5,667

1,000 – 1,999 securities 51 78,907

2,000 – 2,999 securities 46 101,366

3,000 – 3,999 securities 12 43,365

4,000 – 4,999 securities 6 26,676


TOTAL: 13,658,884

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Non-Public Securityholders (Registered)


1-99 securities - -



1,000 – 1,999 securities - -

2,000 – 2,999 securities - -

3,000 – 3,999 securities - -

4,000 – 4,999 securities - -


TOTAL: 11,415,947

14.2 Convertible Securities

The following table sets out information regarding securities convertible or exchangeable into Common Shares:

Description of Security(1)

Number of Convertible / Exchangeable Securities

Outstanding

Number of Common Shares Issuable Upon Conversion /

Exercise

Options 85,209 85,209

RSUs 2,060,304 2,060,304

PSUs 630,000 630,000

(1) See Item 9 – Options to Purchase Securities for a description of the convertible securities listed in this table.

14.3 Other Listed Securities

Trichome Financial has no other listed securities reserved for issuance.

15. EXECUTIVE COMPENSATION

The following information provides details of all compensation for each of the directors and Named Executive Officers of Trichome Financial for the period from the date of incorporation (September 18, 2017) to December 31, 2018.

As of November 25, 2019 Trichome Financial had four NEOs: (i) Michael Ruscetta, Chief Executive Officer; (ii) Karl Grywacheski, Chief Financial Officer; (iii) Daniel Cohen, Vice President & General Counsel, and (iv) Kevin Jarrett, Vice President, Investments. There were no other NEOs of Trichome Financial.

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Stock Options and Other Compensation Securities

Director and NEO compensation, excluding compensation securities

The following table sets forth all annual and long-term compensation for services paid to or earned by each of the NEOs and the Directors during the two most recent fiscal years, excluding compensation securities:

Table of compensation excluding compensation securities

Name and Principal Position Year

Salary, consulting

fee, retainer or commission ($)

Bonus(1)

($)

Committee or meeting fees

($)

Value of Perquisites (2)

($)

Value of all other compensation

($) (5)Total compensation

($)

Michael Ruscetta

CEO and Director

20182017

$114,110 Nil

$116,677 Nil

Nil Nil

$17,500 Nil

$71,047 Nil

$319,334 Nil

Karl Grywacheski(3)

CFO

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Dan Cohen(4)

Vice President, General Counsel

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Kevin Jarrett

Vice President, Investments

20182017

$130,000 Nil

$75,000 Nil

Nil Nil

Nil Nil

$130,350 Nil

$335,350 Nil

Timothy Diamond

Director

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

$93,636 Nil

$93,636 Nil

Marissa Lauder

Director

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

$93,636 Nil

$93,636 Nil

Marc Lustig

Director

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Jonathan Page

Director

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

$93,636 Nil

$93,636 Nil

Christian Sinclair

Director

20182017

Nil Nil

Nil Nil

Nil Nil

Nil Nil

$76,281 Nil

$76,281 Nil

Notes: (1) Amounts under the annual incentive plan are payable in the year following the year in respect of which they are earned. For 2018, under the annual incentive

plan $116,677 and $75,000 was awarded to Mr. Ruscetta and Mr. Jarrett, respectively. (2) For 2018: The $17,500 in respect of Ms. Ruscetta consists of health benefits. (3) It is anticipated that in 2019 Mr. Grywacheski’s compensation will consist of a base salary of $150,000 and a discretionary bonus of up to 75% of base salary. (4) It is anticipated that in 2019 Mr. Cohen’s compensation will consist of a base salary of $150,000 and a discretionary bonus of up to 75% of base salary. (5) Amounts represent the fair value of vested stock-based compensation using the fair value at the grant date

Oversight and Description of Director and Named Executive Officer Compensation

This section provides information regarding the compensation program in effect for the fiscal year ended December 31, 2018 for the named executive officers (“NEOs”) and the directors of Trichome Financial. The NEOs of Trichome Financial in respect of the fiscal year ended December 31, 2018 were: Michael Ruscetta, Chief Executive Officer; Karl Grywacheski, Chief Financial Officer; Daniel Cohen, Vice President, General Counsel and Kevin Jarrett, Vice

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President, Investments. There were no other NEOs of Trichome Financial. The Trichome Financial Board in respect of the fiscal year ended December 31, 2018 were: Timothy Diamond, Marissa Lauder, Marc Lustig, Jonathan Page, Michael Ruscetta and Christian Sinclair (collectively, the “Trichome Directors”).

Trichome Financial does not have a formal pre-determined compensation plan nor does it engage in benchmarking practices. Rather, Trichome Financial informally assesses the performance of its NEOs and considers a variety of factors generally, both objective and subjective, when determining compensation levels. The objective of the compensation program of Trichome Financial is: (i) to provide a compensation program that is fair and competitive in order to attract and retain well-qualified and experienced executives; (ii) to focus the efforts of executives on business performance; and (iii) to recognize individual performance.

Compensation for the NEOs includes three major elements: (i) base salary, (ii) short-term incentives, consisting of a discretionary annual bonus, and (iii) long-term equity incentives, consisting of Trichome Financial Options, Trichome Financial RSUs and Trichome Financial PSUs granted from time to time under the Legacy Equity Incentive Plan. Perquisites and benefits are not a significant element of compensation of our executive officers. Trichome Financial has no pension, retirement or deferred compensation plans.

(a) Base Salaries

Base salary is provided as a fixed source of compensation for our executive officers. Base salaries are determined on an individual basis taking into account the scope of the executive officer’s role, responsibilities, expertise and their prior experience. In addition, base salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope or breadth of an executive officer’s role or responsibilities.

(b) Discretionary Annual Bonuses

Discretionary annual bonuses are designed to motivate our executive officers to meet our strategic business and financial objectives generally and our annual financial performance targets in particular. Annual bonus targets are either set as a percentage of the relevant executive officer’s base salary or as a fixed dollar amount. Payout of the annual bonuses (if any) is generally linked to the achievement of individual and organizational performance. We currently make discretionary annual bonus payments in cash. Bonus payments are determined by the Trichome Financial Board in its sole discretion.

(c) Long-Term Incentives

Legacy Equity Incentive Plan

The Legacy Equity Incentive Plan is a part of a legacy compensation program pursuant to which directors, officers and employees of Trichome Financial were granted Trichome Financial Options, Trichome Financial RSUs and/or Trichome Financial PSUs. No additional awards will be granted under the Legacy Equity Incentive Plan.

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Trichome Financial’s non-employee Directors did not receive any compensation from the company in respect of the prior two fiscal years, except under the Legacy Equity Incentive Plan.

16. INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

No director, officer, employee or former director, officer or employee of Trichome Financial, nor any of their associates or affiliates, is or has been indebted to Trichome Financial since the beginning of Trichome Financial’s most recently completed financial year.

17. RISK FACTORS

CANNABIS IS ILLEGAL UNDER U.S. FEDERAL LAW AND ENFORCEMENT OF RELEVANT LAWS IS A SIGNIFICANT RISK.

READERS ARE STRONGLY ENCOURAGED TO CAREFULLY READ ALL OF THE RISK FACTORS CONTAINED IN THIS SECTION.

17.1 General

The following are certain factors relating to the business of Trichome Financial, which factors investors should carefully consider when making an investment decision concerning the Common Shares. Trichome Financial faces and will face a number of challenges in the development of its business. These risks and uncertainties are not the only ones facing Trichome Financial. Additional risks and uncertainties not presently known to Trichome Financial or which are currently deemed immaterial, may also impair the operations of Trichome Financial. If any such risks occur, shareholders could lose all or part of their investment and the financial condition, liquidity and results of operations of Trichome Financial could be materially adversely affected and the ability of Trichome Financial to implement its growth plans could be adversely affected. The following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this Listing Statement.

An investment in Trichome Financial is speculative. An investment in Trichome Financial will be subject to certain material risks and investors should not invest in securities of Trichome Financial unless they can afford to lose their entire investment. No representation is or can be made as to the future performance of Trichome Financial and there can be no assurance that Trichome Financial will achieve its objectives. Readers should not rely upon forward-looking statements as a prediction of future results. Readers should carefully consider all such risks, including those set out in the discussion below.

Risks Relating to the Business of Trichome Financial

No Control over Cannabis Operations

Trichome Financial may not be directly involved in the ownership or operation of and may have no contractual rights relating to the operations of its current and/or future investees. The investees generally have the power to determine the manner in which their respective businesses are developed, expanded and operated. The interests of Trichome Financial and its investees may not

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always be aligned. As a result, the cash flows of Trichome Financial are dependent upon the activities of its investees, which creates the risk that at any time those investees may: (i) have business interests or targets that are inconsistent with those of Trichome Financial; (ii) take action contrary to Trichome Financial’s policies or objectives; (iii) be unable or unwilling to fulfill their obligations under their agreements with Trichome Financial; or (iv) experience financial, operational or other difficulties, including insolvency, which could limit or suspend an investee’s ability to perform its obligations under its agreements with Trichome Financial. Trichome Financial must rely on the accuracy and timeliness of the disclosure and information it receives from its investees. If the information contains material inaccuracies or omissions, Trichome Financial’s ability to accurately forecast or achieve its stated objectives may be materially impaired. Failure to receive Trichome Financial’s entitlements pursuant to the agreements it has entered into may have a material adverse effect on Trichome Financial.

Compliance with Laws

Trichome Financial’s and its investees’ operations are subject to various laws, regulations and guidelines. Trichome Financial endeavours to and cause its investees to comply with all relevant laws, regulations and guidelines. However, there is a risk that Trichome Financial’s and its investees’ interpretation of laws, regulations and guidelines, including, but not limited to the Cannabis Act, the regulations thereunder and applicable stock exchange rules and regulations, may differ from each other, and Trichome Financial’s and its investees’ operations may not be in compliance with such laws, regulations and guidelines. In addition, achievement of Trichome Financial’s business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and, where necessary, obtaining regulatory approvals. The impact of regulatory compliance regimes, any delays in obtaining, or failure to obtain regulatory approvals required by Trichome Financial or its investees may significantly delay or impact the development of Trichome Financial’s business and operations and could have a material adverse effect on the business, results of operations and financial condition of Trichome Financial. Any potential noncompliance could cause the business, financial condition and results of operations of Trichome Financial to be adversely affected. Further, any amendment to or replacement of the Cannabis Act or other applicable rules and regulations governing the activities of the investees may cause adverse effects to Trichome Financial’s operations. The risks to the business of Trichome Financial and its investees associated with the decision to amend or replace the Cannabis Act and subsequent regulatory changes, could reduce the addressable market for Trichome Financial’s or the investees’ products and could materially and adversely affect the business, financial condition and results of operations of Trichome Financial.

Trichome Financial and its investees incur ongoing costs and obligations related to regulatory compliance. Failure to comply with applicable laws and regulations may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures or remedial actions. Parties may be liable for civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permitting requirements, or more stringent application of existing laws or regulations, may have a material adverse impact on Trichome Financial and/or its investees, resulting in increased capital expenditures or production costs, reduced levels of cannabis production or abandonment or delays

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in the development of facilities which could have a material adverse effect on the business, results of operations and financial condition of Trichome Financial.

The introduction of new tax laws, regulations or rules, or changes to, or differing interpretations of, or application of, existing tax laws, regulations or rules in any of the countries in which Trichome Financial invests could result in an increase in Trichome Financial’s taxes, or other governmental charges, duties or impositions. No assurance can be given that new tax laws, regulations or rules will not be enacted or that existing tax laws, regulations or rules will not be changed, interpreted or applied in a manner which could result in Trichome Financial’s profits being subject to additional taxation or which could otherwise have a material adverse effect on Trichome Financial.

Changes in Laws, Regulations and Guidelines

On June 21, 2018, the Cannabis Act received royal assent and it became effective on October 17, 2018. However, uncertainty remains with respect to the implementation of the Cannabis Act as well as the various provincial and territorial regimes governing the distribution and sale of cannabis for adult-use purposes. The impact of these new laws, regulations and guidelines on the business of Trichome Financial, including increased costs of compliance and other potential risks cannot be predicted, and accordingly, Trichome Financial may experience adverse effects.

The Canadian federal regulatory regime requires plain packaging in order to prohibit testimonials, lifestyle branding and packaging that is appealing to youth. The restriction on the use of logos and brand names on cannabis products could have a material adverse impact on the investees’ business, financial condition and results of operation and their ability to service debt offered by Trichome Financial. In addition, the regulations under the Cannabis Act contemplate licences being granted for outdoor cultivation. The implications of the proposal to allow outdoor cultivation are not yet known, but such a development could be significant as it may reduce start-up capital required for new entrants in the cannabis industry. It may also ultimately lower prices, as capital expenditure requirements related to outdoor growing are typically much lower than those associated with indoor growing.

Edibles, cannabis extracts and cannabis topicals are also permitted for sale. Amendments to the regulations under the Cannabis Act came into force on October 17, 2019 to permit the production and sale of these additional classes of cannabis by holders of federal licences specific for these product classes. The earliest date that the new classes of cannabis products will be available for sale is December 16, 2019.

Provincial governments in Canada have also made varying announcements on the regulatory regimes for the distribution and sale of cannabis for adult-use purposes. The Province of Ontario, for instance, had previously committed to a government-regulated model for distribution but subsequently adopted a hybrid approach of public and private sale and distribution in the province. In both Ontario and other Canadian provinces and territories, there is no guarantee that provincial or territorial legislation regulating the distribution and sale of cannabis for adult-use purposes will be enacted according to the terms announced or at all.

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Business Strategy

As part of Trichome Financial’s business strategy, it seeks new opportunities in the cannabis industry. In pursuit of such opportunities, Trichome Financial may fail to select appropriate investment candidates and negotiate acceptable arrangements. Trichome Financial cannot provide assurance that it can complete any investment that it pursues or is pursuing, on favourable terms, or that any investment completed will ultimately benefit Trichome Financial. In addition, Trichome Financial’s capital solutions may not attract a following in the cannabis industry.

In the event that Trichome Financial chooses to raise debt capital to finance any acquisition or other arrangement, Trichome Financial’s leverage will be increased. In addition, Trichome Financial may issue equity securities to finance its activities. If Trichome Financial were to issue additional equity securities, the ownership interest of existing Trichome Financial shareholders may be diluted and some or all of Trichome Financial’s financial measures on a per share basis could be reduced. Moreover, as Trichome Financial’s intention to issue additional equity securities becomes publicly known, the market price of the Common Shares may be materially adversely affected.

In addition, the introduction of new tax laws or regulations, or accounting rules or policies, or rating agency policies, or changes to, or differing interpretations of, or application of, existing tax laws or regulations or accounting rules or policies or rating agency policies, could make the productivity and services offered by Trichome Financial less attractive to investees. Such changes could adversely affect Trichome Financial’s ability to enter into new investments.

Risks Inherent in Strategic Alliances

Trichome Financial may enter into further strategic alliances with third parties that it believes will complement or augment its existing business. Trichome Financial’s ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance Trichome Financial’s business, and may involve risks that could adversely affect Trichome Financial, including significant amounts of management time that may be diverted from investment activities operations to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve the expected benefits to Trichome Financial’s business or that Trichome Financial will be able to consummate future strategic alliances on satisfactory terms, or at all.

While Trichome Financial conducts due diligence with respect to investees, there are risks inherent in any investment. Specifically, there could be unknown or undisclosed risks or liabilities of investees for which Trichome Financial is not or will not be sufficiently indemnified. Any such unknown, undisclosed or unmitigated risks or liabilities could materially and adversely affect Trichome Financial’s financial performance and results of operations. Trichome Financial could encounter additional transaction and enforcement related costs or other factors such as the failure to realize all of the benefits from its investments. Any of the foregoing risks and uncertainties could have a material adverse effect on Trichome Financial’s business, financial condition and results of operations.

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Risks Associated with Divestment

In certain circumstances, Trichome Financial may decide, or be required, to divest its interest in certain investees. In particular, if any of the investees violate any applicable laws and regulations, Trichome Financial may be required to divest its interest in such investee or risk significant fines, penalties, administrative sanctions, convictions or settlements. There is no assurance that these divestitures will be completed on terms favourable to Trichome Financial, or at all. Any opportunities resulting from these divestitures, and the anticipated effects of these divestitures on Trichome Financial may never be realized, or may not be realized to the extent Trichome Financial anticipates. Any required divestiture or an actual or perceived violation of applicable laws or regulations could have a material adverse effect on Trichome Financial, including its reputation and ability to conduct business, its holdings (directly or indirectly) in the investees, the listing of its securities on applicable stock exchanges, its financial position, operating results, profitability or liquidity or the market price of its publicly traded shares. In addition, it is difficult for Trichome Financial to estimate the time or resources that may be required for the investigation of any such matters or its final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

Competition

As the cannabis financing market matures, there is potential that Trichome Financial will face intense competition from other financial service providers, including but not limited to banks, credit unions, and alternative lenders, some of which may have longer operating histories and greater financial resources than Trichome Financial. Investees may also face intense competition from other companies, some of which can be expected to have longer operating histories and greater financial resources, which may impact investees’ ability to service loans issued by Trichome Financial. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition and results of operations of Trichome Financial and its investees.

Dependence upon Key Management Personnel

The success of Trichome Financial is dependent upon the ability, expertise, judgment, discretion and good faith of its senior management as well as certain consultants (the “Key Personnel”). Trichome Financial’s future success depends on its continuing ability to attract, develop, motivate, and retain the Key Personnel. Qualified individuals for Key Personnel positions are in high demand, and Trichome Financial may incur significant costs to attract and retain them. The loss of the services of Key Personnel, or an inability to attract other suitably qualified persons when needed, could have a material adverse effect on Trichome Financial’s ability to execute on its business plan and strategy, and Trichome Financial may be unable to find adequate replacements on a timely basis, or at all. While employment and consulting agreements are customarily used as a primary method of retaining the services of Key Personnel, these agreements cannot assure the continued services of such individuals and consultants.

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U.S. Operations

Trichome Financial and, to its knowledge, its investees, do not currently engage in any U.S. cannabis-related activities as defined in CSA Staff Notice 51-352.

To date, Trichome Financial has caused its investees to only conduct business and invest in entities in federally-legal jurisdictions by including appropriate representations, warranties and covenants in its agreements with investees. However, an investee may breach such obligations. Any such violation of such obligation would result in a breach of the applicable agreement and, accordingly, may have a material adverse effect on the business, operations and financial condition of Trichome Financial.

Foreign Investments

If Trichome Financial expands its investments into jurisdictions outside of Canada, the business will become subject to additional risks, including whether any cannabis market will develop or be maintained. Trichome Financial may face new or unexpected risks or significantly increased exposure to one or more existing risk factors, including economic instability, changes in laws and regulations, and the effects of competition as a result of expansion into these jurisdictions. In addition, expansion into other geographic areas could increase operational, regulatory, compliance, reputational and foreign exchange rate risks. Future international expansion could require Trichome Financial to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. These factors may limit the ability of Trichome Financial to successfully expand operations into such jurisdictions and may have a material adverse effect on the business, financial condition and results of operations of Trichome Financial.

The legal and regulatory requirements in foreign countries with respect to the cultivation and sale of cannabis, banking systems and controls, as well as local business culture and practices are different from those in Canada. Therefore, Trichome Financial’s officers and directors would rely, to a great extent, on local legal counsel and consultants in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect potential business operations, and to assist with governmental relations. Trichome Financial would rely, to some extent, on those members of management and the Board who have previous experience working and conducting business in these countries, if any, in order to enhance its understanding of and appreciation for the local business culture and practices. Trichome Financial would also need to rely on the advice of local experts and professionals in connection with current and new regulations that develop in respect of the cultivation and sale of cannabis as well as in respect of banking, financing, labor, litigation and tax matters in these jurisdictions. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond Trichome Financial’s control and the impact of any such changes would adversely affect the business, financial condition and operations of Trichome Financial.

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Limited Operating History

Trichome Financial has a limited history of operations and is in the early stage of development as it attempts to capitalize on opportunities in the cannabis industry. Trichome Financial therefore is subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of revenues. The limited operating history may also make it difficult for investors to evaluate Trichome Financial’s prospects for success. There is no assurance that Trichome Financial will be successful and the likelihood of success must be considered in light of its early stage of operations.

Trichome Financial may not be able to achieve or maintain profitability and may incur losses in the future. In addition, Trichome Financial is expected to increase its investments as it implements initiatives to grow its business. If Trichome Financial’s revenues do not increase to offset these expected increases, Trichome Financial may not generate positive cash flow. There is no assurance that future revenues will be sufficient to generate the funds required to continue operations without external funding.

Liquidity and Additional Financing

There is no guarantee that Trichome Financial will be able to achieve its business objectives. The continued development of Trichome Financial may require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives or Trichome Financial going out of business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to Trichome Financial. If additional funds are raised through issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of Common Shares. In addition, any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for Trichome Financial to obtain additional capital and to pursue business opportunities.

Difficulty to Forecast

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

Cannabis Prices

The price of the Common Shares and Trichome Financial’s financial results may be significantly and adversely affected by a decline in the price of production, sale and distribution of cannabis. There is currently no established market price for cannabis, and the price of cannabis is affected by numerous factors beyond Trichome Financial’s control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global and

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regional consumptive patterns, speculative activities and increased production due to new production and distribution developments and improved production and distribution methods. Any price decline may have a material adverse effect on Trichome Financial.

The profitability of Trichome Financial’s interests under agreements with investees may be directly related to the price of cannabis. Trichome Financial’s operating income may be sensitive to changes in the price of cannabis and the overall condition of the cannabis industry as its operating income will be derived in part from royalty payments or cannabis streams. In addition, the value of Trichome Financial’s investments in the investees may be impacted as a result of changes in the prevailing market price of cannabis, which may have a material adverse effect on the ability of the investees to generate positive cash flow or earnings.

Reputational Risk

The cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis produced. Consumer perception can be significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand within the cannabis industry, which could affect the business, results of operations, financial condition and cash flows of Trichome Financial. Trichome Financial’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 Trichome Financial, the business, results of operations, financial condition and cash flows of Trichome Financial. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis in general, or the investees’ products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products legally, appropriately or as directed.

In addition, the parties with which Trichome Financial does business may perceive that they are exposed to reputational risk as a result of Trichome Financial’s cannabis business activities. For example, Trichome Financial could receive a notification from a banker advising it that they would no longer maintain banking relationships with those in the cannabis industry. Trichome Financial may in the future have difficulty establishing or maintaining bank accounts or other business relationships. Failure to establish or maintain business relationships could have a material adverse effect on Trichome Financial.

While Trichome Financial conducts and plans to continue to conduct its business in a manner consistent with good corporate practices, there can be no assurances that events, including events beyond the control of Trichome Financial, will not occur that may damage Trichome Financial’s reputation.

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Equity Price Risk

Trichome Financial may be exposed to equity price risk as a result of loan bonuses tied to the equity securities of cannabis companies. To that extent, Trichome Financial may be exposed to the risks associated with owning equity securities and the risks inherent in the investee companies.

Anti-Money Laundering Laws and Regulation Risks

Trichome Financial is subject to a variety of laws and regulations domestically and internationally that involve money laundering, financial recordkeeping and proceeds of crime, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and the rules and regulations thereunder, the Criminal Code (Canada) and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities internationally.

In the event that any of Trichome Financial’s investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments were found to be contrary to money laundering legislation, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize the ability of Trichome Financial to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while Trichome Financial has no current intention to declare or pay dividends in the foreseeable future, in the event that Trichome Financial determined to declare or pay dividends but a determination was made that the investments in Trichome Financial’s investees could reasonably be shown to constitute proceeds of crime, Trichome Financial may subsequently decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.

Security over Underlying Assets

There is no guarantee that Trichome Financial will be able to effectively enforce any guarantees, indemnities or other security interests it may have. Should a bankruptcy or other similar event occur that precludes an investee from performing its obligations under an agreement with Trichome Financial, Trichome Financial would have to enforce its security interest. In the event that the investee has insufficient assets to pay its liabilities, it is possible that other liabilities will be satisfied prior to the liabilities owed to Trichome Financial. In addition, bankruptcy or other similar proceedings are often a complex, lengthy and expensive process, the outcome of which may be uncertain and could result in a material adverse effect on Trichome Financial.

In Canada, there is a gap in the regulatory scheme as it applies to the ability of lenders to secure collateral, including regulated assets and regulatory licences themselves. In the event of a default, it is currently unclear how or if a lender would be able to realize on its security because it is unclear whether security can be taken in the relevant cannabis licences themselves, whether cannabis licences may be transferred in such circumstances, and whether a lender could take possession of regulated collateral. Canadian cannabis regulations are silent on these topics, and accordingly there can be no assurance that a lender in the cannabis industry will be in a position to enforce security in regulated assets or regulatory licences. Trichome Financial continues to monitor market practice and legal developments in this area. Trichome Financial seeks to mitigate risks on its loan portfolio

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through a variety of methods other than security, and with respect to the taking and enforcement of security, intends to work closely with legal counsel and regulators and participate in creating sensible market practice; however, there can be no assurance as to when or if these matters will be clarified and a sensible market practice develop.

In other jurisdictions, security interests may be subject to enforcement and insolvency laws that differ significantly from those in Canada, and while Trichome Financial takes steps to understand the enforcement of security interests and the insolvency regimes of each jurisdiction in which it chooses to invest, Trichome Financial’s security interests may not be enforceable and the application of such insolvency regimes as they apply to Trichome Financial’s investments may remain unclear. Further, there can be no assurance that any judgments obtained in Canadian courts will be enforceable in any of those jurisdictions. If Trichome Financial is unable to enforce its security interests, there may be a material adverse effect on Trichome Financial.

Unknown Defects and Impairments

A defect in any business arrangement may arise to defeat or impair the claim of Trichome Financial to such transaction, which may have a material adverse effect on Trichome Financial. It is possible that material changes could occur that may adversely affect management’s estimate of the recoverable amount for any agreement Trichome Financial enters into. Impairment estimates, based on applicable key assumptions and sensitivity analysis, are based on management’s best knowledge of the amounts, events or actions at such time, and the actual future outcomes may differ from any estimates that are provided by Trichome Financial. Any impairment charges on Trichome Financial’s carrying value of business arrangements could have a material adverse effect on Trichome Financial.

Challenging Global Financial Conditions

Global financial conditions have been characterized by increased volatility, with numerous financial institutions having either gone into bankruptcy or having to be rescued by government authorities. Global financial conditions could suddenly and rapidly destabilize in response to future events, as government authorities may have limited resources to respond to future crises. Global capital markets have continued to display increased volatility in response to global events. Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability, changes to energy prices or sovereign defaults. Any sudden or rapid destabilization of global economic conditions could negatively impact the ability of Trichome Financial, or the ability of the operators of the companies in which Trichome Financial holds interests, to obtain equity or debt financing or make other suitable arrangements to finance their projects. If increased levels of volatility continue or in the event of a rapid destabilization of global economic conditions, it may result in a material adverse effect on Trichome Financial and the price of Trichome Financial’s securities could be adversely affected.

Credit and Liquidity Risk

Trichome Financial is exposed to counterparty risks and liquidity risks including, but not limited to: (i) through the investees which may experience financial, operational or other difficulties, including insolvency, which could limit or suspend those investees’ ability to perform their

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obligations under agreements with Trichome Financial or result in the impairment or inability to recover Trichome Financial’s equity investment in an investee; (ii) through financial institutions that may hold Trichome Financial’s cash and cash equivalents; (iii) through companies that have payables to Trichome Financial; (iv) through Trichome Financial’s insurance providers; and (v) through Trichome Financial’s lenders, if any. Trichome Financial is also exposed to liquidity risks in meeting its operating expenditure requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact the ability of Trichome Financial to obtain loans and other credit facilities in the future and, if obtained, on terms favourable to Trichome Financial. If these risks materialize, Trichome Financial’s operations could be adversely impacted and the price of the Common Shares could be adversely affected.

Litigation

Trichome Financial may from time to time be involved in various claims, legal proceedings and disputes arising in the ordinary course of business. If Trichome Financial is unable to resolve these disputes favourably, it may have a material adverse effect on Trichome Financial. Even if Trichome Financial is involved in litigation and wins, litigation can significantly redirect Trichome Financial’s resources. Litigation may also create a negative perception of Trichome Financial. Securities litigation could result in substantial costs and damages and divert Trichome Financial’s management’s attention and resources. Any decision resulting from any such litigation that is adverse to Trichome Financial could have a negative impact on Trichome Financial’s financial position.

Cybersecurity Risks

The information systems of Trichome Financial, the investees 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 Trichome Financial and the investees depend, in part, on how well networks, equipment, information technology (“IT”) systems and software are protected against damage from a number of 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 Trichome Financial and/or the investees are unable or delayed in maintaining, upgrading or replacing IT systems and software, the risk of a cybersecurity event such as cable cuts, power loss, hacking, computer viruses and theft 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 reputation and results of operations of Trichome Financial and/or the investees. While Trichome Financial implements protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly.

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Social Media and Other Online Risks

There has been a marked increase in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms is virtually immediate and many social media platforms publish user-generated content without filters or independent verification as to the accuracy of the content posted. Information posted about Trichome Financial may be adverse to Trichome Financial’s interests or may be inaccurate, each of which may harm Trichome Financial’s business, financial condition and results of operations.

Dividend Policy

The declaration, timing, amount and payment of dividends are at the discretion of the Board and will depend upon Trichome Financial’s future earnings, cash flows, acquisition capital requirements and financial condition, and other relevant factors. There can be no assurance that Trichome Financial will ever declare a dividend on a quarterly, annual or any other basis.

PFIC Classification

If Trichome Financial were to constitute a PFIC within the meaning of the U.S. Internal Revenue Code for any year during a U.S. investor’s holding period, then certain potentially adverse U.S. federal income tax rules would affect the U.S. federal income tax consequences to such U.S. investor resulting from the acquisition, ownership and disposition of securities of Trichome Financial.

The determination as to whether a corporation is, or will be, a PFIC for a particular tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations and uncertainty. Whether any corporation will be a PFIC for any tax year depends on its assets and income over the course of such tax year, and, as a result, Trichome Financial’s PFIC status for its current tax year and any future tax year cannot be predicted with certainty. The PFIC rules are complex and may be unfamiliar to U.S. investors. Accordingly, investors subject to United States federal taxation are urged to consult their own tax advisors concerning the application of the PFIC rules to their investment in the securities of Trichome Financial.

Insurance Coverage

While Trichome Financial believes its insurance coverage addresses all material risks to which it is exposed 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 Trichome Financial is exposed. Moreover, there can be no guarantee that Trichome Financial will be able to obtain adequate insurance coverage in the future.

Fraudulent Activity Risk

Trichome Financial is exposed to the risk that its investees, employees, independent contractors, consultants, or service providers may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or activities that violate:

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(i) government regulations, specifically Health Canada regulations; (ii) manufacturing standards; (iii) the Cannabis Act and the regulations thereunder; (iv) provincial cannabis laws and regulations; (v) federal and provincial healthcare fraud and abuse laws and regulations; (vi) laws that require the true, complete and accurate reporting of financial information or data; or (v) the terms of Trichome Financial’s agreements with insurers.

It is not always possible for Trichome Financial to identify and prevent misconduct by its employees and other third parties, and the precautions taken by Trichome Financial to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Trichome Financial from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against Trichome Financial, those actions could have a significant impact on Trichome Financial’s business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of Trichome Financial’s operations, any of which could have a material adverse effect on Trichome Financial’s business, financial condition and results of operations.

Force Majeure Risk

Events, including those beyond the control of Trichome Financial, may damage its operations. Such events include, but are not limited to, non-performance by third party contractors; increases in materials or labour costs of investees; breakdown or failure of equipment of investees; failure of quality control processes of investees; contractor or operator errors; and major incidents and/or catastrophic events such as fires, explosions, earthquakes or storms.

Various Conflict of Interest Risks

Certain of the directors and officers of Trichome Financial are also directors and officers of other companies, and conflicts of interest may arise between their duties as officers and directors of Trichome Financial and as officers and directors of such other companies. In addition, Trichome Financial may from time to time manage capital pools, including some in which Trichome Financial or its directors or officers may have a direct ownership interest. Situations may arise in connection with potential investments where the interests of Trichome Financial and its securityholders and the interests of such managed capital pools and their investors conflict. Policies respecting conflicts of interest between Trichome Financial and its securityholders and such managed capital pools and their investors would be established in negotiation of the documentation establishing such managed capital pools and directors and officers of Trichome Financial will be subject to and required to comply with the procedures set out in the OBCA and other applicable legislation, regulations, rules and policies.

Risks Relating to the Investees

In addition to the risk factors that may impact the business, operations and financial condition of Trichome Financial and the investees noted above, the following supplemental risk factors may directly impact the business, operations and financial condition of the investees and, accordingly, may have an indirect material adverse effect on Trichome Financial.

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Reliance on Licences

Trichome Financial is dependent on the investees’ licences, or ability to obtain a licence, which are subject to ongoing compliance and reporting requirements. Failure to comply with the requirements of these licences or any failure to obtain or maintain those licences could have a material adverse impact on the business, financial condition and operating results of Trichome Financial. There can be no guarantee that an investee’s licence will be issued, extended or renewed or, if issued, extended or renewed, that they will be issued, extended or renewed on terms that are favourable to such investee and Trichome Financial. Should an investee’s licence not be issued, extended or renewed or should it be issued or renewed on terms that are less favourable to such investee and Trichome Financial than anticipated, the business, financial condition and results of the operations of Trichome Financial could be materially adversely affected.

Reliance on Investee Facilities

The investees’ facilities could be subject to adverse changes or developments, including but not limited to: capacity constraints, pressure on internal systems and controls and a breach of security, which could have a material and adverse effect on Trichome Financial’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 regulatory authorities, could also have an impact on the investees’ ability to continue operating under their licences or the prospect of renewing their licences, which may have an adverse effect on Trichome Financial. In addition, the investees’ facilities may be subject to security breaches in respect of electronic document or data storage, which could lead to breaches of applicable privacy laws and associated sanctions or civil or criminal penalties.

Governmental Regulations

Cannabis operations are subject to extensive laws and regulations, including potentially those relating to the manufacture, processing, import, export, management, packaging/labelling, advertising, sale, transportation, storage and disposal of cannabis but also laws and regulations relating to drugs, controlled substances, health and safety, land use, the conduct of operations and the protection of the environment. The costs of compliance with such laws and regulations are significant. It is possible that the costs and delays associated with compliance with such laws and regulations could become such that the investees would not continue to develop or operate their businesses. Moreover, it is possible that future regulatory developments could result in substantial costs and liabilities for the investees in the future such that they would not continue to develop or operate their business. In addition, the investees are subject to various laws, regulations and guidelines, including, but not limited to the Cannabis Act, the regulations thereunder and applicable stock exchange rules and regulations. As a result, additional government approvals, licences or permits may be required by investees in the future. See Item 17 – Risk Factors – Risks Relating to the Business of Trichome Financial – Compliance with Laws above.

Operating Risks

Cannabis operations generally involve a high degree of risk. The investees are subject to all of the hazards and risks normally encountered in the cannabis industry. Should any of these risks or

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hazards affect one of the investees, it may (i) cause the cost of development or production to increase to a point where it would no longer be economic to produce cannabis, (ii) cause delays or stoppage of operations, (iii) cause personal injury or death and related legal liability, or (iv) result in the loss of insurance coverage. The occurrence of any of the above-mentioned risks or hazards could have a material adverse effect on Trichome Financial and the price of Trichome Financial’s securities.

The production of cannabis involves significant risks. In Canada, few applicants for a licence from Health Canada ultimately receive a licence to produce and sell cannabis. Major expenditures may be required in pursuit of a licence and it is impossible to ensure that the expenditures will result in receipt of a licence and a profitable operation. There can be no assurances that any of the applicant investees will obtain and maintain a licence to produce and sell cannabis and be brought into a state of commercial production.

Competitive Conditions

The investees face intense competition from other companies, some of which have longer operating histories as well as more financial resources, production capacity and marketing experience than the investees. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition and results of operations of the investees, including the investees’ ability to source starting materials, retain qualified employees, enter into supply agreements, develop retail sales channels and obtain a share of the overall cannabis market. Accordingly, the business, financial conditions and results of operations of Trichome Financial would also be similarly affected.

Customer Acquisitions

Trichome Financial’s success depends, in part, on the investees’ ability to attract and retain customers. There are many factors which could impact the investees’ ability to attract and retain customers, including but not limited to the ability to continually produce desirable and effective product, the successful implementation of customer-acquisition plans and the continued growth in the aggregate number of customers. The failure to acquire and retain customers would have a material adverse effect on the investees’ business, operating results and financial condition, which could have a materially adverse effect on Trichome Financial.

Constraints on Marketing Products

The development of the investees’ businesses and operating results may be hindered by applicable restrictions on sales and marketing. The regulatory environment in Canada and abroad limits the investees’ ability to compete for market share in a manner similar to other industries. If the investees are unable to effectively market their products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, the investees’ sales and operating results could be adversely affected, which could have a materially adverse effect on Trichome Financial’s business, financial condition and operating results.

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Risks Inherent in an Agricultural Business

The business of certain of the investees involves the growing of cannabis. Cannabis is an agricultural product. As such, the business is subject to the risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks. Weather conditions, which can vary substantially from year to year, have a significant impact on the size and quality of the harvest of the crops processed and sold by the investees. Significant increases or decreases in the total harvest impact Trichome Financial’s profits realized on sales of its investees’ products and, consequently, the results of Trichome Financial’s operations. High degrees of quality variance can also affect processing velocity and capacity utilization, as the processes required to potentially upgrade lower or more variable quality product can slow overall processing times. There can be no assurance that natural elements will not have a material adverse effect on the production of products by the investees, which may have a material adverse effect on Trichome Financial.

Wholesale Price Volatility

The cannabis industry is a margin-based business in which gross profits depend on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labour costs, shipping costs, economic situation and demand), taxes, government programs and policies for the cannabis industry (including price controls and wholesale price restrictions that may be imposed by provincial agencies responsible for the sale of cannabis), and other market conditions, all of which are factors beyond the control of Trichome Financial and its investees.

Product Recalls

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced by the investees are recalled due to an alleged product defect or for any other reason, Trichome Financial may be required to incur unexpected expenses relating to the recall and potentially any legal proceedings that might arise in connection with the recall. In addition, a product recall may require significant management attention. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if one of the products produced by the investees were subject to recall, the image of that product, the investee and Trichome Financial could be harmed. A recall for any of the foregoing reasons could lead to decreased demand and could have a material adverse effect on the results of operations and financial condition of Trichome Financial. 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 also have an adverse effect on Trichome Financial.

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Product Liability

As a manufacturer and distributor of products designed to be ingested by humans, the investees face an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involve 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 investees may be subject to various product liability claims, including that their products 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 any investee could result in increased costs to Trichome Financial, could adversely affect Trichome Financial’s reputation with its clients and consumers generally, and could have a material adverse effect on the results of operations and financial condition of Trichome Financial. There can be no assurances that the investees will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.

Environmental and Employee Health and Safety Regulations

The investees’ operations may be subject to environmental and safety laws and regulations concerning, among other things, emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes, and employee health and safety. Accordingly, the investees may incur ongoing costs and obligations related to compliance with environmental and employee health and safety matters. Failure to comply with environmental and safety laws and regulations may result in costs for corrective measures, penalties or in restrictions on certain investees’ production operations. In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to the investees’ operations or give rise to material liabilities, which could have a material adverse effect on the business, results of operations and financial condition of the investees and Trichome Financial. For example, the Canadian federal government currently proposes to introduce a carbon tax. If implemented, such a tax would increase production costs for investees and could have a material adverse effect on the business, results of operations and financial condition of the investees and therefore ultimately Trichome Financial.

Reliance on Key Inputs

Certain of the investees’ businesses are dependent on a number of key inputs and their related costs including raw materials and supplies related to their growing operations, as well as electricity, water and other utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the financial condition and operating results of these investees. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the business, financial condition

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and operating results of these investees, in which circumstance there could be a materially adverse effect on the financial results of Trichome Financial.

Dependence on Suppliers and Skilled Labour

The ability of the investees to compete and grow is dependent upon having access, at a reasonable cost and in a timely manner, to skilled labour, equipment, parts and components. There is no assurance that any of the investees’ existing personnel who presently or may in the future require a security clearance from Health Canada will be able to obtain or renew such clearances or that new personnel who require a security clearance will be able to obtain one. No assurances can be given that these investees will be successful in maintaining their required supply of skilled labour, equipment, parts and components. It is also possible that the final costs of the major equipment contemplated by capital expenditure programs may be significantly greater than anticipated or available, in which circumstance there could be a materially adverse effect on the financial results of Trichome Financial.

Intellectual Property

The ownership and protection of trademarks, patents, trade secrets and intellectual property rights of certain of Trichome Financial’s current and potential future investees are significant aspects of such investees’ future success, and therefore may be relevant to the future success of Trichome Financial. Unauthorized parties may attempt to replicate or otherwise obtain and use investees’ products and technology. Policing the unauthorized use of current or future trademarks, patents, trade secrets or intellectual property rights could be difficult, expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others. In addition, in any infringement proceeding, some or all of the trademarks, patents or other intellectual property rights or other proprietary know-how, or arrangements or agreements seeking to protect the same may be found invalid, unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could put one or more of the trademarks, patents or other intellectual property rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could materially and adversely affect the business, financial condition and results of operations of the investees and/or Trichome Financial.

In addition, other parties may claim that the investees’ products or services infringe on their proprietary and perhaps patent protected rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders and/or require the payment of damages. As well, the investees may need to obtain licences from third parties who allege that the investee has infringed on their lawful rights. However, such licences may not be available on terms acceptable to the investee or at all. In addition, an investee may not be able to obtain or utilize on terms that are favorable to it, or at all, licences or other rights with respect to intellectual property that they do not own.

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Vulnerability to Rising Energy Costs

Certain of the investees’ growing operations consume considerable energy, making such investees vulnerable to rising energy costs. Rising or volatile energy costs may adversely impact the business of these investees and their ability to operate profitably, which could have a materially adverse effect on Trichome Financial’s business, financial condition and operating results.

Transportation Risks

The investees depend on fast and efficient courier services. Any prolonged disruption of this courier service could have an adverse effect on the financial condition and results of operations of Trichome Financial and/or the investees. Due to the nature of the business of the investees, security of product during transport is of the utmost concern. A breach of security during transport or delivery could have a material and adverse effect on the business, financial condition and prospects of the investees and Trichome Financial. Any breach of the security measures during transport or delivery, including any failure to comply with recommendations or requirements of Health Canada or other regulatory agencies, could also have an impact on the investees’ ability to continue operating.

Financial Reporting Risks

Many investees may not publicly report their financial condition. Compared to public firms, loans and investments to such investees may carry greater risk.

Risks Relating to the U.S. Cannabis Industry

U.S. Marijuana-Related Activities

U.S. federal regulation and enforcement may adversely affect the implementation of medical and recreational marijuana laws and regulations and, if Trichome Financial invests in or provides products or services to entities engaged in the U.S. cannabis industry, may negatively impact our revenues and profits.

Investors are cautioned that in the U.S., cannabis is largely regulated at the state level. Currently, there are 30 states plus the District of Columbia, Puerto Rico and Guam that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and/or recreational use of cannabis.

Nevertheless, cannabis continues to be categorized as a controlled substance under the CSA. Under the CSA, the policies and regulations of the U.S. federal government and its agencies are that cannabis has no “proven” medical benefits. Unless and until Congress amends the CSA with respect to medical marijuana, and as to the timing or scope of any such potential amendments there can be no assurance, there is a risk that U.S. federal authorities may enforce current U.S. federal law. A change in the U.S. federal government’s approach to begin more active enforcement of cannabis may, therefore, adversely affect our revenues and profits were we to make any such investment or provide any such products or services. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated U.S. federal policy remains uncertain.

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In an effort to provide guidance to U.S. federal law enforcement, the Department of Justice (“DOJ”) issued Guidance Regarding Marijuana Enforcement to all U.S. Attorneys in a memorandum from: (1) Deputy Attorney General David Ogden on October 19, 2009; (2) Deputy Attorney General James Cole on June 29, 2011; and (3) Mr. Cole on August 29, 2013 (the “Cole Memorandum”). Each memorandum included statements that the DOJ is committed to the enforcement of the CSA, but also included that the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way.

On February 14, 2014, Mr. Cole supplemented the Cole Memorandum to add guidance regarding the impact of the prior memoranda on “financial crimes” for which cannabis-related conduct is a predicate. Among other things he noted that the provisions of the money laundering statutes, the unlicensed money remitter statute and the Bank Secrecy Act remain in effect with respect to cannabis-related conduct. However, he also reiterated the position reflected in the August 29, 2013 guidance, stating that the investigation and prosecution of financial crimes “would be subject to the same consideration and prioritization.”

Following the inauguration of President Trump, a Task Force on Crime Reduction and Public Safety was established through an executive order by the President of the U.S. in February 2017. The Task Force was to deliver its recommendations by July 27, 2017. To date, its recommendations have not been made public.

In March, 2017, U.S. Attorney General Jeff Sessions acknowledged the validity of the Cole Memorandum and noted limited federal resources due to the appropriations restrictions. However, Mr. Sessions disagreed that the Cole Memorandum had been implemented effectively and, on January 4, 2018, Attorney General Jeff Sessions issued a memorandum (the “Sessions Memorandum”), which rescinded the Cole Memorandum. The Sessions Memorandum rescinded previous nationwide guidance specific to the prosecutorial authority of U.S. Attorneys relative to marijuana enforcement on the basis that they are unnecessary, given the well-established principles governing federal prosecution that are already in place. Those principles are included in chapter 9.27.000 of the U.S. Attorneys’ Manual and require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.

As a result of the Sessions Memorandum, federal prosecutors will now be free to utilize their prosecutorial discretion to decide whether to prosecute marijuana activities despite the existence of state-level laws that may be inconsistent with federal prohibitions. No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such marijuana activities, and it is uncertain how active federal prosecutors will be in relation to such activities.

Potential proceedings under U.S. federal law could involve significant restrictions being imposed upon Trichome Financial or third parties, while diverting the attention of key executives. Such proceedings could have a material adverse effect on Trichome Financial’s business, revenues, operating results and financial condition as well as Trichome Financial’s reputation, even if such proceedings were concluded successfully in favour of Trichome Financial. Such proceedings could

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ultimately involve the prosecution of key executives of Trichome Financial or the seizure of corporate assets.

In addition, if Trichome Financial were to make an investment in an entity involved in the U.S. cannabis industry, such an investment may be subject to additional risks. Courts may find that the contracts establishing such investment are unenforceable on the basis of illegality, or Trichome Financial may be unable to enforce any security taken in connection with any such loan for the same reason. In addition, certain legal regimes relevant to creditors and debtors such as insolvency and bankruptcy regimes may be unavailable due to the federal illegality that may be associated with potential investees’ U.S. cannabis activities. If Trichome Financial were unable to enforce its contracts or securities or to the benefit of court-monitored adjudication of creditor claims in the event of the insolvency or bankruptcy of any investee, its business, capital and results of operations may be materially adversely affected.

Especially if Trichome Financial invests in or provides products or services to entities engaged in the U.S. cannabis sector, Trichome Financial may have difficulty accessing the service of banks, which may make it difficult for it to operate.

In light of concerns in the banking industry regarding money laundering and other federal financial crimes for which offences related to cannabis are predicates, U.S. banks and other financial services providers have been reluctant to accept deposit funds from businesses involved with the cannabis industry. Consequently, businesses involved in the cannabis industry often have difficulty finding a bank willing to accept their business. Likewise, cannabis businesses in the U.S. have limited, if any, access to credit card processing services. As a result, cannabis businesses in the U.S. are largely cash-based. This complicates the implementation of financial controls and increases security issues. The inability to open or maintain bank accounts or take credit cards may make it difficult for Trichome Financial or its investees to operate their respective contemplated businesses.

WARNING TO CANADIAN INVESTORS - Canadian Investors May be Barred from Entering the U.S.

The U.S. Customs and Border Protection Agency (“CBP”) has stated that Canadians who work in the marijuana industry and those who invest in the cannabis sector risk a lifetime ban on travel to the U.S. The CBP will continue to apply long-standing U.S. federal laws and regulations that treat cannabis as a banned substance and participants in the cannabis industry as drug traffickers who are inadmissible into the U.S. Although some U.S. states have eased marijuana laws, the U.S. continues to maintain a federal prohibition that applies at the border. In July 2018, a venture-capitalist from Vancouver, British Columbia who had invested more than $100,000 into U.S. cannabis companies was denied entry to the U.S. and barred from future entry as his investments were deemed to be assisting and abetting in the illicit trafficking of drugs. If Trichome Financial were to make an investment or offer products or services to entities engaged in the U.S. cannabis industry, shareholders of Trichome Financial may risk a lifetime ban on travel to the U.S.

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17.2 Risk Factors Resulting in Securityholder Liability

There are no risks that securityholders of Trichome Financial may become liable to make additional contributions beyond the price of the security.

18. PROMOTERS

Management is not aware of any person or company who could be characterized as a promoter of Trichome Financial or a subsidiary of Trichome Financial within the two years preceding the date of this Listing Statement.

19. LEGAL PROCEEDINGS

19.1 Legal Proceedings

There are no legal proceedings material to Trichome Financial to which Trichome Financial or a subsidiary of Trichome Financial is a party or of which any of their respective property is the subject matter, and no such proceedings are known to the management of Trichome Financial to be contemplated.

19.2 Regulatory Actions

Trichome Financial is not subject to any penalties or sanctions imposed by any court or regulatory authority relating to securities legislation or by a securities regulatory authority, nor has Trichome Financial entered into a settlement agreement with a securities regulatory authority or been subject to any other penalties or sanctions imposed by a court or regulatory body or self-regulatory authority that are necessary to provide full, true and plain disclosure of all material facts relating to Trichome Financial’s securities or would be likely to be considered important to a reasonable investor making an investment decision.

20. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Except in regards to the executive compensation of directors and officers in their roles as same or the participation by directors and officers as shareholders in the Amalgamation and/or the Financing, no director or executive officer, insider, or any associate or affiliate of such insider or director or executive officer, have had any material interest, direct or indirect, in any material transaction within three years before the date of this Listing Statement, which has materially affected or will materially affect Trichome Financial, except as set forth below.

Howard Steinberg is a director of Trichome Financial and the Chief Executive Officer of MYM Nutraceuticals Inc. On July 31, 2019, Trichome Financial made a secured loan to MYM Nutraceuticals Inc. See Item 4.1 “Business of Trichome Financial”. Mr. Steinberg has recused himself from all deliberations concerning the loan and will recuse himself from all future deliberations concerning the loan. Mr. Steinberg owns less than 1% of the common shares of Trichome Financial and less than 1% of the common shares of MYM Nutraceuticals Inc.

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21. AUDITORS, TRANSFER AGENTS AND REGISTRARS

21.1 Auditors

Trichome Financial’s auditor is MNP LLP, whose Toronto office is located at 111 Richmond St. W., Suite 300, Toronto, Ontario M5H 2G4.

21.2 Transfer Agent

The transfer agent and registrar for the Common Shares is AST Trust Company (Canada) at its Toronto office located at 1 Toronto Street, Suite 1200, Toronto, Ontario M5C 2V6.

22. MATERIAL CONTRACTS

During the course of the two years prior to the date of this Listing Statement, Trichome Financial has entered into the following material contracts, other than contracts entered into in the ordinary course of business:

(a) the Amalgamation Agreement;

(b) the OCN Investor Rights Agreement.

23. INTEREST OF EXPERTS

23.1 Names of Experts

MNP LLP prepared the auditor’s reports for the audited financial statements of Trichome Financial for the years ended December 31, 2018 and 2017, which are attached to this Listing Statement as Schedule “A”.

23.2 Interests of Experts

To the knowledge of Trichome Financial, MNP LLP does not hold any beneficial interest, direct or indirect, in any securities of Trichome Financial or of any associate or affiliate of Trichome Financial.

To the knowledge of Trichome Financial, no director, officer or employee of MNP LLP is or is expected to be elected, appointed or employed as a director, officer or employee of Trichome Financial or of any associate or affiliate of Trichome Financial.

24. OTHER MATERIAL FACTS

Other than as set out elsewhere in this Listing Statement, there are no other material facts about Trichome Financial and its securities which are necessary in order for this Listing Statement to contain full, true and plain disclosure of all material facts relating to Trichome Financial and its securities.

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25. FINANCIAL STATEMENTS

Schedule “A” contains the audited financial statements of Trichome Financial for the years ended December 31, 2018 and 2017.

Schedule “B” contains management’s discussion and analysis of Trichome Financial for the years ended December 31, 2018 and 2017.

Schedule “C” contains the pro forma financial statements of Trichome Financial as at and for the six months ended June 30, 2019 and 2018 giving effect to the Amalgamation and the Financing.

Schedule “D” contains the unaudited financial statements of Trichome Financial for the six months ended June 30, 2019 and 2018.

Schedule “E” contains management’s discussion and analysis of Trichome Financial for the six months ended June 30, 2019 and 2018.

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CERTIFICATE OF THE ISSUER

Pursuant to a resolution duly passed by its Board of Directors, Trichome Financial Corp. hereby applies for the listing of the above mentioned securities on the Exchange. The foregoing contains full, true and plain disclosure of all material information relating to Trichome Financial Corp. It contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to prevent a statement that is made from being false or misleading in light of the circumstances in which it was made.

Dated at Toronto, Ontario

this 2nd day of December, 2019.

/s Michael Ruscetta /s Karl Grywacheski

Chief Executive Officer Chief Financial Officer

/s Marc Lustig /s Howard Steinberg

Director Director

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SCHEDULE A

AUDITED FINANCIAL STATEMENTS OF TRICHOME FINANCIAL FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017


Financial Statements

For the period from incorporation on September 18, 2017 to December 31, 2017 and year ended December 31, 2018


Table of Contents

Independent Auditor’s Report 1

Financial Statements

Statements of Financial Position 3

Statements of Net Loss and Comprehensive Loss 4

Statements of Cash Flows 5

Statements of Shareholders’ Equity 6

Notes to Financial Statements 7‐21

Independent Auditor's Report To the Shareholders of Trichome Financial Corp.: Opinion We have audited the financial statements of Trichome Financial Corp. (the "Company"), which comprise the statements of financial position as at December 31, 2018 and December 31, 2017, and the statements of net loss and comprehensive loss, changes in shareholders' equity and cash flows for the period from incorporation on September 18, 2017 to December 31, 2017 and for the year ended December 31, 2018, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2018 and December 31, 2017, and its financial performance and its cash flows for the period September 18, 2017 to December 31, 2017 and for the year ended December 31, 2018 in accordance with International Financial Reporting Standards. Basis for Opinion We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audits of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits. Mississauga, Ontario

Chartered Professional Accountants

May 24 2019 Licensed Public Accountants

3

Notes December 31, 2018 December 31, 2017

ASSETSCurrentCash 13,810,095$ ‐ Short‐term investments 3 17,314 ‐ Subscription receivable 5 ‐ 5,000 Loan receivable 3 447,534 ‐ Total Assets 14,274,943 5,000

LIABILITIESCurrentAmounts payable and accrued liabilities 272,607$ ‐ Due to related party 4 107,910 ‐ Class A preferred shares 5 15,078,173 ‐

Total Liabilities 15,458,690$ ‐

SHAREHOLDERS' DEFICITShare capital 5 335,000$ 5,000 Contributed surplus 5 162,549 ‐ Share‐based reserve 5 531,044 ‐ Accumulated deficit (2,212,340) ‐ Shareholders' Deficit (1,183,747) 5,000

Total Liabilities & Shareholders' Deficit 14,274,943 5,000

Commitments and contingencies (note 6)

Subsequent events (note 11)

The accompanying notes are an integral part of these financial statements

Approved on behalf of the Board:

/s/"Michael Ruscetta" /s/"Marissa Lauder"Director Director


Statements of Financial Position

(Expressed in Canadian Dollars)

For the period from incorporation on September 18, 2017 to December 31, 2017

and year ended December 31, 2018

4


Interest Revenue 22,534$ ‐$

Operating expenses

General and administrative 3,4 1,045,293 ‐

Share‐based compensation 5 693,593 ‐

1,738,886 ‐

Other expenses (income)

Accretion expense 5 558,302 ‐

Other income 4 (45,000)

Change in fair value of short‐term investments 3 (17,314) ‐

Net loss and comprehensive loss (2,212,340)$ ‐$

Earnings per share, basic and diluted(1.09)$ ‐$

2,030,685 1,000,000


Net loss per share:Weighted average number of outstanding common


Statements of Net Loss and Comprehensive Loss



and the year ended December 31, 2018

5


CASH FLOWS FROM OPERATING ACTIVITIESNet loss for the period (2,212,340)$ ‐$ Items not affecting cash:

5 558,302 ‐ 3 (17,314) ‐ 5 693,593 ‐ 3 (447,534) ‐

Subscription receivable 5 5,000 (5,000) (1,420,293) (5,000)

Changes in non‐cash items relating to operations:272,607 ‐

4 107,910 ‐ (1,039,776) ‐

CASH FLOWS FROM FINANCING ACTIVITIES

330,000 5,000 5 14,519,871 ‐

14,849,871 5,000

INCREASE IN CASH 13,810,095 ‐

CASH, BEGINNING OF PERIOD ‐ ‐

CASH, END OF PERIOD 13,810,095$ ‐$


Statements of Cash Flows


Proceeds from common shares issued

Net proceeds from Class A Preferred Shares issued

Share‐based compensation

Increase in amounts payable and accrued liabilitiesAdvances from related parties

Increase in loan receivable

Accretion expenseChange in fair value of short‐term investments



6

Number of shares Share capitalContributed

Surplus

Share‐based

reserveDeficit

Total

Shareholders'

Equity (Deficit)

September 18, 2017 initial capital 1,000,000 5,000$ ‐ $ ‐ $ ‐ $ 5,000$

Balance at December 31, 2017 1,000,000 5,000 ‐ ‐ ‐ 5,000

Common shares issued 1,320,000 330,000 ‐ ‐ ‐ 330,000

Comprehensive loss for the period ‐ ‐ ‐ ‐ (2,212,340) (2,212,340)

Share‐based compensation ‐ ‐ 162,549 531,044 ‐ 693,593

Balance at December 31, 2018 2,320,000 335,000$ 162,549$ 531,044$ (2,212,340)$ (1,183,747)$


TRICHOME FINANCIAL CORP.Statements of Changes in Shareholders' Equity





Notes to the Financial Statements For the period from incorporation on September 18, 2017 to December 31, 2017 and year ended December 31, 2018

7

1. Description of the business

Trichome Financial Corporation (the "Company" or “Trichome”) was incorporated under the Business Corporation Act of Ontario on September 18, 2017 and has its head office located at 150 King Street West, Suite 214, Toronto, Ontario. The Company is controlled by CannaRoyalty Corp d/b/a Origin House, a publicly‐traded corporation listed on the Canadian Securities Exchange (“CSE”) under the ticker symbol “OH”. As at December 31, 2018, Origin House held 69% of the Company’s outstanding common shares. On a diluted basis, assuming the conversion of the convertible Class A preferred shares (Note 5), Origin House’s ownership of Trichome would be 35%.

Trichome provides credit‐based capital solutions to cannabis companies operating across the Canadian cannabis value chain.

On October 2, 2018, the Trichome entered into a Letter of Intent which outlined the general terms and conditions pursuant to which 22 Capital Corp. (TSXV: LFC.P) (“22 Capital”) and Trichome have agreed to complete a transaction that will result in a reverse take‐over of 22 Capital by the shareholders of Trichome (the “Proposed Transaction”). If completed, the transaction will constitute 22 Capital’s Qualifying Transaction as such term is defined in Policy 2.4 of the TSX Venture Exchange (“TSXV”), and it is anticipated that the resulting issuer will be listed as a Tier 1 Investment issuer on the TSXV. Upon completion of this transaction, the Class A preferred shares (Note 5) automatically convert to common shares. On November 13, 2018, Trichome Financial entered into an amalgamation agreement (“Amalgamation Agreement”) with 22 Capital which superseded the Letter of Intent.

2. Significant Accounting Policies

Statement of Compliance with International Financial Reporting Standards

These financial statements have been prepared in compliance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Basis of presentation

These financial statements have been prepared by management on a historical cost basis using the accrual basis of accounting, except for cash flow information.

The currency of presentation for these financial statements is the Canadian dollar.

The financial statements were approved by the Company’s Board of Directors and authorized for issue on May 24, 2019.



8

2. Significant Accounting Policies ‐ continued

Significant accounting judgments and estimates

The preparation of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual outcomes could differ from these estimates. These financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences.

Revisions to accounting estimates are recognized in the period in which the estimate is revised and future

periods if the revision affects both current and future periods. These estimates are based on historical

experience, current and future economic conditions and other factors, including expectations of future

events that are believed to be reasonable under the circumstances.

Significant estimates include the valuation of short‐term investments, fair value through profit and loss of

loan receivable, discount rates used to value the preferred shares, and key inputs used in the application

of the Black‐Scholes option pricing model, used to determine share‐based compensation.

Revenue recognition

The Company adopted IFRS 15, which is required for reporting periods beginning on or after January 1, 2018. This new standard supersedes existing standards and interpretations, including IAS 18, Revenue. This standard introduces a 5‐step approach to revenue recognition:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

The Company recognises revenue from lending and investment arrangements, and consists of interest income recognized on an accrual basis as earned. Revenue is measured based on the consideration specified in contracts with customers and excludes amounts collected on behalf of third parties.



9

2. Significant Accounting Policies – continued

Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. A provision for onerous contracts is recognized when the benefits expected to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The Company had no material provisions at December 31, 2018.

Income taxes

Income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss except to the extent that they relate to items recognized directly in equity or other comprehensive loss. Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized, and the liability is settled. The effect of a change in the enacted or substantively enacted tax rates is recognized in net earnings and comprehensive loss or in equity depending on the item to which the adjustment relates.

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

Earnings per share

Net loss per common share represents the net loss attributable to common shareholders divided by the weighted average number of common shares outstanding during the period.

Diluted net loss per common share is calculated by dividing the applicable net loss by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period. As at December 31, 2018, all instruments were anti‐dilutive.



10

2. Significant Accounting Policies – continued Financial Instruments

The Company early adopted IFRS 9, which is required for reporting periods beginning on or after January 1, 2018.

Classification

On initial recognition, the Company determines the classification of financial instruments based on the following categories:

1. Measured at amortized cost 2. Measured at fair value through profit or loss (“FVTPL”) 3. Measured at fair value through other comprehensive income (“FVOCI”)

The classification under IFRS 9 is based on the business model under which a financial asset is managed and on its contractual cash flow characteristics. Assets held for the collection of contractual cashflows and for which those cashflows correspond solely to principal repayments and interest payments are measured at amortized cost. Contracts with embedded derivatives where the host is a financial instrument in the scope of the standard will be assessed as a whole for classification.

A financial asset is measured at amortized cost if both of the following criteria are met: 1. Held within a business model whose objective is to hold assets to collect contractual cash

flows; and 2. Contractual terms give rise on specified dates to cash flows that are solely payments of

principal and interest on the principal amount outstanding.

Equity investments held for trading are classified as FVTPL. For all other equity investments that are not held for trading, the Company may irrevocably elect, on initial recognition, to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment‐by‐investment basis.

Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as derivatives), or if the Company has chosen to evaluate them at FVTPL.



11


Measurement

Initial recognition – A financial asset or financial liability is initially recorded at its fair value, which is typically the transaction price, plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. In the event that fair value is determined to be different from the transaction price, and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or is based on a valuation technique that uses only data from observable markets, then the difference between fair value and transaction price is recognized as a gain or loss at the time of initial recognition.

Amortized cost – The amount at which a financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit losses. The effective interest method is a method of calculating the amortized cost of a financial asset or liability and of allocating interest and any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount on initial recognition.

Fair value through profit or loss – Changes in fair value after initial recognition, whether realized or not, are recognized through the statements of net loss and comprehensive loss. Income arising in the form of interest, dividends, or similar, is recognized through the statements of net loss and comprehensive loss when the right to receive payment is established, the economic benefits will flow to the Company, and the amount can be measured reliably.

Fair value through other comprehensive income – Changes in fair value after initial recognition, whether realized or not, are recognized through other comprehensive income. Income arising in the form of interest, dividends, or similar, is recognized through the statements of net loss and comprehensive loss when the right to receive payment is established, the economic benefits will flow to the Company, and the amount can be measured reliably.

Refer to Note 9 for classification and measurement details relating to the Company’s financial instruments.



12


Impairment

In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.

The Company has applied the simplified approach to recognise lifetime expected credit losses for its loan receivables. In general, the Company anticipates that the application of the expected credit loss model of IFRS 9 results in earlier recognition of credit losses for the respective items.

Derecognition

Financial assets – The Company derecognizes a financial asset when the contractual rights to the cashflows from the financial asset have expired or when contractual rights to the cashflows have been transferred. Gains and losses from the derecognition are recognized in the statements of net loss and comprehensive loss.

Financial liabilities – The Corporation derecognizes a financial liability when the obligation specified in the contract is discharged, canceled or expired. The difference between the carrying amount of the derecognized financial liability and the consideration paid or payable, including non‐cash assets transferred or liabilities assumed, is recognized in the statements of net loss and comprehensive loss.

3. Loan Receivable and short‐term investments

On May 9, 2018, the Company entered a secured term credit facility with 180 Smoke Inc. (“180 Smoke”) for principal of up to $2,500,000 (the “180 Smoke Facility”). The 180 Smoke Facility bears annual interest of 10% payable upon maturity, and matures on May 9, 2019, with an election available to the borrower to extend up to two years, subject to approval by the Company. As at December 31, 2018, the carrying value of the receivable from 180 Smoke was $447,534, consisting of loan principal of $425,000, with remaining credit to be released based on approval from the Company, and interest accrued of $22,534. Transaction costs of $34,890 were expensed, and included in general and administrative expenses. The Company has assessed the loan as fully recoverable at December 31, 2018, and no provision has been recorded.

In connection with the 180 Smoke Facility, 180 Smoke also issued 1,460,217 warrants to the Company. The fair value of the warrants at year‐end was $17,314, which was calculated using a Black‐Scholes option pricing model. Key assumptions used to value these short‐term investments within the pricing model include; volatility of 65%, risk free rate of 1.85%, expected life of one‐month, and exercise price of $0.387 per share.



13

4. Related Party Transactions and Balances

The Company recorded the following related party transactions during the year ended December 31, 2018:

Prior to the Class A Preferred Share issuance (Note 5), Trichome’s parent Company, Origin House, incurred $541,921 in administrative, rent, and other costs on its behalf.

Origin House provided $96,575 in executive and administrative services.

Included within Other Income, the Company performed $45,000 of due diligence services for Origin House.

Certain employees and directors of the Company and Origin House participated in common and preferred share issuances totalling $766,996.

The Company recorded key management compensation of $478,088 related to share‐based compensation and $131,226 related to salary and benefits.

As at December 31, 2018, the Company owes $152,910 to Origin House related to administrative, rent, executive services, and other expenses, partially offset by $45,000 owed to the Company from Origin House related to due diligence services. These transactions are in the normal course of operations and are measured at the exchange amounts agreed to by the parties.

Marc Lustig, a director of the Company, is a director of 22 Capital (Note 1).

5. Share Capital

Common shares

Authorized As of December 31, 2018, the authorized share capital comprised an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

Issued and outstanding

On September 18, 2017, at inception of the Company, 1,000,000 common shares were issued at $0.005

per share. As at December 31, 2017, a subscription receivable was recorded. On March 12, 2018,

additional common shares of 1,320,000 were issued, at $0.25 per share, and the subscription receivable

was settled.

Number Amount

September 18, 2017 intial capital 1,000,000 5,000$

Balance as at December 31, 2017 1,000,000 5,000$

Shares issued in March 12, 2018 Founders' Round 1,320,000 330,000$

Balance as at December 31, 2018 2,320,000 335,000$



14

5. Share Capital ‐ continued

Class A Preferred Shares Trichome issued 3,171,301 Class A preferred shares as part of a private placement which closed on September 5, 2018, at $4.73 per share. Gross proceeds were $15 million, with issuance costs of $480,129. The shares are convertible to cash, at the option of the holder, for $5.15 per share should an Initial Public Offering of Trichome or a change in control fail to occur (“liquidity event”) by September 5, 2019. The Class A preferred shares automatically convert to common shares upon a liquidity event (Note 1). The Class A preferred shares are classified as liabilities on the Company’s statement of financial position, and issuance costs have been netted against gross proceeds. At inception, the shares were recorded at $14,519,871, and during the period, accretion expense of $558,302 was recorded using a discount rate of 11.9% and term of 12 months. Share‐based Compensation On September 5, 2018, the Board of Directors of Trichome approved an Equity Incentive Plan for its employees and directors. In aggregate, 850,000 common shares of the Company are reserved for issuance under the plan, and these awards can be in the form of Stock Options, Restricted Share Units (“RSUs”), or Performance Share Units (“PSUs”). The number of share units granted, and any applicable vesting conditions are determined at the discretion of the Board or a compensation committee of the Board. The termination provisions under the share unit plan provide for automatic vesting of any unvested awards in the event of retirement, death, disability, and change in control. Share‐based reserve represents RSUs and PSUs that have been earned, for which common shares have yet to be issued.

The following tables summarize the activity of equity awards for the year ended December 31, 2018:

As at December 31, 2018, 161,701 RSUs have vested. The value of vested RSUs totalled $496,044, which has been recorded in share‐based reserve, and unvested totalled $754,812. The awards vest 1/3rd upon grant, and 1/3rd annually thereafter. The fair value of RSUs is determined based on the most recent common share issuance price at the grant date, which is a Level 3 input (Note 9).

RSUs

December 31, 2018

Amount Value per award

Outstanding, beginning of year ‐ ‐$

Granted during the year 545,100 2.76$

Forfeited during the year 53,333 4.73$

Oustanding, end of year 491,767 3.57$



15

5. Share Capital ‐ continued Share‐based Compensation – continued

As at December 31,2018, 140,000 PSUs have vested. The value of vested PSUs totalled $35,000, which has been recorded in share‐based reserve, and unvested totalled $17,500. The awards vest upon completion of certain milestones towards achievement of the reverse take‐over (Note 1). The fair value of PSUs is determined based on the most recent common share issuance price at the grant date, which is a Level 3 input (Note 9).

As at December 31, 2018, 1,667 options have vested. The value of vested options totalled $205, and unvested totalled $410. The expected remaining life of options is 3.25 years. The awards vest 1/3rd upon grant, and 1/3rd annually, thereafter.

The fair value of stock options is determined by the Black‐Scholes method. Volatility is based on comparable industry benchmarks. The following outlines the assumptions used for options issued for the year‐ended December 31, 2018:

PSUs

December 31, 2018

Amount Value per award

Outstanding, beginning of year ‐ ‐$

Granted during the year 210,000 0.25$

Oustanding, end of year 210,000 0.25$

Options

December 31, 2018

Amount

Exercise

price

Weighted average

value per award

Outstanding, beginning of year ‐ ‐ ‐

Granted during the year 5,000 4.73 0.11

Outstanding, end of year 5,000 4.73 0.11

December 31, 2018

Expected life, in years 4

Volatility 129%

Risk free interest rate 2%

Anticipated forfeiture 0%

Dividend yield 0%

Stock price at grant date 0.25



16

5. Share Capital ‐ continued

Contributed Surplus

Contributed Surplus is comprised of stock‐based compensation.

6. Commitments and Contingencies

The Company has lease commitments of approximately $18,000 annually over the next 5 years.

7. General and Administrative Expense

8. Capital Disclosures

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide a return to shareholders, benefits for other stakeholders and to ensure sufficient resources are available to meet day to day operating requirements.

The Company considers the items included in shareholders’ equity as capital. The Company manages its capital structure and makes adjustments based upon funds available to the Company or in response to changes in economic conditions and the risk characteristics of the underlying assets.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

The Company is not subject to externally imposed capital requirements and there has been no change in the overall capital risk management strategy during the year ended December 31, 2018.

December 31, 2018 December 30, 2017

Payroll and recruitment (note 4) 526,449$ ‐$

Professional fees 56,213 ‐

Marketing 19,996 ‐

Executive and advisory fee (note 4) 96,575 ‐

Rent (note 4) 19,726 ‐

Insurance 14,405 ‐

Office and administration costs (note 4) 2,235 ‐

Legal fees 303,186 ‐

Travel costs 6,508 ‐

Total 1,045,293$ ‐$



17

9. Fair Value of Financial Instruments

Financial instruments recorded at fair value on the statement of financial position are classified using a fair value hierarchy that reflects the observability of significant inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 – valuation techniques using one or more significant inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.

In the normal course of business, the Company uses various financial instruments which by their nature involve risk, including liquidity risk, interest rate risk, and credit risk of non‐performance by counter parties. These financial instruments are subject to normal credit standards, financial controls, risk management as well as monitoring procedures.

The Company is exposed in varying degrees to a variety of financial instrument related risks:

Liquidity Risk

Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient, readily available capital in order to meet its liquidity requirements.


Cash FVTPL Level 1 13,810,095$ ‐$

Loan receivable FVTPL Level 3 447,534 ‐

Subscription receivable Amortized cost ‐ 5,000

Warrants FVTPL Level 3 17,314 ‐

Amounts payable and accrued liabilities Amortized cost 272,607 ‐

Due to related party Amortized cost 107,910 ‐

Class A preferred shares Amortized cost 15,078,173 ‐

Total 29,733,633$ 5,000$



18

9. Fair Value of Financial Instruments ‐ continued

Interest rate risk

The Company’s exposure to interest rate risk relates to its ability to earn interest income on cash and loan balances. The Company's policy is to invest excess cash in investment‐grade short‐term guaranteed investment certificates. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its banks.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is in its loans receivable. This risk is mitigated through due diligence performed on counterparties, and other contractual arrangements.

10. Income Taxes

The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the effective tax rate is as follows:

The following table summarizes the components of deferred tax:


Net loss before recovery of income taxes 2,212,340$ ‐$

Combined statutory income tax rate 26.5% 26.5%

Expected income tax recovery 586,270 ‐

Non‐deductible expenses and other adjustments (300,199) ‐

Change in tax benefits not recognized (286,071) ‐

Income tax expense ‐$ ‐$


Deferred tax assets (liabilities):

Unrealized gain on short‐term investments (4,588)$ ‐$

Non‐capital losses carried forward 4,588 ‐

Income tax expense ‐$ ‐$



19

10. Income Taxes ‐ continued

Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred tax assets have not been recognized in respect of the following deductible temporary differences because the Company does not have a history of profit available to utilize the benefits:

Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.

The Company’s non‐capital losses expire in 2038.

11. Subsequent Events

Pure Alpha Holdings

On January 17, 2019, the Company entered into a binding lending agreement with Pure Alpha Holdings Ltd. (“Pure Alpha”) to support Pure Alpha’s application for an Ontario cannabis retail licence. Trichome has agreed to lend Pure Alpha principal of $50,000 without interest, in the form of a promissory note. Principal is required to be repaid by Pure Alpha on the first anniversary date.

Reverse takeover of 22 Capital

On February 14, 2019, Trichome announced the commencement of a non‐brokered private placement of subscription receipts in connection with its reverse take‐over of 22 Capital. Trichome intends to use the proceeds of the financing to fund the Company’s growing pipeline of cannabis sector credit opportunities and for general corporate purposes.

The Amalgamation Agreement was amended January 30, 2019 to extend the outside date for completion of the Amalgamation. The Amalgamation Agreement was further amended and restated on April 5, 2019 to provide for a common share split (the “Common Share Split”) and preferred share split (“Preferred Share Split”) on a three‐to‐one basis and to further extend the outside date for completion of the amalgamation.

The Company is seeking applicable approvals in connection with its reverse take‐over of 22 Capital.


Non‐capital losses carried forward 1,056,471$ ‐$



20

11. Subsequent Events ‐ continued

James E Wagner Cultivation (“JWC”) loan

On February 19, 2019, the Company signed a loan agreement with James E Wagner Cultivation Corporation to loan $3.5 million. The issue price of the investment is for 95% of the $3.5 million issuance, in the form of a Senior Secured Term Loan. The term loan is for a 2‐year period with an annual interest rate of 9.25%. The loan is secured by a first ranking perfected security interest in the assets of JWC and is guaranteed by each of its subsidiaries. The terms of the loan contain covenants standard for this type of transaction and include numerous other contractual commitments which both reduce risk to Trichome while increasing economic returns. Upon closing JWC issued Trichome 291,667 warrants, exercisable for 2‐years at a price of $0.80. The full amount of the loan is due upon maturity.

180 Smoke acquisition

On February 19, 2019, Trichome’s parent company, Origin House, acquired 100% of the outstanding shares of 180 Smoke. Trichome’s investment in 180 Smoke (Note 3) was settled upon close of the acquisition, resulting in a realized gain of $136,562.

C.G.S. Foods Inc. (“CGS” d/b/a “Ganjika House”) loan

On March 15, 2019, Trichome closed a lending arrangement with CGS, a retail cannabis license holder in Ontario, Canada. The lending arrangement consists of a revolving credit facility (“Facility A”) of up to $1.0 million and a term loan for up to $1.0 million (“Facility B”). The initial investment consisted of a $750,000 draw under Facility A and $500,000 draw under Facility B for a total investment of $1.25 million.

The revolving credit facility, Facility A, is for the purchase of inventory and bears monthly interest of 1.8%. The revolving credit facility terminates at the option of the borrower after the six‐month anniversary of the close date, or if certain lending limits are not reached. Facility A has a 2‐year term and repayments over the course of the term of the agreement are based on a margining calculation against CGS’s inventory.

The term loan is to be used for leasehold improvements, operating costs and working capital items and bears interest at 8.5% annually, unless the borrower elects to forego monthly payments, for a pre‐determined quarter, at which point the term loan bears the equivalent of 12.0% annual interest for the elected period. Upon close, $500,000 was lent to the borrower, with up to $500,000 in increments no less than $100,000 to be lent at the discretion of Trichome within one year of the close date. The term loan is due upon maturity on March 15, 2021. In consideration for Facility B, CGS issued to Trichome a total of $500,000 in warrants with a strike price determined by a CGS valuation of $6.5 million. In the event that Trichome advances a second tranche under Facility B, Trichome will receive additional warrants based on a dollar amount equal to the advance. In the event that no additional amount is advanced, Trichome will be entitled to $250,000 in additional warrants one year post the closing of the agreement.



21

11. Subsequent Events ‐ continued

Blissco Holdings Ltd (“Blissco”) loan

On May 14, 2019, the Company entered into an agreement to provide a $4.5 million trade finance facility (the “BlissCo Facility”) and a $1.5 million mortgage loan (the “BlissCo Mortgage”) with Blissco Holdings Ltd. The Blissco Facility provides the borrower with up to $4.5 million, to be drawn at its option, against qualifying receivables and inventory and matures 12 months from issuance with an option to extend for an additional 12 months. The Bliscco Mortgage is for a term of 12 months with an option to extend for an additional 12 months and is secured by a first‐ranking perfected security interest in the assets of Blissco and is guaranteed by Blissco Cannabis Corp. Upon close, $1.5 million was advanced.

77

SCHEDULE B

MANAGEMENT’S DISCUSSION AND ANALYSIS OF TRICHOME FINANCIAL FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

26774920.2


Managements Discussion and Analysis of the Financial Condition and Results of Operations For the period from incorporation on September 18, 2017 to December 31, 2017 and year ended December 31, 2018


Management Discussion and Analysis For the period from incorporation on September 18, 2017 to December 31, 2017 and year ended December 31, 2018

Table of Contents

INTRODUCTION ............................................................................................................................................. 3

CAUTION REGARDING FORWARD‐LOOKING STATEMENTS .......................................................................... 3

DESCRIPTION OF THE BUSINESS ................................................................................................................... 5

HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2018 ............................................................................ 6

FINANCIAL PERFORMANCE ........................................................................................................................... 8

RECENT DEVELOPMENTS .............................................................................................................................. 9

MATERIAL INVESTMENTS............................................................................................................................ 10

RESULTS OF OPERATIONS ........................................................................................................................... 13

FINANCIAL POSITION .................................................................................................................................. 15

LIQUIDITY .................................................................................................................................................... 16

FINANCING AND CAPITAL RESOURCES ....................................................................................................... 18

ACCOUNTING MATTERS .............................................................................................................................. 20

REGULATORY OVERVIEW ............................................................................................................................ 24

RISKS AND UNCERTAINTIES ........................................................................................................................ 30

ADDITIONAL INFORMATION ....................................................................................................................... 31



3

INTRODUCTION

Trichome Financial Corp. (the "Company", “Trichome Financial” or “Trichome”) was incorporated under

the Business Corporation Act (Ontario) on September 18, 2017 and has its head office located at 150 King

Street West, Suite 214, Toronto, Ontario. The Company is controlled by CannaRoyalty Corp d/b/a Origin

House (“Origin House”), a publicly‐traded corporation listed on the Canadian Securities Exchange (“CSE”)

under the ticker symbol “OH”, through a Shareholders Agreement dated March 12, 2018 and amended

June 25, 2018 which automatically terminates upon Trichome becoming a publicly traded entity. As at

December 31, 2018, Origin House exercised voting control through its 69% of the Company’s outstanding

common shares. On a diluted basis, assuming the conversion of convertible Class A preferred shares,

Origin House’s ownership of Trichome would be 35%.

This Managements Discussion and Analysis (“MD&A”) of the Financial Condition and Results of Operations

of Trichome is dated May 24, 2019. The MD&A should be read in conjunction with the Company’s audited

financial statements (the “Financial Statements”) for the year ended December 31, 2018, including the

accompanying notes.

Unless otherwise indicated, all financial information in this MD&A is reported in Canadian dollars. The

Company prepared this MD&A of the Financial Condition and Results of Operations with reference to

National Instrument 51‐102‐ Continuous Disclosure Obligations of the Canadian Securities Administrators

(“CSA”). This MD&A provides information for the year ended December 31, 2018 and is current as of May

24, 2019.

The Financial Statements and this MD&A have been approved by the Company’s Board of Directors.

The accompanying Financial Statements were prepared in accordance with Canadian Generally Accepted

Accounting Principals that incorporate the requirements of International Financial Reporting Standards

(“IFRS” or “GAAP”).

Under GAAP, certain expenses and income must be recognized that are not necessarily reflective of the

Company’s underlying operating performance. Non‐GAAP financial measures exclude the impact of

certain items and are used internally when analyzing consolidated operating performance. These non‐

GAAP financial measures are also helpful in assessing underlying operating performance on a consistent

basis.

CAUTION REGARDING FORWARD‐LOOKING STATEMENTS

The words “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates” “forecasts”, “intends”,

“anticipates”, or “believes” or variation (including negative variations) of such words and phrases, or

statements that certain actions, events, or results “may”, “could”, “would”, “might”, or “will” be taken,

occur or to achieve are all forward‐looking statements.



4

Forward‐looking statements are based on the reasonable assumptions, estimates, internal and external

analysis and opinions of management made in light of its experience and perception of trends, current

conditions and expected developments, as well as other factors that management believes to be relevant

and reasonable at the date that such statements are made. Forward‐looking statements involve known

and unknown risks, uncertainties, assumptions and other factors that may cause actual results,

performance or achievements of the Company to be materially different from any future results,

performance or achievements expressed or implied by the forward‐looking statements. Such factors

include, but are not limited to, the factors discussed in the section entitled “RISKS AND UNCERTAINTIES”.

Although the Company has attempted to identify key factors that could cause actions, events or results

to differ materially from those described in the forward‐looking statements, there may be other factors

that cause actions, events, or results to differ from those anticipated, estimated or intended. Forward‐

looking statements contained herein are made as at the date of this MD&A. There can be no assurance

that forward‐looking statements will prove to be accurate, as actual results and future events could differ

materially from those anticipated in such statements.

With respect to the forward‐looking statements contained in this MD&A, we have made assumptions

regarding, among other things: (i) our ability to generate cash flow from operations and obtain necessary

financing on acceptable terms; (ii) general economic, financial market, regulatory and political conditions

in which we operate; (iii) market demand for our financial products and services; (iv) competition; (v)

anticipated and unanticipated costs; (vi) government regulation of our activities and products and

services; (vii) our ability to obtain qualified staff and appropriate services in a timely and cost efficient

manner; (viii) the ability of our borrowers to repay or refinance our loans; and (ix) the creditworthiness of

factoring counterparties and prompt payment by such counterparties.

Readers are cautioned to consider these and other factors, uncertainties and potential events carefully

and not to put undue reliance on forward‐looking statements. Forward‐looking statements are based on

material assumptions, including those listed above, that were applied in drawing a conclusion or making

a forecast or projection, including management’s perception of historical trends, current conditions and

expected future developments, as well as other considerations that are believed to be appropriate in the

circumstances. While we consider these assumptions to be reasonable based on information currently

available to management, there is no assurance that such assumptions will prove to be reasonable.

The forward‐looking statements contained herein are made as of the date of this MD&A and are based

on the beliefs, estimates, expectations, opinions and assumptions of management on the date such

forward‐looking statements are made. The Company undertakes no obligation to update or revise any

forward‐looking statements, whether as a result of new information, estimates or opinions, future events

or results or otherwise or to explain any material difference between subsequent actual events and such

forward‐looking statements, except as required by applicable securities law. The forward‐looking

statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.



5

DESCRIPTION OF THE BUSINESS

OVERVIEW OF TRICHOME

Trichome is a specialty finance company focused on providing flexible and creative capital solutions to the

global legal cannabis market. Trichome was created to address the lack of credit availability in the large,

growing and increasingly complex cannabis market. Founded by industry leaders Origin House, Stoic

Advisory, and Sprott Inc. (TSX: SII), Trichome’s experienced management team has a unique edge to

capitalize on proprietary deal flow and insight while developing a first‐mover advantage as a global

cannabis focused specialty finance company. Trichome provides customized financing solutions across the

industry value chain to support growth, capital expenditures, M&A, working capital and other

needs. Transactions are typically structured to earn attractive rates of contractual cash flows, retain

optionality on value creation and ensure return of capital. Leveraging the combined resources and

knowledge of its founders and management, it is able to offer significant value‐added financial, product,

market and operational support to its partner companies. Trichome’s current assets are all based in

Canada and it has no operations or assets in the United States.

Trichome Financial has been active in rapidly building‐out a pipeline of unique opportunities that include

the following market participants: Licensed Producers (“LP”), late stage LP applicants, hardware and

ancillary product manufacturers, real estate owners, retail operators and networks, media platforms and

technology companies. Trichome Financial’s investments are flexible and tailored to the specific needs of

client requirements, structured as secured loans with significant asset or enterprise value collateral plus

additional covenant protections to reduce both the probability and quantum of losses in downside

scenarios. Trichome Financial earns its return on capital through a combination of: i) contractual cash

flows, ii) structuring and related fees, as well as iii) upside optionality via equity kickers, bonus payments

and potential penalty payments.



6

HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2018

SUMMARY

Goal: Complete First Capital Raise from Third‐Party Investors and Commence Operations

Trichome established a goal of completing a capital raise from investors in order to commence lending

funds to companies with future potential in the Canadian cannabis industry.

The Company planned to achieve this goal by completing a private placement and using those funds to

start a portfolio of investments.

Achievements:

Private Placement – raised gross proceeds of approximately $15 million

On September 5, 2018, Trichome completed a private placement. Gross proceeds from the

financing were approximately $15 million.

180 Smoke and Affiliates (“180 Smoke”) – Trichome provided strategic financing

Trichome loaned $425,000 to 180 Smoke during the year ended December 31, 2018 for retail

footprint expansion. In addition, 1,460,217 warrants of 180 Smoke were issued to the Company.

Expanded pipeline of investments

In late‐2018, Trichome expanded its pipeline of potential investees. Refer to Recent Developments

below for advancements made by the Company in expanding is investment portfolio.

Operational set‐up

Trichome devoted efforts to establish operations and acquire talent, including appointment of

CEO, Michael Ruscetta.

Goal: Go Public on TSX Venture Exchange (“TSXV”)

Trichome established a goal to become public on the TSXV in 2019 by completing a reverse take‐over

(“RTO”) of a capital pool company.

Achievements:

On October 3, 2018, Trichome entered into an agreement with 22 Capital Corp. (TSXV: LFC.P) (“22

Capital”) to complete a transaction that will result in a reverse take‐over by the shareholders of

Trichome. On November 13, 2018, Trichome and 22 Capital executed a formal Amalgamation

Agreement. As at year‐end, the reverse takeover was in progress. Refer to Recent Developments

for further information.



7

Corporate Governance

In the first quarter of 2018, the Company formalized its Board of Directors (the “Board”) and officers. On January 31, 2018, the Company’s sole director, Jay Goldman resigned. Effective February 1, 2018, Afzal Hasan, Timothy Diamond, Marissa Lauder, and Jonathan Page joined the Company’s Board. Marc Lustig joined as Chief Executive Officer also effective February 1, 2018. On March 13, 2018, Brent Cox joined the Company’s Board. On May 7, 2018, Marc Lustig was replaced as Chief Executive Officer by Michael Ruscetta who also joined as a Director. Marc Lustig became Chairman of the Board on May 18, 2018. On November 13, 2018, Christian Sinclair joined the Company’s Board. On December 17, 2018, Afzal Hasan and Brent Cox resigned from the Board. Corporate Financings and Other Matters

On March 12, 2018, the Company issued 1,320,000 common shares to founders of the Company. The

issuance was at $0.25 per share, for total proceeds of $330,000.

Trichome issued 3,171,301 Class A preference shares, Series 1 as part of a private placement (the “Private

Placement”) which closed on September 5, 2018, at $4.73 per share. Gross proceeds were approximately

$15 million, with issuance costs of $480,383. The shares are convertible to cash, at the option of the

holder, for $5.15 per share if there is no liquidity event by September 5, 2019. The Class A preferred shares

automatically convert to common shares upon a liquidity event, such as an RTO.



8

FINANCIAL PERFORMANCE The following are the major financial highlights of Trichome’s operating results for the year ended

December 31, 2018, in comparison to the period ended December 31, 2017:

revenues were $22,534, as compared to $nil;

operating expenses were $1.7 million, as compared to $nil;

net loss of $2.2 million, as compared to $nil; and

net loss per basic and dilutive shares of $1.09 as compared to $nil.

The following is a summary of key balance sheet totals as at December 31, 2018, compared to December

31, 2017:

cash was $13.8 million, as compared to $nil;

Short‐term investments and loan receivable totaled $0.5 million, as compared to $nil;

total assets of $14.3 million, as compared to $5,000; and

total liabilities of $15.5 million, as compared to $nil.



9

RECENT DEVELOPMENTS


On January 14, 2019, Howard Steinberg joined the Company’s Board of Directors.

Progress towards going public on TSXV

On February 14, 2019, Trichome announced the commencement of a non‐brokered private placement of subscription receipts in connection with its reverse take‐over of 22 Capital. Trichome intends to use the proceeds of the private placement to fund the Company’s growing pipeline of cannabis sector credit opportunities and for general operating purposes. The Company expects to raise gross proceeds of between $15.0 and $30.0 million.

Trichome intends to complete a stock split of its outstanding common and preferred shares, in each case, on the basis of 1 share for 3 post‐split shares.

The Company is seeking applicable approvals in connection with its reverse take‐over of 22 Capital.

James E Wagner Cultivation loan

On February 19, 2019, the Company signed a loan agreement with James E. Wagner Cultivation Corporation (“JWC”) in which Trichome lent $3.5 million to JWC. The term of the loan is 2‐years, with an annual interest rate of 9.25%. The loan is secured by a first‐ranking perfected security interest in the assets of JWC and is guaranteed by each of its subsidiaries. The terms of the loan contain covenants standard for this type of transaction and include numerous contractual commitments intended to reduce risk to Trichome while increasing economic returns. Upon close, JWC issued Trichome 291,667 warrants, exercisable for 2‐years at a price of $0.80. The full amount of the loan is due upon maturity.

180 Smoke acquisition

On February 19, 2019, Trichome’s parent company, Origin House, acquired 100% of the outstanding shares of 180 Smoke. Trichome’s loan to 180 Smoke was repaid in full upon closing of the acquisition, resulting in a realized gain of $136,562 upon settlement.

C.G.S. Foods Inc. (“CGS” d/b/a “Ganjika House”) loan

On March 15, 2019, Trichome closed a lending arrangement with CGS, a retail cannabis license holder in Ontario, Canada. The lending arrangement consists of a revolving credit facility (“Facility A”) of up to $1.0 million and a term loan for up to $1.0 million (“Facility B”). The initial investment consisted of a $750,000 draw under Facility A and $500,000 draw under Facility B for a total investment of $1.25 million.

Blissco Holdings Ltd (“Blissco”) loan

On May 14, 2019, the Company entered into an agreement to provide a $4.5 million trade finance facility and a $1.5 million mortgage loan to Blissco.



10

MATERIAL INVESTMENTS

The following chart is a summary of the Company’s material investments as at December 31, 2018:

180 Smoke

Q2 2018

Description of

Asset

180 Smoke is an e‐commerce retailer, brick and mortar retailer,

manufacturer, and wholesaler of vape products, including e‐

juices, vaping devices, herbal vaporizers, & accessories.

Licensing

Applications underway for cannabis store licenses in Canada.

Type of

Investment

Loan and warrants

Amount

invested

$425,000 loan, 10% interest bearing and 1,460,217 warrants

Geography Canada and New York state (non‐cannabis in the U.S.)

Jurisdiction Canada

Significant

activities

On September 27, 2018, Trichome’s parent company, Origin

House, entered into a binding term sheet to acquire 100% of 180

Smoke. Trichome’s investment in 180 Smoke is settled upon

close of the acquisition. The acquisition closed on February 19,

2019. Refer to Recent Developments.

The following chart is a summary of the Company’s material investments described in Recent

Developments:

James E. Wagner Cultivation Corp. (“JWC”) Q1 2019

Description of Asset

Headquartered in Kitchener, ON, JWC is one of the largest producers of aeroponically‐grown cannabis in the world. JWC is currently licensed to cultivate and sell dried cannabis flower to medical patients and authorized distributors/retailers as well as process cannabis into oil.

Type of Investment

Loan and warrants

Amount Invested

$3,500,000 loan, 9.25% interest bearing and 291,667 bonus warrants at an exercise price of $0.80

Geography Ontario

Jurisdiction Canada

Significant activities

On February 19, 2019, Trichome entered into a Loan Agreement to provide $3,500,000 in the form of a senior secured term loan to JWC. The transaction was funded on March 1, 2019.



11

C.G.S. Foods Inc. (dba

Ganjika House) (“CGS”

or “Ganjika House”)

Q1 2019

Description of

Asset

Licensed Ontario cannabis retailer. Ganjika House is

currently one of only 25 winners of a lottery conducted by

the Alcohol and Gaming Commission of Ontario to legally

sell cannabis in a private retail establishment in Ontario.

Ganjika House was one of the first 5 lottery winners to

receive its Cannabis Retail Operator License and Retail

Store Authorization.

Ganjika House is located at 186 Main Street South in

Brampton, ON.

Type of

Investment

Revolving Credit Facility, Term Loan and Warrants

Amount

Invested

Facility A – Revolving Credit Facility of $1,000,000 at an

interest rate of 1.8% per month with a term ending March

15, 2021.

Facility B – Term Loan of up to $1,000,000 at an interest

rate of 8.50% per annum if CGS pays interest monthly or

12% per annum if CGS elects to accrue interest payments

until maturity with a term ending March 15, 2021.

In addition, Trichome was issued warrants.

Geography Ontario

Jurisdiction Canada

Significant

activities

On March 15, 2019, Trichome entered into a lending

agreement to provide up to $2,000,000 of senior secured

credit facilities to CGS.



12

Blissco Holdings Ltd.

(“Blissco”)

Q1 2019

Description of

Asset

Blissco is a Canadian wellness cannabis brand based in British

Columbia and a multi‐licensed cultivator, processor and

distributor of cannabis.

Blissco is supplying premium cannabis to the Canadian market

with supply agreements in British Columbia, Alberta,

Saskatchewan, and New Brunswick.

Type of

Investment

Trade Finance Facility and Mortgage Loan

Amount

Invested

Up to $4,500,000 ($2,500,000 Factoring Facility & $2,000,000

Purchase Order Finance)

$1,500,000 (Mortgage Loan)

Geography British Columbia

Jurisdiction Canada

Significant

activities

On May 15, 2019 Trichome entered into a $4,500,000 trade

finance facility and a $1,500,000 mortgage loan with Blissco.

The mortgage loan was funded on May 15, 2019.



13

RESULTS OF OPERATIONS

Trichome is currently in the start‐up phase and commenced active business in Spring 2018.

The following tables set forth results of operations data for the year ended December 31, 2018 and period

ended December 31, 2017:

REVENUE

Interest revenue is comprised of interest earned on the 180 Smoke loans. The Company loaned $425,000

in principal to 180 Smoke, which bears annual interest of 10%.

OPERATING EXPENSES

Operating expenses increased due to commencement of business activities in Spring 2018. These include

hiring employees, subleasing office space, issuing stock‐based compensation, audit costs, and legal fees.

There were no active business activates in fiscal 2017, and therefore, no operating expenses.


Consolidated Statements of Net Loss

Revenue 22,534$ ‐$

Operating expenses 1,738,886 ‐

Net loss (2,212,340) ‐

Other expenses (income) 540,988 ‐

Total comprehensive loss (2,212,340) ‐

Net loss per common share ‐ basic & diluted (1.09) ‐

Weighted average common shares ‐ basic & diluted 2,030,685 ‐


Payroll and recruitment 526,449$ ‐$


Marketing 19,996 ‐

Executive and advisory fee 96,575 ‐

Rent 19,726 ‐


Office and administration costs 2,235 ‐



Total 1,045,293$ ‐$



14

OTHER INCOME AND EXPENSES

The Company recorded interest expense of $558,302 related to the liability‐classification of the Class A

preferred shares issued through the private placement on September 5, 2018.

The Company recorded other income of $17,314 in relation to the fair value of the warrants issued by 180

Smoke. In addition, $45,000 of due diligence services was performed for Trichome’s parent company.

NET LOSS AND LOSS PER SHARE

Net loss for the year ended December 31, 2018 amounted to $2.2 million and was $nil in fiscal 2017. The

increase in net loss is due to the Company becoming an active business, however, at its current start‐up

stage, has yet to deploy enough capital to offset expenses through interest revenues.

Due to the increase in net loss, the Company’s basic loss per share has increased to $1.09 for the year

ended December 31, 2018 as compared a loss per share of $nil for the period ended December 31, 2017.



15

FINANCIAL POSITION

The following table sets forth consolidated statement of financial position data at December 31, 2018 and

December 31, 2017:

Cash increased due the Private Placement on September 5, 2018 which raised net proceeds of

approximately $14.5 million, when deducting transaction costs of approximately $0.5 million.

Working capital is negative due to the short‐term liability classification of the Class A preferred

shares issued in the private placement. The Company believes there is a low likelihood of

settlement of the Class A preferred shares in cash; however, the Company has recorded the shares

as a liability in accordance with International Accounting Standard 32 — Financial Instruments:

Presentation.

Total investments are comprised of the loan receivable from 180 Smoke, and the related warrants

issued to the Company.

Current liabilities are comprised primarily of the Class A preferred shares, as well as an amount

due to the Company’s parent company, and working capital payables owed in the normal course

of business.

December 31, 2018 December 31, 2017 Change

Selected statement of financial position data

Cash 13,810,095$ ‐ 13,810,095$

Working capital (1,183,747) 5,000 (1,188,747)

Total investments 464,848 ‐ 464,848

Total assets 14,274,943 5,000 14,269,943

Current liabilities 15,458,690 ‐ 15,458,690

Shareholders' (deficit) equity (1,183,747) 5,000 (1,188,747)

Dividends, per share ‐ ‐ ‐



16

LIQUIDITY

The Company’s objectives in managing its liquidity and capital structure are to generate sufficient cash to

fund the Company’s operating and investment requirements. The Company monitors its liquidity primarily

by focusing on total liquid assets and working capital, as well as forecasting expected spending and

investments.

The table below sets out relevant liquidity related financial information at December 31, 2018and

December 31, 2017:

The Company’s level of liquid assets is relevant to meet its current operating needs and it uses the quick

ratio to measure its short‐term liquidity.

As of December 31, 2018, the Company had liquid assets of $13.8 million compared to $5,000 at

December 31, 2017. The increase in liquid assets is primarily due to the Private Placement.

The Company has incurred cash losses to date, however, management anticipates that eventual cash

profitability will increase its liquid assets. However, at this relatively early stage of the Company’s

development, there cannot be absolute assurance that the Company will be able to generate sufficient

positive cash flows to reach sustained profitability.

Trichome monitors its level of working capital and working capital ratio to assess its ability to enter into

strategic lending opportunities.


Cash 13,810,095$ ‐$

Liquid assets (1) 13,810,095 5,000

Quick ratio (2) 0.89 ‐

Working capital (1,183,747) 5,000

Working capital ratio (3) 0.92 ‐

(1) Liquid assets include cash and subscription receivable

(2) Quick ratio is defined as liquid assets divided by current liabilities

(3) Working capital ratio is defined as current assets divided by current liabilities



17

The chart below highlights the Company’s cash flows during the year ended December 31, 2018 and

period ended December 31, 2017:

CASH USED IN OPERATING ACTIVITIES

Cash used in operating activities increased due to commencement of business activities, such as payroll,

legal, and administrative costs, as well as cash loaned to 180 Smoke.

CASH PROVIDED BY FINANCING ACTIVITIES

Cash provided by financing activities increased due the Private Placement on September 5, 2018 which

raised net proceeds of approximately $14.5 million. In addition, the Company raised $330,000 through a

founders’ round equity raise in March 2018.


Net cash provided (used) by

Operating activities (1,039,776)$ ‐

Financing activities 14,849,871 5,000

Cash, beginning ‐ ‐

Cash, end 13,810,095$ ‐



18

FINANCING AND CAPITAL RESOURCES

The Company is subject to risks including, but not limited to, its ability to raise additional funds through

debt and/or equity financing to support investment, continued operations, and to meet liabilities and

commitments. Specifically, as of December 31, 2018 the Company has a history of losses with an

accumulated deficit of $2.2 million.

CAPITAL ACTIVITIES

The Company manages its capital with the objective of maximizing shareholder value and sustaining

future development of the business. The Company defines capital as the Company’s equity and any debt

it may issue. The Company manages its capital structure based on the funds available to support its

activities. Upon approval from the Board, management will undertake to balance its overall capital

structure through new share issuances, by seeking to leverage its balance sheet with third‐party lenders,

and/or by raising capital through fee‐paying funds to be managed by Trichome.

The Company’s principal capital needs are for funds to use towards its investments and operational needs.

The Company’s objective in managing capital is to ensure sufficient liquidity to pursue its investment

growth strategy and undertake selective investments, while at the same time taking a conservative

approach toward financial leverage and management of financial risk. The Company’s primary uses of

capital are to invest in its pipeline of Canadian and market participants in fully legalized international

marketplaces; opportunities include licensed producers (“LPs”), late stage LP applicants, hardware and

ancillary product manufacturers, real estate owners, retail operators and networks, media platforms and

technology companies. The Company’s investments are most frequently structured as secured debt

instruments. The Company also uses capital to finance operating losses, capital expenditures and

increases in non‐cash working capital. The Company’s objectives when managing capital are to ensure the

Company will continue to have enough liquidity to continue to expand its portfolio and ultimately

generate above market returns.

The Company monitors its capital based on the adequacy of its cash resources to fund its business plan.

To maximize flexibility to finance the Company’s ongoing growth, Trichome does not currently pay a

dividend to holders of its common shares.



19

Outstanding and potentially dilutive share count information

The Company’s authorized share capital is an unlimited number of common shares of which 2,320,000

were issued and outstanding as at December 31, 2018 (December 31, 2017 – 1,000,000 common shares)

and 5,000,000 Class A preferred shares of which 3,171,301 were issued and outstanding as at December

31, 2018 (December 31, 2017 – $nil).

As at December 31, 2018, the Company has issued 545,100 Restricted Share Units (“RSUs”), 210,000

Performance Share Units (“PSUs”), and 5,000 Stock Options. During the period, 53,333 RSUs were

forfeited. The value of vested RSUs totalled $496,044 and the value of vested PSUs totalled $35,000, which

are shares yet to be issued, and have been recorded in share‐based reserve. Subsequent to year‐end, an

additional 40,000 RSUs were granted.

The Class A preferred shares issued in the Private Placement automatically convert to common shares

upon a liquidity event, which would include our proposed reverse takeover of 22 Capital Corp. See Recent

Developments above. As a result, upon a liquidity event, the Company’s issued and outstanding common

shares would increase by 3,171,301.



20

ACCOUNTING MATTERS

Internal Controls Over Financial Reporting

The Chief Executive Officer and Chief Financial Officer, in accordance with National Instrument 52‐109

(“NI 52‐109”), have both certified that they have reviewed the financial report and this MD&A (the

“Filings”) and that, based on their knowledge having exercised reasonable diligence, (a) the Filings do not

contain any untrue statement of a material fact or omit to state a material fact required to be stated or

that is necessary to make a statement not misleading in light of the circumstances under which it was

made with respect to the period covered by the filings; and (b) the financial report together with the other

financial information included in the Filings fairly present in all material respects the financial condition,

financial performance and cash flows of the issuer, as of the date of and for the periods presented in the

Filings. The Company was a venture issuer as of December 31, 2018. Investors should be aware that

inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a

cost‐effective basis Disclosure Controls and Procedures and Internal Controls Over Financial Reporting as

defined in NI 52‐ 109 may result in additional risks to the quality, reliability, transparency and timeliness

of interim and annual filings and other reports provided under securities legislation.

Off‐Balance Sheet Arrangements

The Company has no off‐balance sheet arrangements.

Adoption of New Accounting Standards

IFRS 9, Financial Instruments (“IFRS 9”)

IFRS 9 is required to be applied for reporting periods beginning on or after January 1, 2018, with

retrospective application. The new standard includes a model for the classification and measurement of

financial instruments and a single forward‐looking expected loss impairment model. The Company’s

financial performance and financial position is currently not materially affected by the retrospective

application of the standard.

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)

IFRS 15 is required to be applied for years beginning on or after January 1, 2018. The International

Accounting Standards Board and the Financial Accounting Standards Board of the United States worked

on this joint project to clarify the principles for the recognition of revenue. The new standard was released

in May 2014 and supersedes existing standards and interpretations including IAS 18, Revenue. The

Company has applied IFRS 15, subject to permitted and elected practical expedients. The effects of the

new standard and the materiality of those effects will vary by industry and entity.



21

Future Accounting Pronouncements

IFRS 16, Leases (“IFRS 16”)

This standard specifies the recognition, measurement, presentation and disclosure of leases. This

standard is effective for annual periods beginning on or after January 1, 2019. The Company currently has

a sublease agreement for office space in Toronto. Under IFRS 16, these leases would result in an additional

right of use asset and lease liability being recorded on the Company’s balance sheet. The Company is

currently evaluating the impact of adopting this standard; however, it expects the adoption of this

standard to increase assets and liabilities as it will be required to record a right‐of‐use asset and a

corresponding lease liability in its financial statements.



22

Related Party Transactions

The Company recorded the following related party transactions during the year ended December 31, 2018:

Prior to the Class A Preferred Share issuance, Trichome’s parent Company, Origin House, incurred $541,921 in administrative, rent, and other costs on its behalf.

Origin House provided $96,575 in executive and administrative services.

Included within Other Income, the Company performed $45,000 of due diligence services for Origin House.

Certain employees and directors of the Company and Origin House participated in common and preferred share issuances totalling $766,996.

The Company recorded key management compensation of $478,088 related to share‐based compensation and $131,226 related to salary and benefits.

As at December 31, 2018, the Company owes $152,910 to Origin House related to administrative, rent, executive services, and other expenses, partially offset by $45,000 owed to the Company from Origin House related to due diligence services. These transactions are in the normal course of operations and are measured at the exchange amounts agreed to by the parties.

Marc Lustig, a director of the Company, is a director at 22 Capital.

Financial instruments

In the normal course of business, the Company uses various financial instruments which by their nature

involve risk, including market risk, interest rate risk, liquidity risk and credit risk of non‐performance by

counter parties. These financial instruments are subject to normal credit standards, financial controls, risk

management as well as monitoring procedures.

The following table sets out the fair values of recognized financial instruments using the valuation

methods and assumptions described below. Unless otherwise noted, carrying values approximate fair

values for each financial instrument:


Cash FVTPL Level 1 13,810,095$ ‐$

Loan receivable FVTPL Level 3 447,534 ‐

Subscription receivable Amortized cost ‐ 5,000

Warrants FVTPL Level 3 17,314 ‐

Amounts payable and accrued liabilities Amortized cost 272,607 ‐

Due to related party Amortized cost 107,910 ‐

Class A preferred shares Amortized cost 15,078,173 ‐

Total 29,733,633$ 5,000$



23

Determination of fair value

The estimated fair values of cash, trade and amounts receivable, loans receivable, loans payable, and

trade and amounts payable approximate their carrying values due to the relatively short‐term nature of

the instruments.

Fair value measurements recognized in the consolidated statements of financial position must be

categorized in accordance with the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or

liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data

(unobservable inputs).

The Company’s financial instruments carried at fair value consist of cash (Level 1), and investments (Level

3). The Company has not transferred any financial instruments between Level 1, 2 or 3 of the fair value

hierarchy



24

REGULATORY OVERVIEW Canada

The Cannabis Act received royal assent on June 21, 2018 and came into force on October 17, 2018. The

Cannabis Act outlines the framework for the legalization of adult‐use cannabis in Canada. Pursuant to the

Cannabis Act, individuals over the age of 18 are permitted to purchase fresh cannabis, dried cannabis,

cannabis oil, and cannabis plants or seeds and to possess 30 grams of dried cannabis, or the equivalent

amount in fresh cannabis or cannabis oil. The Cannabis Act also permits households to grow a maximum

of four plants. This limit applies regardless of the number of adults that reside in the household. In

addition, the Cannabis Act provides provincial and municipal governments the authority to prescribe

regulations regarding retail and distribution, as well as the ability to alter some of the existing baseline

requirements, such as increasing the minimum age for purchase and consumption of cannabis.

In connection with the Cannabis Act, the Federal Government introduced new penalties under the

Criminal Code (Canada), including penalties for the illegal sale of cannabis, possession of cannabis over

the prescribed limit, production of cannabis beyond personal cultivation limits, taking cannabis across the

Canadian border, giving or selling cannabis to a youth and involving a youth to commit a cannabis‐related

offence. Provincial and territorial governments in Canada have made varying announcements on the

regulatory regimes for the distribution and sale of cannabis for adult‐use purposes. For example, Québec,

Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and the Northwest Territories have chosen

a government‐owned and ‐operated model for distribution, whereas Saskatchewan and Newfoundland &

Labrador have opted for a private sector approach. Ontario, Alberta and British Columbia have announced

plans to pursue a hybrid approach of public distribution and private or public/private sale.

The federal regulatory regime under the Cannabis Act provides for the issuance of cultivation licenses for

standard cultivation, micro‐cultivation, industrial hemp cultivation and nursery cultivation, licenses for

standard processing and micro‐processing, and sales licenses for medical or non‐medical use. In addition,

the regime includes personnel and physical security obligations. Further, all cannabis products must be

packaged in a tamper‐evident and child‐resistant manner and product labels must contain specified

product information, such as the name of the processor who packaged the products, product lot number,

and THC/CBD content.



25

In addition, federal regulations include packaging and labeling restrictions for cannabis products, aimed

to minimize the appeal to children and youth, protect against accidental consumption and ensure

consumers are informed of the potential risks and harms of cannabis. Specifically, labeling and branding

restrictions require plain packaging, including a standardized cannabis symbol on every label; mandatory

health warning messages (including specifics regarding size, placement and appearance); a limit of only

one brand element, aside from the brand name; no other image or graphic; backgrounds need to be a

single, uniform colour; use of fluorescent or metallic colours is prohibited; labels and packaging cannot

have any coating or embossing; and no inserts can be included.

The Company, as a lender to the legal cannabis industry in Canada, has assessed the cannabis regulatory

regime from the perspective of secured debt financing and has noted a gap in the regulatory scheme as it

applies to the ability of lenders to secure collateral, including regulated assets and regulatory licenses

themselves. In the event of a default, it is currently unclear how or if a lender would be able to realize on

its security because it is unclear whether security can be taken in the relevant cannabis licenses

themselves, whether cannabis licenses may be transferred in such circumstances, and whether a lender

could take possession of regulated collateral. Canadian cannabis regulations are silent on these topics,

and accordingly there can be no assurance that a lender in the cannabis industry will be in a position to

enforce security in regulated assets or regulatory licenses. The Company continues to monitor market

practice and legal developments in this area.

Provincial Regulatory Framework for Recreational Cannabis

While the Cannabis Act provides for the regulation of the commercial production of cannabis and related

matters by the federal government, the Cannabis Act provides the provinces and territories of Canada

with authority to adopt their own laws governing the distribution, sale and consumption of cannabis and

cannabis accessory products within the province or territory, permitting for example, provincial and

territorial governments to set lower possession limit for individuals and higher age requirements.

Currently each of the Canadian provincial and territorial jurisdictions has established a minimum age of

19 years old, except for Québec and Alberta, where the minimum age is 18.

All Canadian provinces and territories have implemented or announced proposed regulatory regimes for

the distribution and sale of cannabis for recreational purposes within those jurisdictions.

Provincial/territorial bodies act as intermediaries between entities licensed federally under the Cannabis

Act and consumers, such bodies acting in some jurisdictions as exclusive cannabis wholesalers and

distributors, and in some instances such bodies acting as exclusive retailers. The laws continue to evolve,

and differences in provincial and territorial regulatory frameworks could result in, among other things,

increased compliance costs, and increased supply costs.



26

Municipal and regional governments may also choose to impose additional requirements and regulations

on the sale of recreational cannabis, adding further uncertainty and risk to the company’s business.

Municipal by‐laws may restrict the number of recreational cannabis retail outlets that are permitted in a

certain geographical area, or restrict the geographical locations wherein such retail outlets may be

opened.

Ontario: Under the Cannabis Act, 2017 (Ontario), the Ontario Cannabis Retail Corporation, which is a

subsidiary of the Liquor Control Board of Ontario (“LCBO”), is the sole distributor of recreational cannabis

and may set a minimum price for cannabis or classes of cannabis. The Ontario Cannabis Store (“OCS”)

currently sells recreational cannabis to the public through its on‐line platform.

Recreational cannabis will also be sold through a tightly regulated Private Retail Model, with a target date

April 1, 2019. Private retailers are required to obtain both a retail operator license and a retail store

authorization. Retail store authorizations are only to be issued to persons holding a retail operator license.

Separate retail store authorizations are to be required for each cannabis retail store, but a licensed retail

operator may hold more than one retail store authorization and operate multiple stores. Private retailers

are not permitted to sell cannabis on‐line, but may only sell cannabis in person at an authorized retail

store. The Alcohol, Gaming and Cannabis Corporation of Ontario regulates retail store authorizations for

privately run recreational cannabis stores. On December 13, 2018, the Government of Ontario announced

that a temporary cap of 25 retail store authorizations was being imposed while cannabis supply stabilizes.

Anyone who supervises employees, oversees cannabis sales, manages compliance or has signing authority

to purchase cannabis, enters into contracts or hires employees is required to have a cannabis retail

manager license. Retail cannabis stores will not be permitted in municipalities which pass resolutions by

January 22, 2019 to prohibit the sale of recreational cannabis. The OCS currently is in the process of

entering into supply agreements with multiple licenced producers and is establishing a wholesale

distribution network to supply legal private.

Federally licenced cannabis producers (and their affiliates) can only operate one retail store and it must

be located on the premises authorized under their federal licence. A broad definition of affiliate is included

in the regulations. An affiliate relationship exists if a corporation beneficially owns or controls voting

shares, or securities that may be converted to voting shares, constituting more than 9.9% of voting rights.

If a person, or group acting together, holds 50% voting control for the election of directors or market share

of the corporation, they are considered affiliates. Additionally, an affiliate relationship may be established

through involvement in a trust, partnership or joint venture, among others. The definition of affiliate may

have the effect of restricting the ability of federally licensed producers from effectively entering into the

consumer retail market in Ontario.

Federally licensed producers are prohibited from providing any material inducement to cannabis retailers

for the purpose of increasing the sale of a particular type of cannabis



27

British Columbia: The Government of British Columbia’s Cannabis Control and Licensing Act and Cannabis

Distribution Act create a hybrid distribution and sales model. The provincial Liquor Distribution Branch is

the sole wholesale distributor of recreational cannabis to privately‐operated stores and it operates its

own BC Cannabis Stores.

Alberta: The Government of Alberta has implemented a cannabis framework providing for the purchase

of cannabis products from private retailers that receive their products from the Alberta Gaming and Liquor

Commission (“AGCL”), a government‐regulated distributor, similar to the distribution system currently in

place for alcohol in the province. Licenced Producers may sell directly to the AGCL, but may not sell directly

to private retailers or to the public. The AGLC also sells recreational cannabis through its own on‐line

platform.

Saskatchewan: The Saskatchewan Liquor and Gaming Authority issues permits for both wholesalers and

cannabis retailers. Permitted wholesalers can sell to permitted retailers and other permitted wholesalers,

but not to the public. Registered Licenced Producers may sell to permitted wholesalers but not to the

public. The Government of Saskatchewan initially announced that it intended to issue approximately 60

retail permits to private stores located in roughly 40 municipalities and First Nation communities across

the province, with municipalities having the option of opting out of having a cannabis store if they choose.

Manitoba: The Government of Manitoba put in place a ‘‘hybrid model’’ for cannabis distribution. Under

the Liquor, Gaming and Cannabis Control Act, the Manitoba Liquor and Lotteries Corporation acts the sole

supplier of recreational cannabis to licenced private retail stores, which may sell to the public both on‐

line and in authorized store locations. Manitoba held an RFP process for private retailers, which was open

until December 22, 2017, at the end of which four proponents were selected. A subsequent process was

opened in July 2018 to select additional pre‐qualified retailers, eligible to apply for retail licences.

Québec: Recreational cannabis in Québec is sold on‐line and in retail stores operated by the Société

québécoise du cannabis, which is a subsidiary of, and under control and supervision of the Société des

alcools du Québec. There are no private retailers.

New Brunswick: Cannabis NB, which is a subsidiary of the New Brunswick Liquor Corporation, is the sole

retailer of recreational cannabis, operating an on‐line platform and retail stores. The Cannabis

Management Corporation controls and oversee the sale of recreational cannabis in New Brunswick.

Nova Scotia: Under the Cannabis Control Act, the Nova Scotia Liquor Corporation is responsible for the

regulation of the retail sale of recreational cannabis in the province, and recreational cannabis is only sold

publicly through government‐operated storefronts and online sales.



28

Prince Edward Island: Similar to Nova Scotia and New Brunswick, under the Cannabis Management

Corporation Act, the sale of recreational cannabis will controlled and supervised by the Cannabis

Management Corporation, which operates retail stores and online sales.

Newfoundland and Labrador: Under the Cannabis Control Act, recreational cannabis is sold through

licenced private stores, with its crown‐owned liquor corporation, the Newfoundland and Labrador Liquor

Corp. (the “NLC”), regulating distribution to private sellers who may sell to consumers. The NLC controls

the possession, sale and delivery of cannabis, and sets prices. It is also be the online retailer, although

licences may later be issued to private interests. The Government of Newfoundland and Labrador has

issued a request for proposals for private retailers.

Yukon: Under the Cannabis Control and Regulation Act, the distribution and sale of recreational cannabis

is limited to government outlets and government‐run online stores, and allows for the later licensing of

private retailers.

Northwest Territories: The N.W.T. Liquor Commission is the sole supplier and distributor of cannabis,

whether through retail outlets or by mail order service run by the liquor commission. Communities in the

Northwest Territories are able to hold a plebiscite to prohibit cannabis, similar to the options currently

available to restrict alcohol.

Nunavut: The Nunavut Liquor and Cannabis Commission sells cannabis to the public on‐line and by

telephone sales, as well as acts as the sole‐source wholesaler for private retailers. Nunavut also permits

private retailers be licenced to operate a cannabis store, remote sales store, or cannabis lounge.

There is no guarantee that the provincial and territorial frameworks supporting the legalization of

cannabis for recreational use in Canada will remain unchanged on the terms outlined above.

Activities Outside Canada

The Company does not currently conduct business outside of Canada and only seeks to conduct business

in jurisdictions outside of Canada where such operations are legally permissible in accordance with all of

the laws of the foreign jurisdiction, the laws of Canada, and, upon completion of the Qualifying

Transaction, the rules and policies of the TSXV. The legal and regulatory requirements with respect to the

cultivation and sale of cannabis in the foreign countries in which the Company may invest, as well as local

business culture and practices, are different from those in Canada. Prior to commencing investment in a

new country, the Company, in partnership with its local legal counsel, consultants and partners, will

conduct legal and commercial due diligence in order to ensure that it and its officers and directors gain a

sufficient understanding of the legal, political and commercial framework and specific risks associated

with operating in such jurisdiction. Where possible, the Company will seek to work with respected and



29

experienced local partners who can help the Company understand and navigate the local business and

operating environment, language and cultural differences. In consultation with its advisors, the Company

takes steps it deems appropriate in light of the level of investment it expects to have in each country to

ensure the management of risks and the implementation of necessary internal controls.

On October 16, 2017, the TSXV provided clarity in respect of Policy 2.1 – Initial Listing Requirements,

Form 2D Listing Agreement and Policy 2.9 – Trading Halts, Suspensions and Delisting of the TSXV Manual

(collectively, the “Requirements”) to applicants and TSXV‐listed issuers with business activities in the

cannabis sector. In the TSXV Bulletin, the TSXV notes that issuers with ongoing business activities that

violate U.S. federal law regarding cannabis are not in compliance with the Requirements. These

business activities may include: i) direct or indirect ownership of, or investment in, entities engaging in

activities related to the cultivation, distribution or possession of cannabis in the U.S., ii) commercial

interests or arrangements with such entities, iii) providing services or products specifically targeted to

such entities, or iv) commercial interests or arrangements with entities engaging in providing services or

products to U.S. cannabis companies. The TSXV reminded issuers that, among other things, should the

TSXV find that a listed issuer is engaging in activities contrary to the Requirements, the TSXV has the

discretion to initiate a delisting review.

The Company does not engage in any “U.S. marijuana‐related activities” as defined in Canadian Securities

Administrators Staff Notice 51‐352 (Revised) – Issuers with U.S. Marijuana‐Related Activities. Note that

180 Smoke, an investee of Trichome, operates a non‐cannabis retail location in New York state which

focuses on the sale of vape and vape‐related products.

In the United States, the 2018 Farm Bill, federally legalized the cultivation of hemp for the production of

CBD and other cannabinoids, except for THC. As a result, once the Farm Bill is fully implemented the

Company may consider investing in fully legal hemp operations or other fully legal operations in the

United States.



30

RISKS AND UNCERTAINTIES

We are subject to various risks that could have a material impact on us, our financial performance,

condition and outlook. These risks could cause actual results to differ materially from those expressed or

implied in the forward‐looking statements included in this MD&A, our financial statements and our other

reports and documents. These risks include, but are not limited to, the following risks, which are discussed

in greater detail under the heading “Risk Factors” in the Company’s management information circular

filed with securities regulators and available on www.sedar.com, which risk factors are incorporated by

reference into this document and should be reviewed in detail by all readers:

there can be no certainty that the Qualifying Transaction will be completed;

possible termination of the Amalgamation Agreement;

following the completion of the Qualifying Transaction, we may issue additional equity securities;

being a public company may increase price volatility;

the pending Qualifying Transaction may divert the attention of our management;

while the Qualifying Transaction is pending, we are restricted from taking certain actions;

the requirements of being a public issuer may strain our resources;

no or limited control over cannabis operations of our investees;

compliance with laws by us and our investees;

changes in laws, regulations and guidelines;

business strategy;

risks inherent in strategic alliances;

risks associated with divestment;

competition;

dependence upon key management personnel;

the risk that our investees may engage in U.S. operations contrary to our agreements with them;

the risks inherent in foreign investments;

our limited operating history;

our need for liquidity and additional financing;

difficulty of forecasting market trends;

the price of cannabis from time to time;

reputational risks;

equity price risk associated with our loan bonuses;

risks relating to anti‐money laundering legislation;

the risk that we may not be able to realize the security we take in our loans;

unknown defects and impairments;

challenging global financial conditions;



31

credit and liquidity risk

litigation;

cybersecurity risks;

social media and other online risks;

our dividend policy;

our PFIC classification;

insurance coverage;

fraudulent activity risk;

force majeure risk;

various conflicts of interest risks;

reliance on licences;

reliance on investee facilities;

governmental regulations;

operating risks;

competitive conditions;

customer acquisitions;

constraints on marketing products;

risks inherent in an agricultural business;

wholesale price volatility;

product recalls;

product liability;

risks related to environmental and employee health and safety regulations;

reliance on key inputs;

dependence on suppliers and skilled labour;

risks relating to intellectual property;

vulnerability to rising energy costs;

transportation risks; and

financial reporting risks.

ADDITIONAL INFORMATION

Our Canadian filings, including our management information circular, are available on the System for

Electronic Document Analysis and Retrieval at www.sedar.com.

78

SCHEDULE C

PRO FORMA FINANCIAL STATEMENTS OF TRICHOME FINANCIAL FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

22 Capital Corp.

Pro Forma Consolidated Statement of Financial Position

(in Canadian dollars)

As at June 30, 2019

(Unaudited)

22 Capital Corp.Trichome Financial

Corp.

Pro Forma

AdjustmentsNotes

Pro Forma

Consolidated

ASSETSCurrentCash 364,232$ 7,794,314$ 15,110,025$ 4(d) 23,268,571$

1,324,226 4(f) 1,324,226

779,588 4(f) 779,588

(3,000,000) 4(f) (3,000,000)

(2,350,000) 4(f) (2,350,000)

Restricted cash ‐ 8,248,598 (8,248,598) 4(d) ‐ Amounts receivable ‐ 80,515 ‐ 80,515 Prepaid expenses ‐ 454,593 ‐ 454,593 Loans receivable ‐ current ‐ 50,000 ‐ 50,000 Other current assets ‐ 7,345 ‐ 7,345 Prepaid Expenses 500 ‐ ‐ 500 Total Current Assets 364,732$ 16,635,365$ 3,615,241$ 20,615,338$

Non‐current Derivative assets ‐ 205,483 205,483 Loans receivable ‐ long‐term ‐ 5,703,186 5,703,186 Blissco loan ‐ ‐ (1,324,226) 4(f) (1,324,226)CGS loan ‐ ‐ (779,588) 4(f) (779,588)MYM loan and warrants ‐ ‐ 3,000,000 4(f) 3,000,000 Good Buds loan and warrants ‐ ‐ 2,350,000 4(f) 2,350,000

Total Assets 364,732$ 22,544,034$ 6,861,427$ 29,770,193$

LIABILITIESCurrent

Amounts payable and accrued liabilities 27,344$ 716,854$ 115,000$ 4(b) 859,198$

Due to related parties ‐ 81,669 ‐ 81,669 Class A preferred shares ‐ 15,982,355 (15,982,355) 4(e) ‐ Deposits ‐ 95,000 ‐ 95,000 Deposits for shares ‐ 8,469,051 (8,469,051) 4(d) ‐

‐ Total Liabilities 27,344$ 25,344,929$ (24,336,406)$ 1,035,867$

SHAREHOLDERS' DEFICITShare capital 756,539$ 335,000$ 15,982,355$ 4(e)

1,577,564 4(a)(756,539) 4(c)

15,330,478 4(d) 33,225,397 Contributed surplus ‐ 480,676 ‐ 4(c) 480,676 Share‐based reserve 85,149 625,088 (85,149) 4(c)

55,601 4(a) 680,689

Accumulated deficit (504,300) (4,241,659) (1,295,777) 4(a)

504,300 4(c)

(115,000) 4(b) (5,652,436)

Shareholders' Deficit 337,388$ (2,800,895)$ 31,197,833$ 28,734,326$

Total Liabilities & Shareholders' Deficit 364,732$ 22,544,034$ 6,861,427$ 29,770,193$


22 Capital Corp. Pro Forma Consolidated Statement of Financial Position (Unaudited)

As at June 30, 2019


2

1. Basis of Presentation

22 Capital Corp. (the "Company" or “22 Capital”) was incorporated pursuant to the provisions of the Business Corporations Act of Ontario on January 4, 2017. The Company carries on business as a “Capital Pool Corporation” (“CPC”), as such term is defined in TSX Venture Exchange Inc. (the "TSX V" or “Exchange”) Policy 2.4 Capital Pool Companies ("Policy 2.4"). The principal business of the Corporation is the identification and evaluation of assets or a business and once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval and acceptance by regulatory authorities to qualify as the Corporation's Qualifying Transaction ("QT") (as defined in the policies of the TSX‐V).

The unaudited pro forma consolidated statement of financial position has been prepared by management for inclusion in the joint management information circular relating to the Company’s proposed QT with Trichome Financial Corp. (“Trichome”) as described in note 3 below. The unaudited pro forma consolidated statement of financial position is prepared in accordance with International Financial Reporting Standards (“IFRS”). The unaudited pro forma consolidated statement of financial position has been prepared from information derived from and should be read in conjunction with the following:

(a) The unaudited financial statements of Trichome as at and for the period ended June 30, 2019;

(b) The unaudited financial statements of 22 Capital as at and for the period ended June 30, 2019;

The unaudited pro forma consolidated statement of financial position of the Company as at June 30, 2019 has been presented assuming the QT had been completed on June 30, 2019. Trichome will fully consolidate the financial results and financial position of 22 Capital upon completion of the QT in accordance with IFRS 10 Consolidated Financial Statements.

An unaudited pro forma consolidated statement of loss for the period ending June 30, 2019 has not been presented on the basis that, as a CPC, 22 Capital has no operations other than pursuing a qualifying transaction and Trichome has not made a significant acquisition or disposition and does not propose to make a significant acquisition or disposition.

The unaudited pro forma consolidated statement of financial position has been prepared for the listing statement only and may not be indicative of the financial position that would have occurred if the Transaction had been in effect at the date indicated as set out in Note 3. The pro forma adjustments and allocations of the purchase price are based in part on an estimate of the fair value of assets acquired and liabilities to be assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized as of the date of completion of the acquisition. The actual fair values of the assets and liabilities will be determined as of the date of acquisition and may differ materially from the amounts disclosed in the assumed pro forma price allocation because of changes in fair value of the assets and liabilities up to the date of the transaction.

2. Significant Accounting Policies The unaudited pro forma consolidated statement of financial position has been compiled using the

significant accounting policies as set out in the audited consolidated financial statements of Trichome and

the audited financial statements of the Company as described in the notes to their respective financial

statements for the year ended December 31, 2018.

3

3. Qualifying transaction

On October 2, 2018, Trichome Financial entered into the Letter of Intent with 22 Capital to combine their respective businesses (the “Transaction”). In accordance with the Letter of Intent, the Transaction would take the form of an amalgamation between the 22 Capital and Trichome to continue as one corporation (the “Resulting Issuer”). On November 13, 2018, Trichome entered into an amalgamation agreement (“Amalgamation Agreement”) with 22 Capital which superseded the Letter of Intent. The Amalgamation Agreement was amended January 30, 2019, April 5, 2019, May 27, 2019, and August 12, 2019 to extend the outside date for completion of the Amalgamation. The April 5, 2019 amendment provided for a common share split (the “Common Share Split”) and preferred share split (“Preferred Share Split”) of Trichome shares on a three‐to‐one basis and to further extend the outside date for completion of the Amalgamation. The amalgamation occurred on October 4, 2019 In connection with the Transaction, Trichome completed a private placement of 7,849,707 Subscription Receipts for gross proceeds of approximately $16.5 million (the “Private Placement”). Completion of the Private Placement was a condition to completion of the Transaction. The Resulting Issuer intends to use the net proceeds of the Private Placement to fund various testing and certification procedures in relation to the Resulting Issuer's proposed business, to fund potential acquisitions and for general corporate purposes. In connection with the Transaction, each 22 Capital shareholder received one (1) common share in the Resulting Issuer ("Resulting Issuer Share") at a deemed price of $2.10 per Resulting Issuer Share for every 14.24347 common shares of 22 Capital ("22 Capital Corp Shares") held by such 22 Capital shareholder for deemed aggregate consideration of approximately $1.6 million. The 22 Capital Corp Shares so exchanged were cancelled without reimbursement of the capital represented by such securities. In addition, after the Common Share Split, each Trichome shareholder received one (1) Resulting Issuer Share for every one (1) common share of Trichome ("Trichome Shares") held by such Trichome shareholder, and the Trichome Shares so exchanged were cancelled without reimbursement of the capital represented by such securities. The class A preferred shares automatically converted to common shares upon the Transaction, and after the Preferred Share Split, received one (1) Resulting Issuer Share for every one (1) converted class A preferred share. In connection with the amalgamation, each 22 Capital Corp option holder received one (1) Resulting Issuer option for every 14.24347 options held by such 22 Capital Corp option holder. The options vest within 6 months of completion of the Transaction, and maintain the same terms as disclosed in the 22 Capital unaudited financial statements as at June 30, 2019 after factoring the conversion ratio of 14.24347. Each Trichome equity award holder, comprised of stock options, Restricted Share Units (“RSUs”), and Performance Share Units (“PSUs”) (together the “Trichome Equity Awards”), received one (1) Resulting Issuer option for every one (1) option of Trichome held by such Trichome option holder. The Trichome Equity Awards maintain the same terms as disclosed in the unaudited financial statements as at June 30, 2019, after factoring the Common Share Split.

4

The Trichome common shares, Class A preferred shares, RSUs, PSUs and options are adjusted, directly or indirectly, by the Common Share Split and the Preferred Share Split. As a result of the Transaction, the former shareholders of Trichome acquired control of 22 Capital. The Transaction will be accounted for as a reverse take‐over (“RTO”) for accounting purposes with Trichome being the acquirer and the net assets of 22 Capital recorded at fair value at the date of the Transaction. The Transaction will be accounted for in accordance with IFRS 2, Share‐based Payments (“IFRS 2”). Accordingly, the Transaction will be recorded at the fair value of the equity instruments granted by the shareholders of Trichome to the shareholders and stock‐based compensation holders of 22 Capital. The difference between the net assets acquired and the fair value of the consideration granted will be treated as a listing expense. The Transaction has been accounted for in the unaudited pro forma consolidated statement of financial position as a continuation of the financial statements of Trichome. The unaudited pro forma consolidated statement of financial position includes all adjustments necessary for the fair presentation of the Transaction described herein. Completion of the Transaction is subject to a number of conditions, and there can be no assurance that the Transaction will be completed as proposed or at all.

4. Pro Forma Adjustments

The pro forma consolidated statement of financial position includes the following pro forma adjustments:

a) Share issuance

Although the Transaction results in Trichome becoming a wholly‐owned subsidiary of 22 Capital, the Transaction constitutes a reverse takeover of 22 Capital and will be accounted for as a reverse takeover transaction in accordance with guidance provided in IFRS 2. Trichome has been identified as the acquirer of 22 Capital for accounting purposes and equity consideration is measured at the estimated fair value of the Trichome shares.

Upon completion of the QT, 751,221 Resulting Issuer shares were issued to shareholders of 22 Capital, the fair value of all identifiable assets and liabilities acquired was determined. The difference between the purchase price consideration and the fair value of net assets acquired will be recorded as listing expense.

Purchase price allocation is as follows:

Fair value of common shares (751,221 shares at $2.10 per share) 1,577,564$

Fair value of stock options (70,208 options exercisable at $1.42 per share) 55,601

1,633,165$

Less, net assets of the Corporation

Cash 364,232$

Prepaid expense 500

Accounts payable and accrued liabilities (27,344)

337,388$

Listing expense 1,295,777$

5

The following inputs were used to determine the fair value of options:

b) Transaction costs

Additional closing costs associated with the QT are estimated to be $115,000.

c) Share capital

Under reverse acquisition accounting, share capital, contributed surplus and deficit accounts of 22 Capital are eliminated.

d) Private placement

On October 4, 2019, Trichome completed a non‐brokered private placement of subscription receipts to raise gross proceeds of approximately $16.5 million. Under the Private Placement, Trichome issued 7,849,707 common share subscription receipts at a price of $2.10 per subscription receipt. In connection with the private placement, Trichome has agreed to pay a work fee of 2% of the gross proceeds of the offering to Primary Capital Inc. and a 5% finders’ fee to eligible brokers.

Options

Risk‐free interest rate 1.66%

Expected volatility 70%

Expected dividend yield 0%

Expected forfeiture rate 0%

Share price 2.10$

Exercise price 1.42$

Expected term (years) 0.5

6

e) Class A preferred shares

Upon completion of the QT, Trichome’s class A preferred shares automatically convert to common shares of the Resulting Issuer on a one (1) to one (1) basis.

f) Subsequent events related to lending

Blissco Holdings Ltd (“Blissco”) loan (ticker BLIS.CN) On May 16, 2019 Blissco announced that it had signed a definitive agreement to sell all of its outstanding shares to Supreme Cannabis Inc. On July 15, 2019, the outstanding balance on the Blissco Mortgage was repaid. No further amounts are outstanding from Blissco. MYM Nutraceuticals (“MYM”) loan On July 31, 2019, Trichome closed a $5.5 million senior secured term loan (“MYM Loan”) to MYM Nutraceuticals to finance cannabis and hemp projects across Canada, the United States and Colombia and to provide working capital for general corporate purposes. The MYM Loan was advanced through an initial tranche of $3.0 million on closing, less transaction costs. The balance of the MYM loan will be advanced as a second tranche of $2.5 million upon the satisfaction of certain conditions by MYM.

7

The MYM Loan has a term of 12 months and may be extended for an additional 6 months at Trichome’s discretion. The MYM Loan bears interest at a rate of 12% per annum, payable monthly in cash from a pre‐established interest reserve account. MYM will also pay a standby fee of 6% per annum, payable monthly in cash on the second tranche until it is drawn or cancelled.

In consideration for advancing the initial tranche of the MYM Loan, Trichome Financial received a set‐up fee, an original issuer discount and 4,000,000 warrants to purchase non‐assessable common shares of MYM, exercisable any time prior to June 10, 2022, at a strike price of $0.30 per share. Trichome shall receive an additional 1,000,000 warrants, on the same terms as those already issued, upon closing of the second tranche.

The MYM Loan is secured by a perfected first lien on all current and future tangible and intangible

assets and equity interests of MYM, and an assignment of all material contracts and licenses. The

MYM Loan has been guaranteed by each of the direct and indirect wholly owned subsidiaries

organized under MYM and by certain companies where the Borrower is a majority shareholder.

CGS – Facility A Loan repayment On July 4, 2019, CGS Foods Inc. elected to repay principle of $500,000 against the outstanding balance of Facility A. On September 10, 2019, an additional $250,000 of principle was repaid, settling the balance owed on Facility A. On September 17, 2019, Facility B was settled. Good Buds Company International Inc. (“Good Buds”) Term Loan On August 20, 2019, Trichome Financial entered into an agreement to provide a $2,350,000 senior secured term loan (the “Good Buds Loan”) to Good Buds Company International Inc. (“Good Buds”) to finance the expansion of the company’s existent indoor facility and the development of its recently licensed outdoor cultivation operation. The Good Buds Loan bears interest at the rate of 11.5% per annum, payable monthly in cash, with the first 12 months of interest being funded out of a pre‐established interest reserve account. The Good Buds Loan will mature on September 1, 2020. Good Buds has the right to prepay all, but not less than all of the Good Buds Loan prior to the maturity date, subject to a prepayment premium equal to the lesser of (a) 6 months’ interest on the outstanding balance and (b) the aggregate amount of interest owing on the loan for the balance of its remaining term as of the date of the prepayment. In consideration for providing the Good Buds Loan, Trichome Financial received a set‐up fee, original issuer discount, and 950,000 non‐assignable warrants, exercisable any time prior to August 20, 2022, at a price per share of Good Buds, equal to the lesser of (1) $0.60 and (2) the lowest price below $0.60 at which Good Buds issues common shares or securities convertible into common shares. The Good Buds Loan has been secured in a first‐priority position against all assets of Good Buds (excluding cannabis and its derivatives) and has been guaranteed by each direct and indirect wholly owned subsidiary organized under Good Buds.

8

5. Pro Forma Share Capital

The pro forma share capital of the Corporation will be as follows:

6. Income taxes

The pro forma effective income tax rate applicable to the operations for the foreseeable future is 26.5%.

Pro Forma Capitalization

Number of

shares Stated value

22 Capital Common Shares 10,700,000 756,539$

Trichome Financial Common Shares 6,960,000 335,000

Trichome Financial Preferred Shares* 9,513,903 15,982,355

Shares issued through private placement 7,849,707 15,330,478

24,323,610 31,647,833

Adjustment for QT (24,323,610) (756,539)

Shares issued to Trichome in connection with QT 24,323,610 ‐

22 Capital Shares cancelled on QT (10,700,000) ‐

Common shares issued to 22 Capital shareholders 751,221 1,577,564

(9,948,779) 821,025

25,074,831 33,225,397$

*convert to common shares upon RTO

As at June 30, 2019

79

SCHEDULE D

UNAUDITED FINANCIAL STATEMENTS OF TRICHOME FINANCIAL FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018


Condensed Interim Financial Statements For the three and six months ended June 30, 2019 and June 30, 2018

(Unaudited)


Condensed Interim Financial Statements (Unaudited) For the three and six months ended June 30, 2019 and June 30, 2018

TABLE OF CONTENTS Condensed Interim Statements of Financial Position ................................................................................... 1

Condensed Interim Statements of Net Loss and Comprehensive Loss ........................................................ 2

Condensed Interim Statements of Cash Flows ............................................................................................. 3

Condensed Interim Statements of Shareholders’ Deficit ............................................................................. 4

Notes to Condensed Interim Financial Statements ................................................................................. 5‐21

1

Notes June 30, 2019 December 31, 2018

ASSETS

Current

Cash and cash equivalents 7,794,314$ 13,810,095$

Restricted cash 6 8,248,598 ‐

Amounts receivable 80,515 ‐

Prepaid expenses 454,593 ‐

Loans receivable ‐ current 3 50,000 447,534

Derivative assets 3 ‐ 17,314

Other current assets 7,345 ‐

Total current assets 16,635,365 14,274,943

Non‐current

Derivative assets 3 205,483 ‐

Loans receivable ‐ long‐term 3 5,703,186 ‐

Total non‐current assets 5,908,669 ‐

Total Assets 22,544,034 14,274,943

LIABILITIES

Current

Amounts payable and accrued liabilities 5 716,854 272,607

Due to related parties 4 81,669 107,910

Class A preferred shares 7 15,982,355 15,078,173

Deposits 3.f 95,000 ‐

Deposits for shares 6 8,469,051 ‐

Total liabilities 25,344,929 15,458,690

SHAREHOLDERS' DEFICIT

Share capital 7 335,000 335,000

Contributed surplus 7 480,676 162,549

Share‐based reserve 7 625,088 531,044

Accumulated deficit (4,241,659) (2,212,340)

Shareholders' Deficit (2,800,895) (1,183,747)

Total Liabilities & Shareholders' Deficit 22,544,034$ 14,274,943$

Commitments and contingencies (Note 8)

Subsequent events (Note 12)

The accompanying notes are an integral part of these condensed interim financial statements

Approved on behalf of the Board:

/s/"Michael Ruscetta" /s/"Marissa Lauder"

Director Director

TRICHOME FINANCIAL CORP.Condensed Interim Statements of Financial Position

(Unaudited ‐ Expressed in Canadian Dollars)

2

Notes June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018

Interest revenue 223,802$ 3,493$ 281,064$ 3,493$

223,802 3,493 281,064 3,493

Operating expenses

General and administrative 4,9 667,629 164,335 1,114,888 167,768

Share‐based compensation 7 169,442 47,235 412,171 47,235

837,071 211,570 1,527,059 215,003

Other expenses (income)

Accretion expense 7 461,134 ‐ 904,182 ‐

Change in fair value of investments 3 35,465 ‐ 15,807 ‐

Gain on settlement of loan 3 ‐ ‐ (136,562) ‐

Foreign exchange gain (103) ‐ (103) ‐

496,496 ‐ 783,324 ‐

Net loss and comprehensive loss (1,109,765)$ (208,077)$ (2,029,319)$ (211,510)$

Earnings per share, basic and diluted

(0.48)$ (0.09)$ (0.87)$ (0.12)$

2,320,000 2,320,000 2,320,000 1,806,667


TRICHOME FINANCIAL CORP.Condensed Interim Statements of Net Loss and Comprehensive Loss


Weighted average number of

outstanding common shares

Net loss per share:

Six months endedThree months ended

3

Notes June 30, 2019 June 30, 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss for the period (2,029,319)$ (211,510)$

Items not affecting cash:

7 904,182 ‐

Non‐cash interest income 3 (89,339) ‐

3 15,807 ‐

Gain on settlement of loan 3 (136,562) ‐

7 412,171 47,235

Expected credit loss on loaned funds 3 9,758 ‐

(913,302) (164,275)

Changes in non‐cash items relating to operations:

Increase in amounts receivable (80,515) (3,493)

(461,938) (101,485)

444,247 31,687

Increase in deposits 95,000 ‐

(3,206) (73,291)

Changes in cash items relating to operations:

Advances of loaned funds 3 (5,679,508) (284,890)

Proceeds on settlement of loan 3 589,999 ‐

Increase in derivative assets 3 (203,976) ‐

(5,293,485) (284,890)

Cash outflows from operating activities (6,209,993) (522,456)

CASH FLOWS FROM FINANCING ACTIVITIES

(Repayment)/Proceeds of related party balances 4 (26,241) 272,317

6 8,469,051 243,669

Transfer to restricted cash (8,248,598) ‐

Proceeds on share issuance ‐ 335,000

Cash inflows from financing activities 194,212 850,986

DECREASE IN CASH (6,015,781) 328,530

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,810,095 ‐

CASH AND CASH EQUIVALENTS, END OF PERIOD 7,794,314$ 328,530$


Proceeds from deposit on shares

Change in fair value of investments

TRICHOME FINANCIAL CORP.Condensed Interim Statements of Cash Flow


Accretion expense


Increase in prepaid expenses and other current assets

Increase in amounts payable and accrued liabilities

4

Number of

shares Share capital

Contributed

surplus

Share‐based

reserve Deficit

Total

Shareholders'

Equity (Deficit)

Balance at December 31, 2017 1,000,000 5,000$ ‐$ ‐$ ‐$ 5,000$

Common shares issued 1,320,000 330,000 ‐ ‐ ‐ 330,000

Comprehensive loss for the period ‐ ‐ ‐ ‐ (211,510) (211,510)

Share‐based compensation for the period ‐ ‐ 47,235 ‐ ‐ 47,235 Vested and transferred to share‐based reserve ‐ ‐ (32,705) 32,705 ‐ ‐

Balance at June 30, 2018 2,320,000 335,000$ 14,530$ 32,705$ (211,510)$ 170,725$

Number of

shares Share capital

Contributed

surplus

Share‐based

reserve Deficit

Total

Shareholders'

Equity (Deficit)

Balance at December 31, 2018 2,320,000 335,000$ 162,549$ 531,044$ (2,212,340)$ (1,183,747)$

Comprehensive loss for the period ‐ ‐ ‐ ‐ (2,029,319) (2,029,319)

Share‐based compensation for the period ‐ ‐ 412,171 ‐ ‐ 412,171

Vested and transferred to share‐based reserve ‐ ‐ (94,044) 94,044 ‐ ‐

Balance at June 30, 2019 2,320,000 335,000$ 480,676$ 625,088$ (4,241,659)$ (2,800,895)$


TRICHOME FINANCIAL CORP.Condensed Interim Statements of Shareholders' Deficit



Notes to the Condensed Interim Financial Statements (Unaudited) For the three and six months ended June 30, 2019 and June 30, 2018

5

1. Description of the business Trichome Financial Corporation (the “Company” or “Trichome”) was incorporated under the Business Corporation Act of Ontario on September 18, 2017 and has its head office located at 150 King Street West, Suite 200, Toronto, Ontario. The Company is controlled by CannaRoyalty Corp doing business as (“d/b/a”) Origin House, a publicly traded corporation listed on the Canadian Securities Exchange (“CSE”) under the ticker symbol “OH”. As at June 30, 2019, Origin House held 69% of the Company’s outstanding common shares. On a diluted basis, assuming the conversion of the convertible Class A preferred shares (Note 7), Origin House’s ownership of Trichome would be 35%. Trichome is a specialty finance company focused on providing creative credit‐based capital solutions to the global legal cannabis market. Trichome provides customized financing solutions across the industry value chain to support growth, capital expenditures, M&A, working capital and other needs. Transactions are typically structured to earn contractual cash flows, retain optionality on value creation and ensure return of capital. Trichome’s assets are all based in Canada and it has no operations or assets in the United States or the rest of the world. On October 2, 2018, Trichome entered into a Letter of Intent which outlined the general terms and conditions pursuant to which 22 Capital Corp. (TSXV: LFC.P) (“22 Capital”) and Trichome have agreed to complete a transaction that will result in a reverse takeover of 22 Capital by the shareholders of Trichome (the “Qualifying Transaction” or “RTO”). The transaction constitutes 22 Capital’s Qualifying Transaction as such term is defined in Policy 2.4 of the TSX Venture Exchange (“TSXV”), and it is anticipated that the resulting issuer will be listed as a Tier 1 Investment issuer on the TSXV. Upon completion of the RTO, the Class A preferred shares (Note 7) automatically convert to common shares. On November 13, 2018, Trichome entered into an Amalgamation Agreement (“Amalgamation Agreement”) with 22 Capital which superseded the Letter of Intent, and was further amended on January 30, 2019, April 5, 2019, May 27, 2019, and August 12, 2019. The Company is completing a private placement in connection with the RTO, whereby the Company plans to raise minimum gross proceeds of $15.0 million and maximum gross proceeds of $30.0 million (Note 12). 2. Significant Accounting Policies Statement of Compliance with International Financial Reporting Standards These unaudited condensed interim financial statements have been prepared in compliance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").



6

These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. The condensed interim financial statements do not include all of the information and disclosures required in the company’s annual financial statements and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2018. Basis of presentation These condensed interim financial statements have been prepared by management on a historical cost basis using the accrual basis of accounting, except for the revaluation of certain financial assets and liabilities to fair value, including derivative assets. The currency of presentation for these financial statements is the Canadian dollar. The financial statements were approved by the Company’s Board of Directors and authorized for issue on September 25, 2019. Significant accounting judgments and estimates The preparation of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual outcomes could differ from these estimates. These financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Significant estimates include the valuation of loans receivable, discount rates used to value the preferred shares, key inputs used in the application of the Black‐Scholes option pricing model used to determine share‐based compensation, the value of certain derivative assets, as well as any expected credit losses associated with lending arrangements. Recently adopted accounting policies: IFRS 16 Leases (“IFRS 16”) Effective January 1, 2019, the Company adopted IFRS 16, which is based on a single lessee accounting model to determine how to recognize, measure, and present leases. A summary of the Company’s structure and implementation of IFRS 16 is described below.



7

The Company has elected to use the Modified Retrospective Approach under IFRS 16. Under this approach, the Company may be required to record an opening balance adjustment for leases previously recognized under IAS 17, Lease (“IAS 17”) and IFRIC 4, Determining Whether an Arrangement Contains a Lease (“IFRIC 4”). Any cumulative effects of adopting IFRS 16 are being recognized in equity as an adjustment to the opening balance of retained earnings in the current period. Prior periods have not been restated. The Company leases office space in Toronto, Ontario. In adopting IFRS 16, The Company has elected to use the short‐term lease recognition exemption which is applied by class of assets. For those Right‐Of‐Use (“ROU”) assets which the Company has elected to use the short‐term or low dollar value lease recognition practical expedient, the lease expense has been accounted for on a straight‐line basis over the remaining term of the lease. At the time of adoption of IFRS 16, the Company only had one lease for office space in Toronto, Ontario. The arrangement has been classified as a short‐term lease. In electing to use the short‐term practical expedient, no right‐of‐use asset and lease liability was recognized on January 1, 2019. The Company will continue to record rent as a monthly operating expense. 3. Loans receivable and derivative assets

Loans receivable are recorded net of the allowance for Expected Credit Losses (“ECLs”) and charged to the statement of net loss and comprehensive loss. Estimates for loss allowances are determined through a loan‐by‐loan evaluation of collectability at each reporting date, with consideration for any amounts past due and any available relevant information on the borrowers’ liquidity.

June 30, 2019 December 31, 2018

Pure Alpha Holdings Inc. (a) 50,000$ ‐$

180 Smoke Inc. (b) ‐ 447,534

Total loans receivable: current 50,000$ 447,534$

James E. Wagner Cultivation (c) 3,189,466 ‐

C.G.S Foods Facility A (d.a) 779,588 ‐

C.G.S Foods Facility B (d.b) 419,664 ‐

Bliss Co Holdings Ltd. (e) 1,324,226

Allowance for expected credit losses (9,758) ‐

Total loans receivable: long‐term 5,703,186$ ‐$

Total loans receivable 5,753,186$ 447,534$



8

a) On January 17, 2019, the Company singed a promissory note with Pure Alpha Holdings Inc. (“Pure

Alpha”), an Ontario licensed cannabis company, totalling $50,000. The note will be repaid in full by Pure Alpha on the one‐year anniversary date of the note. The financing is interest free and can be repaid by Pure Alpha at any time throughout the duration of the loan without penalty. The note is guaranteed by Superette Inc. (“Superette”), a retail licence holder in Ontario, Canada. As part of the arrangement, Superette has advanced $50,000 to Trichome, which was recorded as a security deposit.

b) On May 9, 2018, the Company entered a secured credit facility with 180 Smoke Inc. (“180 Smoke”)

for principal of up to $2,500,000 (the “180 Smoke Facility”).

On February 19, 2019, the Company’s parent, Origin House, acquired 180 Smoke. As part of the acquisition, Origin House settled the Company’s 180 Smoke Facility balance. Prior to February 19, 2019 the Company recorded interest income of $5,903 during the first quarter of 2019, which increased the 180 Smoke Facility balance to $453,437. On February 20, 2019, the Company received proceeds of $589,999 from Origin House to settle the Facility. The Company recorded a gain of $136,562 on the settlement of the 180 Smoke Facility.

c) On February 20, 2019, the Company signed a senior secured term loan with James E. Wagner

Cultivation Corporation (“JWC”) to loan $3.5 million. The term loan was issued at a face value of $3.5 million, with a 2‐year maturity, and annual interest of 9.25%. The loan is secured by first ranking perfected security interest in the assets of JWC and is guaranteed by each of its subsidiaries. The Company also received 291,667 common share purchase warrants of JWC.

In accordance with IFRS 9 Financial Instruments, the term loan was recorded on initial recognition at its fair value of $3,135,474. This was based on a face value of $3.5 million less the warrants, set‐up fees, discount on issuance, and transaction costs. The loan is recorded at amortized cost, with an effective annual interest rate of 15.3%. During the three and six‐month periods ended June 30, 2019, the Company recorded interest and accretion income on the loan of $121,103 and $160,578, respectively.



9

d) On March 18, 2019, the Company entered into a lending arrangement with C.G.S. Food Inc. d/b/a

Ganjika House (“CGS”), a retail cannabis license holder in Ontario, Canada. The lending arrangement consists of a revolving credit facility (“Facility A”) and a term loan (“Facility B”).

a. The revolving credit Facility A provides for up to $1.0 million in funding, subject to a cap

of 75% of CGS’s eligible inventory, with $750,000 lent on closing gross of transaction fees of $10,000. The facility earns interest at a monthly rate of 1.80% on the principal balance outstanding. As part of the arrangement, the facility also pays interest at a monthly rate of 0.5% on any undrawn amounts. In line with IFRS 9 Financial Instruments, the facility was originally recorded at its fair value of $784,747, which was based on CGSs’ initial draw of $740,000, plus transactions costs of $44,747. The facility was recorded at amortized cost, with an effective annual interest rate of 19.5%. During the three and six‐month period ended June 30, 2019, the Company recorded interest income on the loan of $37,893 and $46,466, respectively.

b. The Facility B term loan provides for funding up to $1.0 million, with $500,000 provided

on closing. The loan bears interest at an annual rate of 8.5% if interest is paid monthly or 12.0% if interest is deferred until the maturity of the loan for an elected period. The maturity date of the loan is March 15, 2021, and principal is due upon maturity. CGS has the option to prepay principal by paying a penalty of 12% on unpaid amounts. The penalty declines by 2% per month over the term of the loan until the penalty reaches 0% or the maturity date occurs.

The term loan was recorded on initial recognition at its fair value of $408,120, which is based on an effective interest rate calculation using a market interest rate of 19.5% and transaction costs of $37,570. During the three and six‐month period ended June 30, 2019, the Company recorded interest income on the loan of $21,834 and $25,145, respectively.

e) On May 14, 2019, the Company entered into an agreement to provide a $4.5 million trade finance facility (the “Blissco Facility”) and a $1.5 million mortgage loan (the “Blissco Mortgage”) to Blissco Holdings Ltd (“Blissco”). The Blissco Facility provides the borrower with up to $4.5 million, to be drawn at its option, against qualifying receivables and inventory and matures 12 months from issuance with an option to extend for an additional 12 months. The term is 12 months, with an option to extend for an additional 12 months, and is secured by a first‐ranking perfected security interest in the assets of Blissco and is guaranteed by Blissco Cannabis Corp. Upon close, $1.5 million was advanced towards the mortgage.

During the quarter ended June 30, 2019, the Company did not advance funds to Blissco under the Blissco Facility and recorded interest income of $24,123 related to the Blissco Mortgage.



10

The Blissco Mortgage loan was recorded on initial recognition at its fair value of $1,300,132, calculated using an effective annual interest rate of 14.35%, and was net of a set‐up fee, an upfront lump sum payment of the aggregate monthly interest over the term of the loan totalling $127,500, and transaction costs.

f) Certain potential borrowers have contributed $45,000 towards due diligence deposits. The fair value of the warrants are as follows:

g) Upon settling the loan with 180 Smoke (Note 3(a)), the Company did not exercise the common share purchase warrants originally received when entering the lending arrangement with 180 Smoke on May 9, 2018 and recorded a loss of $17,314.

h) Upon entering the lending arrangement with JWC, 291,667 warrants were issued to the Company (Note 3(c)). The warrants are exercisable for 2 years at a price of $0.80 per share, which is based on the publicly available price per share at issuance. Upon issuance, the warrants had a fair value of $84,526, which was calculated using a Black‐Scholes model with an exercise price of $0.80, an expected life of 2 years, annualized volatility of 64.32%, and a risk‐free rate of 1.77%. On initial recognition the fair value of the warrants was netted against the value of the loan and recorded separately as a derivative asset. As at June 30, 2019, the warrants were recorded at their fair value of $75,252. For the three and six‐month periods ended June 30, 2019, the Company recorded a revaluation loss of $46,699 and $9,274, respectively. The fair values were determined using a Black‐Scholes model with a strike price of $0.80, an expected useful life of 1.6 years, an annualized volatility of 82.07%, and a risk‐free rate of 1.52%.

i) In connection with C.G.S Foods Facility B (Note 3(d.a)), Trichome was issued common share purchase warrants of CGS as well as the right to receive a minimum number of additional warrants. The number of warrants issued to Trichome will vary based on the dollar value of funds advanced to CGS and certain future events. At inception, the warrants were valued at $119,450 based on the implied value using a market effective interest rate when fair valuing Facility B of 19.5%. The warrants and warrants receivable are recorded at fair value through profit and loss. The fair value was calculated using the residual value remaining after valuing the loan portion of Facility B using a market interest rate. As at June 30, 2019, the warrants and warrants receivable were revalued at $130,231. For the three and six‐month periods ended June 30, 2019, the Company recorded a revaluation gain of $11,234 and $10,781, respectively.

June 30, 2019 December 31, 2018

180 Smoke warrants (g) ‐$ 17,314$

James E. Wagner Cultivation warrants (h) 75,252 ‐

C.G.S Foods warrants (i) 87,949 ‐

C.G.S Foods warrants receivable (i) 42,282 ‐

Total derivative assets 205,483$ 17,314$



11

4. Due to related parties The Company recorded the following related party transactions during the three and six‐month periods ended June 30, 2019:

The Company’s employees are included in the Origin House benefits plan. During the three and six‐month periods ended June 30, 2019, $16,004 and $19,292 of benefits expense respectively (three and six‐month periods ended June 30, 2018 – $10,437 and $22,436) were charged by Origin House to the Company. This charge related specifically to the cost of the benefits associated with the Company’s employees.

For the three and six‐month periods ended June 30, 2019, Origin House provided $36,644 and $68,288 respectively in executive and administrative services (three and six‐month periods ended June 30, 2018 – $10,000).

Stock‐based compensation expense for the three and six‐month periods ended June 30, 2019 of $6,190 and $10,141 respectively was recorded by Origin House relating to an employee of the Company (three and six‐month periods ended June 30, 2018 –$9,243).

Origin House paid rent and other operating expenses for the Company which were recorded as general and administrative expenses for the three and six‐month periods ended June 30, 2019, in the amounts of $9,255 and $24,742 respectively (six‐month period ended June 30, 2018 – $10,276 and $18,278).

For the three and six‐month periods ended June 30, 2019, Origin House paid $15,814 for professional fees for the Company which has been capitalised as part of one of the lending arrangements (three and six‐month periods ended June 30, 2018 – nil).

During the three and six months ended, the Company did not incur any expenses related to marketing services provided by a subsidiary of Origin House (three and six‐month periods ended June 30, 2018 – $3,548 and $6,938).

During the three months ended June 30, 2019, the Company repaid part of the balance owing to Origin House resulting in an amount owing of $81,669 related to administrative, rent, executive services, design services, and other expenses. These transactions are in the normal course of operations and are measured at the exchange amounts agreed to by the party.



12

Amounts not included in due to related parties, but are related party transactions include:

The Company recorded key management compensation in the form of share‐based payments for the three and six‐month periods ended June 30, 2019 in the amounts of $6,751 and $14,677 respectively (three and six‐month periods ended June 30, 2018 ‐ $43,936). The Company also recorded key management compensation in the form of salaries and benefits for the three and six‐month periods ended June 30, 2019 in the amount of $90,207 and $122,130 respectively (three and six‐month periods ended June 30, 2018 ‐ $18,075).

Origin House acquired 180 Smoke on February 19, 2019. As part of the acquisition, Origin House settled the Company’s outstanding loan receivable on behalf of 180 Smoke. The Company received proceeds of $589,999 and recorded a gain on the settlement of the loan of $136,592 during the six‐month period ended June 30, 2019.

Marc Lustig, a director of the Company, is a director of 22 Capital (Note 1). 5. Amounts payable and accrued liabilities

6. Restricted cash The Company received $8,469,051 from private investors as deposits on subscriptions receipts in connection with the private placement described in Note 12. As at June 30, 2019, the Company recorded the funds received from these prepayments as a deposit for shares. Of the total funds received, $8,248,598 relates to the first tranche, closed on April 25, 2019. The funds were placed in trust and represent restricted cash.

June 30, 2019 December 31, 2018

Trade payables 66,846$ ‐$

Accrued liabilities 506,732 146,927

Payroll liabilities 143,276 125,680

716,854$ 272,607$



13

7. Share capital Common shares Authorized As at June 30, 2019, the authorized share capital comprised an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid. Issued and outstanding

On September 18, 2017, at inception of the Company, 1,000,000 common shares were issued at $0.005 per share. On March 12, 2018, additional common shares of 1,320,000 were issued, at $0.25 per share. Class A Preferred Shares Trichome issued 3,171,301 Class A preferred shares as part of a private placement which closed on September 5, 2018, at $4.73 per share. Gross proceeds were $15 million, with issuance costs of $480,383. The shares are convertible to cash, at the option of the holder, for $5.15 per share should an initial public offering or a change in control (each, a “liquidity event”) not occur by September 5, 2019. As at the date of these financial statements, no Class A preferred shareholders have elected to convert shares to cash. The Class A preferred shares automatically convert to common shares upon a liquidity event. The Class A preferred shares are classified as liabilities on the Company’s statement of financial position, and issuance costs have been netted against gross proceeds. At inception, the shares were recorded at $14,519,871. During the three and six‐month periods ended June 30, 2019, the Company recorded accretion expense of $461,134 and $904,182repsectively (three and six‐month periods ended June 30, 2018 – nil). Share‐based Compensation On September 5, 2018, the Board of Directors of Trichome approved an Equity Incentive Plan for its employees and directors. In aggregate, 850,000 common shares of the Company are reserved for issuance under the plan, and these awards can be in the form of Stock Options, Restricted Share Units (“RSUs”), or Performance Share Units (“PSUs”). The number of share units granted, and any applicable vesting conditions are determined at the discretion of the Board or a compensation committee of the Board. Share‐based reserve represents RSUs and PSUs that have been earned, for which common shares have yet to be issued.

Number Amount

Balance at January 1, 2019 2,320,000 335,000$

Shares issued during the period ‐ ‐

Balance at June 30, 2019 2,320,000 335,000$



14

The following tables summarize the activity of equity awards for the three and six‐month periods ended June 30, 2019 and June 30, 2018:

As at June 30, 2019, 238,369 RSUs have vested. The value of vested RSUs totalled $589,883, which has been recorded in share‐based reserve, and unvested totalled $897,473. The majority of awards vest 1/3rd upon grant, and 1/3rd annually thereafter. The fair value of RSUs is determined based on the most recent common share issuance price at the grant date, which is a Level 3 input (Note 11). During the three and six‐month periods ended June 30, 2019, the Company recorded share‐based compensation expense on RSUs of $167,910 and $409,139 respectively (three and six‐month periods ended June 30, 2018 ‐ $18,965).

RSU's

June 30, 2019 June 30, 2018

Number Value per award Number Value per award

Outstanding, beginning of period 541,767 3.68$ ‐ ‐$

Granted during the period ‐ ‐ 240,000 0.25

Forfeited during the period ‐ ‐ ‐ ‐

Outstanding, end of period 541,767 3.68$ 240,000 0.25$

RSU's

June 30, 2019 June 30, 2018



Granted during the period 50,000 4.73 240,000 0.25

Forfeited during the period ‐ ‐ ‐ ‐


Three months ended

Six months ended



15

As at June 30, 2019, 140,000 PSUs have vested. The value of vested PSUs totalled $35,000, which has been recorded in share‐based reserve, and unvested totalled $17,500. The awards vest upon completion of certain milestones towards achievement of the reverse take‐over (Note 1). The fair value of PSUs is determined based on the most recent common share issuance price at the grant date, which is a Level 3 input (Note 11). During the three and six‐month periods ended June 30, 2019, the Company recorded share‐based compensation expense on the PSUs of $1,469 and $2,906 respectively (three and six month periods ended June 30, 2018 – $28,118).

PSU's

June 30, 2019 June 30, 2018





PSU's

June 30, 2019 June 30, 2018





Three months ended

Six months ended



16

As at June 30, 2019, 1,667 options have vested. The value of vested options totalled $205, and unvested totalled $410. The expected remaining life of options is 1.25 years. The awards vest 1/3rd upon grant, and 1/3rd annually, thereafter. The fair value of stock options is determined by the Black‐Scholes method. Volatility is based on comparable industry benchmarks. During the three and six‐month periods ended June 30, 2019, the Company recorded share‐based compensation expense on the stock options of $63 and $126 respectively (three‐and six‐month periods ended June 30, 2018 – $152). Contributed Surplus Contributed Surplus is comprised of stock‐based compensation. 8. Commitments and Contingencies The Company has short‐term lease commitments of $10,086 (December 31, 2018 – nil) and long‐term lease commitments of nil (December 31, 2018 – nil) at June 30, 2019.

Options

Number of

options

Weighted average

exercise price

Number of

options

Weighted average

exercise price

Outstanding, beginning of period 5,000 4.73$ ‐$ ‐$



Exercisable at the end of period 1,667 4.73$ ‐ ‐$

Options

Number of

options

Weighted average

exercise price

Number of

options

Weighted average

exercise price

Outstanding, beginning of period 5,000 4.73$ ‐$ ‐$



Exercisable at the end of period 1,667 4.73$ ‐ ‐$

Six months ended

June 30, 2019 June 30, 2018

June 30, 2018June 30, 2019

Three months ended



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9. General and Administrative Expense

10. Capital Disclosures The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide a return to shareholders, benefits for other stakeholders and to ensure sufficient resources are available to meet day to day operating requirements. The Company considers the items included in shareholders’ equity as capital. The Company manages its capital structure and makes adjustments based upon funds available to the Company or in response to changes in economic conditions and the risk characteristics of the underlying assets. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital requirements and there has been no change in the overall capital risk management strategy during the quarter ended June 30, 2019.

Notes

June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018

Salary and benefits 4 164,252$ 100,727$ 330,515$ 100,727$

Bonuses 155,888 31,687 198,504 31,687

Professional fees 43,183 ‐ 93,909 ‐

Marketing 4 1,028 3,548 4,130 6,938

Executive and advisory fee 4 36,644 10,000 68,288 10,000

Rent 4 16,817 ‐ 27,174 ‐

Insurance 9,255 ‐ 18,510 ‐

Office and administration costs 4 20,564 18,373 22,831 18,416

Legal fees 212,342 ‐ 316,481 ‐

Travel costs 7,656 ‐ 16,313 ‐

Transaction fees ‐ ‐ 8,475 ‐

Expected credit loss 3 ‐ ‐ 9,758 ‐

Total 667,629$ 164,335$ 1,114,888$ 167,768$

Three months ended Six months ended



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11. Fair Value of Financial Instruments Financial instruments recorded at fair value on the statement of financial position are classified using a fair value hierarchy that reflects the observability of significant inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

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

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.

In the normal course of business, the Company uses various financial instruments, which by their nature involve risk, including liquidity risk, interest rate risk, and credit risk of non‐performance by counter parties. These financial instruments are subject to normal credit standards, financial controls, risk management as well as monitoring procedures.

June 30, 2019 December 31, 2018

Cash and cash equivalents FVTPL Level 1 7,794,314$ 13,810,095$

Restricted cash FVTPL Level 1 8,248,598 ‐

Amounts receivable Amortized cost 80,515 ‐

Loans receivable* Amortized cost 4,428,960 ‐

Loans receivable** FVTPL Level 3 1,324,226 447,534

Derivative assets FVTPL Level 3 205,483 17,314

Amounts payable and accrued liabilities Amortized cost 716,854 272,607

Due to related parties Amortized cost 81,669 107,910

Class A preferred shares Amortized cost 15,982,355 15,078,173

Security deposits Amortized cost 95,000 ‐

Deposits for shares Amortized cost 8,469,051 ‐

**Loans recorded at FVTPL consist of the lending arrangement with Bliss Co Holdings Ltd. (Note 3(e)).

*Loans recorded at amortized cost consist of the lending arrangements with Pure Alpha Holdings Inc. (Note 3(a)), James E. Wagner Cultivation

(Note 3(c)), C.G.S Foods Facility A and B (Note 3(d.a and d.b)), and net of the $9,758 allowance for expected credit losses (Note 3).



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The Company is exposed in varying degrees to a variety of financial instrument related risks: Liquidity Risk Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient, readily available capital in order to meet its liquidity requirements. Interest rate risk The Company’s exposure to interest rate risk relates to its ability to earn interest income on cash and loan balances. The Company's policy is to invest excess cash in investment grade short term guaranteed investment certificates. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its banks. Credit Risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is in its loan’s receivable. This risk is mitigated through due diligence performed on counterparties, and other contractual arrangements. 12. Subsequent Events Blissco Holdings Ltd (“Blissco”) loan (ticker BLIS.CN) On May 16, 2019 Blissco announced that it had signed a definitive agreement to sell all of its outstanding shares to Supreme Cannabis Inc. On July 15, 2019, the outstanding balance on the Blissco Mortgage was repaid. No further amounts are outstanding from Blissco. Trichome RTO On May 27, 2019, Trichome and 22 Capital received conditional approval from the TSX Venture Exchange regarding the Qualifying Transaction. On July 8, 2019, Trichome and 22 Capital’s shareholders approved the Qualifying Transaction.


Notes to the Condensed Interim Financial Statements (Unaudited)For the three and six months ended June 30, 2019 and June 30, 2018

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MYM Nutraceuticals (“MYM”) loan (ticker: MYM.CN)

On July 31, 2019, Trichome closed a $5.5 million senior secured term loan (“MYM Loan”) to MYM Nutraceuticals to finance cannabis and hemp projects across Canada, the United States and Colombia and to provide working capital for general corporate purposes. The MYM Loan was advanced through an initial tranche of $3.0 million on closing, less transaction costs. The balance of the MYM loan will be advanced as a second tranche of $2.5 million upon the satisfaction of certain conditions by MYM.

The MYM Loan has a term of 12 months and may be extended for an additional 6 months at Trichome’s discretion. The MYM Loan bears interest at a rate of 12% per annum, payable monthly in cash from a pre‐established interest reserve account. MYM will also pay a standby fee of 6% per annum, payable monthly in cash on the second tranche until it is drawn or cancelled.

In consideration for advancing the initial tranche of the MYM Loan, Trichome Financial received a set‐up fee, an original issuer discount and 4,000,000 warrants to purchase non‐assessable common shares of MYM, exercisable any time prior to June 10, 2022, at a strike price of $0.30 per share. Trichome shall receive an additional 1,000,000 warrants, on the same terms as those already issued, upon closing of the second tranche.

The MYM Loan is secured by a perfected first lien on all current and future tangible and intangible assets and equity interests of MYM, and an assignment of all material contracts and licenses. The MYM Loan has been guaranteed by each of the direct and indirect wholly owned subsidiaries organized under MYM and by certain companies where the Borrower is a majority shareholder.

CGS – Facility A Loan repayment

On July 4, 2019, CGS Foods Inc. elected to repay principle of $500,000 against the outstanding balance of Facility A (Note 3). On September 10, 2019, the remaining $250,000 balance of principle was repaid, Facility A was fully repaid. On September 17, 2019, Facility B was fully repaid.



21

Good Buds Company International Inc. (“Good Buds”) Term Loan On August 20, 2019, Trichome Financial entered into an agreement to provide a $2,350,000 senior secured term loan (the “Good Buds Loan”) to Good Buds Company International Inc. (“Good Buds”) to finance the expansion of the company’s existent indoor facility and the development of its recently licensed outdoor cultivation operation. The Good Buds Loan bears interest at the rate of 11.5% per annum, payable monthly in cash, with the first 12 months of interest being funded out of a pre‐established interest reserve account. The Good Buds Loan will mature on September 1, 2020. Good Buds has the right to prepay all, but not less than all of the Good Buds Loan prior to the maturity date, subject to a prepayment premium equal to the lesser of (a) 6 months’ interest on the outstanding balance and (b) the aggregate amount of interest owing on the loan for the balance of its remaining term as of the date of the prepayment. In consideration for providing the Good Buds Loan, Trichome Financial received a set‐up fee, original issuer discount, and 950,000 non‐assignable warrants, exercisable any time prior to August 20, 2022, at a price per share of Good Buds, equal to the lesser of (1) $0.60 and (2) the lowest price below $0.60 at which Good Buds issues common shares or securities convertible into common shares. The Good Buds Loan has been secured in a first‐priority position against all assets of Good Buds (excluding cannabis and its derivatives) and has been guaranteed by each direct and indirect wholly owned subsidiary organized under Good Buds. Private placement On August 16, 2019, an additional $1.1 million of subscription receipts was closed in connection with the Company’s private placement.

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SCHEDULE E

MANAGEMENT’S DISCUSSION AND ANALYSIS OF TRICHOME FINANCIAL FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018


Managements Discussion and Analysis of the Financial Condition and Results of Operations For the three and six months ended June 30, 2019


Management Discussion and Analysis For the three and six months ended June 30, 2019

TABLE OF CONTENTS INTRODUCTION ............................................................................................................................................. 1

CAUTION REGARDING FORWARD‐LOOKING STATEMENTS .......................................................................... 2

DESCRIPTION OF THE BUSINESS ................................................................................................................... 4

HIGHLIGHTS FOR The THREE AND SIX MONTHS ENDED June 30, 2019 ....................................................... 5

FINANCIAL PERFORMANCE ........................................................................................................................... 8

RECENT DEVELOPMENTS .............................................................................................................................. 9

MATERIAL INVESTMENTS............................................................................................................................ 11

RESULTS OF OPERATIONS ........................................................................................................................... 16

FINANCIAL POSITION .................................................................................................................................. 21

LIQUIDITY .................................................................................................................................................... 22

FINANCING AND CAPITAL RESOURCES ....................................................................................................... 24

ACCOUNTING MATTERS .............................................................................................................................. 26

REGULATORY OVERVIEW ............................................................................................................................ 30

RISKS AND UNCERTAINTIES ........................................................................................................................ 36

ADDITIONAL INFORMATION ....................................................................................................................... 37



1

INTRODUCTION Trichome Financial Corp. (the "Company", “Trichome Financial” or “Trichome”) was incorporated under the Business Corporation Act (Ontario) on September 18, 2017 and has its head office located at 150 King Street West, Suite 214, Toronto, Ontario. The Company is controlled by CannaRoyalty Corp doing business as (“d/b/a”) Origin House (“Origin House”), a publicly‐traded corporation listed on the Canadian Securities Exchange (“CSE”) under the ticker symbol “OH”, through a Shareholders Agreement (the “Shareholders Agreement”) dated March 12, 2018 and amended June 25, 2018 which automatically terminates upon Trichome becoming a publicly traded entity. As at June 30, 2019, Origin House exercised voting control through its 69% of the Company’s outstanding common shares. On a diluted basis, assuming the conversion of convertible Class A preferred shares, Origin House’s ownership of Trichome would be 35%. Upon Trichome becoming a publicly traded entity, Origin House’s ownership of Trichome is expected to be approximately 17.2% to 21.9%. This Managements Discussion and Analysis (“MD&A”) of the Financial Condition and Results of Operations of Trichome is dated September 25, 2019. The MD&A should be read in conjunction with the Company’s unaudited condensed interim financial statements (the “Financial Statements”) for the three and six months ended June 30, 2019, including the accompanying notes. Unless otherwise indicated, all financial information in this MD&A is reported in Canadian dollars. The Company prepared this MD&A of the Financial Condition and Results of Operations with reference to National Instrument 51‐102‐ Continuous Disclosure Obligations of the Canadian Securities Administrators (“CSA”). This MD&A provides information for the three and six months ended June 30, 2019 and subsequent events up to and including September 25, 2019. The Financial Statements and this MD&A have been approved by the Company’s Board of Directors. The accompanying Financial Statements were prepared in accordance with Canadian Generally Accepted Accounting Principals that incorporate the requirements of International Financial Reporting Standards (“IFRS” or “GAAP”). Under GAAP, certain expenses and income must be recognized that are not necessarily reflective of the Company’s underlying operating performance. Non‐GAAP financial measures exclude the impact of certain items and are used internally when analyzing consolidated operating performance. These non‐GAAP financial measures are also helpful in assessing underlying operating performance on a consistent basis. See Adjusted loss reconciliation.



2

CAUTION REGARDING FORWARD‐LOOKING STATEMENTS The words “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variation (including negative variations) of such words and phrases, or statements that certain actions, events, or results “may”, “could”, “would”, “might”, or “will” be taken, occur or to achieve are all forward‐looking statements. Forward‐looking statements are based on the reasonable assumptions, estimates, internal and external analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made. Forward‐looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward‐looking statements. Such factors include, but are not limited to, the factors discussed in the section entitled “RISKS AND UNCERTAINTIES”. Although the Company has attempted to identify key factors that could cause actions, events or results to differ materially from those described in the forward‐looking statements, there may be other factors that cause actions, events, or results to differ from those anticipated, estimated or intended. Forward‐looking statements contained herein are made as at the date of this MD&A. There can be no assurance that forward‐looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. With respect to the forward‐looking statements contained in this MD&A, we have made assumptions regarding, among other things: (i) our ability to generate cash flow from operations and obtain necessary financing on acceptable terms; (ii) general economic, financial market, regulatory and political conditions in which we operate; (iii) market demand for our financial products and services; (iv) competition; (v) anticipated and unanticipated costs; (vi) government regulation of our activities and products and services; (vii) our ability to obtain qualified staff and appropriate services in a timely and cost efficient manner; (viii) the ability of our borrowers to repay or refinance our loans; and (ix) the creditworthiness of factoring counterparties and prompt payment by such counterparties. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward‐looking statements. Forward‐looking statements are based on material assumptions, including those listed above, that were applied in drawing a conclusion or making a forecast or projection, including management’s perception of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such assumptions will prove to be reasonable.



3

The forward‐looking statements contained herein are made as of the date of this MD&A and are based on the beliefs, estimates, expectations, opinions and assumptions of management on the date such forward‐looking statements are made. The Company undertakes no obligation to update or revise any forward‐looking statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward‐looking statements, except as required by applicable securities law. The forward‐looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.



4

DESCRIPTION OF THE BUSINESS OVERVIEW OF TRICHOME Trichome is a specialty finance company focused on providing flexible and creative credit‐based capital solutions to the global legal cannabis market. Trichome was created to address the lack of credit availability in the large, growing and increasingly complex cannabis market. Founded by industry leaders Origin House and Stoic Advisory, among others, Trichome’s experienced management team has a unique edge to capitalize on proprietary deal flow and insight while developing a first‐mover advantage as a global cannabis focused specialty finance company. Trichome provides customized financing solutions across the industry value chain to support growth, capital expenditures, M&A, working capital and other needs. Transactions are typically structured to earn attractive rates of contractual cash flows, retain optionality on value creation and ensure return of capital. Leveraging the combined resources and knowledge of its founders and management, it is able to offer significant value‐added financial, product, market and operational support to its partner companies. Trichome’s current assets are all based in Canada and it has no operations or assets in the United States or the rest of the world. Trichome has been active in rapidly building‐out a pipeline of unique opportunities that include the following market participants: Licensed Producers (“LP”), late stage LP applicants, hardware and ancillary product manufacturers, real estate owners, retail operators and networks, media platforms and technology companies.



5

HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 SUMMARY Goal: Continue to add investments to portfolio of lending arrangements. This will be accomplished by seeking out new investment opportunities across the value chain of global cannabis companies by leveraging our current networks in the industry and by creating new strategic relationships in relevant markets. Achievements:

Loan to Pure Alpha On January 17, 2019, Trichome signed a $50,000 promissory note arrangement with Pure Alpha Holdings Ltd. (“Pure Alpha”). The promissory note is interest free and matures in one year from the anniversary date, although it can be repaid at any time throughout the term of the note without penalty. As part of the arrangement Superette Inc. (“Superette”) has guaranteed the full value of the promissory by advancing $50,000 to the Company. Pure Alpha has been awarded a Retail Operator License and Retail Store Authorization by the Alcohol and Gaming Commission of Ontario’s Expression of Interest Application Lottery. Superette is a Toronto‐based retailer offering cannabis consumers a unique experience for human connections at their in‐store locations. Currently, they have one retail store located at 1306 Wellington St. W, in Ottawa, Ontario. Loan to James E Wagner Cultivation On February 20, 2019, the Company signed a loan agreement with James E. Wagner Cultivation Corporation (“JWC”) in which Trichome lent $3.5 million to JWC. The loan is for 2‐years, with an annual interest rate of 9.25% and is secured by a first‐ranking perfected security interest in the assets of JWC and is guaranteed by each of its subsidiaries. Upon closing, JWC issued Trichome 291,667 warrants exercisable for 2‐years at a price of $0.80. 180 Smoke Acquisition On February 19, 2019 Trichome’s parent company, Origin House, acquired 100% of the outstanding commons shares of 180 Smoke. Trichome’s loan to 180 Smoke was repaid in full upon closing of the acquisition, resulting in a realized gain of $136,562 upon settlement.



6

Loan to C.G.S Foods Inc. (“CGS” d/b/a “Ganjika House”)

On March 15, 2019, Trichome closed a lending arrangement with CGS, a retail cannabis license holder in Ontario, Canada. The lending arrangement consists of a revolving credit facility (“Facility A”) of up to $1.0 million and a term loan up to $1.0 million (“Facility B”).

Loan to Blissco Holdings Ltd (“Blissco”)

On May 14, 2019, the Company entered into an agreement to provide a $4.5 million trade finance facility (“the Facility”) and a $1.5 million mortgage loan to Blissco. The Facility was to be used to finance accounts receivables from provincial distributors and other customers as well as to facilitate the purchase of inventory from wholesale cannabis suppliers to Blissco.

Expanded pipeline of investments

Trichome continues to expand its pipeline of potential investees. Refer to Recent Developments below for advancements made by the Company in expanding is investment portfolio.

Goal: Go Public on TSX Venture Exchange (“TSXV”)

Trichome established a goal to become public on the TSXV in 2019 by completing a Reverse Take‐Over (“RTO”).

Achievements:

On October 3, 2018, Trichome entered into an agreement with 22 Capital Corp. (TSXV: LFC.P) (“22 Capital”) to complete a transaction that will result in an RTO by the shareholders of Trichome. On November 13, 2018, Trichome and 22 Capital executed a formal Amalgamation Agreement, which was further amended on January 30, 2019, April 5, 2019, and May 27, 2019.

On February 14, 2019 the Company announced the launch of a non‐brokered private placement of subscription receipts in connection with its RTO of 22 Capital Corp. Trichome intends to use the proceeds of the private placement to fund the Company’s growing pipeline of cannabis sector credit opportunities and for general operating purposes.

On May 27, 2019 Trichome and 22 Capital received conditional approval from the TSX Venture Exchange regarding the Qualifying Transaction.

See Recent Developments.


On January 14, 2019, Howard Steinberg joined the Company’s Board of Directors.



7

Corporate Financings

During the first quarter of 2019, Trichome launched a non‐brokered private placement of subscription receipts in connection with the pending RTO of 22 Capital Corp., expecting to raise minimum gross proceeds of $15 million. Upon closing of the pending RTO of 22 Capital Corp., the holders of the subscription receipts will own common shares in the newly formed company.

On April 25, 2019, the Company closed its first tranche of subscription receipts from its private placement totalling $8.2 million. As at June 30, 2019, the Company has raised $8.5 million towards its private placement.



8

FINANCIAL PERFORMANCE

The following are the major financial highlights of Trichome’s operating results for the three and six months ended June 30, 2019, in comparison to the three and six‐months ended June 30, 2018 respectively:

revenues were $223,802 and $281,064, as compared to $3,493 and $3,493;

operating expenses were $837,071 and $1,527,059 (inclusive of non‐cash stock‐basedcompensation of $169,442 and $412,171), as compared to $211,570 and $215,003 (inclusive ofnon‐cash stock‐based compensation of $47,235 and $47,235);

net loss of $1,109,765 and $2,029,319, as compared to $208,077 and $211,510;

net loss per basic and dilutive shares of $0.48 and $0.87, as compared to $0.09 and $0.12; and

adjusted loss of $316,953 and $465,105, as compared to $160,842 and $164,275.

The following is a summary of key balance sheet totals as at June 30, 2019, compared to December 31, 2018:

• cash was $7.8 million, as compared to $13.8 million;

• restricted cash of $8.2 million, as compared to nil;

• derivative assets and loans receivable totaled $6.0 million, as compared to $0.5 million;

• total assets of $22.5 million, as compared to $14.3 million; and

• total liabilities of $25.3 million, as compared to $15.5 million. $24.5 million in liabilities convert to equity upon completion of the RTO.



9

RECENT DEVELOPMENTS CGS – Facility A Loan repayment On July 4, 2019, CGS Foods Inc. elected to repay principle of $500,000 against the outstanding balance of Facility A. On September 10, 2019, the remaining $250,000 balance of principle was repaid, Facility A was fully repaid. On September 17, 2019, Facility B was fully repaid. Loan to Blissco Holdings Ltd (“Blissco”) On July 15, 2019, the outstanding balance on the Blissco Mortgage loan was repaid. No further amounts are outstanding from Blissco. The repayment was made in connection with Supreme Cannabis Inc.’s acquisition of Blissco, which closed on July 12, 2019. Progress towards going public on TSXV On July 8, 2019, Trichome and 22 Capital’s shareholders approved the Qualifying Transaction. In addition, Trichome’s shareholders approved a share split of 3:1 for all common and preferred shares, in connection with the Qualifying Transaction. MYM Nutraceuticals (“MYM”) loan On July 31, 2019, Trichome closed a $5.5 million senior secured term loan (“MYM Loan”) to MYM Nutraceuticals to finance cannabis and hemp projects across Canada, the United States and Colombia and to provide working capital for general corporate purposes. The MYM Loan was advanced through an initial tranche of $3.0 million on closing, less transaction costs. The balance of the MYM loan will be advanced as a second tranche of $2.5 million upon the satisfaction of certain conditions by MYM. The MYM Loan has a term of 12 months and may be extended for an additional 6 months at Trichome’s discretion. The MYM Loan bears interest at a rate of 12% per annum, payable monthly in cash from a pre‐established interest reserve account. MYM will also pay a standby fee of 6% per annum, payable monthly in cash on the second tranche until it is drawn or cancelled. In consideration for advancing the initial tranche of the MYM Loan, Trichome Financial received a set‐up fee, an original issuer discount, and 4,000,000 warrants to purchase non‐assessable common shares of MYM, exercisable any time prior to June 10, 2022, at a strike price of $0.30 per share. Trichome shall receive an additional 1,000,000 warrants, on the same terms as those already issued, upon closing of the second tranche. The MYM Loan is secured by a perfected first lien on all current and future tangible and intangible assets and equity interests of MYM, and an assignment of all material contracts and licenses. The MYM Loan has been guaranteed by each of the direct and indirect wholly owned subsidiaries organized under MYM and by certain companies where the Borrower is a majority shareholder.



10

Good Buds Company International Inc. (“Good Buds”) Term Loan On August 20, 2019, Trichome entered into an agreement to provide a $2,350,000 senior secured term loan (the “Good Buds Loan”) to Good Buds to finance the expansion of the company’s existent indoor facility and the development of its recently licensed outdoor cultivation operation. The Good Buds Loan bears interest at the rate of 11.5% per annum, payable monthly in cash, with the first 12 months of interest being funded out of a pre‐established interest reserve account. The Good Buds Loan will mature on September 1, 2020. Good Buds has the right to prepay all, but not less than all of the Good Buds Loan prior to the maturity date, subject to a prepayment premium equal to the lesser of (a) 6 months’ interest on the outstanding balance and (b) the aggregate amount of interest owing on the loan for the balance of its remaining term as of the date of the prepayment. In consideration for providing the Good Buds Loan, Trichome Financial received a set‐up fee, original issuer discount, and 950,000 non‐assignable warrants, exercisable any time prior to August 20, 2022, at a price per share of Good Buds, equal to the lesser of (1) $0.60 and (2) the lowest price below $0.60 at which Good Buds issues common shares or securities convertible into common shares. The Good Buds Loan has been secured in a first‐priority position against all assets of Good Buds (excluding cannabis and its derivatives) and has been guaranteed by each direct and indirect wholly owned subsidiary organized under Good Buds. Corporate Financings On August 16, 2019, an additional $1.1 million of subscription receipts was closed in connection with the Company’s private placement.



11

MATERIAL INVESTMENTS The following chart is a summary of the Company’s material investments as at June 30, 2019: Developments:



12



13



14



15



16

RESULTS OF OPERATIONS The following table sets forth results of operations data for the three and six months ended June 30, 2019 and June 30, 2018:

REVENUE Interest revenue is comprised of effective interest income earned on loans to 180 Smoke, JWC, CGS, and Blissco, as well as interest income generated on short‐term investments. For more details of the interest rates associated with the loans to JWC and CGS, see the Material Investments section. Interest income of $5,903 was earned throughout the first quarter of 2019 on the loan to 180 Smoke, prior to it being settled on February 19, 2019 through the acquisition of 180 Smoke by Trichome’s parent company, Origin House. The loan to 180 Smoke had an annual interest rate of 10%.

June 30, 2019 June 30, 2018


Revenue 223,802$ 3,493$

Operating expenses 837,071 211,570

Net loss (613,269) (208,077)


Total comprehensive loss (1,109,765) (208,077)

Net loss per common share ‐ basic & diluted (0.48)$ (0.09)$

Weighted average common shares ‐ basic & diluted 2,320,000 2,320,000

June 30, 2019 June 30, 2018


Revenue 281,064$ 3,493$

Operating expenses 1,527,059 215,003

Net loss (1,245,995) (211,510)


Total comprehensive loss (2,029,319) (211,510)

Net loss per common share ‐ basic & diluted (0.87)$ (0.12)$

Weighted average common shares ‐ basic & diluted 2,320,000 1,806,667

Three months ended

Six months ended



17

OPERATING EXPENSES

June 30, 2019 June 30, 2018

General and administrative

Salary and benefits 164,252$ 100,727$

Bonus 155,888 31,687


Marketing 1,028 3,548

Executive and advisory fee 36,644 10,000

Rent 16,817 ‐

Insurance 9,255 ‐

Office and administration costs 20,564 18,373



Total general and administrative expenses 667,629 164,335


Restricted share units 167,910 18,710

Performance share units 1,469 22,916

Stock options 63 5,609

Total share‐based compensation 169,442 47,235

Total operating expenses 837,071$ 211,570$

Three months ended



18

In comparison to the period ended June 30, 2018, operating expenses increased due to commencement of business operations, which included hiring new employees, leasing office space, insurance, issuing stock‐based compensation, as well as audit fees and legal costs associated with the RTO.

June 30, 2019 June 30, 2018

General and administrative

Salary and benefits 330,515$ 100,727$

Bonus 198,504 31,687


Marketing 4,130 6,938

Executive and advisory fee 68,288 10,000

Rent 27,174 ‐


Office and administration costs 22,831 18,416



Transaction fees 8,475 ‐

Expected credit losses 9,758 ‐

Total general and administrative expenses 1,114,888 167,768


Restricted share units 409,139 18,710

Performance share units 2,906 22,916

Stock options 126 5,609

Total share‐based compensation 412,171 47,235

Total operating expenses 1,527,059$ 215,003$

Six months ended



19

OTHER INCOME AND EXPENSES

The Company recorded non‐cash accretion expense of $904,182 related to the liability‐classification of the Class A preferred shares under International Accounting Standard 32 — Financial Instruments: Presentation (“IAS 32”). Upon RTO, the Class A preferred shares will be reclassified as equity, and interest expense will cease. The Company recorded a gain of $9,274 and a loss of $10,781 for the six‐month period ended June 30, 2019 upon the revaluation of warrants in JWC and CGS respectively. The Company recorded a loss of $17,314 on warrants to purchase shares in 180 Smoke during the quarter ended March 31, 2019, as the warrants were not exercised upon the acquisition of 180 Smoke by Trichome’s parent company, Origin House. The loss was offset by a $136,562 gain on the settlement of the principal and accrued interest of the loan to 180 Smoke by Origin House, upon acquisition. NET LOSS AND LOSS PER SHARE Net loss for the three and six months ended June 30, 2019 and June 30, 2018 was $1,109,765, $2,029,319 and $208,077, $211,510 respectively. The increase in net loss is due to the Company becoming an active business, however, at its current start‐up stage, the Company has yet to deploy enough capital to offset expenses through effective interest income. Due to the increase in net loss, the Company’s basic loss per share has increased to $0.48 and $0.87 for the three and six months ended June 30, 2019 as compared a loss per share of $0.09 and $0.12 for the three and six months ended June 30, 2018.

June 30, 2019 June 30, 2018

Other income and expenses

Accretion expense 461,134$ ‐$

Change in fair value of investments 35,465 ‐

Gain on settlement of loan ‐ ‐

Foreign exchange gain (103) ‐

Net other income and expenses 496,496$ ‐$

Three months ended

June 30, 2019 June 30, 2018

Other income and expenses

Accretion expense 904,182$ ‐$

Change in fair value of investments 15,807 ‐

Gain on settlement of loan (136,562) ‐

Foreign exchange gain (103) ‐

Net other income and expenses 783,324$ ‐$

Six months ended



20

ADJUSTED LOSS Adjusted loss is a non‐GAAP financial measures and accordingly it is not an earnings measure recognized by IFRS and does not carry standard prescribed significance. Moreover, the Company’s method for calculating Adjusted loss may differ from that used by other companies using the same designation. Management defines Adjusted loss as Net loss and comprehensive loss adjusted for other non‐cash items such as share‐based compensation expense, as well as certain non‐recurring items. We caution readers that Adjusted loss should not be substituted as an indicator of operating results or as a substitute for cash flows from operating activities.

The Company has accrued discretionary bonuses of $43,208 and $86,416 for the three and six months ended June 30, 2019.

June 30, 2019 June 30, 2018

Net loss and comprehensive loss (1,109,765)$ (208,077)$

Accretion expense 461,134 ‐

Share‐based compensation 169,442 47,235

One‐time RTO costs 162,236 ‐

Adjusted loss (316,953)$ (160,842)$

Adjusted loss per share (0.14) (0.07)

June 30, 2019 June 30, 2018

Net loss and comprehensive loss (2,029,319)$ (211,510)$

Accretion expense 904,182 ‐

Share‐based compensation 412,171 47,235

One‐time RTO costs 247,861 ‐

Adjusted loss (465,105)$ (164,275)$

Adjusted loss per share (0.20) (0.09)

Three months ended

Six months ended



21

FINANCIAL POSITION The following table sets forth statement of financial position data at June 30, 2019 and December 31, 2018:

Cash decreased due to $5.7 million in cash outflows from lending activities throughout the quarter, offset by the settlement of the 180 Smoke Loan ($0.6 million), deposits from private investors for subscription receipts to be issued as part of a private placement in advance of the RTO ($8.5 million, $8.2 million of which is held in trust and recorded as restricted cash), and other operating activities.

Working capital is negative due to the short‐term liability classification of the Class A preferred shares issued in the September 2018 private placement and a deposit for subscription receipts. The Company believes there is a low likelihood of settlement of the Class A preferred shares in cash; however, the Company has recorded the shares as a liability in accordance with IAS 32.

Total investments are comprised of the loans receivable from JWC, CGS, and Blissco, as well as derivative assets obtained in certain lending arrangements (December 31, 2018 – 180 Smoke).

Current liabilities are comprised primarily of the Class A preferred shares, deposits for subscription receipts, amounts due to the Company’s parent company and working capital payables in the normal course of business.

June 30, 2019 December 31, 2018

Selected statement of financial position data


Restricted Cash 8,248,598 ‐

Working capital (8,709,564) (1,183,747)

Total investments 5,958,669 464,848

Total assets 22,544,034 14,274,943

Current liabilities 25,344,929 15,458,690

Shareholders' deficit (2,800,895) (1,183,747)

Dividends, per share ‐ ‐



22

LIQUIDITY The Company’s objectives in managing its liquidity and capital structure are to generate sufficient cash to fund the Company’s operating and investment requirements. The Company monitors its liquidity primarily by focusing on total liquid assets and working capital, as well as forecasting expected spending and investments. The table below sets out relevant liquidity related financial information at June 30, 2019 and December 31, 2018:

The Company’s level of liquid assets is relevant to meet its current operating needs and it uses the quick ratio to measure its short‐term liquidity. As of June 30, 2019, the Company had liquid assets of $7.8 million compared to $13.8 at December 31, 2018. The marginal decrease in liquid assets is primarily due to movements in the cash balance as follows:

‐ $5.7 million of cash outflows related to loans entered with CGS, JWC, and Blissco.

‐ $0.6 million of cash inflows obtained through the settlement of the loan to 180 Smoke, upon the acquisition of 180 Smoke by Trichome’s Parent Company, Origin House.

‐ $8.5 million of cash inflows from private investor deposits for subscription receipts for shares

ahead of the RTO. This is offset by $8.2 million held in trust in connection with the subscription receipts recorded as restricted cash.

‐ Cash used in working capital since December 31, 2018.

The Company has incurred cash losses to date; however, management anticipates that eventual cash profitability will increase its liquid assets. At this relatively early stage of the Company’s development, there cannot be absolute assurance that the Company will be able to generate sufficient positive cash flows to reach sustained profitability.

June 30, 2019 December 31, 2018


Liquid assets1 7,794,314 13,810,095

Quick ratio20.31 0.89

Working capital (8,709,564) (1,183,747)

Working capital ratio30.66 0.92

(1) Liquid assets include cash

(2) Quick ratio is defined as liquid assets divided by current liabilities

(3) Working capital ratio is defined as current assets divided by current liabilities



23

Trichome monitors its level of working capital and working capital ratio to assess its ability to enter into strategic lending opportunities. The chart below highlights the Company’s cash flows during the years ended June 30, 2019 and June 30, 2018:

CASH USED IN OPERATING ACTIVITIES The change in the cash balance can be attributed to an increase in operating and business activities, such as lending arrangements with JWC, CGS, and Blissco, payroll, legal, administrative costs, as well as cash obtained in the settlement of the loan to 180 Smoke. CASH PROVIDED BY FINANCING ACTIVITIES Cash provided from financing related to deposits received in connection with the Company’s private placement in advance of its RTO.

June 30, 2019 June 30, 2018

Net cash provided (used) by

Operating activities (6,209,993)$ (522,456)$

Financing activities 194,212 850,986

Cash, beginning 13,810,095 ‐

Cash, end of the period 7,794,314$ 328,530$



24

FINANCING AND CAPITAL RESOURCES The Company is subject to risks including, but not limited to, its ability to raise additional funds through debt, equity, and third‐party financing to support investments, continued operations, and to meet liabilities and commitments. As at June 30, 2019, the Company has a history of losses with an accumulated deficit of $4.2 million. Through the first half of 2019, approximately $2.0 million of historical operating expenses were non‐cash, and primarily relate to accretion expense on liability‐classified Class A preferred shares and share‐based compensation. The Company’s history of losses is also due to start‐up costs, as well as minimal lending activities in 2018, as the Company ramped‐up operations, raised funds, and assessed a pipeline of lending candidates. The first half of 2019 saw a significant increase in lending activity, and the Company expects new lending to continue. CAPITAL ACTIVITIES The Company manages its capital with the objective of maximizing shareholder value and sustaining future development of the business. The Company defines capital as the Company’s equity and any debt it may issue. The Company manages its capital structure based on the funds available to support its activities. Upon approval from the Board, management will undertake to balance its overall capital structure through new share issuances, by seeking to leverage its balance sheet with third‐party lenders, and/or by raising capital through fee‐paying funds to be managed by Trichome. The Company’s principal capital needs are for funds to use towards its investments, financing, and operational needs. The Company anticipates that it has sufficient liquidity and capital resources to successfully execute its business plan over the next 12 months. However, the Company does face certain liquidity risks moving forward. The risk of collection from their financing arrangements is present as the Company expands its portfolio of investments. The Company manages this risk through thorough due diligence as well as through structuring arrangements in a manner that decreases the probability of collection risk. If the Company begins to experience significant collection risk, there is the chance that the Company cannot execute the business plan as originally planned. The Company’s objective in managing capital is to ensure sufficient liquidity to pursue its investment growth strategy and undertake selective investments, while at the same time taking a conservative approach toward financial leverage and management of financial risk. The Company’s primary uses of capital are to invest in its pipeline of Canadian and market participants in fully legalized international marketplaces; opportunities include licensed producers (“LPs”), late stage LP applicants, hardware and ancillary product manufacturers, real estate owners, retail operators and networks, media platforms and technology companies. The Company’s investments are most frequently structured as secured debt instruments. The Company also uses capital to finance operating losses, capital expenditures and increases in non‐cash working capital. The Company’s objectives when managing capital are to ensure the Company will continue to have enough liquidity to continue to expand its portfolio and ultimately generate above market returns.



25

The Company monitors its capital based on the adequacy of its cash resources to fund its business plan. To maximize flexibility to finance the Company’s ongoing growth, Trichome does not currently pay a dividend to holders of its common shares. Outstanding and potentially dilutive share count information The Company’s authorized share capital comprises an unlimited number of common shares, of which 2,320,000 were issued and outstanding as at June 30, 2019 (December 31, 2018 – 2,320,000 common shares) and 5,000,000 Class A preferred shares, of which 3,171,301 were issued and outstanding as at June 30, 2019 (December 31, 2018 – 3,171,301). As at June 30, 2019, the Company has issued 595,100 Restricted Share Units (“RSUs”), 210,000 Performance Share Units (“PSUs”), and 5,000 Stock Options. During the year ended December 31, 2018, 53,333 RSUs were forfeited. There were no forfeitures during the six months ended June 30, 2019. The value of vested RSUs totalled $589,883 and the value of vested PSUs totalled $35,000, which are shares yet to be issued, and have been recorded in share‐based reserve. The Class A preferred shares issued in the Private Placement automatically convert to common shares upon a liquidity event, which would include the proposed reverse takeover of 22 Capital Corp. As a result, upon a liquidity event, the Company’s issued and outstanding common shares would increase by 3,171,301.



26

ACCOUNTING MATTERS Internal Controls Over Financial Reporting The Chief Executive Officer and Chief Financial Officer, in accordance with National Instrument 52‐109 (“NI 52‐109”), have both certified that they have reviewed the financial report and this MD&A (the “Filings”) and that, based on their knowledge having exercised reasonable diligence, (a) the Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made with respect to the period covered by the filings; and (b) the financial report together with the other financial information included in the Filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the Filings. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost‐effective basis Disclosure Controls and Procedures and Internal Controls Over Financial Reporting as defined in NI 52‐ 109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation. Off‐Balance Sheet Arrangements The Company has short‐term lease commitments of $10,086 and long‐term lease commitments of nil at June 30, 2019. Adoption of New Accounting Standards IFRS 16, Leases (“IFRS 16”) This standard specifies the recognition, measurement, presentation and disclosure of leases. This standard is effective for annual periods beginning on or after January 1, 2019. The Company currently has a lease agreement for office space in Toronto. In transitioning to IFRS 16, the Company has elected to use the modified retrospective approach. Under this approach, the Company will record a right‐of‐use (“ROU”) asset and matching lease liability at the present value of the future lease payments. Under the modified retrospective approach, the future lease payments would be discounted to their present value using the rate implicit in the lease. If this rate is not known, the borrowing rate of the company at the time of transition will be used to discount the future lease payments. Under IFRS 16, the Company has elected to use the short‐term practical expedient for their Toronto office lease. Under this practical expedient, issuers are exempt from recognizing a ROU asset and lease liability under IFRS 16 due to the short‐term nature (i.e. less than one year) of the lease arrangement. Trichome did not record a ROU asset and matching lease liability on January 1, 2019. The Company continued and will continue to record rent as a monthly operating expense throughout the remaining term of the lease.



27

Related Party Transactions The Company recorded the following related party transactions during the three and six‐month period ended June 30, 2019:

The Company’s employees are included in the Origin House benefits plan. During the three and six‐month periods ended June 30, 2019, $16,004 and $19,292 of benefits expense respectively (three and six‐month periods ended June 30, 2018 – $10,437 and $22,436) were charged by Origin House to the Company. This charge related specifically to the cost of the benefits associated with the Company’s employees.

For the three and six‐month periods ended June 30, 2019, Origin House provided $36,644 and $68,288 respectively in executive and administrative services (three and six‐month periods ended June 30, 2018 – $10,000).

Stock‐based compensation expense for the three and six‐month periods ended June 30, 2019 of $6,190 and $10,141 respectively was recorded by Origin House relating to an employee of the Company (three and six‐month periods ended June 30, 2018 – $9,243).

Origin House paid rent and other operating expenses for the Company which were recorded as general and administrative expenses for the three and six‐month periods ended June 30, 2019, in the amounts of $9,255 and $24,742 respectively (six‐month period ended June 30, 2018 – $10, 276 and $18,278).

For the three and six‐month periods ended June 30, 2019, Origin House paid $15,814 for professional fees for the Company which has been capitalised as part of one of the lending arrangements (three and six‐month periods ended June 30, 2018 – nil).

During the three and six‐month periods ended, the Company did not incur any expenses related to marketing services provided by a subsidiary of Origin House (three and six‐month periods ended June 30, 2018 ‐ $3,548 and $6,938).

During the three months ended June 30, 2019, the Company repaid part of the balance owing to Origin House resulting in an amount owing of $81,669 related to administrative, rent, executive services, design services, and other expenses. These transactions are in the normal course of operations and are measured at the exchange amounts agreed to by the party.



28

Amounts not included in due to related parties, but are related party transactions include:

The Company recorded key management compensation in the form of share‐based payments for the three and six‐month periods ended June 30, 2019 in the amounts of $6,751 and $14,677 respectively (three and six‐month periods ended June 30, 2018 ‐ $43,936). The Company also recorded key management compensation in the form of salaries and benefits for the three and six‐month periods ended June 30, 2019 in the amount of $90,207 and $122,130 respectively (three and six‐month periods ended June 30, 2018 ‐ $18,075).

• Origin House acquired 180 Smoke on February 19, 2019. As part of the acquisition, Origin House

settled the Company’s outstanding loan receivable on behalf of 180 Smoke. The Company received proceeds of $589,999 and recorded a gain on the settlement of the loan of $136,592 during the six‐month period ended June 30, 2019.

Marc Lustig, a director of the Company, is a director at 22 Capital. Financial instruments In the normal course of business, the Company uses various financial instruments which by their nature involve risk, including market risk, interest rate risk, liquidity risk and credit risk of non‐performance by counter parties. These financial instruments are subject to normal credit standards, financial controls, risk management as well as monitoring procedures. The following table sets out the fair values of recognized financial instruments using the valuation methods and assumptions described below. Unless otherwise noted, carrying values approximate fair values for each financial instrument:

June 30, 2019 December 31, 2018

Cash and cash equivalents FVTPL Level 1 7,794,314$ 13,810,095$

Restricted cash FVTPL Level 1 8,248,598 ‐

Amounts receivable Amortized cost 80,515 ‐

Loans receivable* Amortized cost 4,428,960 ‐

Loans receivable** FVTPL Level 3 1,324,226 447,534

Derivative assets FVTPL Level 3 205,483 17,314

Amounts payable and accrued liabilities Amortized cost 716,854 272,607

Due to related parties Amortized cost 81,669 107,910

Class A preferred shares Amortized cost 15,982,355 15,078,173

Security deposits Amortized cost 95,000 ‐

Deposits for shares Amortized cost 8,469,051 ‐

**Loans recorded at FVTPL consist of the lending arrangement with Bliss Co Holdings Ltd.

*Loans recorded at amortized cost consist of the lending arrangements with Pure Alpha Holdings Inc., James E. Wagner Cultivation, C.G.S Foods

Facility A and B, and net of the $9,758 allowance for expected credit losses.



29

Determination of fair value The estimated fair values of cash, trade and amounts receivable, certain loans receivable, derivative assets, loans payable, and trade and amounts payable approximate their carrying values due to the relatively short‐term nature of the instruments. Fair value measurements recognized in the consolidated statements of financial position must be categorized in accordance with the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company’s financial instruments carried at fair value consist of cash (Level 1), loans receivable (Level 3), and derivative assets (Level 3). The Company has not transferred any financial instruments between Level 1, 2 or 3 of the fair value hierarchy.



30

REGULATORY OVERVIEW Canada The Cannabis Act received royal assent on June 21, 2018 and came into force on October 17, 2018. The Cannabis Act outlines the framework for the legalization of adult‐use cannabis in Canada. Pursuant to the Cannabis Act, individuals over the age of 18 are permitted to purchase fresh cannabis, dried cannabis, cannabis oil, and cannabis plants or seeds and to possess 30 grams of dried cannabis, or the equivalent amount in fresh cannabis or cannabis oil. The Cannabis Act also permits households to grow a maximum of four plants. This limit applies regardless of the number of adults that reside in the household. In addition, the Cannabis Act provides provincial and municipal governments the authority to prescribe regulations regarding retail and distribution, as well as the ability to alter some of the existing baseline requirements, such as increasing the minimum age for purchase and consumption of cannabis. In connection with the Cannabis Act, the Federal Government introduced new penalties under the Criminal Code (Canada), including penalties for the illegal sale of cannabis, possession of cannabis over the prescribed limit, production of cannabis beyond personal cultivation limits, taking cannabis across the Canadian border, giving or selling cannabis to a youth and involving a youth to commit a cannabis‐related offence. Provincial and territorial governments in Canada have made varying announcements on the regulatory regimes for the distribution and sale of cannabis for adult‐use purposes. For example, Québec, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Yukon and the Northwest Territories have chosen a government owned and operated model for distribution, whereas Saskatchewan and Newfoundland & Labrador have opted for a private sector approach. Ontario, Alberta, British Columbia, and Nunavut have announced plans to pursue a hybrid approach of public distribution and private or public/private sale. The federal regulatory regime under the Cannabis Act provides for the issuance of cultivation licenses for standard cultivation, micro‐cultivation, industrial hemp cultivation and nursery cultivation, licenses for standard processing and micro‐processing, and sales licenses for medical or non‐medical use. In addition, the regime includes personnel and physical security obligations. Further, all cannabis products must be packaged in a tamper‐evident and child‐resistant manner and product labels must contain specified product information, such as the name of the processor who packaged the products, product lot number, and THC/CBD content. In addition, federal regulations include packaging and labeling restrictions for cannabis products, aimed to minimize the appeal to children and youth, protect against accidental consumption and ensure consumers are informed of the potential risks and harms of cannabis. Specifically, labeling and branding restrictions require plain packaging, including a standardized cannabis symbol on every label; mandatory health warning messages (including specifics regarding size, placement and appearance); a limit of only one brand element, aside from the brand name; no other image or graphic; backgrounds need to be a single, uniform colour; use of fluorescent or metallic colours is prohibited; labels and packaging cannot have any coating or embossing; and no inserts can be included.



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The Company, as a lender to the legal cannabis industry in Canada, has assessed the cannabis regulatory regime from the perspective of secured debt financing and has noted a gap in the regulatory scheme as it applies to the ability of lenders to secure collateral, including regulated assets and regulatory licenses themselves. In the event of a default, it is currently unclear how or if a lender would be able to realize on its security because it is unclear whether security can be taken in the relevant cannabis licenses themselves, whether cannabis licenses may be transferred in such circumstances, and whether a lender could take possession of regulated collateral. Canadian cannabis regulations are silent on these topics, and accordingly there can be no assurance that a lender in the cannabis industry will be in a position to enforce security in regulated assets or regulatory licenses. The Company continues to monitor market practice and legal developments in this area. Provincial Regulatory Framework for Recreational Cannabis While the Cannabis Act provides for the regulation of the commercial production of cannabis and related matters by the federal government, the Cannabis Act provides the provinces and territories of Canada with authority to adopt their own laws governing the distribution, sale and consumption of cannabis and cannabis accessory products within the province or territory, permitting for example, provincial and territorial governments to set lower possession limit for individuals and higher age requirements. Currently each of the Canadian provincial and territorial jurisdictions has established a minimum age of 19 years old, except for Québec and Alberta, where the minimum age is 18. All Canadian provinces and territories have implemented or announced proposed regulatory regimes for the distribution and sale of cannabis for recreational purposes within those jurisdictions. Provincial/territorial bodies act as intermediaries between entities licensed federally under the Cannabis Act and consumers, such bodies acting in some jurisdictions as exclusive cannabis wholesalers and distributors, and in some instances such bodies acting as exclusive retailers. The laws continue to evolve, and differences in provincial and territorial regulatory frameworks could result in, among other things, increased compliance costs, and increased supply costs. Municipal and regional governments may also choose to impose additional requirements and regulations on the sale of recreational cannabis, adding further uncertainty and risk to the company’s business. Municipal by‐laws may restrict the number of recreational cannabis retail outlets that are permitted in a certain geographical area or restrict the geographical locations wherein such retail outlets may be opened. Ontario: Under the Cannabis Act, 2017 (Ontario), the Ontario Cannabis Retail Corporation, which is a subsidiary of the Liquor Control Board of Ontario (“LCBO”), is the sole distributor of recreational cannabis and may set a minimum price for cannabis or classes of cannabis. The Ontario Cannabis Store (“OCS”) currently sells recreational cannabis to the public through its on‐line platform.



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Recreational cannabis will also be sold through a tightly regulated Private Retail Model, with a target date April 1, 2019. Private retailers are required to obtain both a retail operator license and a retail store authorization. Retail store authorizations are only to be issued to persons holding a retail operator license. Separate retail store authorizations are to be required for each cannabis retail store, but a licensed retail operator may hold more than one retail store authorization and operate multiple stores. Private retailers are not permitted to sell cannabis on‐line but may only sell cannabis in person at an authorized retail store. The Alcohol, Gaming and Cannabis Corporation of Ontario regulates retail store authorizations for privately run recreational cannabis stores. On December 13, 2018, the Government of Ontario announced that a temporary cap of 25 retail store authorizations was being imposed while cannabis supply stabilizes. Anyone who supervises employees, oversees cannabis sales, manages compliance or has signing authority to purchase cannabis, enters into contracts or hires employees is required to have a cannabis retail manager license. Retail cannabis stores will not be permitted in municipalities which pass resolutions by January 22, 2019 to prohibit the sale of recreational cannabis. Of the 414 municipalities in Ontario, 77 municipalities have elected to not permit retail cannabis stores within their boundaries. The OCS currently is in the process of entering into supply agreements with multiple licensed producers and is establishing a wholesale distribution network to supply legal private. Federally licensed cannabis producers (and their affiliates) can only operate one retail store and it must be located on the premises authorized under their federal license. A broad definition of affiliate is included in the regulations. An affiliate relationship exists if a corporation beneficially owns or controls voting shares, or securities that may be converted to voting shares, constituting more than 9.9% of voting rights. If a person, or group acting together, holds 50% voting control for the election of directors or market share of the corporation, they are considered affiliates. Additionally, an affiliate relationship may be established through involvement in a trust, partnership or joint venture, among others. The definition of affiliate may have the effect of restricting the ability of federally licensed producers from effectively entering into the consumer retail market in Ontario. Federally licensed producers are prohibited from providing any material inducement to cannabis retailers for the purpose of increasing the sale of a particular type of cannabis British Columbia: The Government of British Columbia’s Cannabis Control and Licensing Act and Cannabis Distribution Act create a hybrid distribution and sales model. The provincial Liquor Distribution Branch is the sole wholesale distributor of recreational cannabis to privately‐operated stores and it operates its own BC Cannabis Stores. Alberta: The Government of Alberta has implemented a cannabis framework providing for the purchase of cannabis products from private retailers that receive their products from the Alberta Gaming and Liquor Commission (“AGCL”), a government‐regulated distributor, similar to the distribution system currently in place for alcohol in the province. Licensed Producers may sell directly to the AGCL but may not sell directly to private retailers or to the public. The AGLC also sells recreational cannabis through its own on‐line platform.



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Saskatchewan: The Saskatchewan Liquor and Gaming Authority issues permits for both wholesalers and cannabis retailers. Permitted wholesalers can sell to permitted retailers and other permitted wholesalers, but not to the public. Registered Licensed Producers may sell to permitted wholesalers but not to the public. The Government of Saskatchewan initially announced that it intended to issue approximately 60 retail permits to private stores located in roughly 40 municipalities and First Nation communities across the province, with municipalities having the option of opting out of having a cannabis store if they choose. Manitoba: The Government of Manitoba put in place a ‘‘hybrid model’’ for cannabis distribution. Under the Liquor, Gaming and Cannabis Control Act, the Manitoba Liquor and Lotteries Corporation acts the sole supplier of recreational cannabis to licensed private retail stores, which may sell to the public both on‐line and in authorized store locations. Manitoba held an RFP process for private retailers, which was open until December 22, 2017, at the end of which four proponents were selected. A subsequent process was opened in July 2018 to select additional pre‐qualified retailers, eligible to apply for retail licenses. Québec: Recreational cannabis in Québec is sold on‐line and in retail stores operated by the Société Québécoise du cannabis, which is a subsidiary of, and under control and supervision of the Société des alcohols du Québec. There are no private retailers. New Brunswick: Cannabis NB, which is a subsidiary of the New Brunswick Liquor Corporation, is the sole retailer of recreational cannabis, operating an on‐line platform and retail stores. The Cannabis Management Corporation controls and oversee the sale of recreational cannabis in New Brunswick. Nova Scotia: Under the Cannabis Control Act, the Nova Scotia Liquor Corporation is responsible for the regulation of the retail sale of recreational cannabis in the province, and recreational cannabis is only sold publicly through government‐operated storefronts and online sales. Prince Edward Island: Similar to Nova Scotia and New Brunswick, under the Cannabis Management Corporation Act, the sale of recreational cannabis will be controlled and supervised by the Cannabis Management Corporation, which operates retail stores and online sales. Newfoundland and Labrador: Under the Cannabis Control Act, recreational cannabis is sold through licensed private stores, with its crown‐owned liquor corporation, the Newfoundland and Labrador Liquor Corp. (the “NLC”), regulating distribution to private sellers who may sell to consumers. The NLC controls the possession, sale and delivery of cannabis, and sets prices. It is also be the online retailer, although licenses may later be issued to private interests. The Government of Newfoundland and Labrador has issued a request for proposals for private retailers. Yukon: Under the Cannabis Control and Regulation Act, the distribution and sale of recreational cannabis is limited to government outlets and government‐run online stores and allows for the later licensing of private retailers. Northwest Territories: The N.W.T. Liquor Commission is the sole supplier and distributor of cannabis, whether through retail outlets or by mail order service run by the liquor commission. Communities in the Northwest Territories are able to hold a plebiscite to prohibit cannabis, similar to the options currently available to restrict alcohol.



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Nunavut: The Nunavut Liquor and Cannabis Commission sells cannabis to the public on‐line and by telephone sales, as well as acts as the sole‐source wholesaler for private retailers. Nunavut also permits private retailers be licensed to operate a cannabis store, remote sales store, or cannabis lounge. There is no guarantee that the provincial and territorial frameworks supporting the legalization of cannabis for recreational use in Canada will remain unchanged on the terms outlined above. Activities Outside Canada The Company does not currently conduct business outside of Canada and only seeks to conduct business in jurisdictions outside of Canada where such operations are legally permissible in accordance with all of the laws of the foreign jurisdiction, the laws of Canada, and, upon completion of the Qualifying Transaction, the rules and policies of the TSXV. The legal and regulatory requirements with respect to the cultivation and sale of cannabis in the foreign countries in which the Company may invest, as well as local business culture and practices, are different from those in Canada. Prior to commencing investment in a new country, the Company, in partnership with its local legal counsel, consultants and partners, will conduct legal and commercial due diligence in order to ensure that it and its officers and directors gain a sufficient understanding of the legal, political and commercial framework and specific risks associated with operating in such jurisdiction. Where possible, the Company will seek to work with respected and experienced local partners who can help the Company understand and navigate the local business and operating environment, language and cultural differences. In consultation with its advisors, the Company takes steps it deems appropriate in light of the level of investment it expects to have in each country to ensure the management of risks and the implementation of necessary internal controls. On October 16, 2017, the TSXV provided clarity in respect of Policy 2.1 – Initial Listing Requirements, Form 2D Listing Agreement and Policy 2.9 – Trading Halts, Suspensions and Delisting of the TSXV Manual (collectively, the “Requirements”) to applicants and TSXV‐listed issuers with business activities in the cannabis sector. In the TSXV Bulletin, the TSXV notes that issuers with ongoing business activities that violate U.S. federal law regarding cannabis are not in compliance with the Requirements. These business activities may include: i) direct or indirect ownership of, or investment in, entities engaging in activities related to the cultivation, distribution or possession of cannabis in the U.S., ii) commercial interests or arrangements with such entities, iii) providing services or products specifically targeted to such entities, or iv) commercial interests or arrangements with entities engaging in providing services or products to U.S. cannabis companies. The TSXV reminded issuers that, among other things, should the TSXV find that a listed issuer is engaging in activities contrary to the Requirements, the TSXV has the discretion to initiate a delisting review.



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The Company does not engage in any “U.S. marijuana‐related activities” as defined in Canadian Securities Administrators Staff Notice 51‐352 (Revised) – Issuers with U.S. Marijuana‐Related Activities. Note that 180 Smoke, an investee of Trichome, operates a non‐cannabis retail location in New York state which focuses on the sale of vape and vape‐related products. In the United States, the 2018 Farm Bill, federally legalized the cultivation of hemp for the production of CBD and other cannabinoids, except for THC. As a result, once the Farm Bill is fully implemented the Company may consider investing in fully legal hemp operations or other fully legal operations in the United States.



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RISKS AND UNCERTAINTIES We are subject to various risks that could have a material impact on us, our financial performance, condition and outlook. These risks could cause actual results to differ materially from those expressed or implied in the forward‐looking statements included in this MD&A, our financial statements and our other reports and documents. These risks include, but are not limited to, the following risks, which are discussed in greater detail under the heading “Risk Factors” in the Company’s management information circular filed with securities regulators and available on www.sedar.com, which risk factors are incorporated by reference into this document and should be reviewed in detail by all readers:

There can be no certainty that the Qualifying Transaction will be completed;

Possible termination of the Amalgamation Agreement;

Following the completion of the Qualifying Transaction, we may issue additional equity securities;

Being a public company may increase price volatility;

The pending Qualifying Transaction may divert the attention of our management;

While the Qualifying Transaction is pending, we are restricted from taking certain actions;

The requirements of being a public issuer may strain our resources;

No or limited control over cannabis operations of our investees;

Compliance with laws by us and our investees;

Changes in laws, regulations and guidelines;

Business strategy;

Risks inherent in strategic alliances;

Risks associated with divestment;

Competition;

Dependence upon key management personnel;

The risk that our investees may engage in U.S. operations contrary to our agreements with them;

The risks inherent in foreign investments;

Our limited operating history;

Our need for liquidity and additional financing;

Difficulty of forecasting market trends;

The price of cannabis from time to time;

Reputational risks;

Equity price risk associated with our loan bonuses;

Risks relating to anti‐money laundering legislation;

The risk that we may not be able to realize the security we take in our loans;

Unknown defects and impairments;

Challenging global financial conditions;

Credit and liquidity risk

Litigation;

Cybersecurity risks;

Social media and other online risks;

Our dividend policy;

Our PFIC classification;



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Insurance coverage;

Fraudulent activity risk;

Force majeure risk;

Various conflicts of interest risks;

Reliance on licences;

Reliance on investee facilities;

Governmental regulations;

Operating risks;

Competitive conditions;

Customer acquisitions;

Constraints on marketing products;

Risks inherent in an agricultural business;

Wholesale price volatility;

Product recalls;

Product liability;

Risks related to environmental and employee health and safety regulations;

Reliance on key inputs;

Dependence on suppliers and skilled labour;

Risks relating to intellectual property;

Vulnerability to rising energy costs;

Transportation risks; and

Financial reporting risks.

ADDITIONAL INFORMATION Our Canadian filings, including our management information circular, are available on the System for Electronic Document Analysis and Retrieval at www.sedar.com.

TRICHOME FINANCIAL CORP. CSE FORM 2A LISTING …

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