Planet 13 Holdings Inc. (Form: 10-12G, Received: 12/13/2021 16:59:22)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
PLANET 13 HOLDINGS INC. (Exact name of registrant as specified in its charter)
British Columbia		83-2787199
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

2548 West Desert Inn Road, Suite 100 Las Vegas, Nevada 89109		(702) 206-1313
(Address of principal executive offices and zip code)		(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares

(Title of class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☐
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financing accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

TABLE OF CONTENTS

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY		1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS		2

ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	29
ITEM 2.	FINANCIAL INFORMATION	52
ITEM 3.	PROPERTIES	77
ITEM 4.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	79
ITEM 5.	DIRECTORS AND EXECUTIVE OFFICERS	80
ITEM 6.	EXECUTIVE COMPENSATION	83
ITEM 7.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE	89
ITEM 8.	LEGAL PROCEEDINGS	91
ITEM 9.	MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	92
ITEM 10.	RECENT SALES OF UNREGISTERED SECURITIES	93
ITEM 11.	DESCRIPTION OF THE REGISTRANT’S SECURITIES TO BE REGISTERED	97
ITEM 12.	INDEMNIFICATION OF DIRECTORS AND OFFICERS	98
ITEM 13.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	100
ITEM 14.	CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE	100
ITEM 15.	FINANCIAL STATEMENTS AND EXHIBITS	100
EXHIBIT INDEX		101
INDEX TO FINANCIAL STATEMENTS		F-1

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY AND FILING THIS REGISTRATION STATEMENT

As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act.” As an emerging growth company, we may take advantage of specified reduced disclosure and other exemptions from requirements that are otherwise applicable to public companies that are not emerging growth companies. These provisions include:

●

Reduced disclosure about our executive compensation arrangements;

●

Exemptions from non-binding shareholder advisory votes on executive compensation or golden parachute arrangements; and

●

Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large-accelerated filer under the rules of the Securities and Exchange Commission (the “SEC”) or if we issue more than $1.0 billion of non-convertible debt over a three-year period.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. You should assume that the information contained in this document is accurate as of the date of this registration statement on Form 10 only.

This registration statement will become effective automatically 60 days from the date of the original filing, pursuant to Section 12(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of the effective date, we will become subject to the reporting requirements of Section 13(a) under the Exchange Act and will be required to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers that are subject to the Exchange Act.

USE OF NAMES AND CURRENCY

In this registration statement on Form 10, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” or “Planet 13” refer to Planet 13 Holdings Inc. together with its wholly-owned subsidiaries.

Unless otherwise indicated, all references to “$,” “US$” or “USD” in this registration statement refer to United States dollars, and all references to “C$” or “CAD” refer to Canadian dollars.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This registration statement includes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities laws and United States securities laws. All information, other than statements of historical facts, included in this registration statement that addresses activities, events or developments that we expect or anticipate will or may occur in the future 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: expectations for the effects of the Business Combination (defined herein); statements relating to the business and future activities of, and developments related to, us after the date of this registration statement, including such things as future business strategy, competitive strengths, goals, expansion and growth of our business, operations and plans, new revenue streams, the completion by us of contemplated acquisitions of additional real estate, cultivation and licensing assets, the roll out of new dispensaries, the application for additional licenses and the grant of licenses or renewals of existing licenses that have been applied for, the expansion of existing cultivation and production facilities, the completion of cultivation and production facilities that are under construction, the construction of additional cultivation and production facilities, the expansion into additional U.S. markets, any potential future legalization of adult-use and/or medical cannabis under U.S. federal law; expectations of market size and growth in the United States and the states in which we operate or contemplate future operations; expectations for other economic, business, regulatory and/or competitive factors related to us or the cannabis industry generally; 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 our management at the time they were provided or made and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, as applicable, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information and statements. Such factors include, among others our actual financial position and results of operations differing from management’s expectations; our business model; a lack of business diversification; increasing competition in the industry; public opinion and perception of the cannabis industry; expected significant costs and obligations; current reliance on limited jurisdictions; development of our business; access to capital; risks relating to the management of growth; risks inherent in an agricultural business; risks relating to energy costs; risks related to research and market development; risks related to breaches of security at our facilities; reliance on suppliers; risks relating to the concentrated voting control of the Company; risks related to our being a holding company; risks related to service providers withdrawing or suspending services under threat of prosecution; risks related to proprietary intellectual property and potential infringement by third parties; risks of litigation relating to intellectual property; negative clinical trial results; insurance related risks; risk of litigation generally; risks associated with cannabis products manufactured for human consumption, including potential product recalls; risks relating to being unable to attract and retain key personnel; risks relating to obtaining and retaining relevant licenses; risks relating to integration of acquired businesses; risks related to quantifying our target market; risks related to industry growth and consolidation; fraudulent activity by employees, contractors and consultants; cyber-security risks; conflicts of interest; risks related to reputational damage in certain circumstances; leased premises risks; risks related to the COVID-19 pandemic; U.S. regulatory landscape and enforcement related to cannabis, including political risks; heightened scrutiny by Canadian regulatory authorities; risks related to capital raising due to heightened regulatory scrutiny; risks related to tax liabilities; risks related to U.S. state and local law regulations; risks related to access to banks and credit card payment processors; risks related to potential violation of laws by banks and other financial institutions; ability and constraints on marketing products; risks related to lack of U.S. federal trademark and patent protection; risks related to the enforceability of contracts; the limited market for our securities; difficulty for U.S. holders of Common Shares to resell over the CSE (as defined herein); price volatility of Common Shares; uncertainty regarding legal and regulatory status and changes; risks related to legislation and cannabis regulation in the states in which we operate or contemplate future operations; future sales by shareholders; no guarantee regarding use of available funds; currency fluctuations; risks related to entry into the U.S; and other factors beyond our control, as more particularly described under the heading “Risk Factors” in this registration statement.

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Although we have 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. There can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements. The forward-looking information and statements contained herein are presented for the purposes of assisting readers in understanding our expected financial and operating performance and our plans and objectives and may not be appropriate for other purposes.

The forward-looking information and statements contained in this registration statement represent our views and expectations as of the date of this registration statement. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update such forward-looking information and statements at a future time, we have no current intention of doing so except to the extent required by applicable law.

ITEM 1.

BUSINESS

Background

We are a vertically integrated cultivator and provider of cannabis and cannabis-infused products in the State of Nevada. Through our subsidiaries in Nevada, we hold six licenses for cultivation (three medical licenses and three recreational licenses), six licenses for production (three medical licenses and three recreational licenses), three dispensary licenses (one medical license and two recreational licenses) and two distribution licenses (one active and one conditional). Additionally, in California, through Newtonian Principles, Inc. (“Newtonian”), a wholly-owned subsidiary of ours located in Santa Ana, California, we hold one dispensary license and one distribution license. Our common shares are listed for trading on the Canadian Securities Exchange (“CSE”) under the symbol “PLTH” and quoted on the OTCQX in the United States under the symbol “PLNHF.”

We currently sell over 107 different strains of cannabis (more than 20 of which are grown in house) and have a customer-loyalty database of over 45,000 customers. We own and manufacture cannabis products under the following brands: HaHa (gummies and beverages), Dreamland (chocolates), TRENDI (vapes and concentrates), Medizin (flower, vapes, concentrates), Leaf and Vine (vapes).

We operate our cultivation licenses at three separate facilities, each location operating jointly under a medical and adult-use cultivation license. Two of our cultivation licenses operate out of Clark County, Nevada (Las Vegas) and include indoor cultivation and perpetual harvest cycles. One is located in an approximately 16,100 square foot facility, and the other operates out of a 25,000 square foot facility and is in construction to expand to a total of 45,000 square feet. The third cultivation license is located near the town of Beatty in Nye County, Nevada. The Beatty cultivation facility currently houses approximately 500 square feet of research and development and genetics testing with the potential to expand to over 2,300,000 square feet of greenhouse production capacity on 80 acres of owned land that includes municipal water and abundant electrical power already at the edge of the property.

Our six production licenses operate at three licensed production facilities, each location operating jointly under a medical and adult-use cultivation license. One production facility is a 18,500 square foot customer facing production facility that opened inside our cannabis entertainment complex adjacent to the Las Vegas Strip (the “Planet 13 Las Vegas Superstore”). This facility incorporates butane hash oil extraction (BHO extraction), distillation equipment and microwave assisted extraction equipment as well as a state-of-the-art bottling and infused beverage line and an edibles line able to produce infused chocolates, infused gummies and other edible products. The second production facility is co-located at the Beatty facility, and the third facility is co-located in a 25,000 square foot cultivation facility located in Las Vegas.

We operate two dispensaries in Nevada under two adult-use and one medical licenses. Since 2018, two licenses (one medical and one adult-use) jointly operate out of the Planet 13 Las Vegas Superstore and occupy approximately 24,000 square feet of retail space adjacent to the Las Vegas Strip. Prior to relocating to the Planet 13 Las Vegas Superstore, the licenses operated out of a 2,300 square foot facility located approximately six miles off the Las Vegas Strip (the “Medizin Facility”). In September 2020, we received an unincorporated Clark County recreational license for the Medizin Facility dispensary which had closed when its dispensary licenses were transferred to the Planet 13 Las Vegas Superstore and re-opened the Medizin Facility on November 30, 2020.

Additionally, we have an active distribution license and launched a distribution and delivery service in Nevada to augment our retail locations and deliver product to both wholesale customers and local Nevada state residents throughout the State of Nevada. We expect our Las Vegas conditional license to be operational in 2022.

We operate one dispensary in California and occupy approximately 25,600 square feet of retail space on Warner Boulevard in the City of Santa Ana located in Orange County (the “Planet 13 OC Superstore”). We have a licensed 6,300 square feet distribution facility adjacent to the Planet 13 OC Superstore, and launched a distribution and delivery service in Orange County to augment our retail location and deliver product to customers and local California state residents throughout Orange County and the surrounding area.

On August 5, 2021, our subsidiary, Planet 13 Illinois LLC (“Planet 13 Illinois”), which is owned 49% by us and 51% by Frank Cowan, a resident of Illinois, was a lottery winner for a Social-Equity Justice Involved Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Department of Financial and Professional Regulation in the State of Illinois. We intend to open a dispensary in the downtown Chicago area and anticipate that it will be operational in late 2022. On October 5, 2021, we formed Planet 13 Chicago, LLC as a 100% owned leasing entity to support future operations in Illinois.

On October 1, 2021, our wholly owned subsidiary, Planet 13 Florida Inc. (“Planet 13 Florida”), completed the acquisition of a license from a subsidiary of Harvest Health & Recreation Inc. (the “Seller”) pursuant to which Planet 13 Florida purchased from the Seller a license to operate as a Medical Marijuana Treatment Center issued by the Florida Department of Health for $55,000,000 in cash. No other assets or liabilities were acquired. Licensed Medical Marijuana Treatment Centers (“MMTCs”) are vertically integrated and the only businesses in Florida authorized to dispense medical marijuana cannabis to qualified patients and caregivers. MMTCs are authorized to cultivate, process, transport and dispense medical marijuana. As of September 24, 2021, there were 22 companies with MMTC licenses with 370 dispensing locations across Florida. License holders are not subject to restrictions on the number of dispensaries that may be opened or on the number or size of cultivation and processing facilities they may operate.

The following table presents the inter-corporate relationships between us and our subsidiaries as at the date hereof.

Subsidiaries of Company	Ownership and control	Description
MM Development Company, Inc.	100%	Licensed Nevada cannabis operations
BLC Management Company, LLC	100%	Management / Holding Entity
LBC CBD, LLC	100%	CBD products / sales company
BLC NV Food, LLC	100%	Holding company for By The Slice, LLC
By The Slice, LLC	100%	Subsidiary of BLC NV Food, LLC, holdings restaurant and retail operations
Newtonian Principles, Inc.	100%	Licensed California cannabis operations
Planet 13 Illinois, LLC	49%	Applicant entity for Illinois dispensary license in Chicago region
Planet 13 Florida, Inc.	100%	Holding company for Florida cannabis license
Planet 13 Chicago, LLC	100%	Holding entity for prospective Illinois lease(s)
MM Development MI, Inc.	100%	Inactive shelf corporation
MM Development CA, Inc.	100%	Inactive shelf corporation

Our registered office is located at 10th floor, 595 Howe St., Vancouver, BC V6C 2T5, and our head office is located at 2548 West Desert Inn Road, Suite 100, Las Vegas, Nevada 89109.

History of the Company

We were incorporated under the Canada Business Corporations Act (“CBCA”) on April 26, 2002 under the name “High Income Preferred Shares Corporation.” On October 18, 2010, Wombat Investment Trust acquired control of us and on January 1, 2011, we changed our name to “Carpincho Capital Corp.” (“Carpincho”).

MM Development Company, Inc. (“MMDC”), now one of our wholly owned subsidiaries, was formed on March 20, 2014 as a Nevada limited liability company under the name MM Development Company, LLC (“MMDC LLC”) with the mission to provide compassionate, dignified and affordable access to cannabis, cannabis concentrates and cannabis-infused products to approved customers in the State of Nevada. MMDC LLC underwent a statutory conversion to a Nevada corporation and became MMDC on March 14, 2018. On June 11, 2018, MMDC completed a reverse-take-over (“RTO” or “Business Combination”) transaction of Carpincho and filed Articles of Amendment to effect (i) a consolidation of its share capital on a 0.875 (new) for one (1) old basis; (ii) a name change from “Carpincho Capital Corp.” to “Planet 13 Holdings Inc.”; and (iii) the creation of a new class of convertible, class A restricted voting shares (the “Restricted Voting Shares”). The Restricted Voting Shares were convertible into common shares of the Company (the “Common Shares”) at the option of the holders on a share-for-share basis.

On May 31, 2018, the Nevada State Department of Taxation (“DOT”), the agency which regulates cannabis operations in Nevada, approved the transfer of MMDC’s cultivation production and dispensary licenses to us.

On June 26, 2019, we continued out of the jurisdiction of Canada under the CBCA into the jurisdiction of the Province of British Columbia under the Business Corporations Act (British Columbia) (“BCBCA”). On August 12, 2019, our wholly owned subsidiary 10653918 Canada Inc. (“Finco”) was continued out of the jurisdiction of Canada under the CBCA into the jurisdiction of the Province of British Columbia under the BCBCA and on September 24, 2019, we completed a short-form vertical amalgamation with Finco (the “Short Form Amalgamation”). The Short Form Amalgamation was undertaken to simplify our corporate structure and to obtain certain administrative and financial reporting efficiencies. No securities were issued in connection with the Short Form Amalgamation.

Prior to the completion of the Business Combination, the only active business operations of Carpincho was to carry on activities as a venture capital company seeking assets or businesses with good growth potential to merge with or acquire. Following the Business Combination, we have continued the business of MMDC.

2018 Financings

Prior to 2018, MMDC was largely financed by its founders Robert Groesbeck and Larry Scheffler, and companies controlled by them, through a combination of cash contributions classified as debt with accrued interest exceeding US$6,600,000 and reinvestment of operating proceeds.

On January 1, 2018, Messrs. Groesbeck and Scheffler converted an aggregate of US$3,334,304 of their controlled entity debts to equity in MMDC and Chris Wren, Vice President of Operations of MMDC, contributed valuable intellectual property, including genetic strains, cultivation processes, and manufacturing processes, to MMDC in return for a 6% interest in MMDC. The foregoing resulted in MMDC issuing to such persons, in the aggregate, 25,300 class A common voting shares of MMDC and 49,700,000 class B common non-voting shares of MMDC which were subsequently converted into 25,300,000 Common Shares and 49,700,000 Restricted Voting Shares, respectively, on closing of the Business Combination.

On October 15, 2015, an original member of MMDC LLC, Ollehea, LLC, requested that MMDC LLC repurchase its interest as allowed under an operating agreement then in effect. Consequently, the remaining members of MMDC LLC at the time agreed to issue promissory notes to Ollehea on behalf of the MMDC LLC in the amount of US$101,997 each to satisfy the repurchase requirement. The notes were repaid by us on July 9, 2018.

2018 Subscription Receipt Offering

Over the course of three tranches on April 26, May 18 and May 23, 2018, Finco completed private placements of subscription receipts (the “Subscription Receipts”) at a price of C$0.80 per Subscription Receipt for aggregate gross proceeds of approximately C$25.1 million (the “Subscription Receipt Offering”), the brokered portion of which was conducted by a syndicate of agents co-led by Beacon Securities Limited and Canaccord Genuity Corp. and including Haywood Securities Inc. (collectively, the “Agents”). The proceeds from the Subscription Receipt Offering, less certain expenses, were placed into escrow on completion of the Subscription Receipt Offering. In connection with the completion of the Business Combination, the Subscription Receipts were converted on a one-for-one basis into a total of 31,458,300 common shares of Finco and 15,729,150 common share purchase warrants of Finco, which upon completion of the acquisition of Finco by us were exchanged for an equal number of Common Shares and Common Share purchase warrants (the “Common Share Warrants”), respectively, and the escrowed proceeds from the Subscription Receipt Offering, less the commission of the Agents and certain fees and expenses, were released from escrow to us. Each Common Share Warrant may be exercised for one Common Share at an exercise price of C$1.40 for a period of 24 months from the date of issue. In consideration for services rendered, the Agents were paid a cash commission equal to 6% of the gross proceeds of the Subscription Receipt Offering and issued 1,485,645 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant entitled the holder thereof to purchase one Common Share at an exercise price of C$0.80 until June 11, 2020.

2018 Bought Deal Offering

On December 4, 2018, we issued 8,735,250 units (each, a “Unit”) at a price of C$3.00 per Unit and 425,000 Common Share Warrants (the “Over-Allotment Warrants”) for a price of C$0.44 per Over-Allotment Warrant for aggregate gross proceeds of C$26,392,750 pursuant to a bought deal offering (the “2018 Bought Deal Offering”). The 2018 Bought Deal Offering was led by Beacon Securities Limited and included Canaccord Genuity Corp and Cormark Securities Inc. (collectively, the “2018 Bought Deal Underwriters”). Each Unit was comprised of one Common Share and one-half of one Common Share purchase warrant (each whole warrant, a “Unit Warrant” and, together with the Over-Allotment Warrants, the “2018 Bought Deal Warrants”). Each 2018 Bought Deal Warrant entitled the holder to purchase one Common Share at an exercise price of C$3.75 for a period of 36 months following the closing of the 2018 Bought Deal Offering unless earlier accelerated by us pursuant to the terms thereof. On December 23, 2020, we announced that we had elected to accelerate the expiry date of the outstanding 2018 Bought Deal Warrants to January 28, 2021.

As consideration for services rendered, the 2018 Bought Deal Underwriters were paid a cash commission equal to 6.0% of the gross proceeds of the 2018 Bought Deal Offering and issued compensation options equal to 6% of the number of Units and Over-Allotment Warrants sold (the “Compensation Options”). Each Compensation Option entitled the holder thereof to purchase one Common Share at an exercise price of C$3.00 for a period of 24 months following the closing of the 2018 Bought Deal Offering. We recorded share issuance costs of C$1,536,302.

2019 Formation of Non-Operational Entities

In 2019, we formed MM Development MI, Inc. and Planet 13 Illinois, LLC for the purpose of state and local cannabis applications, and LBC CBD, LLC for the purpose of marketing and selling our cannabidiol (“CBD”) line of products. We also formed BLC NV Food, LLC in January 2020, for the purpose of potential lounge, restaurant, and catering opportunities, and submitted restricted license applications to local jurisdictions in Nevada. These projects are non-operational as at the date hereof, and as material information develops related to each entity, it will be disclosed at the appropriate time and manner by us.

2020 Acquisitions and Financing, Re-Opening Medizin Dispensary

Santa Ana Acquisition

On May 20, 2020, we acquired all of the issued and outstanding common stock (the “Newtonian Shares”) of Newtonian Principles Inc. (“Newtonian”) (the “Santa Ana Acquisition”), resulting in our acquiring a provisional cannabis retail license, adult use issued by the State of California Bureau of Cannabis Control (the “California License”) and a regulatory safety permit issued by the City of Santa Ana (the “Santa Ana Permit”), which were both held by Newtonian, and a 30-year lease for a dispensary in Santa Ana, California (the “Santa Ana Premises”) along with certain other assets (collectively, the “Warner Assets”) from Warner Management Group, LLC (“Warner”). Newtonian had no operations at the time of the Santa Ana Acquisition. We issued 3,940,932 Restricted Voting Shares (the “Santa Ana Consideration Shares”), representing an agreed value of US$4,000,000, to certain vendors in consideration for the Newtonian Shares, and paid Warner US$1,000,000 in cash and cancelled an interim buildout loan to Warner in consideration for the Warner Assets.

The Santa Ana Consideration Shares were subject to a four-month and one day hold period under Canadian securities laws and were subject to a lock-up whereby 1/8 of the Santa Ana Consideration Shares were released from lock-up each month beginning on September 22, 2020.

On September 25, 2020, Newtonian received a Regulatory Safety Permit Phase 1 approval from the City of Santa Ana for distribution activities at the Santa Ana Premises. On June 18, 2021, Newtonian received both a Commercial Cannabis Adult-Use Retail Sales and a Commercial Cannabis Distribution Regulatory Safety Permit Phase 2 approval from the City of Santa Ana, and on June 21, 2021, received a California Adult-Use and Medicinal – Distributor License.

In mid-June 2021, we completed the build-out of the Planet 13 OC Superstore dispensary and distribution facility, and opened the facility for California State and the City of Santa Ana licensed cannabis sales and distribution starting July 1, 2021.

WCDN Acquisition

On July 17, 2020, we entered into an asset purchase agreement (the “WCDN Asset Acquisition Agreement”) with West Coast Development Nevada, LLC (“WCDN”), W The Brand, LLC, and R. Scott Coffman, pursuant to which we, through MMDC, acquired cannabis inventory, equipment and tenant improvements located in a 25,000 square feet facility at 4801 West Bell Drive, Las Vegas, Nevada 89118 (the “WCDN Acquisition Facility”), which has the ability to expand to 45,000 square feet (the “WCDN Acquisition”). The purchase price for the asset purchase was US$4.1 million and consisted of US$1.156 million in cash for the inventory and US$3 million (US$0.5 million cash and US$2.5 million of Common Shares, resulting in the issuance of 1,374,833 Common Shares (the “WCDN Consideration Shares”) based on a 10-day volume weighted average price of the Common Shares as of the close of trading on July 16, 2020) for the operating assets and licenses. The WCDN Consideration Shares were held in escrow until the Second Closing (as defined herein). The WCDN Acquisition allowed us to solidify our vertical integration in Nevada. The privileged licenses included medical and adult-use cultivation and production licenses in unincorporated Clark County, and these licenses were transferred to our existing Nevada subsidiary, MMDC, to be operated on the same terms and subject to the same oversight provided at MMDC’s current production and cultivation operations in unincorporated Clark County, Nevada.

The transaction was scheduled to close in two parts, the first closing being cash transferred for the equipment and cannabis inventory which occurred on July 17, 2020, and the second closing (the “Second Closing”) being contingent on the approval to transfer the license and receipt of the cultivation and production licenses from the State of Nevada’s Cannabis Control Board (the “CCB”). On August 25, 2020, the CCB conditionally approved the transfer of the cultivation and production licenses to MMDC, and on September 3, 2020, MMDC received the cultivation and production licenses pursuant to a letter from the CCB and certificates issued on November 3, 2020. By way of an October 12, 2020 letter from the CCB, MMDC received a conditional distribution license from WCDN. The CCB later revisited that letter, claimed it was issued unintentionally or in error, and by CCB public hearing approved the transfer of the conditional distribution license from WCDN to MMDC on December 18, 2020. The approval of the conditional distribution license was confirmed in a letter from the CCB dated January 4, 2021. This is a conditional permit, and no certificate will be available until receipt of a final inspection by the CCB on or prior to February 5, 2022.

On September 11, 2020, we mutually agreed with WCDN that the receipt by MMDC of a business license issued by unincorporated Clark County which would permit us to conduct business in Clark County (the “Clark County Business License”) was a necessary condition precedent to the Second Closing. MMDC received the Clark County Business License and subsequently completed the Second Closing on November 27, 2020, at which time WCDN Consideration Shares were released from escrow to WCDN.

Concurrent with the first closing of the WCDN Acquisition, RX Land, LLC (“RX Land”), an entity owned by Robert Groesbeck and Larry Scheffler (our co-chief executive officers, collectively the “Co-CEOs” and each a “Co-CEO”), acquired the WCDN Acquisition Facility for US$3.3 million and entered into a lease agreement with WCDN in respect of such facility (the “Initial West Bell Lease”). In accordance with the terms of the WCDN Asset Acquisition Agreement and approvals by our independent directors, WCDN assigned the Initial West Bell Lease to MMDC on November 25, 2020, and MMDC subsequently entered into an amending agreement with RX Land on November 27, 2020, to amend certain terms of such lease agreement including increasing the lease payments, extending the duration of the lease and, if desired, allowing for second floor installation by MMDC without a corresponding lease rate increase due to an increase in facility size.

July 2020 Bought Deal Offering

On July 3, 2020, we completed bought deal financing for aggregate gross proceeds of C$11,521,850 (the “July 2020 Bought Deal”) pursuant to which an aggregate of 5,359,000 units (each, a “July 2020 Bought Deal Unit”) of the Company were sold at a price of C$2.15 per July 2020 Bought Deal Unit. Each July 2020 Bought Unit consisted of one Common Share and one-half (1/2) of one Common Share purchase warrant (each whole warrant, a “July 2020 Bought Deal Warrant”). Each July 2020 Bought Deal Warrant entitles the holder thereof to acquire one Common Share at an exercise price of C$2.85 per Common Share until July 3, 2022.

The underwriters received a cash commission equal to 6.0% of the gross proceeds from the sale of the July 2020 Bought Deal Units. The underwriters also received compensation options (each a “July 2020 Bought Deal Compensation Option”) equal to 6.0% of the number of July 2020 Bought Deal Units sold. Each July 2020 Bought Deal Compensation Option entitles the underwriters to purchase one Common Share at a price of C$2.15 until July 3, 2022.

September 2020 Bought Deal Offering

On September 10, 2020, we completed our previously announced bought deal financing for aggregate gross proceeds of C$23,019,550 (the “September 2020 Bought Deal”) pursuant to which an aggregate of 6,221,500 units (each, a “September 2020 Bought Deal Unit”) of the Company were sold at a price of C$3.70 per September 2020 Bought Deal Unit. Each September 2020 Bought Unit consisted of one Common Share and one-half (1/2) of one Common Share purchase warrant (each whole warrant, a “September 2020 Bought Deal Warrant”). Each September 2020 Bought Deal Warrant entitles the holder thereof to acquire one Common Share at an exercise price of C$5.00 per Common Share until September 10, 2022.

The underwriters received a cash commission equal to 6.0% of the gross proceeds from the sale of the September 2020 Bought Deal Units. The underwriters also received compensation options (each a “September 2020 Bought Deal Compensation Option”) equal to 6.0% of the number of September 2020 Bought Deal Units sold. Each September 2020 Bought Deal Compensation Option entitles the underwriters to purchase one Common Share at a price of C$3.70 until September 10, 2022.

November 2020 Bought Deal Offering

On November 5, 2020, we completed our previously announced bought deal financing for aggregate gross proceeds of C$28,604,625 (the “November 2020 Bought Deal”) pursuant to which an aggregate of 6,698,750 units (each, a “November 2020 Bought Deal Unit”) of the Company were sold at a price of C$4.30 per November 2020 Bought Deal Unit. Each November 2020 Bought Unit consisted of one Common Share and one-half (1/2) of one Common Share purchase warrant (each whole warrant, a “November 2020 Bought Deal Warrant”). Each November 2020 Bought Deal Warrant entitles the holder thereof to acquire one Common Share at an exercise price of C$5.80 per Common Share until November 5, 2022.

The underwriters received a cash commission equal to 6.0% of the gross proceeds from the sale of the November 2020 Bought Deal Units. The underwriters also received compensation options (each a “November 2020 Bought Deal Compensation Option”) equal to 6.0% of the number of November 2020 Bought Deal Units sold. Each November 2020 Bought Deal Compensation Option entitles the underwriters to purchase one Common Share at a price of C$4.30 until November 5, 2022.

Medizin Re-opening

MMDC applied for dispensary licenses in Nevada pursuant to a competitive application process in September 2018, and was notified that no licenses were awarded in December 2018. On information known at that time, MMDC filed a lawsuit against the State of Nevada, along with a significant majority of similarly denied applicants. After the first week of trial in July 2020 concerning that litigation pending from December 2018, MMDC entered into a settlement agreement with the State of Nevada, and defendants in intervention to receive a license in unincorporated Clark County to reopen the Medizin location (the “Nevada License Settlement”). On July 31, 2020, the Nevada Tax Commission convened and approved the signed Nevada License Settlement and requested that the CCB, which had authority over Nevada-licensed cannabis businesses as of July 1, 2020, also convene and approve the settlement. On August 7, 2020, the CCB convened and approved the Nevada License Settlement. Pursuant to the Nevada License Settlement, our subsidiary MMDC agreed to a release and waiver of its claims against the State of Nevada and the defendants in intervention, in return for MMDC receiving the provisional unincorporated Clark County adult-use dispensary license originally received by Nevada Organic Remedies in December 2018. Pursuant to a letter dated September 3, 2020, the CCB transferred the conditional Clark County dispensary license to MMDC. On November 20, 2020, we opened the Medizin store location, having received CCB final inspection approvals and a Clark County business license.

2021 Bought Deal Offering, Opening of Planet 13 OC Superstore, Illinois Conditional license award and Florida License Purchase Agreement

On February 2, 2021, we completed a bought deal financing for aggregate gross proceeds of C$69,028,750 (the “February 2021 Bought Deal”) pursuant to which an aggregate of 9,861,250 units (each, a “February 2021 Bought Deal Unit”) of the Company were sold at a price of C$7.00 per February 2021 Bought Deal Unit. Each February 2021 Bought Unit consisted of one Common Share and one-half (1/2) of one Common Share purchase warrant (each whole warrant, a “February 2021 Bought Deal Warrant”). Each February 2021 Bought Deal Warrant entitles the holder thereof to acquire one Common Share at an exercise price of C$9.00 per Common Share until February 2, 2023.

The underwriters received a cash commission equal to 6.0% of the gross proceeds from the sale of the February 2021 Bought Deal Units. The underwriters also received compensation options (each a “February 2021 Bought Deal Compensation Option”) equal to 6.0% of the number of February 2021 Bought Deal Units sold. Each February 2021 Bought Deal Compensation Option entitles the underwriters to purchase one Common Share at a price of C$7.00 until February 2, 2023.

Following completion of tenant improvement construction in the first and second quarters of 2021, on July 1, 2021 the our subsidiary, Newtonian, opened the Planet 13 OC Superstore, a California licensed and City of Santa Ana permitted cannabis dispensary and distribution facilities, at 25,600 and 6,300 square feet, respectively.

On August 5, 2021, our subsidiary, Planet 13 Illinois, which is owned 49% by us and 51% by Frank Cowan, a resident of Illinois, was a lottery winner for a Social-Equity Justice Involved Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Department of Financial and Professional Regulation in the State of Illinois. We intend to launch a dispensary in the downtown Chicago area and anticipate that it will be operational in late 2022.

On October 1, 2021, Planet 13 Florida completed the acquisition of a license from the Seller pursuant to which Planet 13 Florida purchased from the Seller a license to operate as a MMTC issued by the Florida Department of Health for $55,000,000 in cash.

Overview of the Company’s Cannabis Business

Introduction

On November 1, 2018, we opened the Planet 13 Las Vegas Superstore, less than 500 feet from the Trump Tower and less than 2,500 feet from the Wynn hotel. MMDC entered into an arm’s length agreement to lease a 100,000 square foot building to house its Planet 13 Las Vegas Superstore dispensary and corporate office space in a Phase I build-out of the location. In October 2019, we opened a 4,500-square-foot coffee shop and pizzeria in the Planet 13 Las Vegas Superstore. In 2020, the coffee shop and pizzeria was renamed as the Trece Eatery + Spirits restaurant, owned and operated by us through our subsidiaries. Future plans include the opening of a possible consumption lounge and a non-cannabis retail facility. The Planet 13 Las Vegas Superstore lease has a seven-year term with two seven-year renewal options and we have a right-of-first-refusal on any sale of the building. Prior to opening the Planet 13 Las Vegas Superstore, we sold both medical and recreational products from our then existing facilities. On April 1, 2019, we entered into a lease and sub-license agreement for an additional 4.17 acres of land directly adjacent to the Planet 13 Las Vegas Superstore for additional parking. The term of the April 1, 2019 lease and sub-license runs concurrent with the Planet 13 Las Vegas Superstore lease.

We may in the future build a 100,000 square foot greenhouse for cultivation and an approximately 43,000 square foot processing/production facility located in Beatty, Nevada, approximately 120 miles north-west of Las Vegas. The Beatty location is licensed and zoned for up to three million square feet of greenhouse space for the cultivation of cannabis. The site, which is owned by us, has been permitted and is ready for construction to begin. We are evaluating the timing of construction based on a current excess of supply of wholesale cannabis product in the State of Nevada and in the event of future federal legalization. We expect to revisit our expansion plans for the Beatty facility once the wholesale market in Nevada stabilizes.

Cultivation

We, through MMDC, cultivate our cannabis products at: (i) a 16,100 square foot leased facility with a perpetual harvest cycle located in Las Vegas (Clark County); (ii) a 500 square foot facility in Nye County where we conduct product research and development and genetics testing, and (iii) a 25,000 square foot leased facility, which is currently undergoing a 20,000 square foot expansion that will bring the total size of the facility to 45,000 square feet, that houses both cultivation and production facilities located in Las Vegas (Clark County).

Production

Since October 2019, we produce our cannabis products in (i) a 14,000 square foot leased facility in Las Vegas (Clark County) co-located at the Planet 13 Las Vegas Superstore, expanded in Q3 2021 to 18,500 square feet, and separate from the 16,100 square foot cultivation and distribution facility in Las Vegas (Clark County); (ii) a facility in Nye County owned by us and co-located with cultivation operations, and (iii) a 25,000 square foot leased facility, currently undergoing an expansion to add an additional 20,000 square feet to the facility for cultivation and production located in Las Vegas (Clark County). From prior to opening the 18,500 square foot production facility that is co-located in the Planet 13 Las Vegas Superstore complex and up to the end of October 2019, we produced our cannabis products at a separate 4,750 square foot facility leased in Las Vegas (Clark County). All cannabis production licenses held by us in the State of Nevada have been issued to MMDC.

Distribution

We currently operate Nevada distribution activities, primarily for the transport of our products between our cultivation, production, and dispensing operations, out of our 16,100 square foot cultivation facility located in Las Vegas (Clark County). In addition to self-distribution services, the distribution license is used for the delivery of our wholesale products to licensed Nevada-state cannabis retailers. All distribution licenses held by us in the State of Nevada have been issued to MMDC.

We currently operate California distribution activities at our licensed facility in Santa Ana, California to receive cannabis products purchased from our vendors prior to placement in the Planet 13 OC Superstore.

Dispensing

We have three Nevada dispensary licenses, one for medical and two for the sale of adult-use product, and an adult-use California dispensary license. The Planet 13 Las Vegas Superstore, approximately 23,000 square feet of retail space located adjacent to the Las Vegas Strip, houses one medical and one adult-use license. The other adult-use license operates out of the Medizin-branded store in Clark County, a 2,300 square foot retail facility. The Planet 13 Las Vegas Superstore has the capacity to serve between 2,000 to 3,000 customers per day through its new, enhanced dispensary. We intend to build out the balance of the Planet 13 Las Vegas Superstore location with ancillary services such as a potential cannabis lounge in a segregated area of the facility where patrons will be able to consume products that have been purchased at the dispensary. Lounge facility build-out and operation are pending state and county regulation and ordinance drafting and subsequent licensing of the facility. The Planet 13 Las Vegas Superstore also houses our corporate offices. The Planet 13 OC Superstore, with approximately 15,000 square feet of retail space is located in Santa Ana.

In March 2020, per executive order of Nevada’s Governor Steve Sisolak in response to the public health crisis arising from the novel strain of the coronavirus known as SARS-CoV-2 which is responsible for the coronavirus disease known as COVID-19, all Nevada dispensaries were mandated as an essential service but were restricted to delivery only, with no curb-side pickup or in-store sales permitted until such delivery-only order was lifted on May 30, 2020, when the Planet 13 Las Vegas Superstore re-opened with no more than ten customers allowed in the store at any given time. During the delivery-only restricted operational period, we increased our delivery vehicle fleet to 29 vehicles, and upon the re-opening of the Planet 13 Las Vegas Superstore, we were able to meet the increased home-delivery requests by keeping 20 of those vehicles in constant operation. On June 4, 2020, the State of Nevada increased the allowed occupancy of all businesses in Nevada to a maximum of 50% of the fire rated capacity of the location. We are currently adhering to the guidelines set by the State of Nevada and are able to serve 268 customers in the Planet 13 Las Vegas Superstore at one time under the revised capacity limits set out as of June 4, 2020. On November 24, 2020, Governor Sisolak instituted a Nevada state-wide “pause”, which limited certain industries such as gaming and restaurants, to 25% capacity, but did not further restrict the 50% fire rated capacity limits imposed on cannabis establishments. On December 4, 2020, Nevada announced a COVID-19 vaccine allocation plan, and on December 14, 2020, the first shipment of vaccines was received in Nevada and began distribution under the Nevada allocation plan. The Nevada state-wide “pause” was extended on December 13, 2020, and again for an additional 30-days on January 11, 2021. On March 4, 2021, Nevada announced a “Roadmap to Recovery” relaxing the restrictions in phases and a release from State-level oversight to local jurisdictions in May 2021. As of June 1, 2021, businesses have been allowed to operate at 100% capacity so long as they adhere to both state and local COVID-19 operating protocols, which, currently include maintaining social distancing and the requirement to wear masks while indoors.

We have identified that regulatory permits, applications, and submittals are taking longer for Nevada and California regulators to process, as those jurisdictions at the state and local levels have redesignated resources towards COVID-19 response, furloughed regulatory employees, or maintained limited office hours for submissions. As of the date hereof, we do not yet know the duration or magnitude of the COVID-19 pandemic but will continue to operate our core business of dispensing cannabis to adult-use and medical customers in accordance with the federal and state guidelines and restrictions. The current COVID-19 protocols in California includes a general industry safety order by Cal/OSHA that masks are required statewide for unvaccinated individuals in indoor public settings and workplaces.

On July 31, 2020, the Nevada Tax Commission convened and approved the Nevada License Settlement, we and other plaintiffs, and intervening defendants in connection with the DOT License Matter (as defined herein). While the Nevada Tax Commission approved the settlement, it also requested that the CCB, which had authority over Nevada-licensed cannabis businesses as of July 1, 2020, also convene and approve of the settlement. On August 7, 2020, the CCB convened and approved the Nevada License Settlement. Pursuant to the Nevada License Settlement, our subsidiary MMDC agreed to a release and waiver of its claims against the State of Nevada and the defendants in intervention, in return for MMDC receiving the provisional unincorporated Clark County adult-use dispensary license originally received by Nevada Organic Remedies in December 2018. As a further condition of the settlement, many of the enjoined parties were re-categorized by the State of Nevada, and thus no longer subject to a preliminary injunction. In a letter dated September 3, 2020, the CCB transferred the conditional Clark County dispensary license to MMDC. On November 20, 2020, we opened the Medizin store location, having received CCB final inspection approvals and the Clark County Business License.

Licenses

We are licensed to operate in the State of Nevada as a Retail and Medical Cultivator, a Retail and Medical Product Manufacturer and a Retail and Medical Dispensary. In the State of Nevada, “Retail” refers to the recreational cannabis market. Please see Table 1 below for a list of the licenses issued to us in respect of our operations in Nevada. Under applicable laws, the licenses permit us to cultivate, manufacture, process, package, sell, and purchase marijuana pursuant to the terms of the licenses, which were formerly issued by the DOT under the provisions of Nevada Revised Statutes section 453A through June 30, 2020 and issued by the CCB under NRS 678A, B and D starting July 1, 2020. All licenses are independently issued for each approved activity for use at our facilities and retail locations in Nevada.

All Nevada marijuana establishments must register with the CCB. If applications contain all required information and after vetting by officers, establishments are issued a marijuana establishment registration certificate. In a local governmental jurisdiction that issues business licenses, the issuance by the CCB of a marijuana establishment registration certificate is considered provisional until the local government has issued a business license for operation and the establishment is in compliance with all applicable local governmental ordinances. Final registration certificates are valid for a period of one year and are subject to annual renewals after required fees are paid and the business remains in good standing. It is important to note conditional licenses do not permit the operation of any commercial or medical cannabis activity. Only after a conditional licensee has gone through necessary state and local inspections, if applicable, and has received a final registration certificate from the CCB may an entity engage in cannabis business operation. The CCB limits application for all licenses.

On May 20, 2020, pursuant to the Santa Ana Acquisition, we acquired a 100% interest in Newtonian which holds the California Adult-Use Dispensary License (the “California License”), permitting us to sell cannabis goods to customers at the Santa Ana Premises. Newtonian also holds the Santa Ana Regulatory Permit for Commercial Cannabis Adult-use Sales for the Santa Ana Premises. We opened the Planet 13 OC Superstore dispensary on July 1, 2021 and commenced retail sales operations under the California License and also launched distribution activities at the Santa Ana Premises under the California State distribution license. Both licenses were active but were not used in operations until completion of tenant improvements and are now in operation since July 1, 2021.

On August 5, 2021, our subsidiary, Planet 13 Illinois, which is owned 49% by us and 51% by Frank Cowan, a resident of Illinois, was a lottery winner for a Social-Equity Justice Involved Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Department of Financial and Professional Regulation in the State of Illinois (“IDFPR”). As of the date of this registration statement, the license has not been issued by the IDFPR. We intend to launch a superstore dispensary in the downtown Chicago area and anticipate that it will be operational in late 2022.

On October 1, 2021, through our subsidiary Planet 13 Florida., we acquired a license from Harvest Health & Recreation Inc. issued by the Florida Department of Health to operate as a MMTC in the State of Florida for US$55 million in cash. Licensed MMTCs are vertically integrated and the only businesses in Florida authorized to dispense medical marijuana to qualified patients and caregivers. MMTCs are authorized to cultivate, process, transport and dispense medical marijuana. As of September 24, 2021, there were 22 companies with MMTC licenses with 370 dispensing locations across Florida. License holders are not subject to restrictions in the number of dispensaries that may be opened or on the number or size of cultivation and processing facilities they may operate.

Table 1: Licenses

Holding Entity	Permit/License	Jurisdiction	Expiration/Renewal Date	Description
MMDC	Medical/Retail	Clark County, NV	June 30, 2022	Dispensary
MMDC	Retail	Clark County, NV	November 30, 2022	Dispensary
MMDC	Medical/Retail	Clark County, NV	June 30, 2022	Cultivation
MMDC	Medical/Retail	Clark County, NV	June 30, 2022	Production
MMDC	Medical/Retail	Nye County, NV	June 30, 2022	Cultivation
MMDC	Medical/Retail	Clark County, NV	June 30, 2022	Cultivation
MMDC	Medical/Retail	Clark County, NV	June 30, 2022	Production
MMDC	Medical	Nye County, NV	June 30, 2022	Production
MMDC	Retail	Nye County, NV	December 31, 2021	Production
MMDC	Distribution	Nevada	March 31, 2022	Distribution
MMDC	Distribution	Nevada	February 5, 2022	Distribution1
Newtonian	Adult-Use Retailer	Santa Ana, CA	April 17, 2022	Dispensary
Newtonian	Adult-Use / Medical Distribution	Santa Ana, CA	June 11, 2022	Distribution
Planet 13 Florida	MMTC	Florida	October 25, 2022	MMTC
Planet 13 Illinois	Adult-Use Dispensing	Chicago-Naperville-Elgin	TBD	Dispensary2

Notes:

(1)

Transferred from WCDN to MMDC as being associated with the former WCDN cultivation and production facility, approved by CCB hearing on December 18, 2020, as confirmed in the CCB letter dated January 4, 2021. This is a conditional permit, and no certificate will be available until receipt of a final inspection by the CCB on or prior to February 5, 2022.

(2)

As of the date of this registration statement, the conditional license has not been issued by the IDFPR.

Uses of Cannabis

Cannabis can be vaporized, smoked or ingested to alleviate pain and other ailments. Since 2014, we have been cultivating and selling cannabis within the price range from US$7.50 to US$14.50 per gram, depending on the strain. Typically, growth time and strain yield will determine whether a strain is low or high priced. Very particular strains may be priced higher than the given range, but this would be the exception.

We offer our customers a diverse range of products, including cannabis flowers, cannabis concentrates and cannabis-infused products. In total, we currently offer over 100 cannabis strains at our dispensaries, up to 20 of which are proprietary strains grown in-house, covering the entire cannabis spectrum. We believe that carrying a popular variety of strains of medical and recreational cannabis is essential to long-term success. Each strain of medical cannabis is different. Some of the factors that impact whether a particular strain may be right for a customer include levels of THC and/or CBD and whether the plant strain is a Sativa, Indica or Hybrid genetic variant.

We believe that we can gain a competitive advantage by growing high yielding strains which are good extractors and which mature in a short growing cycle while still providing medicinal benefits that are appropriate for a customer’s specific ailments or desired effects. Further, finding the right product for a customer’s condition or needs may require sampling a variety of strains, as every person is different.

Our cultivation, production, distribution and marketing business is currently focused on the medical and recreational segments, with product offerings sold through our own licensed retail dispensaries.

Principal Products and Services

We currently operate the Planet 13 Las Vegas Superstore, a 24,000 square foot licensed cannabis dispensary located near the Las Vegas Strip, from which we: (i) dispense medical (Medizin) and retail (Planet 13) product lines and provides customer experiences through entertainment features; (ii) provide the consultation, education and convenience services described below; and (iii) own and operate Trece Eatery + Spirits as well as operate a non-cannabis retail merchandise store and event space. Our principal products are cannabis and cannabis-infused items sold to consumers in the medical and retail cannabis markets in the State of Nevada. We sell more than more than 100 strains of cannabis, up to 20 of which are grown in-house by us.

Co-located with the Planet 13 Las Vegas Superstore complex, we operate a customer-viewable production facility manufacturing wholesale edible and concentrate products, include the TRENDI line, the Leaf & Vine line Dreamland Chocolates, HaHa gummies and sparkling beverages. These products are sold in-store and wholesale to 57 other dispensaries in Nevada.

We also operate the Medizin dispensary, reopened in November 2020 and operate the Planet 13 OC Superstore dispensary in Santa Ana, California on July 1, 2021.

Services

In addition to our product offerings, we offer a number of services designed to educate, spread awareness of the benefits of medical cannabis and increase customer convenience. These services include the following:

Cardholder Process Navigation. Our dispensary staff assist new patients through the medical cannabis cardholder application process. We also work with a referral network of doctors to whom they can send potential new patients in order to commence the process.

Individual Consultations. We offer one-on-one consultations for first time patients/customers who might be apprehensive about the use of cannabis as a medicinal or recreational product.

Compassionate Care Program. We offer a compassion program for eligible, cardholding veterans, offering such veterans access to our alternative healing services, regardless of financial status.

Patient Education. Trained sales associates and customer service representatives provide patient education services with a goal of providing patient education in the context of every service we offer.

Express Service. We offer customers the option to place orders in advance of arriving at the dispensary similar to pick up orders at a restaurant.

Home Delivery. We offer our customers a convenient home delivery program at our Nevada and California locations.

Curbside. We offer curbside pick up, providing an additional channel for customers to access our products and services at our Nevada and California locations.

Provision of Services

Our services are currently provided at our Planet 13 Las Vegas Superstore dispensary located at 2548 West Dessert Inn Rd, Las Vegas, Nevada, at our Medizin dispensary located at 4850 W. Sunset Rd., Ste 130, Las Vegas, Nevada, and at our Planet 13 OC Superstore located at 2400 Warner Blvd, Santa Ana, California. We also offer home delivery services through our distribution licenses that currently operate out of the Planet 13 Las Vegas Superstore and Planet 13 OC Superstore locations.

Competition

With respect to retail operations, we compete with other retail license holders across Nevada and California. In addition to physical dispensaries, we also compete with third-party delivery services which provide direct-to-consumer delivery services in Nevada and California. In terms of cultivation and production, we compete with other licensed cultivators and operators in Nevada, California, and other states in which we may operate in the future.

Other than the Nevada state cap on licenses and California local jurisdictional caps on licenses, the retail markets in Nevada and California have fewer barriers to entry and more closely reflect free market dynamics typically seen in mature retail and manufacturing industries. The growth of these markets poses a risk of increased competition. However, given that we have entered the Nevada and California cannabis market at an early stage, management views our market share as less at risk than operators without a current operating footprint.

Management also believes that there are a number of illegally operating dispensaries and cultivators in Nevada and California which serve as competition to us. We expect, however, that the majority of these illegal dispensaries and cultivators will be forced to cease operations in the near-term. See “Risk Factors”.

Components

The main raw materials and components used in the production of our products are cannabis seeds and clones, water, plant nutrients, and electricity.

Water for our Clark County operations is obtained from the municipal water system in Las Vegas, Nevada. The price of water is determined by the City of Las Vegas. Our Nye County operations are similarly part of the municipal water and waste disposal system.

Raw materials include soil, nutrients, organic integrated pest and disease management, environmental supplementation, disposable supplies, and other miscellaneous inputs, all of which are readily available from multiple sources at wholesale or lower prices.

Cycles

There have been potential seasonal fluctuations observed in the first few years of operations at the Planet 13 Las Vegas Superstore, reflective of the Las Vegas market specifically, as well as industry-wide cannabis-themed holidays and events. These potential seasonal fluctuations have been interrupted by the COVID-19 pandemic, which have presented the industry and the Planet 13 Las Vegas Superstore with a unique set of opportunities and challenges. As at the date hereof, we do not know the long-term impact that the COVID-19 pandemic will have on the previously observed trends. Our Planet 13 OC Superstore location opened July 1, 2021 and has a limited operating history. We are continuing to monitor the seasonal fluctuations at this location.

Intellectual Property

We have applied for trademarks at Nevada state and federal level, some of which are currently pending for Medizin, Planet 13, TRENDI, Leaf & Vine, HaHa, and Dreamland. In California, we have registrations for Planet 13 and Planet M. These trademarks were applied for and are designed for use on clothing, wearables, and other non-cannabis products with the intent of creating a valuable brand.

Environmental

We do not anticipate that environmental protection requirements will have a material financial or operational effect on our capital expenditures, earnings, and competitive position in the current financial year or in future years.

Human Capital

We employ approximately 600 full-time and 150 part-time employees, and anticipate that number will increase as we expand our operations in California, Florida, Illinois, and Nevada. Full time employees are distributed among several departments, including sales, management and administration, security, cultivation, operations, marketing, facilities, human resources, finance, accounting and legal. In order to ensure that the motivation, integrity and culture of our team stays strong, our Board of Directors (the “Board”) and executive team put significant focus on our human capital resources.

We are committed to diversity and to providing equal employment opportunities to all employees and applicants. This commitment extends to all of our employment practices including recruiting, hiring, training, promotions, and benefits.

Our goal is to use the highest standards in attracting and training the best talent. Our recruiting practices and decisions on whom to hire are among our most important activities. We utilize professional services, industry groups, social media, local job fairs, and educational organizations across the country to find diverse, motivated, and responsible employees. It is a requirement that all of our employees pass background checks and drug screening. To support the advancement of our employees, we offer training and development programs encouraging advancement from within. These programs include employee mentoring and one-on-one quality and regulatory training sessions overseen by our Human Resources Department and Regulatory Compliance team.

The main objective of our compensation program is to attract, retain, motivate, and reward superior employees who must operate in a quick-paced and patient-focused environment. To accomplish this, we offer a package of company-sponsored benefits to our employees. Eligibility depends on each employee’s full-time or part-time status, location, and other factors, and benefits include medical and dental plans, paid and unpaid leaves, and flexible time-off. We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. Additionally, we believe in aligned incentives and utilize share unit and stock option plans as well as annual bonuses to align the long-term compensation of eligible directors, employees, officers and contractors with our shareholders’ interests for a competitive total rewards program.

Legal and Regulatory Matters

United States Federal Law Overview

At the federal level, cannabis currently remains a Schedule I controlled substance under the U.S. Controlled Substance Act of 1970 (the “CSA”). Despite this federal prohibition, 48 states and the District of Columbia have either decriminalized or legalized adult-use and/or medical cannabis, and of the two states that have not yet decriminalized or authorized cannabis, Nebraska has decriminalized the first offense. Under U.S. 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. As such, the manufacture, importation, possession, use or distribution of cannabis remains illegal under U.S. federal law. This has created a dichotomy between state and federal law, whereby many states have elected to regulate and remove state-level penalties regarding a substance that is still illegal at the federal level.

While technically illegal, the U.S. federal government’s approach to enforcement of such laws has, at least until recently, trended toward non-enforcement. On August 29, 2013, the U.S. Department of Justice (“DOJ”) issued a memorandum known as the “Cole Memorandum” to all U.S. Attorneys’ offices (federal prosecutors). The Cole Memorandum generally directed U.S. Attorneys not to prioritize the enforcement of federal marijuana laws against individuals and businesses that rigorously comply with state regulatory provisions in states with strictly-regulated medical or adult-use cannabis programs. The Cole Memorandum, while not legally binding, assisted in managing the tension between state and federal laws concerning state-regulated marijuana businesses.

However, on January 4, 2018, the Cole Memorandum was revoked by then Attorney General Jeff Sessions. While this did not create a change in federal law - as the Cole Memorandum was not itself law - the revocation added to the uncertainty of U.S. federal enforcement of the CSA in states where cannabis use is regulated. Sessions also issued a one-page memorandum known as the “Sessions Memorandum”. This confirmed the rescission of the Cole Memorandum and explained that the Cole Memorandum was “unnecessary” due to existing general enforcement guidance as set forth in the U.S. Attorney’s Manual (the “USAM”). The USAM enforcement priorities, like those of the Cole Memorandum, are also based on the federal government’s limited resources, and include “law enforcement priorities set by the Attorney General,” the “seriousness” of the alleged crimes, the “deterrent effect of criminal prosecution,” and “the cumulative impact of particular crimes on the community.”

While the Sessions Memorandum does emphasize that marijuana is a Schedule I controlled substance and states the statutory view that it is a “dangerous drug and that marijuana activity is a serious crime,” it does not otherwise guide U.S. Attorneys that the prosecution of marijuana-related offenses is now a DOJ priority. Furthermore, the Sessions Memorandum explicitly describes itself as a guide to prosecutorial discretion. Such discretion is firmly in the hands of U.S. Attorneys in deciding whether to prosecute marijuana-related offenses. U.S. Attorneys could individually continue to exercise their discretion in a manner similar to that displayed under the Cole Memorandum’s guidance. Dozens of U.S. Attorneys across the country have affirmed their commitment to proceeding in this manner, or otherwise affirming that their view of federal enforcement priorities has not changed, although a few have displayed greater ambivalence. On November 7, 2018, Mr. Sessions tendered his resignation as Attorney General at the request of President Donald Trump. Following Mr. Sessions’ resignation, and Matthew Whitaker serving as Acting United States Attorney General, William Barr was appointed as US Attorney General on January 15, 2019. Mr. Barr stated at his confirmation hearing to the Senate Judiciary Committee that he would “not go after companies” that had relied upon the Obama-era guidance (the Cole Memorandum) that former Attorney General Jeff Sessions had rescinded in states where cannabis has been legalized. The Department of Justice under Mr. Barr did not take a formal position on federal enforcement of laws relating to cannabis.

On January 21, 2021, Joseph Biden, Jr. was sworn in as President of the United States. President Biden’s Attorney General, Merrick Garland, was confirmed by the United States Senate on March 10, 2021. It is not yet known whether the Department of Justice under President Biden and Attorney General Garland will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy. Mr. Garland indicated at a confirmation hearing before the United States Senate that it did not seem to him to be a good use of limited resources to pursue prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise. Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of marijuana 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 marijuana (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law. Currently, in the absence of uniform federal guidance, as had been established by the Cole memorandum, enforcement priorities are determined by respective United States Attorneys.

While it is too soon to determine what prosecutorial effects will be created by the rescission of the Cole Memorandum under the Trump administration and the appointment of Mr. Garland under the current administration, a nationwide “crackdown” on regulated marijuana business is unlikely. The sheer size of the cannabis industry, in addition to participation by state and local governments and investors, suggests that a large-scale enforcement operation would more than likely create unwanted political backlash for the DOJ and the current administration. It is also possible that the rescission of the Cole Memorandum could motivate Congress to reconcile federal and state laws. Regardless, marijuana remains a Schedule I controlled substance at the federal level, and the federal government of the U.S. continues to reserve the right to enforce federal law in regard to the sale and disbursement of medical or adult-use marijuana, even where state law sanctioned such sale and disbursement. From a purely legal perspective, the criminal risk today remains identical to the risk on January 3, 2018, prior to the Cole Memorandum being rescinded. It remains unclear whether the risk of enforcement has been altered.

Additionally, under U.S. federal law, it may potentially be a violation of federal anti-money laundering statutes for financial institutions to take any proceeds from the sale of marijuana or any other Schedule I controlled substance. Canadian banks are likewise hesitant to deal with cannabis companies, due to the uncertain legal and regulatory framework of the industry. Banks and other financial institutions, particularly those that are federally chartered in the U.S., could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses.

Despite these laws, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a memorandum on February 14, 2014 (the “FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned marijuana businesses in compliance with federal enforcement priorities. The FinCEN Memorandum echoed the enforcement priorities of the Cole Memorandum. Under these guidelines, financial institutions must submit a Suspicious Activity Report (“SAR”) in connection with all marijuana-related banking activities by any client of such financial institution, in accordance with federal money laundering laws. These marijuana-related SARs are divided into three categories – marijuana limited, marijuana priority, and marijuana terminated – based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively. On the same day as the FinCEN Memorandum was published, the DOJ issued a memorandum (the “2014 DOJ Memorandum”) directing prosecutors to apply the enforcement priorities of the Cole Memorandum in determining whether to charge individuals or institutions with crimes related to financial transactions involving the proceeds of marijuana-related conduct. The 2014 DOJ Memorandum has been rescinded as of January 4, 2018, along with the Cole Memorandum, removing guidance that enforcement of applicable financial crimes against state-compliant actors was not a DOJ priority.

However, former Attorney General Sessions’ revocation of the Cole Memorandum and the 2014 DOJ Memorandum has not affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself. Though it was originally intended for the 2014 DOJ Memorandum and the FinCEN Memorandum to work in tandem, the FinCEN Memorandum appears to be a standalone document which explicitly lists the eight enforcement priorities originally cited in the Cole Memorandum. As such, the FinCEN Memorandum remains intact, indicating that the Department of the Treasury and FinCEN intend to continue abiding by its guidance. However, in the United States, it is difficult for cannabis-based businesses to open and maintain a bank account with any bank or other financial institution.

In the U.S., the SAFE Banking Act of 2019, H.R. 1595 (“SAFE Banking Act”), was first introduced on March 7, 2019 and passed a vote on September 25, 2019 by the Committee of the Whole Congress, but failed to receive the support needed to pass the U.S. Senate. Generally, the act would let banks offer services to cannabis-related businesses. They could also offer services to those businesses’ employees. In both Canada and the U.S., transactions involving banks and other financial institutions are both difficult and unpredictable under the current legal and regulatory landscape. Legislative changes could help to reduce or eliminate these challenges for companies in the cannabis space and would improve the efficiency of both significant and minor financial transactions. The SAFE Banking Act re-emerged in March 2021, H.R. 1996, with more bipartisan support including with 180 cosponsors. On April 19, 2021, the House passed the re-introduced SAFE Banking Act in a bipartisan vote of 321 – 101, but it again stalled in the Senate. While there is strong support in the public and within Congress for the SAFE Banking Act and similar legislation, there can be no assurance that it will be passed as presently proposed or at all.

Although the Cole Memorandum and 2014 DOJ Memorandum have been rescinded, Congress has used the Rohrabacher-Leahy Amendment as a rider provision in the FY 2015, 2016, 2017, 2018, 2019 2020, and 2021 Consolidated Appropriations Acts and accompanying stopgap spending measures to prevent the federal government from using congressionally appropriated funds to enforce federal marijuana laws against regulated medical marijuana actors operating in compliance with state and local law. President Joe Biden became the first president to propose a budget with the Rohrabacher-Farr Amendment included. On September 30, 2021 and on December 3, 2021 the amendment was renewed through the signing of a stopgap spending, and remains effective through February 18, 2022.

Despite the legal, regulatory, and political obstacles the marijuana industry currently faces, the industry has continued to grow. It was anticipated that the federal government would eventually repeal the federal prohibition on cannabis and thereby leave the states to decide for themselves whether to permit regulated cannabis cultivation, production and sale, just as states are free today to decide policies governing the distribution of alcohol or tobacco.

Given current political trends, however, these developments are considered unlikely to materialize in the near-term. As an industry best practice, despite the recent rescission of the Cole Memorandum, we intend to abide by the following to ensure compliance with the guidance provided by the Cole Memorandum:

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ensure that our operations are compliant with all licensing requirements as established by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions;

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ensure that our cannabis related activities adhere to the scope of the licensing obtained (for example, in states where cannabis is permitted only for adult-use, the products are only sold to individuals who meet the requisite age requirements);

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implement policies and procedures to ensure that cannabis products are not distributed to minors;

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implement policies and procedures in place to ensure that funds are not distributed to criminal enterprises, gangs or cartels;

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implement an inventory tracking system and necessary procedures to ensure that such compliance system is effective in tracking inventory and preventing diversion of cannabis or cannabis products into those states where cannabis is not permitted by state law, or cross any state lines in general;

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ensure that our state-authorized cannabis business activity is not used as a cover or pretense for trafficking of other illegal drugs, is engaged in any other illegal activity or any activities that are contrary to any applicable anti-money laundering statutes; and

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ensure that our products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.

In addition, we may (and frequently do) conduct background checks to ensure that the principals and management of our operating subsidiaries are of good character and have not been involved with other illegal drugs, engaged in illegal activity or activities involving violence, or use of firearms in cultivation, manufacturing or distribution of cannabis. We also conduct ongoing reviews of the activities of our cannabis businesses, the premises on which they operate and the policies and procedures that are related to possession of cannabis or cannabis products outside of the licensed premises, including the cases where such possession is permitted by regulation.

Nevada State Law Overview

In 2000, Nevada voters passed a medical marijuana initiative allowing physicians to recommend cannabis for an inclusive set of qualifying conditions including chronic pain and created a limited non-commercial medical marijuana patient/caregiver system. Senate Bill 374, which passed the legislature and was signed by the Nevada Governor in 2013, expanded this program and established a for-profit regulated medical marijuana industry.

In 2014, Nevada accepted medical marijuana business applications and a few months later the Nevada Division of Public and Behavioral Health (the “Division”) approved 182 cultivation licenses, 118 licenses for the production of edibles and infused products, 17 independent testing laboratories, and 55 medical marijuana dispensary licenses. The number of dispensary licenses was then increased to 66 by legislative action in 2015. The application process was merit-based, competitive, and is currently closed.

Nevada has a medical marijuana program and passed adult-use legalization through the ballot box in November 2016. Under Nevada’s adult-use marijuana law, the state licensed marijuana cultivation facilities, product manufacturing facilities, distributors, retail stores and testing facilities. For the first 18 months after legalization, applications to the DOT for adult-use establishment licenses were only accepted from existing medical marijuana establishments and from existing liquor distributors for the adult-use distribution license. The Division licensed and regulated medical marijuana establishments up until July 1, 2017, when the state’s medical marijuana program merged with adult-use marijuana enforcement under the DOT. After merging medical and adult-use marijuana regulation and enforcement, the single regulatory agency was known as the “Marijuana Enforcement Division of the Department of Taxation”. The DOT oversaw regulation of cannabis operations until the CCB took over on July 1, 2020. As of October 5, 2020, all five members of the CCB were appointed by the Nevada Governor.

In February 2017, the state announced plans to issue “early start” recreational marijuana establishment licenses in the summer of 2017. These licenses expired at the end of the year and, beginning on July 1, 2017, allowed marijuana establishments holding both a retail marijuana store and dispensary license to sell their existing medical marijuana inventory as either medical or adult-use marijuana. All cannabis cultivated and infused products produced under the adult-use program that were not existing inventory at a medical marijuana dispensary were transported to retail marijuana stores utilizing a licensed retail marijuana distributor. Starting on July 1, 2017, medical and adult-use marijuana became subject to a 15% excise tax on the first wholesale sale (calculated on the fair market value) and adult-use cannabis is subject to an additional 10% special retail marijuana sales tax in addition to any general state and local sales and use taxes.

The regular retail marijuana program began in early 2018. The Regulation and Taxation of Marijuana Act specifies that, for the first 18 months of the program, only existing medical marijuana establishment certificate holders could apply for a retail marijuana establishment license. As that restriction expired in November 2018, on December 5, 2018, the DOT expanded the application process and awarded an additional 61 licenses for retail marijuana dispensaries in Nevada. The regular program was governed by permanent regulations found in Nevada Administrative Code Sections 453A and 453D through June 30, 2020.

In early 2019, Nevada legislature passed Nevada Assembly Bill 533 (“AB533”), which authorized the formation of the CCB to be vested with the authority to license and regulate persons and establishments engaged in cannabis activities within Nevada and promulgated statutes which will replace Nevada Revised Statute (“NRS”) 453A and 453D effective on July 1, 2020. Those statutes are currently codified at NRS 678A, B, C and D. On July 21, 2020, the CCB adopted final Nevada Cannabis Compliance Regulations 1 through 15 (or, “NCCR”) which are substantially similar to the former Nevada Administrative Code Sections 453A and 453D.

In response to industry feedback, on October 20, 2020, the CCB amended NCCR 5 to give clarity regarding public company ownership of Nevada cannabis companies. Generally, those amendments include such companies being required to provide to the CCB notice of annual general meetings of shareholders and a non-objecting beneficial owners (“NOBO”) list as of the record date of each such meeting, and disclosure of any stockholders having 5% or greater ownership interest or that are able to exert control over a Nevada cannabis establishment. Additionally, the CCB requires an updated list of all beneficial owners, regardless of amount or type of ownership, but if a list of all beneficial owners cannot be obtained through reasonable cost and/or effort, the publicly traded company must provide an updated NOBO list as of the annual meeting record date, and explain why it cannot provide a list of all beneficial owners through reasonable cost and effort.

Nevada does not have any U.S. residency requirements with respect to license ownership, but does require background checks of all individuals having an ownership interest. Background checks are waivable at the discretion of the CCB for individuals having less than 5% ownership interest, and we have submitted waiver requests to the CCB for all ownership interests less than 5%. Although the CCB has not chosen to exercise their authority to require a background check on ownership interests in public cannabis companies that remain under 5% and do not otherwise exercise control over a Nevada cannabis licensee, the CCB does have authority to require a licensee to investigate and submit any ownership interest, beneficial or direct, for CCB approval. For example, under Nevada cannabis laws, any beneficial holder of any of our securities, regardless of the number of shares, may be required to file an application, be investigated, and have his or her suitability as a beneficial holder of the voting securities determined if the CCB has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada.

In addition, vertical integration is neither required nor prohibited. All medical marijuana sales are made subject to the recipient holding a registry identification card issued by the State of Nevada as defined at NRS 678A.235. We are permitted to sell medical marijuana products to non-Nevada patients as non-Nevada patients are permitted reciprocity under NRS 678C.470.

Nevada Licenses

There are five types of retail marijuana establishment licenses under Nevada law:

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Cultivation Facility – Licenses to cultivate (grow), process, and package marijuana; to have marijuana tested by a testing facility; and to sell marijuana to retail marijuana stores, to marijuana product manufacturing facilities, and to other cultivation facilities, but not to consumers.

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Distributor - Licenses to transport marijuana from a marijuana establishment to another marijuana establishment.

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Product Manufacturing Facility - Licenses to purchase marijuana; manufacture, process, and package marijuana and marijuana products; and sell marijuana and marijuana products to other product manufacturing facilities and to retail marijuana stores, but not to consumers.

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Testing Facility - Licenses to test marijuana and marijuana products, including for potency and contaminants.

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Retail Store - Licenses to purchase marijuana from cultivation facilities, marijuana and marijuana products from product manufacturing facilities, and marijuana from other retail stores; can sell marijuana and marijuana products to consumers.

MMDC applied for and did not receive any of the 61 new licenses granted by DOT on December 5, 2018. Upon review of this result, we determined that there were significant irregularities in the license application and review process. MMDC filed a complaint against the State of Nevada and DOT on December 10, 2018, and concurrently pursued all available administrative remedies (the “DOT License Matter”). MMDC requested a judicial review of the license application process and the scoring criteria utilized by DOT, and requested that the court award MMDC monetary damages as a result of DOT’s failure to properly award licenses and that the court award retail dispensary licenses to MMDC. On August 23, 2019, as a result of discrepancies discovered in the application process administered by the State of Nevada, a court issued a partial preliminary injunction against the State of Nevada from moving forward with the numerous holders of provisional licenses awarded under the December 5, 2018, provisional license awards.

After the first week of trial in July 2020, MMDC entered into a settlement agreement with the State of Nevada and defendants in intervention to receive a license in unincorporated Clark County to reopen the Medizin location. On July 31, 2020, the Nevada Tax Commission convened and approved the signed Nevada License Settlement and requested that the CCB, which had authority over Nevada-licensed cannabis businesses as of July 1, 2020, also convene and approve the settlement. On August 7, 2020, the CCB convened and approved the Nevada License Settlement. Pursuant to the Nevada License Settlement, our subsidiary MMDC agreed to a release and waiver of its claims against the State of Nevada and the defendants in intervention, in return for MMDC receiving the provisional unincorporated Clark County adult-use dispensary license originally received by Nevada Organic Remedies in December 2018. Pursuant to a letter dated September 3, 2020, the CCB transferred the conditional Clark County dispensary license to MMDC. On November 20, 2020, we opened the Medizin store location, having received CCB final inspection approvals and a Clark County business license.

Cannabis consumption lounges were authorized in Nevada pursuant to AB 341 in the 2021 81st Session of the Nevada Legislature. On July 9, 2021, our subsidiary MMDC received a notification letter of eligibility to hold a retail cannabis consumption lounge license from the CCB. On December 2, 2021 the CCB released draft regulations for the cannabis consumption lounge application and requirements to operate, and has scheduled a December 14, 2021 workshop to receive comment and discuss the draft regulations with stakeholders.

Nevada Reporting Requirements

Nevada has selected Franwell Inc.’s METRC solution (“METRC”) as the state’s track-and-trace system used to track commercial cannabis activity and movement across the distribution chain. Individual licensees whether directly or through third-party integration systems are required to push data to the state to meet all reporting requirements. For all licensed facilities, we have designated an in-house computerized seed to sale software that integrates with METRC via an application programming interface, and captures the required data points for cultivation, manufacturing and retail as required by Nevada statutes and regulations.

Nevada Regulatory Compliance

Our licenses are in good standing to cultivate, possess and/or wholesale marijuana in the State of Nevada and we, through MMDC, are in compliance with Nevada’s marijuana regulatory program. MMDC has responded to all DOT and CCB inspections and received approval on all corrective actions.

We comply with applicable Nevada state licensing requirements as follows: (i) MMDC is licensed pursuant to applicable Nevada state law to cultivate, possess and/or distribute THC-bearing cannabis (or “marijuana”) in Nevada; (ii) renewal dates for such licenses are docketed by legal counsel and/or other advisors; (iii) random internal audits of our business activities are conducted by the applicable Nevada state regulator and by us to ensure compliance with applicable Nevada state law; (iv) each of our employees is provided with an employee handbook that outlines internal standard operating procedures in connection the cultivation, possession and distribution of marijuana to ensure that all marijuana inventory and proceeds from the sale of such marijuana are properly accounted for and tracked and using scanners to confirm each customer’s legal age and the validity of each customer’s drivers’ license; (v) each room that marijuana inventory and/or proceeds from the sale of such inventory enter is monitored by video surveillance; (vi) software is used to track marijuana inventory from seed to sale; and (vii) we are contractually obligated to comply with applicable Nevada state law in the United States in connection with the cultivation, possession and/or distribution of marijuana in Nevada.

We have a full time General Counsel on staff in Nevada, who is a licensed attorney under the State Bar of Nevada, in good standing, whose responsibilities include monitoring the day-to-day activities of regulatory compliance staff, including ensuring that the established standard operating procedures are being adhered to at each stage of the cultivation, processing and distribution cycle, to identify any non-compliance matters and to put in place the necessary modifications to ensure compliance. The regulatory compliance staff conducts regular unannounced audits against our established standard operating procedures and State of Nevada regulations. Each employee is provided with an employee handbook outlining the standard operating procedures and state regulations upon hiring and is then provided with one-on-one quality and regulatory training through programs overseen by the General Counsel.

California State Law Overview

In 1996, California was the first state to legalize medical marijuana through Proposition 215, the Compassionate Use Act of 1996. This legalized the use, possession and cultivation of medical marijuana by patients with a physician recommendation for treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief.

In 2003, Senate Bill 420 was signed into law establishing an optional identification card system for medical marijuana patients. In September 2015, the California legislature passed three bills collectively known as the Medical Cannabis Regulation and Safety Act (“MCRSA”). The MCRSA established a licensing and regulatory framework for medical marijuana businesses in California. The system created multiple license types for dispensaries, infused products manufacturers, cultivation facilities, testing laboratories, transportation companies, and distributors. Edible infused product manufacturers would require either volatile solvent or non-volatile solvent manufacturing licenses depending on their specific extraction methodology. Multiple agencies would oversee different aspects of the program and businesses would require a state license and local approval to operate. However in November 2016, voters in California overwhelmingly passed Proposition 64, the Adult-Use of Marijuana Act (“AUMA”) creating an adult-use marijuana program for adults 21 years of age or older. AUMA included certain conflicting provisions with MCRSA, so in June 2017, the California State Legislature passed Senate Bill No. 94, known as Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which amalgamates MCRSA and AUMA to provide a set of regulations to govern a medical and adult-use licensing regime for cannabis businesses in the State of California. At that time the four agencies that regulated marijuana at the state level were the Bureau of Cannabis Control (“BCC”), California Department of Food and Agriculture, California Department of Public Health, and California Department of Tax and Fee Administration. MAUCRSA came into effect on January 1, 2018. One of the central features of MAUCRSA is known as “local control.” In order to legally operate a medical or adult-use marijuana business in California, an operator must have both a local and state license. This requires license holders to operate in cities or counties with marijuana licensing programs. Cities and counties in California are allowed to determine the number of licenses they will issue to marijuana operators, or can choose to outright ban marijuana.

State cannabis licenses in California must be renewed annually. Depending on the jurisdiction, our local authorizations must generally be renewed annually as well. Each year, licensees are required to submit a renewal application per State cannabis regulatory guidelines. Provided renewal applications are submitted in a timely manner, we can expect the renewals to be granted in the ordinary course of business.

On January 10, 2020, the three commercial cannabis licensing agencies in California, the BCC, the Department of Food and Agriculture, and the Department of Public Health (collectively, “California Licensing Agencies”) announced that California Governor Gavin Newsom’s budget proposal for cannabis industry regulation and taxation included plans to consolidate the three licensing entities that are currently housed at the California Licensing Agencies into a single Department of Cannabis Control by July 2021. With the passage of AB 141 on July 12, 2021, the California Licensing Agencies were consolidated into the Department of Cannabis Control (“DCC”). On September 8, 2021, the DCC announced proposed emergency regulations to move all cannabis regulations into Title 4 of the California Code of Regulations, with a stated goal of consolidating and improving the regulations. The proposed emergency regulations were in the review and comment period which closed on September 20, 2021.

MAUCRSA allows local municipalities and jurisdictions to authorize the on-site consumption of cannabis by state-licensed retailers and/or microbusinesses. If a city or county permits it, retailers and microbusinesses can have on-site consumption if: (i) access to the area where cannabis consumption is allowed is restricted to persons 21 years of age and older, (ii) cannabis consumption is not visible from any public place or nonage-restricted area, and (iii) the sale or consumption of alcohol or tobacco is not allowed on the premises.

The City of Santa Ana is silent on on-site consumption and does not explicitly prohibit cannabis lounges and on-site consumption by licensees. Santa Ana does prohibit the on-site sales of alcohol or tobacco products, (excluding rolling papers and lighters) and no on-site consumption of food, alcohol or tobacco by patrons. Currently, on-site consumption is permitted in various forms in the City of West Hollywood, San Francisco, City of Oakland, City of Alameda and Palm Springs.

California Reporting Requirements

California has selected METRC as the state’s track-and-trace system used to track commercial cannabis activity and movement across the distribution chain. Individual licensees whether directly or through third-party integration systems are required to push data to the state to meet all reporting requirements. For all licensed facilities, we have designated an in-house computerized seed to sale software that integrates with METRC via an application programming interface, and captures the required data points for cultivation, manufacturing and retail as required by California statutes and regulations.

California License and Regulatory Compliance

We, through our subsidiary Newtonian, hold the Santa Ana Permit and the California License and are in compliance with applicable licensing requirements and the regulatory framework enacted by the State of California. In order to qualify for these licenses, we submitted applications with detailed plans and procedures evidencing to the applicable regulators that it complies with all statutory and regulatory requirements in California for the operation of the licenses. We have further retained a California regulatory consultant, with experience operating regulatory-compliant California license operations, to advise us on regulatory requirements and updates in that state. Additionally, our General Counsel works regularly with our California regulatory consultant and oversees all aspects of services provided in connection with the Santa Ana Permit and the California License to ensure compliance and continuity of those licenses.

Florida State Law Overview

In 2014, the Florida Legislature passed the Compassionate Use Act, which was the first legal medical cannabis program in the state’s history. The original Compassionate Use Act only allowed for low-THC cannabis to be dispensed and purchased by patients suffering from cancer and epilepsy. In 2016, the Legislature passed the Right To Try Act which allowed for full potency cannabis to be dispensed to patients suffering from a diagnosed terminal condition. Also in 2016, the Florida Medical Marijuana Legalization Initiative was introduced by citizen referendum and passed on November 8. This language, known as “Amendment 2,” amended the state constitution and mandated an expansion of the state’s medical cannabis program.

Amendment 2, and the resulting expansion of qualifying medical conditions, became effective on January 3, 2017. The Florida Department of Health, physicians, dispensing organizations and patients are bound by Article X Section 29 of the Florida Constitution and Florida Statutes Section 381.986. On June 9, 2017, the Florida House of Representatives and Florida Senate passed respective legislation to implement the expanded program by replacing large portions of the existing Compassionate Use Act, which officially became law on June 23, 2017.

The Florida Statutes Section 381.986(8) provides a regulatory framework that requires licensed producers, which are statutorily defined as “Medical Marijuana Treatment Centers”, to cultivate, process and dispense medical cannabis in a vertically-integrated marketplace.

Licenses are issued by the OMMU and must be renewed biennially. License holders can only own one license. Currently, the dispensaries can be in any geographic location within the state, provided that the local jurisdiction’s zoning regulations authorize such a use, the proposed site is zoned for a pharmacy and the site is not within 500 feet of a school.

The MMTC license permits us to sell medical cannabis to qualified patients to treat certain medical conditions in Florida, which are delineated in Florida Statutes Section 381.986. As we expect our operations in Florida to be vertically-integrated, we will be able to cultivate, harvest, process and sell/dispense/deliver our own medical cannabis products. Under the terms of our Florida license, we are permitted to sell medical cannabis only to qualified medical patients that are registered with the State. Only qualified physicians who have successfully completed a medical cannabis educational program can register patients on the Florida Office of Medical Marijuana Use Registry.

Florida Reporting Requirements

Florida law calls for the OMMU to establish, maintain, and control a computer software tracking system that traces cannabis from seed to sale and allows real-time, 24-hour access by the OMMU to such data. The tracking system must allow for integration of other seed-to-sale systems and, at a minimum, include notification of certain events, including when marijuana seeds are planted, when marijuana plants are harvested and destroyed and when cannabis is transported, sold, stolen, diverted, or lost. Each medical marijuana treatment center shall use the seed-to-sale tracking system established by the OMMU or integrate its own seed-to-sale tracking system with the seed-to-sale tracking system established by the OMMU. At this time the OMMU has not implemented a statewide seed-to-sale tracking system. Additionally, the OMMU also maintains a patient and physician registry and the licensee must comply with all requirements and regulations relative to the provision of required data or proof of key events to said system in order to retain its license. Florida requires all MMTCs to abide by representations made in their original application to the State of Florida or any subsequent variances to same. Any changes or expansions of previous representations and disclosures to the OMMU must be approved by the OMMU via a variance process.

Security and Storage Requirements

Adequate outdoor lighting is required from dusk to dawn for all MMTC facilities. 24-hour per day video surveillance is required and all MMTCs must maintain at least a rolling 45-day period that is made available to law enforcement and the OMMU upon demand. Alarm systems must be active at all times for all entry points and windows. Interior spaces must also have motion detectors and all cameras must have an unobstructed view of key areas. Panic alarms must also be available for employees to be able to signal authorities when needed.

In dispensaries, the MMTC must provide a waiting area with a sufficient seating area. There must also be a minimum of one private consultation/education room for the privacy of the patient(s) and their caregiver (if applicable). The MMTC may only dispense products between 7:00 am and 9:00 pm. All active products must be kept in a secure location within the dispensary and only empty packaging may be kept in the general area of the dispensary which is readily accessible to customers and visitors. No product or delivery devices may be on display in, or visible from, the waiting area.

An MMTC must at all times provide secure and logged access for all cannabis materials. This includes approved vaults or locked rooms. There must be at least two employees of the MMTC or an approved security provider on site at all times where cultivation, processing, or storing of cannabis occurs. All employees must wear proper identification badges and visitors must be logged in and wear a visitor badge while on the premises. The MMTC must report any suspected activity of loss, diversion or theft of cannabis materials within 24 hours of becoming aware of such an occurrence.

Florida Transportation Requirements

When transporting cannabis to dispensaries or to patients, a manifest must be prepared and transportation must be done using an approved vehicle. The cannabis must be stored in a separate, locked area of the vehicle and at all times while in transit there must be two people in a delivery vehicle. During deliveries, one person must remain with the vehicle. The delivery employees must at all times have identification badges. The manifest must include the following information: (i) departure date and time; (ii) name, address and license number of the originating MMTC; (iii) name and address of the receiving entity; (iv) the quantity, form and delivery device of the cannabis; (v) arrival date and time; (vi) the make, model and license plate of the delivery vehicle; and (vii) the name and signatures of the MMTC delivery employees. These manifests must be kept by the MMTC for inspection for up to three years. During the delivery, a copy of the manifest is also provided to the recipient.

OMMU Inspections in Florida

The OMMU may conduct announced or unannounced inspections of MMTC’s to determine compliance with applicable laws and regulations. The OMMU is to inspect an MMTC upon receiving a complaint or notice that the MMTC has dispensed cannabis containing mold, bacteria, or other contaminants that may cause an adverse effect to humans or the environment. The OMMU is to conduct at least a biennial inspection of each MMTC to evaluate the MMTC’s records, personnel, equipment, security, sanitation practices, and quality assurance practices.

Florida License and Regulatory Compliance

We, through our subsidiary, Planet 13 Florida, hold the MMTC license and are in compliance with applicable licensing requirements and the regulatory framework enacted by the State of Florida. We have retained Florida regulatory consultants, with experience to advise us on regulatory requirement and update sin that state. Our General Counsel works regularly with our Florida regulatory consultant and oversees all aspects of statutory and regulatory compliance for our MMTC license.

Illinois State Law Overview

In June 2019, Illinois passed into law The Cannabis Regulation and Tax Act (“CRTA”), which legalized cannabis for recreational use and created one of the largest adult use markets in the country. The law went into effect on June 25, 2019, and adult use sales of cannabis began in the state on January 1, 2020. Under the CRTA, existing medical cannabis license holders were allowed to apply for Early Approval Adult Use Dispensing Organization (“EAAUDO”) licenses to be able to sell adult use product at existing medical cannabis dispensaries (known as “co-located” or “same site” dispensaries). Existing medical operators also received the privilege of opening a secondary adult use only retail dispensary for every medical cannabis dispensary location already existing in the operator’s portfolio. All EAAUDO license holders were also required to commit to Illinois’s groundbreaking Social Equity program either through a financial contribution, grant agreement, donation, incubation program, or sponsorship program.

The CRTA also authorized the issuance of an additional 75 Adult Use Dispensing Organization (“AUDO”) licenses, 40 craft grower licenses as well as infuser and transporter licenses in 2020. Generally speaking, these licenses were to be awarded via a competitive application process. The CRTA provided a significant advantage to applicants that qualified as a “Social Equity Applicant” under the CRTA. In addition, the CRTA authorized issuance up to 110 additional AUDO licenses and 60 craft grower licenses by December 21, 2021. However, due the Covid-19 pandemic, litigation relating to the application process, and the passage of H.B. 1443, which amended the CRTA, the issuance of new cannabis licenses in Illinois was delayed until July 2021. As of the date of this filing, the IDFPR reports 40 craft grower licenses, along with infuser and transporter licenses have been issued. On September 3, 2021, Illinois announced that 185 AUDO licenses have been awarded through three license lotteries that took place on July 29, 2021, August 5, 2021, and August 19, 2021 respectively. However, no AUDO licenses have been issued to the lottery winners and it is uncertain when they will be issued. Illinois also announced that it would issue 60 more craft grower licenses by December 21, 2021.

Illinois Reporting Requirements

The state of Illinois uses BioTrack THC as its computerized track-and-trace system for seed-to-sale reporting. Individual licensees, whether directly or through third-party integration systems, are required to push data to the state to meet all reporting requirements.

Illinois Licenses and Regulatory Compliance

Illinois allows for four types of cannabis businesses within the state: (1) cultivation/craft grower; (2) infusing; (3) transportation; and (4) dispensary. Dispensaries are regulated by the IDFPR. The remaining licenses are regulated by the Illinois Department of Agriculture (IDOA).

We have been awarded, but not yet issued, a Conditional Adult Use Dispensary license in the Chicago-Naperville-Elgin region—the most populated region of Illinois. Such a license will cease to be “conditional” once it is tethered to an approved location, which according to the CRTA should occur within 180 days of issuance. The CRTA and regulations provide for extensions of this deadline.

All cultivation, infusing, and transporter establishments must register with IDOA. All dispensaries must register with the IDFPR. If applications contain all required information, establishments are issued a marijuana establishment registration certificate. Registration certificates are valid for a period of one year and are subject to annual renewals after required fees are paid and the business remains in good standing. Pursuant to Illinois law, registration renewal applications must be received 45 days prior to expiration and may be denied if the license has a history of non-compliance and penalties.

The cultivation licenses permit a licensee to acquire, possess, cultivate, manufacture and process cannabis into edible products and cannabis-infused products. Cultivators can transfer, have tested, supply or sell cannabis and cannabis products and related supplies to dispensaries and infusers. Infusing licenses permit a licensee to acquire and possess distillate from a licensed cultivator and to manufacture edible and cannabis-infused products. Infusers can transfer, have tested, supply or sell cannabis and cannabis products to dispensaries. The transporter license permits a licensee to transport cannabis and cannabis products to and from licensed entities.

The retail dispensary license permits us to purchase cannabis and manufactured cannabis products from licensed cultivation facilities and infusing organizations and to sell such products to adult consumers (21 years old or older).

We have retained Illinois regulatory consultants, with experience to advise us on regulatory requirements during the pre-license issuance period and following the anticipated license issuance to Planet 13 Illinois, LLC. Our General Counsel works regularly with our Illinois regulatory consultants and oversees all aspects of statutory and regulatory compliance.

Compliance with State Law

We are in compliance with U.S. state law and the related licensing framework. We use reasonable commercial efforts to confirm, through the advice of our General Counsel and local consultants, through the monitoring and review of our business practices, and through regular monitoring of changes to U.S. Federal enforcement priorities, that our businesses are in compliance with applicable licensing requirements and the regulatory frameworks enacted by the states in which we operate. Our General Counsel works with external legal advisors in Nevada, California, Illinois, and Florida to ensure that we and our subsidiaries are in compliance with applicable state laws, including:

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weekly correspondence and updates with advisors;

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development and maintenance of standard operating procedures with respect to cultivation, processing and distribution;

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ongoing monitoring of compliance with operating procedures and regulations by on-site management;

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appropriate employee training for all standard operating procedures; and

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subscription to monitoring programs to ensure compliance with the FinCEN Memorandum.

We have not received any noncompliance orders, citations or notices of violation that remain uncorrected or that may have an ongoing impact on our licenses, business activities or operations.

In addition, we will continue to ensure we are in compliance with applicable licensing requirements and the regulatory framework enacted in the states in which we operate by continuous review of our licenses and affirmation certifications from management. Each new license received by us undergoes both internal and independent reviews, and is subject to all compliance monitoring and requirements that are applied to existing licenses held or controlled by us. While our business activities are compliant with applicable state and local law, such activities remain illegal under United States federal law.

Storage and Security

To ensure the safety and security of cannabis business premises and to maintain adequate controls against the diversion, theft, and loss of cannabis or cannabis products, we do the following in full compliance with state statutes and regulations:

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have an enclosed, locked facility, with appropriate entrance security;

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train employees in security measures and controls, emergency response protocol, confidentiality requirements, safe handling of equipment, procedures for handling products, as well as the differences in strains, methods of consumption, methods of cultivation, methods of fertilization and methods for health monitoring;

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install sophisticated, regulatory-compliant security equipment to deter and prevent unauthorized entrances;

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install security alarms to alert local law enforcement of unauthorized breach of security; and

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implement security procedures that:

restrict access of the establishment to only those persons/employees authorized to be there;

deter and prevent theft;

provide identification (badge) for those persons/employees authorized to be in the establishment;

prevent loitering;

require and explain electronic monitoring; and

require and explain the use of automatic or electronic notification to alert local law enforcement of an unauthorized breach of security.

Regulatory Risks

The U.S. cannabis industry is highly regulated, highly competitive and evolving rapidly. As such, new risks may emerge, and management may not be able to predict all such risks or be able to predict how such risks may impact on actual results.

Participants in the U.S. cannabis industry will incur ongoing costs and obligations related to regulatory compliance. Failure to comply with regulations may result in additional costs for corrective measures, penalties or restrictions of operations. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Further, we may be subject to a variety of claims and lawsuits. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. The litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. A material adverse impact on our financial statements also could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

The U.S. cannabis industry is subject to extensive controls and regulations, which may significantly affect the financial condition of market participants. The marketability of any product may be affected by numerous factors that are beyond our control and which cannot be predicted, such as changes to government regulations, including those relating to taxes and other government levies which may be imposed. Changes in government levies, including taxes, could reduce our earnings and could make future growth uneconomic. The industry is also subject to numerous legal challenges, which may significantly affect our financial condition and which cannot be reliably predicted.

We expect to derive all of our revenues from the U.S. cannabis industry, which industry is illegal under U.S. federal law. As a result of the conflicting views between state legislatures and the federal government regarding cannabis, cannabis businesses in the U.S. are subject to inconsistent legislation and regulation. We began our operations in the State of Nevada, which has legalized the medical and recreational adult-use of cannabis, and have expanded or plan to expand in other states with licensed cannabis opportunities. The U.S. federal government has not enacted similar legislation and the cultivation, sale and use of cannabis remains illegal under federal law pursuant to the CSA. The federal government of the U.S. has specifically reserved the right to enforce federal law in regard to the sale and disbursement of medical or recreational adult-use cannabis even if state law sanctioned such sale and disbursement. It is presently unclear whether the U.S. federal government intends to enforce federal laws relating to cannabis where the conduct at issue is legal under applicable state law. This risk was further heightened by the revocation of the Cole Memorandum in January 2018. See “United States Federal Law Overview.”

Further, there can be no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local government authorities will not limit the applicability of state laws within their respective jurisdictions. It is also important to note that local and city ordinances may strictly limit and/or restrict the distribution of cannabis in a manner that will make it extremely difficult or impossible to transact business in the cannabis industry. If the U.S. federal government begins to enforce federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing state laws are repealed or curtailed, then our business would be materially and adversely affected. U.S. federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect us. Our involvement in the medical and recreational adult-use cannabis industry is illegal under the applicable federal laws of the United States and may be illegal under other applicable law. There can be no assurances the federal government of the United States or other jurisdictions will not seek to enforce the applicable laws against us. The consequences of such enforcement would be materially adverse to our business and could result in the forfeiture or seizure of all or substantially all of our assets. See “Risk Factors.”

Nature of the Company’s Involvement in the U.S. Cannabis Industry

We have a material direct involvement in the cannabis industry in Nevada and California. Currently, we are directly engaged in the cultivation, manufacture and production, possession, use, sale and distribution of cannabis in the medical and adult-recreational use cannabis marketplace in Nevada and the adult-recreational use cannabis market in California. Approximately 41.3% of our assets and 100% of our revenues are directly attributable to the medical and recreational adult-use cannabis market in Nevada and California. We hold cultivation, production and retail distribution licenses for the State of Nevada and retail and distribution licenses for the State of California.

As previously stated, violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on us, including our reputation and ability to conduct business, the listing of our securities on any stock exchange, our financial position, operating results and profitability. In addition, it is difficult for us to estimate the time or resources that would be needed for the investigation of any such matters or their 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. The approach to the enforcement of cannabis laws may be subject to change or may not proceed as previously outlined. See “Risk Factors.”

Our operations in the U.S. cannabis industry are presently only in the States of Nevada and California and we currently hold licenses in Illinois and Florida. We may, in future periods, expand our operations outside of Nevada and California and intend to restrict such future expansion to: (i) only those states that have enacted laws legalizing cannabis; and (ii) only those states where we can comply with state (and local) laws and regulations and have the licenses, permits or authorizations to properly carry on each element of our business.

We will continue to monitor, evaluate and re-assess the regulatory framework in the states in which we operate and any state that we may look to expand our operations to in the future, and the federal laws applicable thereto, on an ongoing basis; and will update our continuous disclosure regarding government policy changes or new or amended guidance, laws or regulations regarding cannabis in the U.S as required.

Anti-Money Laundering Laws and Regulations

We are subject to a variety of laws and regulations in the U.S. that involve money laundering, financial recordkeeping and proceeds of crime, including the U.S. Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the Bank Secrecy Act), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) and the rules and regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the U.S. Further, under U.S. federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering, aiding and abetting, or conspiracy.

Our activities, and any proceeds thereof, may be considered proceeds of crime due to the fact that cannabis remains illegal federally in the U.S. This may restrict our ability to declare or pay dividends or effect other distributions. Furthermore, while we have no current intention to declare or pay dividends on our Common Shares in the foreseeable future, we may decide to, or be required to, suspend declaring or paying dividends without advance notice and for an indefinite period of time.

Ability to Access Private and Public Capital

Prior to the RTO, we relied entirely on access to private capital in order to support our continuing operations and capital expenditure requirements. We expect to rely on both private and public capital markets to finance our growth plans in the U.S. legal cannabis industry. However, there is no assurance we will be successful, in whole or in part, in raising funds, particularly if the U.S. federal authorities change their position toward enforcing the CSA. Further, access to funding from U.S. residents may be limited due their unwillingness to be associated with activities which violate U.S. federal laws.

Available Information

Our website address is www.planet13holdings.com. Through this website, our filings with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K will be accessible (free of charge) as soon as reasonably practicable after materials are electronically filed or furnished to the SEC. The information provided on our website is not part of this registration statement. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are available to the public on the SEC’s website at www.sec.gov.

ITEM 1A.

RISK FACTORS

Summary of Risk Factors

Our business is subject to a number of risks and uncertainties which you should evaluate before making a decision to invest in our Common Shares. This summary does not address all of the risks related to our business. Additional discussion of the risks summaries may be found under the “Risk Factors” section and elsewhere in this registration statement, and should be carefully considered before making a decision to invest in our Common Shares. These risks include, among others:

Risks Related to Regulation and our Industry

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Cannabis continues to be a controlled substance under the CSA and our business model and the nature of our operations could result in adverse actions by agencies of the U.S. federal government.

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Some of our planned business activities, while compliant with applicable U.S. state and local law, are illegal under U.S. federal law.

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The industry in which we operate is still developing and subject to extensive regulation.

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We face risks due to industry immaturity or limited comparable, established industry best practices.

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The size of our target market is difficult to quantify and investors will be reliant on their own estimates on the accuracy of market data.

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Our sales and marketing activities and enforcement of contracts may be hindered by regulatory restrictions.

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We expect to incur significant ongoing costs and obligations related to our investment in infrastructure, growth, regulatory compliance and operations.

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Regulatory scrutiny of the industry in which we operate may negatively impact our ability to raise additional capital.

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Banks and other financial institutions which service the cannabis industry are at risk of violating certain financial laws, including anti-money laundering statutes.

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The re-classification of cannabis or changes in U.S. controlled substance laws and regulations could have a material adverse effect on our business.

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We may incur significant tax liabilities due to limitations on tax deductions and credits under section 280E of the Internal Revenue Code of 1986, as amended, (the “Code”).

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We may have difficulty accessing the service of banks and processing credit card payments in the future.

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Failure to obtain or maintain the necessary licenses, permits, authorizations or accreditations could have a material adverse effect on our business.

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U.S. state laws legalizing and regulating the sale and use of cannabis could be repealed or overturned.

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We may face limitations on ownership of cannabis licenses, which may restrict our ability to grow.

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We may become subject to FDA or ATF regulation that may have an adverse effect on our business, and we may be subject to negative clinical trials.

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We could be subject to criminal prosecution or civil liabilities under RICO.

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We lack access to U.S. bankruptcy protections.

Risks Related to our Business and Operations

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The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may continue to have a significant negative effect on us in the future.

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We face increasing competition that may materially and adversely affect our business, financial condition and results of operations.

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Our probable lack of business diversification could have a material adverse effect on our business.

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There is no assurance that we will be profitable or pay dividends.

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We are a developing company and have only recently begun to generate positive cash flow.

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Our business is exposed to risks inherent in an agricultural business.

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We are dependent on the popularity of consumer acceptance of our brand portfolio to generate revenues.

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We may be adversely impacted by rising or volatile energy costs.

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We may encounter unknown environmental risks that may delay the development of our businesses.

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Our business is subject to risks and hazards for which we may not be able to obtain insurance coverage.

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Product recalls could lead to decreased demand for our products.

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Our research and development activities may not prove profitable, and we may not be able to accurately forecast our operating results and plan our operations due to uncertainties in the cannabis industry.

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We rely on our executive officers, our key research and development personnel and our key growth and extraction personnel for our future success, and if any such persons were unable to continue in their present positions, we might not be able to replace them.

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Unfavorable publicity or consumer perception could lead to a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows.

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We are a holding company and are dependent on the earnings and distributions by our subsidiary, MMDC.

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Currency fluctuations could expose us to exchange risk.

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We may face difficulties acquiring additional financing to fund our growth.

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Our officers and directors may be engaged in a range of business activities resulting in conflicts of interest.

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Our actual financial position and results of operations may differ materially from the expectations of management.

Risks Related to Intellectual Property

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We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights.

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U.S. federal trademark and patent protection may not be available for our intellectual property due to the current classification of cannabis as a Schedule I controlled substance.

Risks Related to our Common Shares

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Our Co-CEOs are able to exert significant influence over all matters requiring shareholder approval.

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We are a U.S. domestic company for U.S. federal income tax purposes, are subject to U.S. tax law.

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Dividends received by Canadian holders of Common Shares are subject to U.S. withholdings tax.

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The market price for the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control.

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It may be difficult, if not impossible, for U.S. holders of the Common Shares to resell them over the CSE.

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Future sales of the Common Shares by existing shareholders could reduce the market price of the Common Shares.

Risks Related to our Acquisitions and Growth Strategy

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Our failure to successfully integrate acquired businesses, their products and other assets, may result in our inability to realize any benefit from such acquisition.

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We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.

Risks Related to Regulation and our Industry

Cannabis continues to be a controlled substance under the CSA and our business model, and the nature of our operations could result in adverse actions by agencies of the U.S. federal government, which could have a material adverse effect on us.

Unlike in Canada, which has federal legislation uniformly governing the cultivation, distribution, sale and possession of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (Canada) and the Cannabis Act (Canada), in the United States, cannabis is largely regulated at the state level. To date, a total of 36 states, Washington D.C., and the territories of Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands, have legalized medical cannabis in some form, and 15 of those states, Washington D.C., and the territories of Guam and the Northern Mariana Islands have legalized recreational cannabis.

If the DOJ policy were to aggressively pursue financiers or equity owners of cannabis-related business, and United States attorneys followed such DOJ policies through pursuing prosecutions, then we could face: (i) seizure of our cash and other assets used to support or derived from our cannabis subsidiaries; and (ii) the arrest of our employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis. Additionally, as has recently been affirmed by U.S. Customs and Border Protection, our employees, directors, officers, managers and investors who are not U.S. citizens face the risk of being barred from entry into the United States for life.

Our primary businesses (owned directly or through one or more of our operating companies) are intended to be leading cultivators and dispensaries of cannabis and cannabis-infused products in the State of Nevada and other U.S. states. Because the production and sale of recreational cannabis remain illegal under federal law, it is possible that our future suppliers (and other third-party service providers) and customers may be forced to cease activities. The U.S. federal government, through both the U.S. Drug Enforcement Administration (the “DEA”) and the U.S. Internal Revenue Service (the “IRS”), has the right to actively investigate, audit and shut-down cannabis growing facilities and retailers. The U.S. federal government may also attempt to seize our property. Any action taken by the DEA and/or the IRS to interfere with, seize, or shut down our operations will have an adverse effect on our business, operating results and financial condition.

Some of our planned business activities, while compliant with applicable U.S. state and local law, are illegal under U.S. federal law.

Because the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal under U.S. federal law, and any such acts are criminal acts under federal law under any and all circumstances under the CSA, an investor’s contribution to and involvement in such activities may result in federal civil and/or criminal prosecution, including forfeiture of his, her or its entire investment. We may also be deemed to be aiding and abetting illegal activities through the contracts we have entered into and the products that we intend to provide. As a result, U.S. law enforcement authorities, in their attempt to regulate the illegal use of cannabis and any related drug paraphernalia, may seek to bring an action or actions against us, including, but not limited to, aiding and abetting another’s criminal activities. The U.S. federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” As a result of such an action, we may be forced to cease operations and be restricted from operating in the U.S., and our investors could lose their entire investment. Such an action would have a material negative effect on our business and operations.

Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property was never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which with minimal due process, it could be subject to forfeiture.

In addition, companies providing goods and/or services to companies like us that are engaged in cannabis-related activities may, under threat of federal civil and/or criminal prosecution, suspend or withdraw their services. Any suspension of service and inability to procure goods or services from an alternative source, even on a temporary basis, that causes interruptions in our operations could have a material and adverse effect on our business, financial condition and results of operations.

There is uncertainty surrounding the U.S. federal government and Attorney General Merrick B. Garland and their influence and policies in opposition to the cannabis industry as a whole, and their actions could result in significant fines penalties, convictions or criminal charges, which could have a material adverse effect on us.

As a result of the conflicting views between state legislatures and the federal government regarding cannabis, investments in cannabis business in the United States are subject to inconsistent legislation and regulation. The response to this inconsistency was addressed in the Cole Memorandum. The Cole Memorandum was addressed to all United States district attorneys acknowledging that notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several U.S. states have enacted laws relating to cannabis for medical purposes. The Cole Memorandum outlined certain priorities for the DOJ relating to the prosecution of cannabis offenses. In particular, the Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. Notably, however, the DOJ has never provided specific guidelines for what regulatory and enforcement systems it deems sufficient under the Cole Memorandum standard.

In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the DOJ should be focused on addressing only the most significant threats related to cannabis. States where medical cannabis had been legalized were not characterized as a high priority. On January 4, 2018, former U.S. Attorney General Jeff Sessions issued a memorandum to U.S. district attorneys which rescinded the Cole Memorandum. With the Cole Memorandum rescinded, U.S. federal prosecutors can exercise their discretion in determining whether to prosecute compliant state law cannabis-related operations as violations of U.S. federal law throughout the United States. The potential impact of the decision to rescind the Cole Memorandum is unknown and may have a material adverse effect on our business and results of operations. Through September 30, 2021, DOJ appropriations prohibit use of funds for enforcement actions against medical cannabis. Merrick B. Garland was sworn in on March 11, 2021 as the 86th U.S. Attorney General, and it remains unknown what position he or President Biden’s administration will take regarding federal enforcement actions against the cannabis industry.

With the repeal of the Cole Memorandum by former Attorney General Jeff Sessions, the Department of Justice could allege that we and our Board and, potentially our shareholders, “aided and abetted” violations of federal law by providing finances and services to our portfolio cannabis companies. Under these circumstances, it is possible that the federal prosecutor would seek to seize our assets and to recover the “illicit profits” previously distributed to shareholders resulting from any of the foregoing financing or services. In these circumstances, our operations would cease, shareholders may lose their entire investment and our directors, officers and/or shareholders may be left to defend any criminal charges against them at their own expense and, if convicted, be sent to federal prison.

Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on us, including our reputation and ability to conduct business, our holding (directly or indirectly) of cannabis licenses in the United States, the listing of our securities on stock exchanges, our financial position, operating results, profitability or liquidity or the market price of our publicly traded Common Shares. In addition, it is difficult to estimate the time or resources that would be needed 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.

Our business interests in the United States include the cultivation and provision of cannabis and cannabis-infused products. We are not aware of any non-compliance with the applicable licensing requirements or regulatory framework enacted by the states in which any of our customers or partners are operating.

The industry in which we operate is still developing and subject to extensive regulation.

The cannabis industry is a new industry that may not succeed. Should the federal government in the U.S. change course and decide to prosecute those dealing in medical or other cannabis under applicable law, there may not be any market for our products and services in the U.S. Cannabis is a new industry subject to extensive regulation, and there can be no assurance that it will grow, flourish or continue to the extent necessary to permit us to succeed. We are treating the cannabis industry as a deregulating industry with significant unsatisfied demand for our proposed products and will adjust our future operations, product mix and market strategy as the industry develops and matures. Further, few clinical trials on the benefits of cannabis or isolated cannabinoids have been conducted. Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies currently favored, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our products and dispensary services.

Accordingly, there is no assurance that the cannabis industry and the market for medicinal and/or adult-use cannabis will continue to exist and grow as currently anticipated or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that adversely affects the cannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets could have a material adverse effect on our business, financial condition and results of operations.

We face risks due to industry immaturity or limited comparable, competitive or established industry best practices.

As a relatively new industry, there are not many established operators in the medical and adult use cannabis industries whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us.

Shareholders and investors should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies, like us, that are in their early stages. For example, unanticipated expenses and problems or technical difficulties may occur, which may result in material delays in the operation of our business. We may fail to successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of the Common Shares to the extent that investors may lose their entire investments.

The size of our target market is difficult to quantify and investors will be reliant on their own estimates on the accuracy of market data.

Because the cannabis industry is in an early stage with uncertain boundaries, there is a lack of information about comparable companies available for potential investors to review in deciding about whether to invest in us and, few, if any, established companies whose business model we can follow or upon whose success we can build. Accordingly, investors will have to rely on their own estimates in deciding about whether to invest in us. There can be no assurance that our estimates are accurate or that the market size is sufficiently large for our business to grow as projected, which may negatively impact our financial results.

Our sales and marketing activities and enforcement of contracts may be hindered by regulatory restrictions.

The development of our business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by government regulatory bodies. The regulatory environment in the United States limits our ability to compete for market share in a manner similar to other industries. If we are unable to effectively market our 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 our products, our sales and operating results could be adversely affected. In addition, because our contracts involve cannabis and other activities that are not legal under U.S. federal law and in some jurisdictions, we may face difficulties in enforcing our contracts in U.S. federal and certain state courts.

We expect to incur significant ongoing costs and obligations related to our investment in infrastructure, growth, regulatory compliance and operations, and uncertainty regarding legal and regulatory status and changes may have a material adverse effect on our business.

We expect to incur significant ongoing costs and obligations related to our investment in infrastructure and growth and for regulatory compliance, which could have a material adverse effect on our results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Our efforts to grow our business may be costlier than management expects, and we may not be able to increase our revenue enough to offset higher operating expenses. We may incur significant losses in the future for a number of reasons, and unforeseen expenses, difficulties, complications and delays, and other unknown events. If we are unable to achieve and sustain profitability, the market price of the Common Shares may significantly decrease.

Achievement of our business objectives is also contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining other required regulatory approvals. The regulatory regime applicable to the cannabis industry in Canada and the United States is currently undergoing significant proposed changes and we cannot predict the impact of the regime on our business once the structure of the regime is finalized. Similarly, we cannot predict the timeline required to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failing to obtain, required regulatory approvals may significantly delay or impact the development of our markets, products and sales initiatives and could have a material adverse effect on our business, results of operations and financial condition. We will incur ongoing costs and obligations related to regulatory compliance. Failure to comply with regulations may result in additional costs for corrective measures, penalties or in restrictions on our operations.

Our investors, directors, officers and employees may be subject to entry bans into the United States.

Because cannabis remains illegal under United States federal law, those employed at or investing in legal and licensed Canadian cannabis companies could face detention, denial of entry or lifetime bans from the United States for their business associations with cannabis businesses. Entry happens at the sole discretion of the U.S. customs and border protection (“CBP”) officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a foreign national. The government of Canada has started warning travelers on its website that previous use of cannabis, or any substance prohibited by United States federal laws, could mean denial of entry to the United States. Business or financial involvement in the legal cannabis industry in Canada or in the United States could also be reason enough for United States border guards to deny entry.

On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States. It stated that Canada’s legalization of cannabis will not change CBP enforcement of United States laws regarding controlled substances, and because cannabis continues to be a controlled substance under United States law, working in or facilitating the proliferation of the legal cannabis industry in U.S. states where it is deemed legal or Canada may affect admissibility to the United States. As a result, CBP has affirmed that, employees, directors, officers, managers and investors of companies involved in business activities related to cannabis in the United States or Canada, like us, who are not United States citizens face the risk of being barred from entry into the United States for life. As described above, on October 9, 2018, CBP released an additional statement regarding the admissibility of Canadian citizens working in the legal cannabis industry. CBP stated that a Canadian citizen working in or facilitating the proliferation of the legal cannabis industry in Canada coming into the United States for reasons unrelated to the cannabis industry will generally be admissible to the United States; however, if such person is found to be coming into the United States for reasons related to the cannabis industry, such person may be deemed inadmissible. Any entry bans against our investors, directors, officers and employees may have a material adverse effect on us.

Our operations may become the subject of heightened scrutiny, which may lead to the imposition of additional restrictions on our operations.

Currently, our Common Shares trade on the CSE and are quoted on the OTCQX in the United States. Our business, operations and investments in the United States, and any future business, operations or investments, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada and the United States. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to operate or invest in the United States or any other jurisdiction, in addition to those described herein.

It had been reported in Canada that the Canadian Depository for Securities Limited is considering a policy shift that would see its subsidiary, CDS Clearing and Depository Services Inc. (“CDS”), refuse to settle trades for cannabis issuers that have investments in the United States. CDS is Canada’s central securities depository, clearing and settling trades in the Canadian equity, fixed income and money markets.

On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group announced the signing of a Memorandum of Understanding (“MOU”) with Aequitas NEO Exchange Inc., the CSE, the Toronto Stock Exchange, and the TSX Venture Exchange. The MOU outlines the parties’ understanding of Canada’s regulatory framework applicable to the rules, procedures, and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the United States. The MOU confirms, with respect to the clearing of listed securities, that CDS relies on the exchanges to review the conduct of listed issuers. As a result, there is no CDS ban on the clearing of securities of issuers with cannabis-related activities in the United States. However, there can be no guarantee that this approach to regulation will continue in the future. If such a ban were to be implemented at a time when the Common Shares are listed on a stock exchange, it would have a material adverse effect on the ability of holders of the Common Shares to make and settle trades. In particular, the Common Shares would become highly illiquid until an alternative was implemented, investors would have no ability to effect a trade of the Common Shares through the facilities of the applicable stock exchange.

Regulatory scrutiny of the industry in which we operate may negatively impact our ability to raise additional capital.

Our business activities rely on newly established and developing laws and regulations in the states in which we operate or intend to operate. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes, including changes in the interpretation and/or administration of applicable regulatory requirements may adversely affect our profitability or cause us to cease operations entirely. Any determination that our business fails to comply with applicable cannabis regulations would require us either to significantly change or terminate our business activities, which would have a material adverse effect on our business.

The cannabis industry may come under the scrutiny or further scrutiny by the U.S. Food and Drug Administration, Securities and Exchange Commission, the DOJ, the Financial Industry Regulatory Advisory or other federal, state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or nonmedical purposes in the United States. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding our industry may adversely affect the business and our operations, including, without limitation, the costs to remain compliant with applicable laws and the impairment of our ability to raise additional capital, which could reduce, delay or eliminate any return on investment in us.

Due to the classification of cannabis as a Schedule I controlled substance under the CSA, banks and other financial institutions which service the cannabis industry are at risk of violating certain financial laws, including anti-money laundering statutes.

Because the manufacture, distribution, and dispensation of cannabis remains illegal under the CSA, banks and other financial institutions providing services to cannabis-related businesses risk violation of federal anti-money laundering statutes, the unlicensed money-remitter statute and the U.S. Bank Secrecy Act. These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity” such as distributing controlled substances which are illegal under federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA. In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments in the United States are found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This finding could restrict or otherwise jeopardize our ability to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while we have no current intention to declare or pay dividends in the foreseeable future, in the event that a determination is made that any such investments in the United States could reasonably be shown to constitute proceeds of crime, we may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.

The re-classification of cannabis or changes in U.S. controlled substance laws and regulations could have a material adverse effect on our business.

If cannabis is re-classified as a Schedule II or lower controlled substance under the CSA, the ability to conduct research on the medical benefits of cannabis would most likely be more accessible; however, if cannabis is re-categorized as a Schedule II or lower controlled substance, the resulting re-classification would result in the need for approval by the U.S. Food and Drug Administration (the “FDA”) if medical claims are made about our medical cannabis products. As a result of such a re-classification, the manufacture, importation, exportation, domestic distribution, storage, sale and use of such products could become subject to a significant degree of regulation by the DEA. In that case, we may be required to be registered to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Obtaining the necessary registrations may result in delay of the manufacturing or distribution of our products. The DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance could have a material adverse effect on our business, financial condition and results of operations. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

We, and/or contract counterparties that are directly engaged in the trafficking of cannabis, may incur significant tax liabilities due to limitations on tax deductions and credits under section 280E of the Code.

Section 280E of the Code prohibits businesses from taking deductions or credits in carrying on any trade or business consisting of trafficking in certain controlled substances that are prohibited by federal law. The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are authorized under state laws, seeking substantial sums in tax liabilities, interest and penalties resulting from underpayment of taxes due to the application of Section 280E. Under a number of cases, the United States Supreme Court has held that income means gross income (not gross receipts). Under this reasoning, the cost of goods sold (“COGS”) is permitted as a reduction in determining gross income, notwithstanding Section 280E. Although proper reductions for COGS are generally allowed to determine gross income, the scope of such items has been the subject of debate, and deductions for significant costs may not be permitted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses. Thus, we, to the extent of our “trafficking” activities (if applicable), and/or key contract counterparties directly engaged in trafficking in cannabis, may be subject to United States federal tax, without the benefit of deductions or credits. To the extent such tax limitations create a financial burden on contract counterparties, such burdens may impact the ability of such counterparties to make full or timely payment to us, which would have a material adverse effect on our business.

State and local laws and regulations may heavily regulate brands and forms of cannabis products, and there is no guarantee that our proposed products and brands will be approved for sale and distribution in any state.

States generally only allow the manufacture, sale and distribution of cannabis products that are grown in that state and may require advance approval of such products. Certain states and local jurisdictions have promulgated certain requirements for approved cannabis products based on the form of the product and the concentration of the various cannabinoids in the product. While we intend to follow the guidelines and regulations of each applicable state and local jurisdiction in preparing products for sale and distribution, there is no guarantee that such products will be approved to the extent necessary. If the products are approved, there is a risk that any state or local jurisdiction may revoke its approval for such products based on changes in laws or regulations or based on its discretion or otherwise. As we expand into other U.S. jurisdictions, we plan to undertake no cross-border cannabis commerce between states until the federal regulatory environment permits such commerce to occur.

We may have difficulty accessing the service of banks and processing credit card payments in the future, which may make it difficult for us to operate.

In February 2014, the FinCEN issued guidance (which is not law) with respect to financial institutions providing banking services to cannabis businesses, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators. Thus, most banks and other financial institutions do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the Biden administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, we may have limited or no access to banking or other financial services in the United States and may have to operate our business on an all-cash basis. The inability or limitation in our ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for us to operate and conduct our business as planned.

Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions.

Our operations are subject to environmental regulation in the various jurisdictions in which we operate. These regulations mandate, among other things, the maintenance of air and water quality standards. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors (or the equivalent thereof) and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our operations.

Government approvals and permits are currently, and may in the future, be required in connection with our operations. To the extent such approvals are required and not obtained, we may be curtailed or prohibited from our current or proposed production, manufacturing or sale of marijuana or marijuana products or from proceeding with the development of our operations as currently proposed.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. We may be required to compensate those suffering loss or damage by reason of its operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing the production, manufacturing or sale of marijuana or marijuana products, or more stringent implementation thereof, could have a material adverse impact on us and cause increases in expenses, capital expenditures or production or manufacturing costs or reduction in levels of production, manufacturing or sale or require abandonment or delays in development.

Failure to obtain or maintain the necessary licenses, permits, authorizations or accreditations could have a material adverse effect on our business.

We may not be able to obtain or maintain the necessary licenses, permits, authorizations or accreditations, or may only be able to do so at great cost, to operate our businesses. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable to the cannabis industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations or accreditations could result in restrictions on our ability to operate in the cannabis industry, which could have a material adverse effect on our business.

If obtained, any state licenses in the U.S. are expected to be subject to ongoing compliance and reporting requirements. Should any state in which we consider a license important not grant, extend or renew such license or should it renew such license on different terms, or should it decide to grant more than the anticipated number of licenses, our business, financial condition and results of the operation could be materially adversely affected.

U.S. state laws legalizing and regulating the sale and use of cannabis could be repealed or overturned, and local governmental authorities will not limit the applicability of state laws within their respective jurisdictions.

There is no assurance 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. 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 state laws are repealed or curtailed, our business or operations in those states or under those laws would be materially and adversely affected. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect us, our business and our assets or investments.

The rulemaking process at the state level that applies to cannabis operators in any state will be ongoing and result in frequent changes. As a result, a compliance program is essential to manage regulatory risk. All operating policies and procedures we have implemented are compliance-based and are derived from the state regulatory structure governing ancillary cannabis businesses and their relationships to state-licensed or permitted cannabis operators, if any. Notwithstanding our efforts and diligence, regulatory compliance and the process of obtaining regulatory approvals can be costly and time-consuming. No assurance can be given that we will receive the requisite licenses, permits or cards to continue operating our businesses.

In addition, local laws and ordinances could restrict our business activity. Although our operations are legal under the laws of the states in which our business operates, local governments have the ability to limit, restrict and ban cannabis businesses from operating within their jurisdiction. Land use, zoning, local ordinances and similar laws could be adopted or changed and have a material adverse effect on our business.

Multiple states where medical and/or adult use cannabis is legal have or are considering special taxes or fees on businesses in the cannabis industry. It is uncertain at this time whether other states are in the process of reviewing such additional taxes and fees. The implementation of special taxes or fees could have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

We may face limitations on ownership of cannabis licenses, which may restrict our ability to grow.

In certain states, the cannabis laws and regulations limit not only the number of cannabis licenses issued, but also the number of cannabis licenses that one person or entity may own. Such limitations on the ownership of additional licenses within certain states may limit our ability to grow in such states. We employ joint ventures from time to time to ensure continued compliance with the applicable regulatory guidelines. Currently, we have a joint venture with a third party in Illinois. We intend to structure our joint ventures on a case-by-case basis but generally intend to maintain operational control over the joint venture business and a variable economic interest through the applicable governing documents.

We may become subject to FDA or ATF regulation that may have an adverse effect on our business, and we may be subject to negative clinical trials.

Cannabis remains a Schedule I controlled substance under U.S. federal law. If the federal government reclassifies cannabis to a Schedule II controlled substance, it is possible that the FDA would seek to regulate cannabis under the Food, Drug and Cosmetics Act of 1938. Additionally, the FDA may issue rules and regulations, including good manufacturing practices, related to the growth, cultivation, harvesting and processing of medical cannabis. Clinical trials may be needed to verify the efficacy and safety of cannabis. It is also possible that the FDA would require facilities where medical use cannabis is grown to register with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, the impact they would have on the cannabis industry is unknown, including the costs, requirements and possible prohibitions that may be enforced. If we are unable to comply with the potential regulations or registration requirements prescribed by the FDA, it may have an adverse effect on our business, prospects, revenue, results of operation and financial condition.

It is also possible that the federal government could seek to regulate cannabis under the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”). The ATF may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products, including smokeless cannabis products.

From time to time, studies or clinical trials on cannabis products may be conducted by academics or others, including government agencies. The publication of negative results of studies or clinical trials related to our proposed products or the therapeutic areas in which our proposed products will compete could have a material adverse effect on our sales.

Some of our planned business activities are contingent upon the enactment of adoption of new regulations in the State of Nevada.

Our objective is to build out a portion of the Planet 13 Las Vegas Superstore for use as an on-site cannabis consumption lounge as part of its phased expansion plans. In order to operate a consumption lounge, we are reliant on the CCB passing the required regulations to enable on-site consumption lounges. There is no guarantee that the CCB will pass the required regulations, and there is no guarantee that if the regulations are passed that we will be awarded the necessary license(s) to operate a consumption lounge. Should we not be awarded the necessary licenses, we may be unable to position the reserved space at the Planet 13 Las Vegas Superstore to its highest and best intended use.

Nevada has updated its regulatory framework in accordance with a revised statutory framework effective on July 1, 2020 which could have a material adverse effect on our business.

We, through our subsidiary MMDC, hold privileged licenses issued under the previous NRS 453A and NRS 453D statutory framework in Nevada. Starting on July 1, 2020, the NRS 453A and 453D statutory framework expired and was replaced by NRS 678A, B, C and D, under which framework the MMDC licenses will continue in full force and effect. Nevada has established the CCB, which oversees the regulation of cannabis licenses and regulation in Nevada. On July 21, 2020, the CCB adopted regulations substantially similar to the NAC 453A and 453D regime under which licensee previously operated. As the CCB clarifies how it will interpret the statutes and regulations, there may be impact on the processes, procedures, administration, taxation, costs, and generally the operations of MMDC. On October 20, 2020, the CCB adopted regulations requiring disclosure of all public company shareholders having a 5% or greater ownership interest in a Nevada cannabis company, and that all public companies disclose to the CCB their NOBO list as of the record date of each annual general meeting of shareholders.

California is considering a revised statutory framework for agency consolidation and tax simplification in 2021.

We, through our subsidiary Newtonian, hold the California License issued under the MAUCRSA statutory framework in California. California’s Department of Cannabis Control under the administration of Governor Gavin Newsom (the “Newsom Administration”) consolidated the California Licensing Agencies into a single department and approved consolidated emergency regulations which are now in effect. The regulations create consistent standards for cannabis licenses across all license types, which may impact the processes, procedures, administration, and generally the operations of commercial cannabis licenses in California. The Newsom Administration is also considering tax simplification in 2022, which would shift the responsibilities of tax collection from the final distributor to the first for cultivation, and for the retail excise tax from the distributor to the retailer. While we are closely following the Newsom Administration’s budget proposals and revisions and will provide public comment, the enacted form of the uniform licensing protocols and regulatory clean-up as part of a short-term and longer-term strategy are unknown and the regulations and regulatory impact on the licenses and operations therefrom is not currently known.

We could be subject to criminal prosecution or civil liabilities under RICO.

The Racketeer Influenced Corrupt Organizations Act (“RICO”) criminalizes the use of any profits from certain defined “racketeering” activities in interstate commerce. While intended to provide an additional cause of action against organized crime, due to the fact that cannabis is illegal under U.S. federal law, the production and sale of cannabis qualifies cannabis related businesses as “racketeering” as defined by RICO. As such, all officers, managers and owners in a cannabis related business could be subject to criminal prosecution under RICO, which carries substantial criminal penalties.

RICO can create civil liability as well: persons harmed in their business or property by actions which would constitute racketeering under RICO often have a civil cause of action against such “racketeers,” and can claim triple their amount of estimated damages in attendant court proceedings. We, as well as our officers, managers and owners, could all be subject to civil claims under RICO.

We lack access to U.S. bankruptcy protections.

Many courts have denied cannabis businesses bankruptcy protections because the use of cannabis is illegal under federal law. In the event of a company’s bankruptcy, it may be very difficult for lenders to recoup their investments in the cannabis industry. If we experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections would be available, which would have a material adverse effect on us.

Our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our business.

We will be subject to various SEC reporting and other regulatory requirements. We have incurred and will continue to incur expenses and, to a lesser extent, diversion of our management’s time in our efforts to comply with Section 404 of the Sarbanes-Oxley Act regarding internal controls over financial reporting. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing we conduct in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of the Common Shares.

Risks Related to our Business and Operations

The full effect of the COVID-19 pandemic on our operations is unknown at this time, and it may continue to have a significant negative effect on us in the future.

As reflected in the Management’s Discussion & Analysis, the COVID-19 pandemic has had a negative effect on our business. While the continued impact of COVID-19 on us remains unknown, continued spread of COVID-19 or its variants may have a material adverse effect on global economic activity, and can result in volatility and disruption to global supply chains, labor productivity, operations, mobility of people as a result of travel restrictions and border closures and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and expected timelines and other factors relevant to us. The current global uncertainty with respect to the spread of COVID-19 or its variants and its effect on the broader global economy may have a significant negative effect on us.

Management is committed to keeping our retail stores open to customers but continues to monitor the situation on a daily basis and is prepared to take necessary actions in response to directives of government and public health authorities, and any actions that are in the best interests of our team members, customers, and other stakeholders. We have already taken and will continue to take actions to mitigate the effects of COVID-19 on our operations, such as the expansion of our fleet of delivery vehicles, while protecting the health and safety of our team members, customers and other stakeholders.

Uncertain economic conditions resulting from the COVID-19 pandemic may, in the short or long term, adversely impact demand for our products. We rely on consumers’ demand for the cannabis products we sell in our retail stores. Consumer spending may decline across cannabis retail. Such a situation could adversely affect our business, financial condition, liquidity and results of operations. A limited or general decline in consumption of cannabis products could occur in the future due to a variety of factors related to the COVID-19 pandemic, including: (i) a continued decline in economic or geopolitical conditions, including increased or prolonged unemployment, resulting in reduced consumer disposable income; (ii) concern about the health consequences of consuming cannabis products given the increased awareness of health concerns during this time; and (iii) a general decline in consumers leaving their homes and favoring online shopping, resulting in less foot traffic in our retail stores.

Many of the third-party statistics or data presented herein predate the COVID-19 pandemic, and forecasts or estimates may be impacted by economic or regulatory changes resulting from the pandemic. Although we have yet to experience a material decline in consumer spending, the ultimate impact is currently unknown and may become significant as consumers continue to experience financial hardship from prolonged unemployment.

We face increasing competition that may materially and adversely affect our business, financial condition and results of operations.

The cannabis industry and businesses ancillary to and directly involved with cannabis businesses are undergoing rapid growth and substantial change, which has resulted in an increase in competitors, consolidation and formation of strategic relationships. As such, we face competition from companies that may have greater capitalization, access to public equity markets, more experienced management or more maturity as a business. The vast majority of both manufacturing and retail competitors in the cannabis market consist of localized businesses (those doing business in a single state), although there are multistate operators with which we compete directly. Aside from this direct competition, out-of-state operators that are capitalized well enough to enter markets through acquisitive growth are also part of the competitive landscape. Similarly, as we execute our growth strategy, operators in our future state markets will inevitably become direct competitors. We are likely to continue to face increasing and intense competition from these companies. Increased competition by larger and better financed competitors could materially and adversely affect our business, financial condition and results of operations.

If the number of users of adult-use and medical marijuana in the United States increases, the demand for products will increase. Consequently, we expect that competition will become more intense as current and future competitors begin to offer an increasing number of diversified products to respond to such increased demand. To remain competitive, we will require a continued investment in research and development, marketing, sales and client support. We may not have sufficient resources to maintain sufficient levels of investment in research and development, marketing, sales and client support efforts to remain competitive, which could materially and adversely affect our business, financial condition and results of operations.

Acquisitions or other consolidating transactions in the cannabis industry could harm us in a number of ways, including losing customers, revenue and market share, or forcing us to expend greater resources to meet new or additional competitive threats, all of which could harm our operating results. As competitors enter the market and become increasingly sophisticated, competition in our industry may intensify and place downward pressure on retail prices for our products and services, which could negatively impact our profitability.

Our reliance on our operations in limited jurisdictions means that adverse changes or developments could have a material adverse effect on our business.

To date, our activities and resources have been primarily focused within the States of Nevada and California, and we have acquired or announced award of licenses in the States of Florida and Illinois in 2021. We expect to continue the focus on these states as we continue to review further expansion opportunities into other jurisdictions in the United States. Adverse changes or developments within California, Florida, Illinois, or Nevada could have a material adverse effect on our ability to continue producing cannabis, and our business, financial condition and prospects.

Our probable lack of business diversification could have a material adverse effect on our business.

Because we are initially focused solely on developing our cannabis business, the prospects for our success will depend upon the future performance and market acceptance of our intended facilities, products, processes, and services. Unlike certain entities that have the resources to develop and explore numerous product lines, operating in multiple industries or multiple areas of a single industry, we do not anticipate the ability to immediately diversify or benefit from the possible spreading of risks or offsetting of losses.

There is no assurance that we will be profitable or pay dividends.

There is no assurance as to whether we will achieve profitability or pay dividends. We have incurred and anticipate that we will continue to incur substantial expenses relating to the development and initial operations of our business. The payment and amount of any future dividends, if any, will depend upon, among other things, our results of operations, cash flow, financial condition, and operating and capital requirements. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividends. In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments in the United States were found to be in violation of money laundering legislation or otherwise, 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 our ability to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada.

We are a developing company and have only recently begun to generate positive cash flow.

We have only recently begun to generate positive cash flow and opened the Planet 13 Las Vegas Superstore on November 1, 2018, and the Planet 13 OC Superstore on July 1, 2021. It is extremely difficult to make accurate predictions and forecasts of our finances. This is compounded by the fact that we operate in the cannabis industry, which is rapidly transforming. There is no guarantee that our products or services will continue to be attractive to current and potential consumers.

Our business is exposed to risks inherent in an agricultural business, which may have a material adverse effect on us.

Our business involves the growing of cannabis, an agricultural product. As such, there are many similar risks as with any agricultural commodity, such as fluctuations in pricing. We will be subject to other risks inherent in the agricultural business, such as insects, plant diseases, drought, and similar cultivation risks. Although we expect that any such growing will be completed under climate-controlled conditions, there can be no assurance that natural elements will not have a material adverse effect on any such future production.

We are dependent on the popularity of consumer acceptance of our brand portfolio to generate revenues.

Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance of and demand for our products. Acceptance of our products depends on several factors, including availability, cost, ease of use, familiarity of use, convenience, effectiveness, safety and reliability. If these customers do not accept our products, or if such products fail to adequately meet customers’ needs and expectations, our ability to continue generating revenues could be reduced.

We may be adversely impacted by rising or volatile energy costs.

Our cannabis growing operations consume considerable energy, which makes us vulnerable to rising energy costs. Accordingly, rising or volatile energy costs may adversely affect our business and our ability to operate profitably.

We may encounter unknown environmental risks that may delay the development of our businesses.

There can be no assurance that we will not encounter hazardous conditions, such as asbestos or lead, at the sites of the real estate used to operate our businesses, which may delay the development of our businesses. Upon encountering a hazardous condition, work at our facilities may be suspended. If we receive notice of a hazardous condition, we may be required to correct the condition prior to continuing construction. If additional hazardous conditions were present, it would likely delay construction and may require significant expenditure of our resources to correct the conditions. Such conditions could have a material impact on our investment returns.

Threats to our information technology systems and potential cyber-attacks and security breaches could have a material adverse effect on our business, reputation and financial condition.

Our operations depend, in part, on how well we and our suppliers protect networks, equipment, information technology (“IT”) systems and software against damage and threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. Our operations also depend on the timely maintenance and replacement of network equipment, IT systems and software, as well as pre-emptive expenses to mitigate associated risks. Given the nature of our products and the lack of legal availability outside of channels approved by the federal government, as well as the concentration of inventory in our facilities, there remains a risk of shrinkage, as well as theft. A security breach at one of our facilities could expose us to additional liability and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential consumers from choosing our products. If there were a breach in security and we fell victim to theft or robbery, the loss of cannabis plants, cannabis oils, cannabis flowers and cultivations and processing equipment, or if there were a failure in information systems, it could adversely affect our reputation and business continuity.

Additionally, we may store and collect personal information about customers and are responsible for protecting that information from privacy breaches that may occur through procedural or process failure, IT malfunction or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly consumer lists and preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

We have not experienced any material losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not incur such losses in the future. Our risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

We are subject to laws, rules and regulations in the United States (such as the California Consumer Privacy Act (“CCPA”)) and other jurisdictions relating to the collection, processing, storage, transfer and use of personal data. Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify regulators and customers, employees and other individuals of a data security breach. Evolving compliance and operational requirements under the CCPA and the privacy laws, rules and regulations of other jurisdictions in which we operate impose significant costs that are likely to increase over time. In addition, non-compliance could result in proceedings against us by governmental entities and/or significant fines, could negatively impact our reputation and may otherwise adversely impact our business, financial condition and operating results.

Our business is subject to a number of risks and hazards for which we may not be able to obtain any or adequate insurance coverage.

Our business is subject to a number of risks and hazards generally, including adverse environmental conditions, accidents, labor disputes and changes in the regulatory environment. Such occurrences could result in damage to assets, personal injury or death, environmental damage, delays in operations, monetary losses and possible legal liability.

Although we intend to continue to maintain insurance to protect against certain risks in such amounts as we consider to be reasonable, our insurance will not cover all the potential risks associated with our operations. We may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards encountered in our operations is not generally available on acceptable terms. We might also become subject to liability for pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect on our financial performance and results of operations.

Our business faces risks of exposure to product liability claims, regulatory action, complaints, enforcement action and litigation that could prevent or inhibit the commercialization of our potential products.

As a distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury. In addition, the sale of our products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of our products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that our products caused injury, illness or death, 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 us could result in increased costs, could adversely affect our reputation with our clients and consumers generally and could have a material adverse effect on our business, results of operations and financial condition. There can be no assurances that we 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 our potential products.

In general, our participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against us. Litigation, complaints, and enforcement actions involving either us and/or our subsidiaries could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on our future cash flows, earnings, results of operations and financial condition.

Product recalls could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition.

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 labelling disclosure. If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although we have detailed procedures in place for testing our products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if one of our brands were subject to recall, the image of that brand and of us could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention and potential legal fees and other expenses.

Although we are committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets and/or products, if any, will be commercially viable or successfully produced and marketed.

We are operating our business in a relatively new medical and adult-use cannabis industry and market. We must rely largely on our own market research to forecast sales as detailed forecasts are not generally obtainable from other sources at this early stage of the medical and adult-use cannabis industry in the States of California, Florida, Illinois, or Nevada. Further, because U.S. federal and state laws prevent widespread participation in and otherwise hinder market research in the medical and adult-use cannabis industry as a whole, the third-party market data available to us is limited and unreliable. Our market research and projections of estimated total retail sales, demographics, demand, and similar consumer research, are based on assumptions from limited and unreliable market data, and generally represent the personal opinions of our management team. Due to the early stage of the regulated cannabis industry, forecasts regarding the size of the industry and the sales of products by us are inherently difficult to prepare with a high degree of accuracy and reliability. Any event or circumstance that affects the recreational or medical cannabis industry or market could have a material adverse effect on our business, financial condition and results of operations. No assurances can be given that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management’s expectations and assumptions. A failure in the demand for products to materialize as a result of competition, technological change or other factors could have a material adverse effect on our business, results of operations and financial condition.

Our success has depended, and continues to depend, upon our ability to attract and retain key management, including our Co-CEOs, Chief Financial Officer, Vice-President of Finance, Vice-President of Operations, Vice-President of Sales and Marketing, General Counsel and technical experts. We will attempt to enhance our management and technical expertise by continuing to recruit qualified individuals who possess desired skills and experience in certain targeted areas. Our inability to retain employees and attract and retain sufficient additional employees or engineering and technical support resources could have a material adverse effect on our business, results of operations, sales, cash flow or financial condition. Shortages in qualified personnel or the loss of key personnel could adversely affect our financial condition, results of operations of the business and could limit our ability to develop and market our cannabis-related products. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them.

Our future success depends substantially on the continued services of our executive officers, our key research and development personnel and our key growth and extraction personnel. If one or more of our executive officers or key personnel were unable or unwilling to continue in their present positions, we might not be able to replace them easily or at all. In addition, if any of our executive officers or key employees join a competitor or form a competing company, we may lose know-how, key professionals and staff members. These executive officers and key employees could compete with and take customers away. The loss of any of our senior management or key employees could materially adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all. We do not maintain key person life insurance policies on any of our employees.

We could be liable for fraudulent or illegal activity by our employees, contractors and consultants resulting in significant financial losses and claims against us.

We are exposed to the risk that our employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate government regulations. It is not always possible for us to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us 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 us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our 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 our operations, any of which could have a material adverse effect on our business, financial condition and results of operations.

In certain circumstances, our reputation could be damaged, resulting in a material adverse effect to our business.

Damage to our reputation can be the result of the actual or perceived occurrence of any number of events and could include any negative publicity, whether true or not. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easy for individuals and groups to communicate and share opinions and views regarding us and our activities, whether true or not. Although we believe that we operate in a manner that is respectful to all stakeholders and that we take care in protecting our image and reputation, we do not ultimately have direct control over how we are perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our projects, thereby having a material adverse impact on our financial performance, financial condition, cash flows and growth prospects.

Unfavorable publicity or consumer perception could lead to a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows.

We believe the medical and recreational cannabis industries are highly dependent upon consumer perception regarding the safety, efficacy and quality of cannabis distributed to such consumers. Consumer perception of our products may be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis or derivative products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the medical or recreational 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 favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows. Our dependence on 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 us, the demand for our products, and our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis in general, or our 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 appropriately or as directed. Public opinion and support for medical and recreational cannabis has traditionally been inconsistent and varies from jurisdiction to jurisdiction. While public opinion and support appears to be rising for legalizing medical and adult-use cannabis, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis as opposed to legalization in general).

Because of our reliance on key inputs and their related costs, any significant interruption or negative change in the availability or economics of our supply chain could have a materially adverse impact on our business, financial condition and operating results.

The cultivation, extraction and processing of cannabis and derivative products is dependent on a number of key inputs and their related costs, including raw materials, electricity, water and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact our business, financial condition and operating results. Some of these inputs may only be available from a single supplier or a limited group of suppliers. If a sole source supplier were to go out of business, the relevant investment entity might be unable to find a replacement for such source in a timely manner or at all. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on our business, financial condition and operating results.

Our ability to compete and grow will also be dependent on having access, at a reasonable cost and in a timely manner, to equipment, parts and components. No assurances can be given that we will be successful in maintaining our required supply of equipment, parts and components. This could have an adverse effect on our financial results.

We are a holding company and are dependent on the earnings and distributions by our subsidiary, MMDC.

We are a holding company and the vast majority of our assets are the capital stock of MMDC. As a result, our investors are subject to the risks attributable to MMDC. As a holding company, we conduct substantially all of our business through MMDC, which generates substantially all of our revenues. Consequently, our cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of MMDC and the distribution of those earnings to us. The ability of MMDC to pay dividends and other distributions will depend on its operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by MMDC and contractual restrictions contained in the instruments governing its debt. In the event of a bankruptcy, liquidation or reorganization of MMDC, holders of indebtedness and trade creditors may be entitled to payment of their claims from the assets of MMDC before us.

The termination of any of our leases may have a material adverse effect on our business, financial condition and prospects.

We currently lease our production and cultivation facility, the Planet 13 Las Vegas Superstore, the Medizin dispensary in Las Vegas, Nevada, and the Planet 13 OC Superstore. Each of the leases specifically contemplates carrying on licensed cannabis activities pursued by us and through our subsidiaries at those locations. While we currently have a good relationship with each of our landlords, a termination of any of the leases by any of our respective landlords could have a material adverse effect on our business, financial condition and prospects.

Competition for the acquisition and leasing of properties suitable for the cultivation, production and sale of medical and adult use cannabis may impede our ability to make acquisitions or increase the cost of these acquisitions, which could adversely affect our operating results and financial condition.

We compete for the acquisition of properties suitable for the cultivation, production and sale of medical and adult use cannabis with entities engaged in agriculture and real estate investment activities, including corporate agriculture companies, cultivators, producers and sellers of cannabis. These competitors may prevent us from acquiring and leasing desirable properties, may cause an increase in the price we must pay for properties or may result in us having to lease our properties on less favorable terms than we expect. Our competitors may have greater financial and operational resources than we do and may be willing to pay more for certain assets or may be willing to accept more risk than we believe can be prudently managed. In particular, larger companies may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may also adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms. In addition, due to a number of factors, including but not limited to potential greater clarity of the laws and regulations governing medical use cannabis by state and federal governments, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. If we pay higher prices for properties or enter into leases for such properties on less favorable terms than we expect, our profitability and ability to generate cash flow and make distributions to our stockholders may decrease. Increased competition for properties may also preclude us from acquiring those properties that would generate attractive returns to us.

We face costs of maintaining a public listing which could adversely affect our business, financial condition and results of operations.

As a public company with securities listed on the CSE, there are costs associated with legal, accounting and other expenses related to regulatory compliance. Securities legislation and the rules and policies of the CSE require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs. We may also elect to devote greater resources than we otherwise would have on communication and other activities typically considered important by publicly traded companies.

In addition we are subject, or will become subject, to the reporting requirements, rules and regulations under applicable Canadian and U.S. securities laws. The requirements of existing and potential future rules and regulations will increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming or costly and may place undue strain on our personnel, systems and resources, which could adversely affect our business, financial condition and results of operations.

Currency fluctuations could expose us to exchange risk, which may have a material adverse effect on our business.

Our revenues and expenses are expected to be primarily denominated in U.S. dollars, while funding may occur in Canadian dollars or other non-U.S. currencies, therefore exposing us to currency exchange fluctuations. Recent events in the global financial markets have been coupled with increased volatility in the currency markets. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material adverse effect on our business, financial condition and operating results. We may, in the future, establish a program to hedge a portion of our foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if we develop a hedging program, there can be no assurance that it will effectively mitigate currency risks.

We may face difficulties acquiring additional financing to fund our growth, and we can provide no guarantee on the use of available funds.

The development of our business and our ability to execute on expansion opportunities will depend, in part, upon the amount of additional financing available. Failure to obtain sufficient financing may result in delaying, scaling back, eliminating or indefinitely postponing our expansion opportunities and our current or future operations. 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 acceptable. In addition, there can be no assurance that future financing can be obtained without substantial dilution to existing shareholders. Our inability to raise financing through traditional banking to fund ongoing operations, capital expenditures or acquisitions could limit our growth and may have a material adverse effect on our business, prospects, revenue, results of operation and financial condition.

We expect to continue to have access to equity and debt financing from the public and prospectus exempt (private placement) markets in Canada. If such equity and/or debt financing is no longer available in the public markets in Canada due to changes in applicable law, then we expect that we would have access to raise equity and/or debt financing privately. However, we can provide no assurances that access to such sources of capital will be available in the future.

Commercial banks, private equity firms and venture capital firms have approached the cannabis industry cautiously to date. However, there are increasing numbers of high-net-worth individuals and family offices that have made meaningful investments in companies and projects similar to our projects. Although there has been an increase in the amount of private financing available over the last several years, there is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants. There can be no assurance that additional financing, if raised privately, will be available to us when needed or on terms that are acceptable. Any inability by us to raise financing, if, as, or when required, to fund capital expenditures or acquisitions could limit our growth and may have a material adverse effect upon future profitability.

Further, we cannot specify with certainty the particular uses of our available funds. Management has broad discretion in the application of our available funds. Accordingly, shareholders of the Common Shares will have to rely upon the judgment of management with respect to the use of available funds, with only limited information concerning management’s specific intentions. Our management may spend a portion or all of the available funds in ways that our shareholders might not desire, that might not yield a favorable return and that might not increase the value of a shareholder’s investment. The failure by management to apply these funds effectively could harm our business. Pending use of such funds, we might invest available funds in a manner that does not produce income or that loses value.

Our officers and directors may be engaged in a range of business activities resulting in conflicts of interest.

Although certain of our officers are bound by non-competition agreements limiting their ability to enter into competing and/or conflicting ventures or businesses during, and for a period of 12 months after, their employment with us, we may be subject to various potential conflicts of interest because some of our officers and directors may be engaged in a range of business activities. In addition, our executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to us. In some cases, our executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to our business and affairs and that could adversely affect our operations. These business interests could require significant time and attention of our executive officers and directors.

In addition, we may also become involved in other transactions which conflict with the interests of our directors and the officers who may from time to time deal with persons, firms, institutions or companies with which we may be dealing, or which may be seeking investments similar to those desired by us. The interests of these persons could conflict with ours. In addition, from time to time, these persons may be competing with us for available investment opportunities. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws. In particular, if such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, our directors are required to act honestly, in good faith and in our best interests.

Our actual financial position and results of operations may differ materially from the expectations of management.

Our actual financial position and results of operations may differ materially from management’s expectations. As a result, our revenue, net income and cash flow may differ materially from our projected revenue, net income and cash flow. The process for estimating our revenue, net income and cash flow requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect our financial condition or results of operations.

Risks Related to Intellectual Property

We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights.

We may be forced to litigate to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary rights. Any such litigation could be very costly and could distract management from focusing on operating our business. The existence and/or outcome of any such litigation could harm our business. Further, because the content of much of our intellectual property concerns cannabis and other activities that are not legal in some state jurisdictions or under federal law, we may face additional difficulties in defending our intellectual property rights.

U.S. federal trademark and patent protection may not be available for our intellectual property due to the current classification of cannabis as a Schedule I controlled substance, and we may be unable to adequately protect our proprietary and intellectual property rights, particularly in the U.S., even if available.

Our ability to compete may depend on the superiority, uniqueness and value of any intellectual property and technology that we may develop. To the extent we are able to do so, to protect any proprietary rights, we intend to rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of any of our intellectual property:

The market for our products and services may depend to a significant extent upon the goodwill associated with our trademarks and trade names, and our ability to register certain of our intellectual property under U.S. federal and state law is impaired by the illegality of cannabis under U.S. federal law;

Patents in the cannabis industry involve complex legal and scientific questions and patent protection may not be available for some or any products;

Our applications for trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;

Issued patents, trademarks and registered copyrights may not provide us with competitive advantages;

Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of any of our products or intellectual property;

Our efforts may not prevent the development and design by others of products or marketing strategies similar to or competitive with, or superior to those we develop;

Another party may assert a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or

The expiration of patent or other intellectual property protections for any assets we own could result in significant competition, potentially at any time and without notice, resulting in a significant reduction in sales.

The effect of the loss of these protections on us and our financial results will depend, among other things, upon the nature of the market and the position of our products in the market from time to time, the growth of the market, the complexities and economics of manufacturing a competitive product and regulatory approval requirements, but the impact could be material and adverse.

Further, as long as cannabis remains illegal under U.S. federal law as a Schedule I controlled substance pursuant to the CSA, the benefit of certain federal laws and protections which may be available to most businesses, such as a federal trademark regarding the intellectual property of a business, may not be available to us. As a result, our intellectual property may never be adequately or sufficiently protected against the use or misappropriation by third parties. In addition, because the regulatory framework of the cannabis industry is in a constant state of flux, we can provide no assurance that we will ever obtain any protection of our intellectual property, whether on a federal, state or local level.

Risks Related to our Common Shares

Our Co-CEOs are able to exert significant influence over all matters requiring shareholder approval.

Robert Groesbeck and Larry Scheffler, the Co-CEOs, co-Chairmen and each a director of the Company, are promoters of the Company. As of December 8, 2021: (i) Mr. Groesbeck owns, or controls or directs, directly or indirectly, a total of 38,819,587 Common Shares, and 562,511 restricted share units (“Restricted Share Units” or “RSUs”), representing in the aggregate approximately 18.71% of the equity of the Company on a fully diluted basis; and (ii) Mr. Scheffler owns, or controls or directs, directly or indirectly, a total of 39,470,859 Common Shares and 562,511 RSUs, representing in the aggregate approximately 19.02% of the equity of the Company on a fully diluted basis. By virtue of their status as our principal shareholders, and by each being a director and/or our executive officer, each of Messrs. Groesbeck and Scheffler have the power to exercise significant influence over all matters requiring shareholder approval, including the election of directors, amendments to our articles, mergers, business combinations and the sale of substantially all of our assets. As a result, we could be prevented from entering into transactions that could be beneficial to us or our other shareholders. Also, third parties could be discouraged from making a takeover bid. Further, sales by either Messrs. Groesbeck and Scheffler of a substantial number of Common Shares could cause the market price of the Common Shares to decline.

We are a U.S. domestic company for U.S. federal income tax purposes, and we and our shareholders are subject to U.S. tax law.

We are treated as a U.S. domestic corporation for U.S. federal income tax purposes under Section 7874(b) of the Code. As a result, we are subject to U.S. income tax on our worldwide income, and any dividends paid by us to holders of our shares not domiciled in the U.S. (“Non-U.S. Holders”) are generally subject to U.S. federal income tax withholding at a 30% rate or such lower rate as provided in an applicable treaty. We expect to continue to be treated as a U.S. domestic corporation for U.S. federal tax purposes.

In addition, Section 382 of the Code contains rules that limit for U.S. federal income tax purposes the ability of a corporation that undergoes an “ownership change” to utilize its net operating losses (and certain other tax attributes) existing as of the date of such ownership change. Under these rules, a corporation generally is treated as having had an “ownership change” if there is more than a 50% increase in stock ownership by one or more “five percent shareholders,” within the meaning of Section 382 of the Code, during a rolling three-year period. We do not have any net operating loss carry forwards or research and development credit carry forwards as of December 31, 2017 that would be subject to Section 382 of the Code.

Furthermore, we will be subject to Canadian income tax on our worldwide income. Consequently, it is anticipated that we may be liable for both U.S. and Canadian income tax, which could have a material adverse effect on our financial condition and results of operations.

Because the Common Shares are treated as shares of a U.S. domestic corporation, the U.S. gift, estate and generation-skipping transfer tax rules may apply to a Non-U.S. Holder of Common Shares.

Dividends received by Canadian holders of Common Shares are subject to U.S. withholdings tax.

Dividends received by holders of Common Shares who are residents of Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”) will be subject to U.S. withholding tax. A foreign tax credit under the Tax Act in respect of such U.S. withholding taxes may not be available to such holder.

Dividends received by non-resident holders of Common Shares who are U.S. holders will not be subject to U.S. withholding tax but will be subject to Canadian withholding tax. Because we will be considered to be a U.S. domestic company for U.S. federal income tax purposes, dividends paid by us will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code.

The market price for the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control.

The market price for the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following: (i) actual or anticipated fluctuations in our quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of companies in the industry in which we operate; (iv) addition or departure of our executive officers and other key personnel; (v) release or expiration of lock-up or other transfer restrictions on outstanding Common Shares; (vi) sales or perceived sales of additional Common Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; (viii) fluctuations to the costs of vital production materials and services; (ix) changes in global financial markets and global economies and general market conditions, such as interest rates and pharmaceutical product price volatility; (x) operating and share price performance of other companies that investors deem comparable to us or from a lack of market comparable companies; (xi) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in our industry or target markets; and (xii) regulatory changes in the industry.

Financial markets have at times historically experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely affected and the trading price of the Common Shares might be materially adversely affected.

It may be difficult, if not impossible, for U.S. holders of the Common Shares to resell them over the CSE or at all.

It has recently come to management’s attention that all major securities clearing firms in the U.S. have ceased participating in transactions related to securities of Canadian public companies involved in the medical cannabis industry. This appears to be due to the fact that cannabis continues to be listed as a controlled substance under U.S. federal law, with the result that cannabis-related practices or activities, including the cultivation, possession or distribution of cannabis, are illegal under U.S. federal law. Accordingly, U.S. residents who acquire the Common Shares as “restricted securities” may find it difficult – if not impossible – to resell such shares over the facilities of any Canadian stock exchange on which the shares may then be listed including the CSE. It remains unclear what impact, if any, this and any future actions among market participants in the U.S. will have on the ability of U.S. residents to resell any of the Common Shares that they may acquire in open market transactions.

Generally, given the heightened risk profile associated with cannabis in the United States, capital markets participants may be unwilling to assist with the settlement of trades for U.S. resident securityholders of companies with operations in the U.S. cannabis industry, which may prohibit or significantly impair the ability of securityholders in the United States to trade our securities. If residents of the United States are unable to settle trades of our securities, this may affect the pricing of such securities in the secondary market, the transparency and availability of trading prices and the liquidity of these securities.

Future sales of the Common Shares by existing shareholders could reduce the market price of the Common Shares.

Sales of a substantial number of the Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of the Common Shares intend to sell the Common Shares, could reduce the market price of the Common Shares. Additional Common Shares may be available for sale into the public market, subject to applicable securities laws, which could reduce the market price for the Common Shares. Holders of our incentive stock options may have an immediate income inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the underlying Common Shares). As a result, these holders may need to sell the Common Shares purchased on the exercise of options in the same year that they exercise their options. This might result in a greater number of Common Shares being sold in the public market, and fewer long-term holds of Common Shares by our management and employees.

Risks Related to our Acquisitions and Growth Strategy

Our failure to successfully integrate acquired businesses, their products and other assets, or if integrated, failure to further our business strategy, may result in our inability to realize any benefit from such acquisition.

We may grow by acquiring other businesses. The consummation and integration of any acquired business, product or other assets may be complex and time consuming and, if such businesses and assets are not successfully integrated, we may not achieve the anticipated benefits, cost-savings or growth opportunities. Furthermore, these acquisitions and other arrangements, even if successfully integrated, may fail to further our business strategy as anticipated, expose us to increased competition or other challenges with respect to our products or geographic markets, and expose us to additional liabilities associated with an acquired business, technology or other asset or arrangement. If integration is not managed successfully by our management, we may experience interruptions in our business activities, deterioration in our employee, customer or other relationships, increased costs of integration and harm to our reputation, all of which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

If and when we acquire cannabis businesses, we may obtain the rights to applications for licenses as well as licenses; however, the procurement of such applications for licenses and licenses generally will be subject to governmental and regulatory approval. There are no guarantees that we will successfully consummate such acquisitions, and even if we consummate such acquisitions, the procurement of applications for licenses may never result in the grant of a license by any state or local governmental or regulatory agency and the transfer of any rights to licenses may never be approved by the applicable state and/or local governmental or regulatory agency.

While we intend to conduct reasonable due diligence in connection with our acquisitions, there are risks inherent in any acquisition. Specifically, there could be unknown or undisclosed risks or liabilities of such entities or assets for which we are not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect our financial performance and results of operations. We could encounter additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from the acquisition. All of these factors could cause dilution to our revenue per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of the Common Shares.

We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.

If we implement our business plan as intended, we may in the future experience rapid growth and development in a relatively short period of time. The management of this growth will require, among other things, continued development of our financial and management controls and management information systems, stringent control of costs, the ability to attract and retain qualified management personnel and the training of new personnel. We intend to utilize outsourced resources and hire additional personnel to manage our expected growth and expansion. Failure to successfully manage our possible growth and development could have a material adverse effect on our business and the value of the Common Shares.

There is a risk that some or all of the anticipated strategic and financial benefits may fail to materialize, may not continue on their existing terms, or may not occur within the time period anticipated. Although we have conducted due diligence with respect to material aspects of the development of our business, there is no certainty that our due diligence procedures will reveal all of the risks and liabilities associated with our current plans. Although we are not aware of any specific liabilities, such liabilities may be unknown and, accordingly, the potential monetary cost of such liability is also unknown.

ITEM 2.

FINANCIAL INFORMATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Planet 13 Holdings Inc. (the “Company” or “Planet 13”) is for the nine months ended September 30, 2021 and 2020 and for the years ended December 31, 2020, 2019 and 2018. It is supplemental to, and should be read in conjunction with, our consolidated financial statements for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018 and the accompanying notes for each respective periods. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$” or “US$”), unless otherwise indicated.

This MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable Canadian and United States securities laws. Please refer to the discussion of forward-looking statements and information set out under the heading “Disclosure Regarding Forward-Looking Statements,” identified in this registration statement. As a result of many factors, our actual results may differ materially from those anticipated in these forward-looking statements and information.

Overview of the Company

Our predecessor, MMDC, was incorporated on March 20, 2014, as a Nevada limited liability company. On March 14, 2018, MMDC underwent a statutory conversion to a Nevada domestic corporation named MM Development Company, Inc. On June 11, 2018, MMDC then completed a reverse-take-over of Carpincho, and the resulting entity was renamed Planet 13 Holdings Inc.

We continued on June 26, 2019, under the jurisdiction and laws of British Columbia and hold 100% ownership in MMDC, a vertically integrated US subsidiary corporation active in the cultivation, production, distribution, and retail sale of both medical and recreational cannabis which at the date of this registration statement is restricted to the State of Nevada. For purposes of this registration statement, reference to the Company may also include MMDC as a wholly owned and controlled subsidiary of Company. We hold six cultivation licenses operating at three licensed cultivation facilities, each location operating jointly under a medical and adult-use cultivation license. One cultivation license is located in Clark County Nevada (Las Vegas) in an approximately 16,100 square foot facility with indoor cultivation and a perpetual harvest cycle. The second cultivation license is located near the town of Beatty in Nye County, Nevada. The facility currently houses approximately 500 square feet of research and development and genetics testing. The Beatty site has the potential for over 2,300,000 square feet of greenhouse production capacity on 80 acres of owned land with municipal water and abundant electrical power already at the edge of the property. The third cultivation license is located in Clark County Nevada (Las Vegas) in a 25,000 square foot facility with indoor cultivation and a perpetual harvest cycle in Las Vegas, Nevada. This facility is in the process of being expanded to 45,000 square feet.

We also have six production licenses operating at three licensed production facilities, each location operating jointly under a medical and adult-use cultivation license, four of which are located in Clark County. Two of the four were previously co-located within the 16,100 square foot cultivation facility and were approximately 2,300 square feet. These two licenses were relocated to the 18,500 square foot customer facing production facility that opened inside the Planet 13 Las Vegas Superstore cannabis entertainment complex in November 2019. This facility incorporates butane hash oil extraction (BHO extraction), distillation equipment and microwave assisted extraction equipment as well as a state-of-the-art bottling and infused beverage line and an edibles line able to produce infused chocolates, infused gummies and other edible products and was expanded to 18,500 square feet in September 2021. The second production facility is co-located at the Beatty facility and the third facility is co-located in the 25,000 square foot cultivation facility (currently undergoing an expansion to 45,000 square feet) but is not active at present.

We also have three dispensary licenses. Two licenses are operating at one licensed dispensary facility, one license is medical and the other is for adult-use retail sales. The licenses operate out of the same joint location and presently occupy approximately 24,000 square feet of retail space (expanded from 16,000 square feet in September 2021) located adjacent to the Las Vegas Strip where we opened, on November 1, 2018, the Planet 13 Las Vegas Superstore. Prior to November 1, 2018, the licenses operated out of a 2,300 square feet facility located approximately six miles off the Las Vegas Strip (the “Medizin Facility”). The licenses were transferred to the Planet 13 Las Vegas Superstore location on October 31, 2018.

We were successful in our litigation (for additional discussion regarding this litigation refer to the heading Medizin Re-opening) and were awarded an additional Clark County recreational license and have transferred the license to our Medizin dispensary that was closed when the licenses were transferred to the Planet 13 Las Vegas Superstore. We reopened the Medizin dispensary on November 20, 2020. We have also been granted a distribution license and launched a distribution and delivery service in Nevada to augment our retail locations and be able to deliver product to both wholesale customers and local Nevada state residents throughout the State of Nevada.

We opened the second phase of the Planet 13 Las Vegas Superstore location with ancillary offerings that include a coffee shop, restaurant and event space in November 2019. The build out of a merchandise store and CBD store selling our Planet M branded CBD products inside the Planet 13 Las Vegas Superstore entertainment complex was completed in September 2021. The recent expansion of the Planet 13 Las Vegas Superstore dispensary floor space to 24,000 square added new entertainment features, a second entrance and an additional 40 point-of-sale terminals, all designed to reduce wait times for customers and improve on the already fantastic customer experience was completed in September 2021 We also plan to build a potential cannabis lounge in a segregated area of the facility where patrons will be able to consume products that have been purchased at the dispensary. The state and county have passed the necessary legislation that legalizes consumption lounges, and we are scheduled to obtain a license for such an activity and are waiting on final approval of local regulations prior to determining the final design of the planned lounge. The Planet 13 Las Vegas Superstore also houses our corporate offices. In addition, the production facility housed within the superstore complex, described above, has enabled us to expand our vertical integration and increase the amount of our own branded products that are sold in the Planet 13 Las Vegas Superstore as well as re-entering the wholesale market selling concentrates, edibles and infused beverages.

On July 17, 2020, we expanded our premium indoor cultivation capacity and added additional production and distribution capabilities with the purchase of the inventory, equipment and tenant improvements and cannabis cultivation, production and distribution licenses located in a 25,000 square foot facility with indoor cultivation and a perpetual harvest cycle in Las Vegas, Nevada, which is currently being expanded to 45,000 square feet (the “WCDN Asset Acquisition”). The WCDN Asset Acquisition has allowed us to expand our vertically integrated product offerings in Nevada.

The Santa Ana Acquisition occurred on May 20, 2020, whereby we acquired all of the issued and outstanding common stock of Newtonian, resulting in our acquiring the California License and the Santa Ana Permit, which were both held by Newtonian, and a 30-year lease for the Santa Ana Premises along with the Warner Assets. Newtonian had no operations at the time of the Santa Ana Acquisition. On July 1, 2021, we opened the Planet 13 OC Superstore dispensary to the public. Upon application made, on September 25, 2020, our subsidiary Newtonian received a City of Santa Ana Regulatory Safety Permit Phase 1 for distribution at the Santa Ana Premise, and plans to open a distribution facility upon completion of construction and receipt of the Regulatory Safety Permit Phase 2 from the City of Santa Ana. The construction budget for the 33,000 square foot adult-use retail facility and distribution at the Santa Ana Premise was US$7.5 to $8.5 million. Although there have been minor delays due to temporary staffing shutdowns at the City of Santa Ana related primarily to COVID-19, and the City of Santa Ana not allowing in-person plan submissions, we managed to open the facility on time and within budget. Total buildout costs, including the costs associated with the buildout of our wholesale distribution license was $9.2 million.

The focus of activity during the nine months ended September 30, 2021, was to continue to grow and provide cannabis and cannabis related products to our medical cannabis and adult recreational customers as well as selling branded recreational and medical cannabis products and related cannabis products to our growing wholesale customer base in the State of Nevada. In addition, in the State of California, we were focused on the opening of the Planet 13 OC Superstore on July 1, 2021 and growing revenue from the sale of recreational cannabis through both the retail store and home delivery, and on continuing the integration and optimization of the WCDN Asset Acquisition.

On March 19, 2020, we announced that we would continue to provide core dispensary services during the COVID-19 pandemic and encouraged all local Nevada resident customers to utilize our express pick-up and/or delivery services so as to limit personal interactions and practice social distancing as recommended by the Centre for Disease Control. On March 17, 2020, Nevada State Governor Steve Sisolak announced the closure of all non-essential business starting at noon on March 18, 2020, for 30 days as part of the State’s response to curb the threat of the spread of the COVID-19 virus. This shutdown was extended until June 1, 2020. On April 30, 2020, all retail cannabis dispensaries in Nevada were allowed to offer online ordering with curbside pick-up in addition to delivery and on May 7, 2020, as part of the State of Nevada’s COVID 19 reopening plan, all dispensaries were allowed to reopen to the general public at significantly reduced number of customers allowed in the facility at the same time. All dispensaries are allowed to have a maximum of 50% of the dispensary location’s fire rated occupancy level. The shutdown due to COVID-19 during the months of April, May and June 2020 had a material impact on our business in Q2 2020 from the business closures and lack of tourist traffic in Las Vegas coupled with the reduction in allowed customer traffic during the shutdown period. The partial reopening of resorts, hotels and casinos resulted in increased tourist traffic to Las Vegas and an increase of customers to the Planet 13 Las Vegas Superstore in July to October 2020 and coincided with a return of in-store retail sales, with the store operating at 50% capacity under COVID-19 social distancing safety measure and protocols, coupled with continued online ordering with home delivery and curbside pick-up. This saw operations return to, and surpass, pre-COVID-19 revenue in the months of July to October 2020. The State of Nevada initiated renewed COVID-19 restrictions in November 2020, and, coupled with the lockdowns in California that drastically reduced the amount of tourist traffic to Las Vegas during November and December 2020, caused a significant reduction in tourist traffic to the Planet 13 Las Vegas Superstore during the final two months of 2020 and through to the end of February 2021. The easing of restrictions in Nevada and surrounding states in January 2021 and the move to further open the State of Nevada on February 15, 2021, resulted in an increase in tourist traffic to the Planet 13 Las Vegas Superstore during the first three months of 2021, with us reporting record revenues for the months of March and April 2021. On May 1, 2021, the State of Nevada allowed businesses to operate at 80% of their fire rated occupancy limits and on June 1, 2021, further eased its COVID-19 restrictions to allow all businesses to fully open. Current COVID-19 protocols in Nevada include mask mandates in Clark and Nye county, where we have operations, for all individuals within public indoor settings. Current COVID-19 protocols in California includes a general industry safety order by Cal/OSHA that masks are required statewide for unvaccinated individuals in indoor public settings and workplaces.

We caution that current global uncertainty with respect to the spread of COVID-19 or its variants and its effect on the broader global economy may have a significant negative effect on us. While the precise impact of COVID-19 on us remains unknown, rapid spread of COVID-19 or its variants may have a material adverse effect on global economic activity and can result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to us.

Results of Operations

Three Months and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 31, 2020

Expressed in USD$	Three Months	Three Months
	Ended	Ended	Percentage
	Sep-30-2021	Sep-30-2020	Change
Revenue
Revenues, net of discounts	$32,952,254	$22,797,338	44.5%
Cost of Goods Sold	(15,235,120)	(10,244,725)	48.7%
Gross Profit	$17,717,134	$12,552,613	41.1%
Gross Profit Margin %	53.8%	55.1%

Expenses
General and Administrative	13,174,781	6,223,792	111.7%
Sales and Marketing	1,959,579	991,215	97.7%
Lease expense	673,878	612,329	10.1%
Depreciation and Amortization	1,376,520	945,537	45.6%
Share based compensation expense	6,613,846	569,227	1061.9%
Total Expenses	23,798,604	9,342,100	154.7%

Income (Loss) From Operations	(6,081,470)	3,210,513	(289.4%)

Other (Income) Expense:
Interest Expense, net	8,111	13,367	(39.3%)
Realized Foreign Exchange (gain) loss	(362,402)	169,684	(313.6%)
Transaction costs	-	135,075	na
Change in fair value of warrants	(6,240,073)	3,959,128	(257.6%)
Other expense (income)	(152,466)	(174,145)	(12.4%)
Total Other (Income) Expense	(6,746,830)	4,103,109	(264.4%)

Income (loss) for the period before tax	665,360	(892,596)	(174.5%)
Provision for income tax (current and deferred)	3,397,821	4,754,018	(6.4%)
Income (Loss) for the period	$ (2,732,461)	$(5,646,614)	(33.0%)

Income (Loss) per share for the period
Basic and fully diluted income (loss) per share	$ (0.01)	$(0.03)

Weighted Average Number of Shares Outstanding
Basic and diluted	196,357,392	162,536,424

Expressed in USD$	Nine Months	Nine Months
	Ended	Ended	Percentage
	Sep-30-2021	Sep-30-2020	Change
Revenue
Revenues, net of discounts	89,612,050	50,351,336	78.0%
Cost of Goods Sold	(39,827,876)	(23,853,435)	67.0%
Gross Profit	$49,784,174	$26,497,901	87.9%
Gross Profit Margin %	55.6%	52.6%

Expenses
General and Administrative	31,974,118	17,547,769	82.2%
Sales and Marketing	4,162,934	2,684,174	55.1%
Lease expense	1,934,138	1,502,412	28.7%
Depreciation and Amortization	3,325,524	2,753,936	20.8%
Share based compensation expense	12,211,567	2,006,067	508.7%
Total Expenses	53,608,281	26,494,358	102.3%

Income (Loss) From Operations	(3,824,107)	3,543	(108,034.2%)

Other (Income) Expense:
Interest Expense, net	23,698	23,914	(0.9%)
Realized Foreign Exchange (gain) loss	(1,805,953)	(266,003)	578.9%
Transaction costs	256,666	135,075	90.0%
Change in fair value of warrants	2,728,386	(423,917)	(743.6%)
Other expense (income)	(338,890)	(250,212)	35.4%
Total Other (Income) Expense	863,907	(781,143)	(210.6%)

Income (loss) for the period before tax	(4,688,014)	784,686	(697.4%)
Provision for income tax (current and deferred)	9,632,808	7,581,972	40.9%
Income (Loss) for the period	(14,320,822)	(6,797,286)	126.1%

Income (Loss) per share for the period
Basic and fully diluted income (loss) per share	$ (0.07)	$(0.05)

Weighted Average Number of Shares Outstanding
Basic and diluted	194,529,766	144,932,087

We experienced a 44.5%% increase in revenue during the three months ended September 30, 2021, when compared to the three months ended September 30, 2020. The increase is directly attributable to an increase in the number of customers and an increase in average spend per customer at our Planet 13 Las Vegas Superstore dispensary during both the three and nine months ended September 30, 2021 when compared to the same periods ended September 30, 2020. The increase in wholesale transactions during the period, the re-opening of the Medizin Dispensary in late November 2020 and the addition of revenue from the recently opened Planet 13 OC Superstore in Santa Ana, also contributed to the increase in overall revenue when compared to the three and nine months ended September 30, 2020 that was negatively impacted by the COVID-19-related shutdowns. The Medizin dispensary and the Planet 13 OC Superstore were not open during the nine months ended September 30, 2020 and, and we had limited wholesale business during the prior year period. Curb-side pick-up and home delivery revenue decreased by 36% and 57% respectively in Q2 2021 when compared to Q2 2020 as a result of the easing of COVID-19 operating protocols during Q2 2021 that lead to more customers opting for an in-person shopping experience. While the COVID-19 shutdown impacted our tourist customer base due to the partial shutdown of hotels and resorts in the State of Nevada during April 2021, the increase in average spend per customer during May and June 2021 more than off-set the decline in curb-side pick-up and home delivery revenue. The reopening of the Medizin dispensary and the addition of a robust wholesale business and the opening of the Planet 13 OC Superstore drove an overall 44.5% increase in revenue in Q3 2021 when compared to Q3 2020. Overall revenue for the nine months ended September 30, 2021, increased by 78.0% when compared to revenue during the nine months ended September 30, 2020.

The easing of restrictions in Nevada and surrounding states in January 2021 and the move to further open the State of Nevada on February 15, 2021, resulted in an increase in tourist traffic to the Superstore during the first three months of 2021, with us reporting record revenues for the months of March and April 2021. On May 1, 2021, the State of Nevada allowed businesses to operate at 80% of their fire rated occupancy limits and on June 1, 2021, the State further eased its COVID-19 restrictions and allowed all businesses to fully open. Current COVID-19 protocols in Nevada include mask mandates in Clark and Nye county, where we have operations, for all individuals within public indoor settings.

On August 5, 2021, our subsidiary, Planet 13 Illinois LLC won a Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Illinois Department of Financial and Professional Regulation. We are evaluating potential locations for a dispensary. We own 49% of Planet 13 Illinois and 51% is owned by Frank Cowan.

On October 1, 2021, we, through our wholly owned subsidiary, Planet 13 Florida Inc., completed the purchase of a license issued by the Florida Department of Health to operate as a Medical Marijuana Treatment Center in the state of Florida for $55.0 million in cash.

Licensed Medical Marijuana Treatment Centers (“MMTCs”) are vertically integrated and the only businesses in Florida authorized to dispense medical marijuana cannabis to qualified patients and caregivers. MMTCs are authorized to cultivate, process, transport and dispense medical marijuana. As of October 1, 2021, there were 22 companies with MMTC licenses with 370 dispensing locations across Florida. License holders are not subject to restrictions on the number of dispensaries that may be opened or on the number or size of cultivation and processing facilities they may operate.

Details of net revenue by product category are as follows:

	Three Months	Three Months
	Ended	Ended	Percentage
	30-Sep-21	30-Sep-20	Change
Flower	$15,797,957	$13,881,768	13.8%
Concentrates	$8,896,194	$4,002,641	122.3%
Edibles	$5,197,188	$3,012,090	72.5%
Topicals and Other Revenue	$1,947,811	$1,179,786	65.1%
Wholesale	$1,099,580	$721,053	52.5%
Total Revenue	$32,938,730	$22,797,338	44.5%

	Nine Months	Nine Months
	Ended	Ended	Percentage
	30-Sep-21	30-Sep-20	Change
Flower	$46,400,764	$27,398,621	69.4%
Concentrates	$22,365,768	$11,078,934	101.9%
Edibles	$12,596,942	$8,113,031	55.3%
Topicals and Other Revenue	$4,858,491	$2,754,363	76.4%
Wholesale	$3,376,359	$1,006,387	235.5%
Total Revenue	$89,598,324	$50,351,336	77.9%

Gross Profit margin for Q3 2021 decreased to 53.8% from 55.1% when compared Q3 2020 (increased to 55.6% compared to 52.6% for the nine months ended September 30, 2021, and 2020 respectively). The decrease in Q3 2021 was a result of lower revenue contribution from in-store sales at the Las Vegas Superstore when compared to Q3 2020. Revenue from the Medizin dispensary, the Santa Ana dispensary, wholesale revenue and revenue from curb side pick-up and home delivery all have lower gross margin profitability when compared to in-store retail sales at the our Planet 13 Las Vegas Superstore.

The following revenue amounts are before the allocation of sales discounts and loyalty accruals and are for the nine months ended September 30, 2021, and 2020:

●

Superstore In-Store revenue of $62.8 million in 2021 compared to $38.2 million in 2020.

●

Nevada Delivery & Curbside revenue of $9.8 million in 2021 compared to $10.5 million in 2020.

●

Wholesale revenue of $3.4 million in 2021 compared to $1.0 million in 2020.

●

Medizin In-Store revenue of $9.6 million in 2021 compared to $0 in 2020.

●

Orange County In-Store revenue of $2.1 million in 2021 compared to $0 in 2020.

●

Orange County Delivery & Curbside of $0.321 million compared to $0 in 2020.

●

Other revenue (Restaurant and other) of $1.6 million in 2021 compared to $0.562 million in 2020.

●

Total revenue of $89.6 million in 2021 compared to $50.3 million 2020, representing an increase of 78.0% over 2020.

The costs of internal cultivation have continued to trend down as we continue to improve our yields and cultivation efficiency across all of our cultivation facilities. In addition, margin enhancement through the creation of internally generated brands, such as TRENDI, Leaf & Vine, HaHa Gummies, Dreamland Chocolate, HaHa Beverages and Medizin, continue to have a positive impact on gross margins during the three and nine months ended September 30, 2021, helping offset the lower margins received on the sale of wholesale product and the sales to local customers in the State of Nevada. We anticipate that margins will trend upward as tourist customers return to Las Vegas and the Planet 13 Las Vegas Superstore in greater numbers.

Our premium cultivation facilities were operating near capacity during the three and nine months ended September 30, 2021, and 2020, respectively. The amount of cannabis grown during Q3 2021 (and the nine months ended September 30, 2021) increased significantly when compared to Q3 2020 (and the nine months ended September 30, 2020) due to the addition of the 25,000 square feet of cultivation capacity that was added as part of the WVapes acquisition that closed in November 2020.

The yield per plant for the nine months ended September 30, 2021, was negatively impacted by our acquisition of the WCDN cultivation facility and the WCDN strains thereby acquired. Several of the acquired WCDN strains genetically yield a lesser number of grams per plant than our Medizin strains. We have optimized the WCDN facility, both by introducing higher yielding Medizin strains as well as increasing the yield of the retained WCDN strains through improved cultivation techniques. Management believes that aggregate yields for the balance of 2021 will continue to show improvement. The comparative metrics for the overall cultivation were as follows:

	September 30,	September 30,
	2021	2020

Stage of growth	42.20%	39.10%
Yield by plant	117 grams	91 grams
Survival rate	87.90%	87.10%
Wholesale Selling price	$5.29	$4.73

Overall gross margin was $17,717,134 in Q3 2021 compared to $12,552,613 in Q3 2020, an increase of 41.1% (Gross margins were $49,784,174 and $26,497,901 for the nine months ended September 30, 2021, and 2020 respectively, an increase of 87.9%).

General and Administrative (“G&A”) expenses (which excludes non-cash share-based compensation expenses, sales and marketing expenses and depreciation and amortization expenses) increased by 111.7% in Q3 2021 when compared to Q3 2020 (increased 82.2% for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020). The large increase in G&A expenses incurred during Q3 2021 and the nine months ended September 30, 2021, was a result of increased costs incurred as a result of COVID-19 operating procedures, Medizin dispensary G&A expense for the full nine-month period, pre-operating labor and expenses for the Planet 13 OC Superstore location as well as operating costs post-opening July 1, 2021, and the expansion of our wholesale and delivery sales channels as well as increased expenditures related to corporate initiatives during the current periods when compared to the prior periods. Overall, G&A expenses as a percentage of revenue equaled 39.9% for the three months ended September 30, 2021, as compared to 49.6% for the three months ended September 30, 2020, (35.7% for the nine months ended September 30, 2021, compared to 34.9% for the nine months ended September 30, 2020).

A detailed breakdown of G&A expenses is as follows:

	For the three months ended		Percentage
	September, 30		Change
	2021	2020

Salaries and wages	$6,134,539	$2,420,126	153.5%
Executive compensation	447,800	392,142	14.2%
Licenses and permits	969,610	301,707	221.4%
Payroll taxes and benefits	931,950	451,497	106.4%
Supplies and office expenses	621,642	275,107	126.0%
Subcontractors	953,356	444,175	114.6%
Professional fees (legal, audit and other)	938,028	848,726	10.5%
Miscellaneous general and administrative expenses	2,177,855	1,090,312	99.7%
	$13,174,781	$6,223,792	111.7%

	For the nine months ended		Percentage
	September, 30		Change
	2021	2020

Salaries and wages	$14,481,158	$6,546,241	121.2%
Executive compensation	1,385,009	897,203	54.4%
Licenses and permits	2,258,551	1,296,695	74.2%
Payroll taxes and benefits	2,380,171	1,370,969	73.6%
Supplies and office expenses	1,562,832	641,796	143.5%
Subcontractors	2,166,299	1,056,499	105.0%
Professional fees (legal, audit and other)	2,842,599	2,592,331	9.7%
Miscellaneous general and administrative expenses	4,897,500	3,146,035	55.7%
	$31,974,118	$17,547,769	82.2%

Sales and marketing expenses increased by 97.7% during Q3 2021 when compared to Q3 2020. The large increase was a result of the State of Nevada easing COVID-19 operating restrictions resulting in a return of the tourist customer to Las Vegas with sales and marketing expenditures ramping up to promote the Planet 13 Las Vegas Superstore location to potential tourist customers. We continue to refine our marketing efforts to optimize marketing spend on initiatives that drive increased customer traffic to the Superstore complex. In addition, we ramped up our sales and marketing spend at the Planet 13 OC Superstore location, which opened on July 1, 2021, in order to drive awareness and traffic to the new location.

Depreciation and Amortization increased by 45.6% during Q3 2021 when compared to Q3 2020 and increased 20.8% during the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020, because of our recording depreciation on the WCDN cultivation facility during the period as well as additional depreciation resulting from the Planet 13 OC Superstore location that opened July 1, 2021.

Non-cash, share based compensation of $6,613,846 were recognized during Q3 2021 ($12,211,567 during the nine months ended September 30, 2021) and increased from the $569,227 incurred in Q3 2020 ($2,006,067 for the nine months ended September 30, 2020). The increase can be attributable to the vesting schedule for both RSUs and incentive stock options that were previously granted, particularly the RSUs that were granted on April 18, 2021, that vest 1/3 on December 1, 2021, and 1/3 on the first and second anniversary of the first vesting date. During the nine months ended September 30, 2020, we also granted 50,000 RSUs to an employee on January 1, 2020, that vest 1/3 on the grant date and 1/3 on the first and second anniversary of the grant date. These amounts are non-cash, and the expense is recognized in accordance with the vesting schedule of the underlying stock options and RSUs. (See Note 14 in our audited consolidated financial statements for the year ended December 31, 2020, for additional details on the assumptions used to calculate fair value as well as information regarding the vesting of the various components of the non-cash share-based compensation).

Interest expense recorded in Q3 2021 of $8,111 and $13,367 in Q3 2020 (as well as interest expense of $23,698 during the nine months ended September 30, 2021, and $23,914 during the nine months ended September 30, 2020), relates to accrued interest on our long-term debt that is due and payable on demand. The balance of long-term debt as of September 30, 2021, was $884,000 compared to $884,000 as of December 31, 2020.

We conduct our operations in both the United States and Canada holding financial assets in both currencies and incurs expenses in both USD and CAD. On December 31, 2020, the value of the USD was USD$1.00= CAD$1.2732 compared to the value of the USD of USD$1.00=CAD$1.2741 as at September 30, 2021, resulting in our realizing a foreign exchange gain of $362,42 for Q3 2021 compared to a foreign exchange loss of ($169,684) Q3 2020 (realized foreign currency gain of $1,805,953 and a foreign exchange gain of $266,003 for the nine months ended September 30, 2021 and 2020 respectively). It is our policy to not hedge our CAD$ exposure.

Warrants are accounted for in accordance with the applicable authoritative accounting guidance in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815”), as derivative liabilities based on the specific terms of the warrant agreements. Liability-classified instruments are recorded at fair value at each reporting period with any change in fair value recognized as a component of change in fair value of derivative liabilities in the consolidated statements of operations and comprehensive loss. Transaction costs allocated to warrants that are presented as a liability are expensed immediately within other expenses (income) in the statements of net loss and comprehensive loss. During Q3 2021 the change in fair value of the warrants resulted in a gain of $6,240,073 compared to a loss of $3,959,128 during Q3 2020 (loss of $2,728,386 for the nine months ended September 30, 2021, and a gain of $423,917 for the nine months ended September 30, 2020).

Other income, consisting of Automated Teller Machine (ATM) fees, interest and other miscellaneous income was $152,466 for Q3 2021 compared to $174, 145 for Q3 2020 ($338,890 for the nine months ended September 30, 2021, and $250, 212 for the nine months ended September 30, 2020).

The income tax provision for Q3 2021, was $3,397,821 compared to $4,754,018 for Q3 2020. The tax provision decreased due to the decrease in taxable profitability during the period. We are subject to US Federal tax legislation that denies the deduction of certain expenditures for tax purposes that would otherwise be available to non-cannabis-based businesses that results in our being subject to a higher overall tax rate on net income.

The income tax provision for the nine months ended September 30, 2021 was 9,632,808 compared to $7,581,972 for the nine months ended September 30, 2020. The tax provision increased due to the increase in taxable profitability durign the period.

Overall net loss after tax for the three months ended September 30, 2021 was $2,732,461 (($0.01) per share) compared to a net loss of $5,646,614 ($0.03) per share) for the three months ended September 30, 2020.

The overall net loss for the nine months ended September 30, 2021 was $14,320,822 (($0.07) per share) compared to an overall net loss of $6,797,286 (($0.05) pershare) for the nine months ended September 30, 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Expressed in USD$	Year	Year
	Ended	Ended	Percentage
	Dec-31-2020	Dec-31-2019	Change
Revenue
Revenues, net of discounts	70,491,280	63,595,036	10.8%
Cost of Goods Sold	(35,394,019)	(27,086,453)	30.7%
Gross Profit	35,097,261	36,508,583	(3.9%)
Gross Profit Margin %	49.8%	57.4%

Expenses
General and Administrative	24,903,598	20,407,487	22.0%
Sales and Marketing	3,305,639	6,539,483	(49.5%)
Lease expense	2,114,743	1,912,984	10.5%
Depreciation and Amortization	3,674,907	2,287,249	60.7%
Share based compensation expense	2,512,568	4,822,787	(47.9%)
Total Expenses	36,511,455	35,969,990	1.5%

Income (Loss) From Operations	(1,414,194)	538,593	(362.6%)

Other (Income) Expense:
Interest Expense, net	22,202	27,073	(18.0%)
Realized Foreign Exchange (gain) loss	(398,525)	271,240	(246.9%)
Transaction costs	275,250	-	na
Change in fair value of warrants	16,805,941	5,541,590	203.3%
Other expense (income)	(216,850)	(350,775)	(38.2%)
Total Other (Income) Expense	16,488,019	5,489,128	200.4%

Income (loss) for the period before tax	(17,902,213)	(4,950,535)	261.6%
Provision for income tax (current and deferred)	7,106,516	7,352,808	(3.3%)
Income (Loss) for the period	(25,008,729)	(12,303,343)	103.3%

Income (Loss) per share for the period
Basic and fully diluted income (loss) per share	$(0.16)	$(0.09)

Weighted Average Number of Shares Outstanding
Basic and diluted	151,825,439	134,074,476

We experienced a 10.8% increase in revenue during the year ended December 31, 2020, when compared to the year ended December 31, 2019. The increase is directly attributable to an increase in average spend per customer at our Planet 13 Las Vegas Superstore dispensary as well as the addition of curb-side pickup and home delivery transactions during the period offset by the impact of COVID-19 on revenue and customer traffic during Q2 2020 when a full lock-down was in place in Nevada, and we were only able to offer on-line ordering/home delivery followed by a partial reopening towards the end of Q2 2020. Curb-side pick-up was not available during the prior year period and home delivery volumes represented an immaterial amount of our revenue during the year ended December 31, 2019. The large increase in both home delivery and curb-side pick-up during the period was the result of the impact of the COVID-19 pandemic and the change in consumer buying habits that it has caused. While the COVID-19 shutdown impacted our tourist customer base due to the full lock-down and partial reopening of hotels and resorts in the State of Nevada during the year ended December 31, 2020, the increase in average spend per customer during the period, coupled with the addition of increased home delivery volume and curb-side pick-up volumes and revenue from our wholesale business and recently opened Medizin dispensary in November 2020 more than offset the reduction in customer traffic when compared to the year ended December 31, 2019.

Details of gross revenue, excluding loyalty and discounts, by product category are as follows:

	Year	Year
	Ended	Ended	Percentage
	31-Dec-20	31-Dec-19	Change
Flower	$38,628,268	$26,145,413	47.7%
Concentrates	15,316,769	19,018,607	(19.5%)
Edibles	11,019,130	13,470,082	(18.2%)
Topicals and Other Revenue	3,812,053	4,960,934	(23.2%)
Wholesale	1,715,059	-	n/a
Total Revenue	$70,491,280	$63,595,036	10.8%

Gross Profit margin decreased to 48.5% for the year ended December 31, 2020 when compared to the Gross Profit margin of 57.3% experienced during the ended December 31, 2019. Gross profit margin for the year ended December 31, 2020 was affected by the revenue mix and the addition of lower margin home delivery and wholesale revenue during the year when compared to the year ended December 31, 2019. Wholesale revenue has lower gross margin profitability while the home delivery and curb-side pick-up revenue is heavily skewed to the local Nevada customer that receives a set discount from the listed price for being a Nevada state resident. The costs of internal cultivation have continued to trend down as we continue to improve our yields and cultivation efficiency. In addition, margin enhancement through the creation of internally generated brands, such as TRENDI, Leaf & Vine, HaHa Gummies, Dreamland Chocolate, HaHa Beverages and Medizin, continue to have a positive impact on gross margins during the three months and year ended December 31, 2020, helping offset the lower margins received on the sale of wholesale product and the sales to local customers.

Our premium cultivation facilities were operating near capacity during the year ended December 31, 2020, as well as during the year ended December 31, 2019. The amount of cannabis grown during each period was similar, the price per gram was also similar. The yield for the year ended December 31, 2020, was 79 grams/plant, while the yield for the year ended December 31, 2019, was 140 grams per plant. The yield per plant for the year ended December 31, 2020, was negatively impacted by our acquisition of the WCDN cultivation facility and the WCDN strains thereby acquired. Several of the acquired WCDN strains genetically yield a lesser number of grams per plant than our Medizin strains. For the year ended December 31, 2020, the average yield of our Medizin strains equalled 142 grams per plant whereas the acquired WCDN strains average yield equalled 36 grams per plant. The amount of cannabis harvested in each of the years ended December 31, 2020 and 2019, respectively, was similar and resulted in a consistent level of biological assets being transferred to inventory and sold during each year. We also added an additional 25,000 square feet of cultivation as part of the WCDN asset acquisition that was announced on July 17, 2020 (the transaction formally closed in November 2020).

Overall gross margin was 36,511,456 for the year ended December 31, 2020, compared to $35,969,990 for the year ended December 30, 2019, an increase of 1.5% for the year ended December 31, 2020.

G&A expenses (which excludes non-cash share-based compensation expenses, sales and marketing expenses and depreciation and amortization expenses) increased by 22.0% in the year ended December 31, 2020 when compared to the year ended December 31, 2019. The large increase in G&A expenses was a result of increased costs incurred as a result of COVID-19 operating procedures and the expansion of our wholesale and delivery sales channels.

	For the Years ended		Percentage
	December, 31		Change
	2020	2019
Salaries and wages	$9,611,047	$6,941,111	38.5%
Executive compensation	1,204,925	874,598	37.8%
Licenses and permits	1,957,183	1,704,755	14.8%
Payroll taxes and benefits	1,971,215	1,531,261	28.7%
Supplies and office expenses	960,456	1,184,401	(18.9%)
Subcontractors	1,569,921	1,272,414	23.4%
Professional fees (legal, audit and other)	2,944,706	2,723,555	8.1%
Miscellaneous general and administrative expenses	4,684,145	4,175,392	12.2%
	$24,903,598	$20,407,487	22.0%

Sales and marketing expenses decreased by 49.5% during the year ended December 31, 2020 when compared to the year ended December 31, 2019. The large decrease was a result of the COVID-19 shutdown of the Las Vegas strip resulting in the curtailment of our sales and marketing activities geared towards the tourist customer and a switch to less costly sales and marketing activity that focused on the local customer when compared to the prior year periods. We continued to refine our marketing efforts to optimize marketing spend on initiatives that drive increased customer traffic to the Planet 13 Las Vegas Superstore complex, in light of the phased reopening of the Las Vegas Strip and the Planet 13 Las Vegas Superstore since June 1, 2020, the reopening of the Medizin dispensary in November 2020 and the opening of the Santa Ana dispensary in July 2021.

Lease expense increased by $201,759 or 10.5% for the year ended December 31, 2020, when compared to the prior year as a result of the additional lease expense associated with the acquired WCDN cultivation facility during the in July 2020.

Depreciation and Amortization increased by $1,387,658 or 60.7% for the year ended December 31, 2020, when compared to the prior year as a result of our completing the buildout of Phase II of the Planet 13 Las Vegas Superstore entertainment complex during Q4 2019 and the recording depreciation on the Phase II assets during the year ended December 31, 2020. In addition, we also began recording depreciation on the acquired WCDN cultivation facility during the three months and year ended December 31, 2020.

Non-cash, share based payments of $2,512,568 were recognized during the year ended December 31, 2020, a decrease from the $4,822,787 for the year ended December 31, 2019. The decrease can be attributable to the vesting schedule for both RSUs and incentive stock options granted on June 11, 2018 and on June 30, 2019 that vested 1/3 on January 1, 2020 and 1/3 on the first and second anniversary of the grant date. We also granted 50,000 RSUs to an employee on January 1, 2020 that vest 1/3 on the grant date and 1/3 on the first and second anniversary of the grant date. We granted 100,000 options to employees on January 7, 2019, and 22,500 on June 30, 2019, that vest 1/3 on the grant date and 1/3 on the first and second anniversaries of the grant date. We granted 100,000 options to one of our consultants on July 4, 2019, that vested 1/4 on the grant date and 1/4 every three months from the grant date to April 4, 2020 and granted 50,518 RSUs to a consultant on July 3, 2020 for services rendered that vested immediately. The expense represents the recognition over time of the fair market value of incentive options and RSUs that were granted to our employees, consultants, officers and directors. These amounts are non-cash and the expense is recognized in accordance with the vesting schedule of the underlying stock options and RSUs.

We conduct our operations in both the United States and Canada holding financial assets in both currencies and incurs expenses in both USD and CAD. On December 31, 2019, the value of the USD was USD$1.00=CAD$1.2998 compared to the value of the USD of USD$1.00=CAD$1.2732 as at December 31, 2020, resulting in our recording realized foreign exchange gains of 398,525 for the year ended December 31, 2020 and a realized foreign exchange loss of $271,240 for the year ended December 31, 2019. It is our policy to not hedge our CAD$ or USD$ exposure.

The large swing in the CAD$/USD$ exchange rate during the year combined with changes in volatility and the trading prices of the listed warrants had a significant impact on the fair market value of the warrant liability recognized by us. The change in the fair market value of the warrants resulted in our recognizing a loss of $16,805,941 during the year ended December 31, 2020, when compared to the loss of $5,541,590 recognized in the year ended December 31, 2019.

We incurred transaction costs of $275,250 during the year ended December 31, 2020, that relates to the issuance of warrants as part of unit financings that were completed during the year.

The income tax provision (combined current and deferred tax provisions) for the year ended December 31, 2020, was $7,106,5166 compared to $7,352,808 for the year ended December 31, 2019. The tax provision decreased due to the decrease in taxable profitability during the year. We are subject to U.S. Federal tax legislation that denies the deduction of certain expenditures for tax purposes that would otherwise be available to non-cannabis-based businesses that results in our being subject to a higher overall tax rate on net income.

Overall net loss after tax for the year ended December 31, 2020, was $25,008,729 compared to a net loss of $12,303,343 for the year ended December 30, 2019.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Expressed in USD$	Year	Year
	Ended	Ended	Percentage
	Dec-31-2019	Dec-31-2018	Change
Revenue
Revenues, net of discounts	63,595,036	21,166,755	200.4%
Cost of Goods Sold	(27,086,453)	(11,708,639)	131.3%
Gross Profit	36,508,583	9,458,116	286.0%
Gross Profit Margin %	57.4%	44.7%

Expenses
General and Administrative	20,407,487	9,583,376	112.9%
Sales and Marketing	6,539,483	1,702,841	284.0%
Lease expense	1,912,984	-	n/a
Depreciation and Amortization	2,287,249	400,116	471.6%
Share based compensation expense	4,822,787	2,663,679	81.1%
Total Expenses	35,969,990	14,350,012	150.7%

Income (Loss) From Operations	538,593	(4,891,896)	(111.0%)

Other (Income) Expense:
Interest Expense, net	27,073	241,860	(88.8%)
Realized Foreign Exchange (gain) loss	271,240	63,634	326.3%
Transaction costs	-	1,932,702	(100.0%)
Change in fair value of warrants	5,541,590	3,579,934	54.8%
Other expense (income)	(350,775)	16,055	(2,284.8%)
Total Other (Income) Expense	5,489,128	5,834,185	(5.9%)

Income (loss) for the period before tax	(4,950,535)	(10,726,081)	(53.8%)
Provision for income tax (current and deferred)	7,352,808	1,900,069	287.0%
Income (Loss) for the period	(12,303,343)	(12,626,150)	(2.6%)

Income (Loss) per share for the period
Basic and fully diluted income (loss) per share	$(0.09)	$(0.13)

Weighted Average Number of Shares Outstanding
Basic and diluted	134,074,476	95,997,827

We experienced a 200.4% increase in revenue during the year ended December 31, 2019, when compared to the year ended December 31, 2018 (the year ended December 31, 2018, included ten months of activity from our former Medizin dispensary and two months of start-up activity at the Planet 13 Las Vegas Superstore). The results from the prior periods in 2018 represent medical and recreational cannabis sales from our former Medizin dispensary, a premium 2,500 square foot retail cannabis dispensary that was located approximately 5.9 miles from the Planet 13 Las Vegas Superstore cannabis entertainment complex. We experienced revenue growth across all of our cannabis product categories (Flower sales, Concentrates, Edibles, Topicals and Other revenue) for the year ended December 31, 2019, when compared to the prior year.

Details of gross revenue, excluding discounts, by product category are as follows:

	Year	Year
	Ended	Ended	Percentage
	31-Dec-19	31-Dec-18	Change
Flower	$26,145,413	$11,749,570	122.5%
Concentrates	19,018,607	6,320,351	200.9%
Edibles	13,470,082	2,282,282	490.2%
Topicals and Other Revenue	4,960,934	814,552	509.0%
Wholesale	-	-	n/a
Total Revenue	$63,595,036	$21,166,755	200.4%

Overall revenue increased by 200.4% or by $42,428,281 when compared to the year ended December 31, 2018. The increase is due to both increased customer traffic and an increase in the average spend per customer. In addition, the prior year December 31, 2018, only included two months of sales from the Planet 13 Las Vegas Superstore. The average number of daily customer visits was up over 159% in the three months ended December 31, 2019, when compared to the three months ended December 31, 2018. The large increase in daily customer visits during this period was due to the Planet 13 Las Vegas Superstore opening on November 1, 2018, resulting in only 2 months of activity at the Planet 13 Las Vegas Superstore being recorded in the year ended December 31, 2018, with the remaining 10 months of the year coming from the much smaller Medizin dispensary, which closed on October 30, 2021, when we transferred the licenses to the Planet13 Las Vegas Superstore location. For the year ended December 31, 2019, the average number of daily customers increased by 135% when compared to the year ended December 31, 2018, and the average ticket price per customer increased to $91.47 from $70.94 for the year ended December 31, 2018.

Gross Profit margin for the year ended December 31, 2019, was 57.4% compared to a gross profit margin of 44.7% for the year ended December 31, 2018. The increase during the year ended December 31, 2019, is attributable to better pricing on product purchased in the wholesale market during the year ended December 31, 2019 when compared to the year ended December 3, 2018, as well as the additional costs incurred on the purchases of initial ramp-up in inventory product purchases during the stocking of the Planet 13 Las Vegas Superstore for its opening on November 1, 2018. The costs of internal cultivation have continued to trend down as we have improved our yields and cultivation efficiency. In addition, margin enhancement through the creation of internally generated brands, such as TRENDI, Leaf & Vine, HaHa Gummies, Dreamland Chocolate, HaHa Beverages and Medizin branded flower and vape products, has also had a positive impact on gross margins. Our premium cultivation facility was operating near its capacity during the year ended December 31, 2019, as well as the year ended December 31, 2018. The amount of cannabis grown during each period was similar, the price per gram was also similar. The yield for the year ended December 31, 2019, was 140 grams/plant while the yield for the year ended December 31, 2018, was 195 grams per plant. The yield per plant for the year ended December 31, 2019, was negatively impacted by our decision to add additional, movable plant tables to our grow rooms. By adding additional plants, the amount of photo electronic energy each plant received was reduced, thereby reducing yields on a plant-by-plant basis. Consequently, we have explored additional ways to increase the yield, including testing new fertilizers to boost individual plant yields. Harvests during the three months ended December 31, 2019, have generated yields in excess of our historic rate, and 2020 yields showed an improvement over 2019 rates. The amount of cannabis harvested in each of the years ended December 31, 2019, and 2018 was similar.

Overall gross margin increased to $36,508,583 for the year ended December 31, 2019, compared to $9,458,116 for the year ended December 31, 2018, an increase of 286.0%.

G&A expenses (which excludes non-cash share-based compensation expenses, sales and marketing expenses and depreciation and amortization expenses) increased by 112.9% for the year ended December 31, 2019, when compared to the year ended December 31, 2018. The large increase in G&A expenses incurred during the year ended December 31, 2019, when compared to 2018 is attributable to the increase in our overall activity level. A detailed breakdown of G&A expenses is as follows:

	For the Years ended		Percentage
	December, 31		Change
	2019	2018
Salaries and wages	$6,941,111	$3,151,509	120.2%
Executive compensation	874,598	553,814	57.9%
Licenses and permits	1,704,755	589,178	189.3%
Payroll taxes and benefits	1,531,261	641,906	138.5%
Supplies and office expenses	1,184,401	1,222,053	(3.1%)
Subcontractors	1,272,414	1,024,175	24.2%
Professional fees (legal, audit and other)	2,723,555	600,877	353.3%
Miscellaneous general and administrative expenses	4,175,392	1,799,864	132.0%
	$20,407,487	$9,583,376	112.9%

Sales and marketing expenses increased by 284.0% in the year ended December 31, 2019, when compared to the year ended December 31, 2018. The large increase of $4,836,642 for the year period is a result of marketing efforts to support the corresponding increases in revenue for the same periods. We continued to refine our marketing efforts to optimize marketing spend on initiatives that drive increased customer traffic to the Planet 13 Las Vegas Superstore complex.

Lease expense increased by $1,912,984 for the year ended December 31, 2019, when compared to the prior year as a result of the additional lease expense associated with the Planet 13 Las Vegas Superstore that was opened for the full year when compared to the two months it was open during 2018.

Depreciation and Amortization increased by $1,887,133 for the year ended December 31, 2019, when compared to the year ended December 31, 2018, because of the opening of the Planet 13 Las Vegas Superstore entertainment complex. The prior year ended December 31, 2018, includes Depreciation and Amortization from our significantly smaller Medizin location for 10 months and only two months for the Planet 13 Las Vegas Superstore location compared to a full year of the Planet 13 Las Vegas Superstore location during the year ended December 31, 2019.

Non-cash share-based payments of $4,822,787 incurred for the year ended December 31, 2019, increased from the $2,663,679 incurred during the year ended December 31, 2018. The increase in the year ended December 31, 2019, can be attributable to the vesting schedule for both RSUs and incentive stock options granted on June 11, 2018, and on June 30, 2019 that vest 1/3 on the initial grant date and 1/3 on the first and second anniversary of the grant date. We also granted 100,000 options to employees on January 7, 2019, and 22,500 on June 30, 2019, that vest 1/3 on the grant date and 1/3 on the first and second anniversaries of the grant date. We granted 100,000 options to one of our consultants on July 4, 2019, that vest 1/4 on the grant date and 1/4 every three months from the grant date to April 4, 2020. The expense represents the recognition over time of the fair market value of incentive options and RSUs that were granted to our employees, consultants, officers and directors on the closing of the RTO on June 11, 2018, as well as incentive RSUs and options granted to directors, officers, consultants and employees on June 30, 2019, options granted to employees on January 7, 2019, and options granted to a consultant on July 4, 2019. These amounts are non-cash and the expense is recognized in accordance with the vesting schedule of the underlying stock options and RSUs.

Interest expenses recorded in the year ended December 31, 2019, relates to interest incurred on third party debt that was outstanding during the period. Interest expense incurred during the year ended December 31, 2018, related to interest expense on the related party notes that were outstanding in the period. The balance of long-term debt as at December 31, 2019 was $884,000 compared to $928,227 as at December 31, 2018.

We conduct our operations in both the United States and Canada holding financial assets in both currencies and incur expenses in both USD and CAD. On December 31, 2018, the value of the USD was USD$1.00=CAD$1.3642 compared to the value of the USD declining to CAD$1.2998 as at December 31, 2019, resulting in our recording unrealized foreign exchange losses of $770,134 and realized foreign exchange losses of $406,213 for the year ended December 31, 2019 (unrealized foreign exchange gain of $431,402 and realized foreign exchange loss of $442,546 for the year ended December 31, 2018). It is our policy to not hedge our CAD$ or USD$ exposure.

We incurred transaction costs of $1,932,702 during the year ended December 31, 2018, that relate to the issuance of warrants as part of a unit financings that was completed during the year and costs associated with the RTO of Carpinchico Capital Corporation that closed in June 2018.

The large swing in the CAD$/USD$ exchange rate during the year, combined with changes in volatility and the trading prices of the listed warrants had a significant impact on the fair market value of the warrant liability recognized by us. The change in the fair market value of the warrants resulted in us recognizing a loss of $5,541,590 on the change in fair value of the warrants during the year ended December 31, 2019, when compared to the loss of $3,579,934 recognized in the year ended December 31, 2018.

The income tax provision (combined current and deferred) for the year ended December 31, 2019, was $7,352,808 compared to $1,900,069 for the year ended December 31, 2018. The tax provision increased substantially due to the increase in revenue and taxable profitability during the period. We are subject to U.S. Federal tax legislation that denies the deduction of certain expenditures for tax purposes that would otherwise be available to non-cannabis-based businesses that results in our being subject to a higher overall tax rate on net income.

Overall net (loss) after tax for the for the year ended December 31, 2019, was $12,303,343 compared to a net (loss) of $12,626,150 for the year ended December 31, 2018.

Segmented Disclosure

We operate in a single reportable operating segment as a vertically integrated cannabis company with cultivation, production and distribution operations in Nevada, and retail dispensary and distribution operations in California since July 2021. The following tables present the results of our cannabis operations in Nevada and California, and our Corporate activities for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019, and 2018:

Expressed in USD$	Nine Months
	Ended
	Sep-30-2021
	California	Nevada	Canadian
	Cannabis	Cannabis	Corporate	Consolidated
	Operations	Operations	Overhead	Total

Revenues, net of discounts	$2,425,210	$87,186,840	$-	$89,612,050
Gross profit	$1,461,978	$48,322,196	$-	$49,784,174
Gross Profit Margin %	60.3%	55.4%	na	55.6%

Expenses
General and Administrative	3,556,884	24,491,350	3,925,884	31,974,118
Sales and Marketing	598,204	3,564,730	-	4,162,934
Lease expense	324,475	1,609,663	-	1,934,138
Depreciation and Amortization	557,896	2,767,628	-	3,325,524
Share based compensation	-	-	12,211,567	12,211,567
Total Expenses	$5,037,459	$32,433,371	$16,137,451	$53,608,281
Income (Loss) From Operations	$(3,575,481)	$15,888,825	$(16,137,451)	$(3,824,107)
Total Other Expense (Income)
Interest expense, net	-	23,698	-	23,698
Realized foreign exchange (gain) loss	-	-	(1,805,953)	(1,805,953)
Transaction costs	-	-	256,666	256,666
Change in fair value of warrants	-	-	2,728,386	2,728,386
Other income	-	(338,890)	-	(338,890)
	$-	$(315,192)	$1,179,099	$863,907

Income tax provision	$309,353	$ 9,323,455	$-	$ 9,632,808

Income (Loss) for the year after tax	$(3,884,834)	$ 6,880,562	$(17,316,550)	$ (14,320,822)

Expressed in USD$	Year
	Ended
	Dec-31-2020
	Nevada	Canadian
	Cannabis	Corporate	Consolidated
	Operations	Overhead	Total

Revenues, net of discounts	$70,491,280	$-	$70,491,280
Gross profit	$35,097,261	$-	$35,097,261
Gross Profit Margin %	49.8%	na	49.8%

Expenses
General and Administrative	21,670,725	3,232,873	24,903,598
Sales and Marketing	3,305,639	-	3,305,639
Lease expense	2,114,743	-	2,114,743
Depreciation and Amortization	3,674,907	-	3,674,907
Share based compensation	-	2,512,568	2,512,568
Total Expenses	$30,766,014	$5,745,441	$36,511,455

Income (Loss) From Operations	$4,331,247	$(5,745,441)	$(1,414,194)

Total Other Expense (Income)
Interest expense, net	22,194	8	22,202
Realized foreign exchange (gain) loss	-	(398,525)	(398,525)
Transaction costs	-	275,250	275,250
Change in fair value of warrants	-	16,805,941	16,805,941
Other income	(216,850)	-	(216,850)
Total other (income) expense	$(194,656)	$16,682,675	$16,488,019

Income tax provision	$7,106,516	$-	$7,106,516
Income (Loss) for the year after tax	$(2,580,613)	$(22,428,116)	$(25,008,729)

Expressed in USD$	Year
	Ended
	Dec-31-2019
	Nevada	Canadian
	Cannabis	Corporate	Consolidated
	Operations	Overhead	Total

Revenues, net of discounts	$63,595,036	$-	$63,595,036
Gross profit	$36,508,583	$-	$36,508,583
Gross Profit Margin %	57.4%	na	57.4%

Expenses
General and Administrative	17,342,149	3,065,338	20,407,487
Sales and Marketing	6,539,483	-	6,539,483
Lease expense	1,912,984	-	1,912,984
Depreciation and Amortization	2,287,249	-	2,287,249
Share based compensation	-	4,822,787	4,822,787
Total Expenses	$28,081,865	$7,888,125	$35,969,990

Income (Loss) From Operations	$8,426,718	$(7,888,125)	$538,593

Total Other Expense (Income)
Interest expense, net	27,073	-	27,073
Realized foreign exchange (gain) loss	-	271,240	271,240
Transaction costs	-	-	-
Change in fair value of warrants	-	5,541,590	5,541,590
Other income	(350,775)	-	(350,775)
Total other (income) expense	(323,702)	5,812,830	$5,489,128

Income tax provision	$7,352,808	$-	$7,352,808

Income (Loss) for the year after tax	$1,397,612	$(13,700,955)	$(12,303,343)

Expressed in USD$	Year
	Ended
	Dec-31-2018
	Nevada	Canadian
	Cannabis	Corporate	Consolidated
	Operations	Overhead	Total

Revenues, net of discounts	$21,166,755	$-	$21,166,755
Gross profit	$9,458,116	$-	$9,458,116
Gross Profit Margin %	44.7%	na	44.7%

Expenses
General and Administrative	8,616,336	967,040	9,583,376
Sales and Marketing	1,702,841	-	1,702,841
Lease expense	-	-	-
Depreciation and Amortization	400,116	-	400,116
Share based compensation	-	2,663,679	2,663,679
Total Expenses	$10,719,293	$3,630,719	$14,350,012

Income (Loss) From Operations	$(1,261,177)	$(3,630,719)	$(4,891,896)

Other Expense (Income)
Interest expense, net	241,860	-	241,860
Realized foreign exchange (gain) loss	-	63,634	63,634
Transaction costs	-	1,932,702	1,932,702
Change in fair value of warrants	-	3,579,934	3,579,934
Other income	(80,285)	96,340	16,055
Total other (income) expense	$161,575	$5,672,610	$5,834,185

Income tax provision	$1,900,069	$-	$1,900,069

Income (Loss) for the year after tax	$(3,322,821)	$(9,303,329)	$(12,626,150)

Financial Position and Liquidity

As at September 30, 2021, our financial instruments consist of cash, accounts payable and accrued liabilities, and sales tax receivables. We have no speculative financial instruments, derivatives, forward contracts, or hedges.

As at September 30, 2021, we had working capital, excluding restricted cash, of $80,539,210 compared to working capital of $81,498,467 as at December 31, 2020.

The following table relates to the nine months ended September 30, 2021, and 2020, and the years ended December 31, 2020, 2019 and 2018:

	Nine Months Ended September 30,		Years Ended December 31,
	2021	2020	2020	2019	2018
Cash flows provided by operating activities	$ 825,239	$ 8,755,204	$(3,688,853)	$4,701,020	$(6,189,556)
Cash flows used in investing activities	$(14,624,473)	$(5,787,465)	$(8,031,458)	$(16,061,582)	$(13,313,401)
Cash flows provided by financing activities	$ 64,520,739	$ 40,807,997	$77,335,979	$5,030,185	$38,723,249

Cash Flow from Operating Activities

Net cash provided by operating activities was $825,239 for the nine months ended September 30, 2021, compared to $8,755,204 for the nine months ended September 30, 2020. The decrease is primarily due to the net changes in non-cash working capital items, included income tax liability, that decreased as a result of cash payments for income taxes during the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020.

Net cash provided by (used in) operating activities was ($3,688,853) for the year ended December 31, 2020, a decrease of $8,389,873 compared to cash provided by operating activities of $4,701,020 for the year ended December 31, 2019. This is primarily due to changes in non-cash working capital during the period, including a growth in inventory levels, as we ramped the business to support the revenue growth experienced during the year.

Net cash provided by operating activities was $4,701,020 for the year ended December 31, 2019, an increase of $10,890,576, compared to ($6,189,556) used in operations during the year ended December 31, 2018. This is primarily due to the impact of changes in inventory and accounts payable and accrued liabilities related to our growth and expanded product mix, partially offset by our increase in gross profit from operations as a result of the increase in organic growth from a large increase in customers served.

Cash Flow from Investing Activities

Net cash used in investing activities was $14,624.473 for the nine months ended September 30, 2021, compared to net cash used in investing activities of $5,787,465 for the nine months ended September 30, 2020. The increase is due to the build-out of the Planet 13 OC Superstore location and the expansion of the Planet 13 Las Vegas Superstore dispensary floor space and production facility during the nine months ended September 30, 2021.

Net cash used in investing activities was $8,031,458 for the year ended December 31, 2020, decrease of $8,030,124 , compared to the $16,061,582 net cash used in investing activities for the year ended December31, 2019. The decrease is due a smaller number of expansion projects undertaken during the year ended December 31, 2020, when compared to the prior year.

Net cash used in investing activities was $16,061,582 for the year ended December 31, 2019, an increase of $2,748,181, compared to the $13,313,401 net cash used in investing activities for the year ended December 31, 2018. The increase is due to the additional enhancements made to the Planet 13 Las Vegas Superstore location during the Phase II and III buildouts compared to the Phase I buildout that occurred in the year ended December 31, 2018.

Cash Flow from Financing Activities

Net cash provided by financing activities was $64,520,739 for the nine months ended September 30, 2021, compared to net cash provided by financing activities of $40,807,997 for the nine months ended September 30, 2020. The increase was primarily related to an increase in proceeds for the issuance of unit (each unit comprised of one common share and one half of a common share purchase warrant) offering that occurred in the nine months ended September 30, 2021, as well as increased cash proceeds received from the exercise of common share purchase warrants during the period, when compared to the nine months ended September 30, 2020.

Net cash provided by financing activities was $77,335,979 for the year ended December 31, 2020, an increase of $72,305,794, compared to the $5,030,185 net cash provided by financing activities for the year ended December 31, 2019. The increase was primarily related to $48,125,125 in gross proceeds from the issuance of units (each unit comprised of one common share and one half of a common share purchase warrant) that occurred for the year ended December 31, 2020, compared to $0 during the year ended December 31, 2019. In addition, we received cash proceeds of $32,871,439 from the exercise of common share purchase warrants during the year ended December 31, 2020, compared to cash proceeds of $5,030,185 during the year ended December 31, 2019, an increase of $27,841,254.

Net cash provided by financing activities was $5,030,185 for the year ended December 31, 2019, a decrease of $33,693,064 compared to the $38,723,249 net cash provided by financing activities for the year ended December 31, 2018. The decrease was primarily related to the $40,381,022 net proceeds received from the issuance of units (each unit comprised of one common share and one half of a common share purchase warrant) that occurred in the year ended December 31, 2018, compared to $0 during the year ended December 31, 2019. This was partially offset by the $5,030,185 in cash proceeds received from the exercise of common share purchase warrants during the year ended December 31, 2019, compared to cash proceeds of $2,374,253 during the year ended December 31, 2019, an increase of $2,655,932.

Financial Instruments and Risk Management

Financial instrument classification and measurement

Our financial instruments carried on the annual audited consolidated statement of financial position are carried at amortized cost with the exception of cash, which is carried at fair value. There are no significant differences between the carrying value of financial instruments and their estimated fair values as at September 30, 2021 or December 31, 2020, or December 31, 2019, due to the immediate or short-term maturities of the financial instruments.

Fair values of financial assets and liabilities

Our financial instruments include cash, accounts payable and accrued expenses. At September 30, 2021, the carrying value of cash is fair value. Financial instruments classified as loans and receivables and other financial liabilities are carried at amortized cost using the effective interest method. Transaction costs are included in the amount initially recognized. Accounts payable and other liabilities, notes payable, and notes payable related parties have been classified as other financial liabilities.

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. It is management’s opinion that we are not exposed to significant credit risk arising from these financial instruments. A portion of our revenue utilizes third-party payment platforms. These platforms batch process several days’ worth of activity before funds are remitted to us. A failure of such platforms, or the inability of the platform provider to remit funds in a timely manner to us could have a material impact on our financial position. We limit credit risk by entering into business arrangements with high credit-quality counterparties. Thus, the credit risk associated with other receivables is also considered to be negligible.

Interest Rate Risk

Interest rate risk is the risk of losses that arise as a result of changes in contracted interest rates. We are not exposed to significant interest rate risk.

Currency risk

We operate internationally and are exposed to foreign exchange risk arising from various currency exposures. We primarily operate in Canada and the United States and incur certain expenditures and obtain financing in both Canadian and US dollars. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the functional currency of the Company or the subsidiary that holds the financial asset or liability. Our risk management policy is to review our exposure to non-US dollar forecast operating costs on a case-by-case basis. The majority of our forecast operating costs are in US dollars and Canadian dollars. The risk is measured using sensitivity analysis and cash flow forecasting.

The carrying amount of foreign currency financial assets and liabilities in US dollars as at September 30, 2021, is as follows:

US Dollar amounts of foreign currency assets and liabilities
	Assets	Liabilities
Canadian Dollars	$1,466,671	$137,890

Based on the financial instruments held as at September 30, 2021, we would have recognized an additional unrealized foreign exchange loss of $169,300 had the US dollar shifted by 10% as a result of foreign exchange effect on translation of non-US dollar denominated financial instruments. As at September 30, 2021, we have no hedging agreements in place with respect to foreign exchange rates. We have not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.

Liquidity Risk

Prudent liquidity risk management implies maintaining at all times sufficient cash and liquid investments to meet our commitments as they arise. We manage liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flows. Where insufficient liquidity may exist, we may pursue various debt and equity instruments for short or long-term financing of our operations.

As at September 30, 2021, we had working capital (excluding restricted cash) of $81,498,467 (December 31, 2020 - $81,584,108) and anticipate that revenue from operations will provide sufficient funds to cover all our operating expenditures for the next 12 months and available cash on hand will be sufficient to fund any and all capital expenditure requirements for the build-out of operations in the State of Florida and the State of Illinois over the next 12 months.

Planned expansion of our cultivation facilities, production and manufacturing facilities and retail distribution facilities will require us to raise additional capital from outside sources. We will consider financing alternatives while contemplating minimal shareholder dilution.

Our potential sources of cash flow in the upcoming year will be from the proceeds of the sale of cannabis and cannabis related products and possible equity financings, loans, lease financing and entering into joint venture agreements, or any combination thereof.

Pricing Risk

Price risk is the risk of variability in fair value due to movements in equity or market prices.

Concentration Risk

We currently operate exclusively in Southern Nevada and Southern California. Should economic conditions deteriorate within those regions, our results of operations and financial position would be negatively impacted.

Capital Resources

We have a recent history of operating losses. It may be necessary for us to arrange for additional financing to meet our on-going growth initiatives.

Management believes it will be able to raise equity capital as required in the long term, but recognizes the risks attached thereto. There can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing may be favorable.

Capital Management

Our capital consists of shareholders’ equity. Our objective when managing capital is to maintain adequate levels of funding to support the development of our businesses and maintain the necessary corporate and administrative functions to facilitate these activities. This is done primarily through equity financing and incurring debt. Future financings are dependent on market conditions. and there can be no assurance we will be able to raise funds in the future. We invest all capital that is surplus to our immediate operational needs in short-term, highly liquid, high-grade financial instruments. There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of September 30, 2021 and 2020, respectively, or as of the date hereof.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires our management to make judgements, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates. Estimates and judgements are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Leases

We apply judgement in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease.

We determine the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The lease term is used in determining classification between operating lease and finance lease, calculating the lease liability and determining the incremental borrowing rate. We have several lease contracts that include extension and termination options. We apply judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date of the lease, we reassess the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset).

We are required to discount lease payments using the rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate. We generally use the incremental borrowing rate when initially recording real estate leases. Information from the lessor regarding the fair value of underlying assets and initial direct costs incurred by the lessor related to the leased assets is not available. We determine the incremental borrowing rate as the interest rate we would pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Share-based compensation

We use the Black-Scholes valuation model to determine the fair value of options and warrants granted to employees and non-employees under share-based payment arrangements, where appropriate. In instances where equity awards have performance or market conditions, we utilize the Monte Carlo valuation model to simulate the various outcomes that affect the value of the award. In estimating fair value, management is required to make certain assumptions and estimates such as the expected term of the instrument, volatility of our future share price, risk free rates, future dividend yields and estimated forfeitures at the initial grant date, by reference to the underlying terms of the instrument, and our experience with similar instruments. Changes in assumptions used to estimate fair value could result in materially different results. Refer to Note 13 in our audited consolidated annual financial statements for the year ended December 31, 2020 for further information.

Estimated useful lives and depreciation and amortization of property and equipment, right-of-use asset and intangible assets

Depreciation and amortization of property and equipment, right-of-use assets and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets. Refer to Notes 6 and 7 for further information.

Fair value measurement

We use valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. We base our assumptions on observable data as far as possible, but this is not always available. In that case, we use the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

Deferred tax assets and uncertain tax positions

We recognize deferred tax assets and liabilities based on the differences between the Consolidated financial statement carrying amounts and the respective tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using current enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that some portion of the tax benefit will not be realized.

In evaluating the ability to recover deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of operations. In projecting future taxable income, we consider historical results and incorporate assumptions about the amount of future pretax operating income adjusted for items that do not have tax consequences. Our assumptions regarding future taxable income are consistent with the plans and estimates that are used to manage our underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income/(loss). The income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect our best assessment of estimated current and future taxes to be paid. Deferred tax asset valuation allowances and liabilities for unrecognized tax benefits require significant judgment regarding applicable statutes and their related interpretation, the status of various income tax audits and our particular facts and circumstances. Although we believe that the judgments and estimates discussed herein are reasonable, actual results, including forecasted COVID-19 business recovery, could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established or is required to pay amounts in excess of the established liability, the effective income tax rate in a given financial statement period could be materially affected.

ITEM 3.

PROPERTIES

The following tables set forth our principal physical properties. We believe our existing properties and equipment are in good operating condition and are suitable for the conduct of our business.

Type	Location	Lease/owned
Corporate Properties
Headquarters, U.S.	Las Vegas, NV	Leased

Business Operation Properties
Cultivation & Production Facility	Clark County, NV	Leased
Cultivation & Distribution Facility	Clark County, NV	Leased
Cultivation & Production Facility	Nye County, NV	Owned
Dispensary & Production Facility	Clark County, NV	Leased
Dispensary Facility	Clark County, NV	Leased
Dispensary & Distribution Facility	Orange County, CA	Leased
Cultivation & Production Facility	Marion County, FL	Leased

Properties Subject to an Encumbrance. There is a mortgage on one property owned by us in Nye County, Nevada.

Leases

We currently have rights and obligations under the following leases:

Lease 1: MMDC signed a five-year, triple net lease dated July 22, 2015 for our 4,750 square foot Clark County dispensary location with a rate of US$1.75 per square foot, per month, with the right to extend for two additional terms of five years each.

Lease 2: MMDC signed a lease starting on August 30, 2014 and ending on December 31, 2034 for the Clark County cultivation and production location, with a monthly rent of US$9,667.67, with the right to extend for two additional terms of five years each. MMDC also entered into a sub-lease at that facility for an additional, approximately 2,000 square feet from the neighboring tenant, with a termination date of December 31, 2034. The landlord was initially an entity owned by Mr. Scheffler, our Co-CEO. That entity subsequently sold the building effective September 26, 2018 and the new owner, an arm’s length party, has assumed all the obligations of the former landlord under the terms of the lease.

Lease 3: MMDC signed a lease dated April 23, 2018 in respect of the Planet 13 Las Vegas Superstore location (the “Planet 13 Las Vegas Superstore Lease”) for approximately 112,663 square feet of office and warehouse space located at 2548 West Desert Inn Road, Las Vegas, Nevada, on a 9.14 acre parcel for a term of seven years, starting at a base rent of US$0.20 per square foot, per month, and rising to US$0.824 per square foot, per month for the last year of the initial seven year term. MMDC has the right to extend the lease for two additional terms of seven years each.

Lease 4: MMDC signed a lease dated April 1, 2019 with respect to certain premises located next to the Planet 13 Las Vegas Superstore consisting of a 3,378 square foot building (“Building 2”), 32,400 square feet of land immediately adjacent to such building and a license for use of approximately 4.17 acres of land situated immediately adjacent and north of Building 2. The lease is for a term of six years and five months, starting with a base rent of US$8,000 per month for months one to three and US$12,000 per month for months four to 17. MMDC has the right to extend the lease for two additional terms of seven years each. MMDC intends to use Building 2 for general office, warehouse and services use, and the remaining land as parking space that it expects it will need to accommodate our growth plans with respect to the Planet 13 Las Vegas Superstore.

Lease 5: BLC Management Company, LLC assumed a lease from Warner Management Company at the closing of the Santa Ana Acquisition on May 20, 2020, for 16,263 square feet of office and warehouse space located at 3400 Warner Ave., Units, F, F-2, G and H, commencing December 1, 2018. The lease is for a term of eleven years and six months with a base rent of US$2.00 per square foot, and includes four five-year options to renew. That lease has been subsequently amended to include Units A through H for the retail facility under construction and Units K-M for the distribution facility currently under construction, for a total of 30,001 square feet of office and warehouse space. The lease includes a tenant improvement allowance at US$25.00 per square foot of improvement, and a roof repair/replacement contribution allowance capped at US$112,000.

Lease 6: On November 25, 2020, MMDC entered into an assignment and assumption agreement with WCDN and RX Land pursuant to which WCDN assigned to MMDC all of WCDN’s right, title and interest under the Initial West Bell Lease, which lease agreement was subsequently amended pursuant to an amendment to lease entered into between MMDC and RX Land on November 27, 2020 (the “Amended West Bell Lease” and, together with the Initial West Bell Lease, the “West Bell Lease”). The West Bell Lease is for a term of 15 years, at a base rent of US$1.66 per square foot, subject to further annual rate increases of 3%, with MMDC having the right to extend the lease for two additional terms of five years each. MMDC is using the space for licensed cultivation and production operations.

Lease 7: On September 7, 2021, Planet 13 Florida entered into a lease for approximately 9,000 square feet of nursery and warehouse space located in Marion County, Florida. The lease is for a term of one year, with two options to extend the lease for additional terms of one year each, and has a base rent of $6,000.00 per month for the first three months, and $8,500 per month for the remaining term. Planet 13 Florida will maintain this space as the licensed Florida cultivation and production facility until such time as it identifies a more permanent installation to support its expansion plans in Florida.

ITEM 4.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the expected beneficial ownership of our voting securities as of December 8, 2021 for (i) each member of the Board, (ii) each named executive officer (as defined herein), (iii) each person known to us to be the beneficial owner of more than 5% of our voting securities and (iv) the members of the Board and our executive officers as a group. Beneficial ownership is determined according to the rules of the SEC. Generally, a person has beneficial ownership of a security if the person possesses sole or shared voting or investment power of that security, including any securities that a person has the right to acquire beneficial ownership within 60 days. Except as indicated, all shares of our securities will be owned directly, and the person or entity listed as the beneficial owner has sole voting and investment power. The percentage ownership in the below table is based on 198,674,245 Common Shares outstanding as of December 8, 2021. On May 7, 2021, all of the outstanding Restricted Voting Shares were converted to Common Shares. As a result, there are no Restricted Voting Shares outstanding and we have only one class of outstanding shares, the Common Shares. To our knowledge, except as noted below, no person or entity is the beneficial owner of more than 5% of the Common Shares. The address for each director and executive officer is c/o Planet 13 Holdings Inc., 548 West Desert Inn Road, Suite 100, Las Vegas, Nevada 89109.

	Common Shares
Name of Beneficial Owner	Number Beneficially Owned	Percent of Total Common Shares
Larry Scheffler	39,470,859(1)	19.87%
Robert Groesbeck	38,819,587(2)	19.54%
Dennis Logan	184,129(3)	*
Chris Wren	4,665,582(4)	2.35%
Michael Harman	268,609	*
Adrienne O’Neal	137,295	*
All directors and executive officers as a group (10 persons)	84,304,992	42.43%

* Less than one percent.

(1)

Beneficial ownership includes 562,500 Common Shares owned by the Scheffler Family Limited Partnership (the “Partnership”) and 5,000,000 Common Shares owned by Thirteen, LLC (“Thirteen”) and 33,016,470 Common Shares owned by Scheffler RX LLC. The Partnership, Scheffler RX LLC and Thirteen are entities owned and controlled by Mr. Scheffler. Mr. Scheffler has the sole voting power over 39,470,859 Common Shares, shared voting power over no Common Shares, sole dispositive power over 39,470,859 Common Shares and shared dispositive power over no Common Shares.

(2)

Beneficial ownership includes 30,413,176 Common Shares owned by RAG Holdings LLC (“RAG”) and 7,603,294 Common Shares owned by PRMN Investments, LLC (“PRMN”). RAG and PRMN are entities owned and controlled by Mr. Groesbeck. Mr. Groesbeck has the sole voting power over 30,413,176 Common Shares, shared voting power over no Common Shares, sole dispositive power over 30,143,176 Common Shares and shared dispositive power over no Common Shares.

(3)

Beneficial ownership includes 56,887 Common Shares owned securities through his registered retirement savings plan. Mr. Logan has the sole voting power over 184,129 Common Shares, shared voting power over no Common Shares, sole dispositive power over 184,129 Common Shares and shared dispositive power over no Common Shares.

(4)

Beneficial ownership includes 4,037,000 Common Shares owned by 4 Degrees Higher LLC (“4 Degrees”). 4 Degrees is an entity owned and controlled by Mr. Wren. Mr. Wren has the sole voting power over 4,665,582 Common Shares, shared voting power over no Common Shares, sole dispositive power over 4,665,582 Common Shares and shared dispositive power over no Common Shares.

ITEM 5.

DIRECTORS AND EXECUTIVE OFFICERS

The articles of the Company (the “Articles”) provide that the number of directors should not be fewer than three directors. Each director shall hold office until the close of our next annual general meeting, or until his or her successor is duly elected or appointed, unless his or her office is earlier vacated. Our Board currently consists of four directors.

The following table sets forth our directors and executive officers and their respective positions:

Name	Age	Position
Robert Groesbeck	60	Director, Co-Chairman and Co-CEO
Larry Scheffler	71	Director, Co-Chairman and Co-CEO
Michael Harman	49	Director
Adrienne O’Neal	62	Director
Dennis Logan	54	Chief Financial Officer
Leighton Koehler	43	General Counsel
Chris Wren	39	Vice President Operations
William Vargas	62	Vice President Finance
David Farris	27	Vice President Sales and Marketing
Stephen Markle	33	Vice President Production

Director and Executive Officer Biographies

Robert Groesbeck has served as Co-CEO and a director of the Company since June 2018. Prior to that, Mr. Groesbeck served as Co-President of MMDC, a subsidiary of the Company, from 2014 to June 2018. Mr. Groesbeck also serves as General Counsel and Advisor to C&S Waste Solutions, a provider of comprehensive solid waste and recycling services, since 2013. He has practiced law for over 25 years and has also served as the mayor of the City of Henderson, Nevada from 1993 to 1997. Mr. Groesbeck earned his B.S. in Criminal Justice from the University of Nevada, a M.B.A. from National University and a J.D. from Western Michigan University.

We believe that Mr. Groesbeck’s experience as a long-time entrepreneur, starting and/or assisting in the creation of a number of businesses, qualifies him to serve on the Board.

Larry Scheffler has served as Co-CEO and a director of the Company since June 2018. Prior to that, Mr. Scheffler served as Co-President of MMDC, a subsidiary of the Company, from 2014 to June 2018. He is also the Chairman and Founder of Las Vegas Color Graphics, Inc., a privately owned commercial printing company, where he has served since 1978. Mr. Scheffler has also served as a councilman for the city of Henderson, Nevada from 1990 to 1995. Mr. Scheffler has also served as a commissioner on six major commissions in Southern Nevada government and has an extensive background in real estate. He has founded and is managing director of entities controlling over 1,000 acres in three states that are under some form of development.

We believe that Mr. Scheffler’s broad management experience and past success with guiding the growth of the Company qualifies him to serve on the Board.

Michael Harman, CPA, has been a director of the Company since June 2018. He is the Managing Partner and senior audit partner with HRP CPAs, a certified public accounting and consulting firm, since July 2016. Prior to that, Mr. Harman was a Partner at LLB CPAs from 1998 to June 2016. He holds FINRA series 27 and 63 licenses, serves as Financial Operations Principal for a Broker Dealer in Las Vegas, is a member of the American Institute of Certified Public Accountants, the Turnaround Management Association and the Nevada Society of Certified Public Accountants and is a CPA licensed in the State of Nevada.

We believe that Mr. Harman is qualified to serve on the Board due to his extensive accounting experience and his familiarity in working with management of a variety of companies in his role as a CPA.

Adrienne O’Neal has been a director of the Company since June 2019. She has been the owner of Las Vegas Counselor LLC since 2004, where she provides marriage and family therapy services, and she is also the co-owner of Red Rock Counseling, a private practice agency which includes licensed therapists and training for pre-licensed graduate students since December 2018. Prior to 2004, Ms. O’Neal was an Account Manager at R&R Partners, an advertising, marketing, public relations, and public affairs firm, for 13 years between 1984 to 2004. From June 2017 to February 2021, Ms. O’Neal was appointed by former State of Nevada Governor Brian Sandoval and served on the Nevada State Board of Marriage & Family Therapy and Clinical Professional Counselors. Ms. O’Neal has also served as a part-time instructor at the University of Nevada, Las Vegas School of Medicine’s Marriage and Family Therapy Graduate Program, where she has served since January 2017. Ms. O’Neal has passed the Series 7 exam, which measures the degree to which a candidate possesses the knowledge needed to perform the critical functions of a general securities representative, including sales of corporate securities, municipal securities, investment company securities, variable annuities, direct participation programs, options and government securities, administered by the Financial Industry Regulatory Authority. She holds a B.S. in Marketing and a M.S. in Marriage and Family Therapy degree from the University of Nevada.

We believe that Ms. O’Neal’s expertise in securities matters and her background in a variety of types of business qualifies her to serve on the Board.

Dennis Logan has served as Chief Financial Officer of the Company since June 2018. He is currently the part-time Chief Financial Officer of BTU Metals Corp. (TSX-V: BTU), a junior exploration company, since August 2017, and is the part-time Chief Financial Officer or Sterling Metals Corp. (TSX-V: SAG), a mineral exploration company, since September 2017. Previously, Mr. Logan was the Chief Financial Officer, Director and Corporate Secretary of Almonty Industries Inc., a publicly traded tungsten mining and processing company (TSX-V: AII), from September 2011 until March 2017. Mr. Logan was also the Chair of the Audit Committee of Magna Terra Minerals Inc. (TSX-V: MTT), a precious metals focused exploration company, from September 2017 until May 2021. From June 2015 until April 2018, he served as the Chairman of the Audit Committee of Eurocontrol Technics Group Ltd. (TSX-V: EUO), a detection and marking systems developer. Mr. Logan started his career in finance and accounting at Ernst & Young LLP in 1992.

Leighton Koehler has been the General Counsel of the Company since June 2018. Mr. Koehler is a licensed attorney and CPA, whose previous experience includes working at Dickinson Wright, a U.S.-Canada law firm, as a transactional and tax attorney from October 2016 to May 2018, regional and local law firms Fabian VanCott and Gerrard Cox Larsen from 2013 through October 2016, the Internal Revenue Service as a senior revenue agent from 2007 to 2013, and at Ernst & Young in both the audit and tax divisions from 2004 to 2007. He holds a B.A. and M.A. in Accounting from Southern Utah University, a J.D. from the Boyd School of Law, and he is a U.S. Army veteran. Prior to joining the Company, Mr. Koehler successfully represented his Fortune 500 company clients and other clients before federal, state, and local regulators, and served as Nevada counsel for the Company’s reverse take-over transaction.

Chris Wren has been the Vice President Operations of the Company since March 2014 and is responsible for the oversight of all production and cultivation operations. He possesses more than 16 years of cannabis industry cultivation and extraction experience. Mr. Wren also managed the construction of the Company’s dispensary, the Clark County cultivation facility and the Beatty complex, as well as design and implementation of the Company processes at those facilities. Mr. Wren is an internationally recognized cannabis horticulturist and has won several awards for his cultivation efforts, including first place in the 2015 International Cannagraphic Growers Cup.

William Vargas has been the Vice President Finance of the Company since June 2018. He currently serves as Chief Financial Officer and Senior Vice President of Las Vegas Color Graphics, Inc., a privately owned commercial printing company, since July 2000. Previously, Mr. Vargas served as Vice President Finance, Chief Financial Officer and Corporate Secretary of LEC Technologies, Inc., a publicly-traded computer leasing company, from 1995 to 2000. Mr. Vargas started his career in finance and accounting as audit manager with Arthur Andersen & Co. in 1995.

David Farris has been Vice President Sales & Marketing of the Company since December 2019. Prior to that, he was the Company’s Director of Sales and Marketing from June 2018 through December 2019, MMDC’s Director of Sales and Marketing from October 2017 through June 2018, MMDC’s General Manager from June 2017 through October 2017, and MMDC’s Marketing and Sales Coordinator from January 2016 through June 2017. Mr. Farris has established branding and advertising initiatives in the cannabis marketplace focused on creating an unparalleled experience and patient education. Mr. Farris oversees a multidisciplinary sales and marketing team responsible for advertising, events, promotions, product packaging, design, and web development/design. In addition to creative efforts, he currently oversees the operations at three dispensaries in Nevada and California, including adult-use and medical sales, and wholesale sales in Nevada. Mr. Farris holds a B.S. in Business Administration – Marketing from University of Nevada.

Stephen Markle has served as the Vice President of Production of the Company since June 2018. Prior to that, Mr. Markle worked in manufacturing and processing for MMDC, a subsidiary of the Company, from March 2017 to June 2018. Prior to joining MMDC, Mr. Markle was an analytical chemist from 2012 to 2015 for Procaps Laboratories, where he implemented all of their inorganic testing procedures. In early 2015, Mr. Markle entered the newly legalized medical cannabis industry and assisted in the design, buildout and operation of MM Lab, an independent cannabis testing facility located in Las Vegas, Nevada. He is responsible for all concentrate and infused product manufacturing for MMDC. Mr. Markle has provided notice of his resignation as VicePresident of Production and his last date of employment with the Company will be December 31, 2021.

Board Committees

We currently have an audit committee, compensation committee and a corporate governance and nominating committee. A brief description of each committee is set out below.

Audit Committee

The audit committee of the Board (the “Audit Committee”) assists the Board in fulfilling its responsibilities for oversight of financial, audit and accounting matters. The Board has adopted a written charter for the Audit Committee, which sets out the Audit Committee’s responsibilities. The Audit Committee reviews the financial reports and other financial information provided by us to regulatory authorities and our shareholders, as well as reviews our system of internal controls regarding finance and accounting, including auditing, accounting and financial reporting processes. The current members of the Audit Committee include the following directors: Michael Harman (Chair), Adrienne O’Neal and Larry Scheffler.

Compensation Committee

The compensation committee of the Board (the “Compensation Committee”) assists the Board in fulfilling its responsibilities for compensation philosophy and guidelines. The Compensation Committee also has responsibility for fixing compensation levels for our executive officers. In addition, the Compensation Committee is charged with reviewing our incentive plans and proposing changes thereto, approving any awards of options under our incentive plans and recommending any other employee benefit plans, incentive awards and perquisites with respect to our executive officers. The Compensation Committee is also responsible for reviewing, approving and reporting to the Board annually (or more frequently as required) on our succession plans for our executive officers. The current members of the Compensation Committee include the following directors: Michael Harman and Adrienne O’Neal (Chair).

For additional details on the Compensation Committee, see Item 6—“Compensation Committee.”

Corporate Governance and Nominating Committee

The corporate governance and nominating committee (the “CG&N Committee”) assists us in fulfilling our corporate governance responsibilities under applicable law and is responsible for reviewing and assessing the effectiveness of the Board, evaluating the Board and its directors and making policy recommendations aimed at enhancing Board effectiveness. In addition to assisting us with the recruitment and education of new and current directors, the CG&N Committee reports to the Board to assist us in identifying and recommending individuals qualified to become members of the Board and evaluating the Board and its directors. The current members of the CG&N Committee include the following directors: Michael Harman and Adrienne O’Neal (Chair).

ITEM 6.

EXECUTIVE COMPENSATION

In accordance with reduced disclosure rules applicable to emerging growth companies as set forth in Item 402 of Regulation S-K, this section explains how our compensation program is structured for the co-CEOs and NEOs, as defined below.

Compensation Committee

The Board as a whole determines the level of compensation in respect of our senior executives. The Compensation Committee is appointed by and reports to the Board. The Compensation Committee, on behalf of the Board, establishes policies with respect to the compensation of our Co-CEOs, CFO and other senior executive officers. The Compensation Committee assists the Board in discharging the Board’s oversight responsibilities relating to the attraction, compensation, evaluation and retention of key senior management employees, and in particular the Co-CEOs, with the skills and expertise needed to enable us to achieve our goals and strategies at fair and competitive compensation and appropriate performance incentives.

The Compensation Committee is responsible to review and approve corporate goals and objectives relevant to the Co-CEOs and other senior executive officers’ compensation, evaluate the performance of the Co-CEOs and each senior executive officer’s performance in light of those goals and objectives, and recommend to the Board for approval the compensation level each senior executive officer based on this evaluation. The Compensation Committee is also responsible for the review of our compensation systems in order to ensure the fairness and appropriateness of the compensation of senior executive officers that may participate, including incentive compensation plans and equity-based plans.

Named Executive Officers

For the purpose of this registration statement, a named executive officer (“NEO”) of the Company means each of the following individuals:

●

each co-CEO of the Company;

●

the two most highly compensated executive officers other than the Co-CEOs who were serving as executive officers at the end of the last completed fiscal year; and

●

up to two additional individuals for whom disclosure would have been provided under the above but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year.

For the year ended December 31, 2020, we had four NEOs: Robert Groesbeck, Co-CEO, Larry Scheffler, Co-CEO, Dennis Logan, Chief Financial Officer, and Chris Wren, Vice-President, Operations.

Elements of Compensation

In determining such compensation, the Compensation Committee will consider our performance and relative shareholder return and the compensation of CEOs and other senior executive officers at comparable companies. Additionally, the Compensation Committee may consider input from the Co-CEOs on senior executive compensation, but the Co-CEOs may not provide input with respect to their own compensation.

A combination of fixed and variable compensation is used to motivate executives to achieve overall company goals. The basic components of the executive compensation program are:

1. Base Salary. Base salary is the fixed portion of each executive officer’s total compensation. It is designed to provide income certainty and retain executives. In determining the base level of compensation for the executive officers, weight is placed on the following objective factors: the particular responsibilities related to the position; salaries or fees paid by companies of similar size in the industry; level of experience and expertise; and subjective factors such as leadership, commitment and attitude.

2. Annual Bonus. The annual bonus is intended to reward an executive officer for his or her yearly individual contribution and performance of personal objectives in the context of our overall annual performance. The bonus is designed to motivate executives annually to achieve their predetermined objectives. In determining compensation and, in particular, bonuses, the Compensation Committee and the Board consider factors over which the executive officer can exercise control, such as their role in identifying and completing acquisitions and integrating such acquisitions into our business, meeting any budget targets established by controlling costs, taking successful advantage of business opportunities and enhancing our competitive and business prospects.

3. Stock Options. Stock options are a form of long-term equity incentive compensation granted from time to time to align executives’ interests with those of the Company and its shareholders and reward executives for their contribution to the creation of shareholder value. Participants benefit only if the market value of our Common Shares at the time of the stock option exercise is greater than the exercise price of the stock options at the time of grant. In establishing the number of stock options that may be granted, reference is made to the recommendations made by the Compensation Committee as well as, from time to time, the number of similar awards granted to officers and directors of other publicly-traded companies of similar size in the same business as us. The Compensation Committee and the Board also consider previous grants of stock options and the overall number of stock options that are outstanding relative to the number of outstanding securities in determining whether to make any new grants and the size and terms of any such grants. With respect to executive officers, the Compensation Committee and the Board also consider the level of effort, time, responsibility, ability, experience and level of commitment of the executive officer in determining the level of long-term equity incentive awards. With respect to directors, the Compensation Committee and the Board also consider committee assignments and committee chair responsibilities, as well as the overall time requirements of the Board members in determining the level of long-term equity incentive awards.

4. Restricted Share Units. Restricted Share Units are a form of long-term equity incentive compensation granted from time to time to align executives’ interests with those of the Company and its shareholders and to attract and retain executives. Restricted Share Units are notional shares that have the same value as Common Shares and earn dividend equivalents as additional units, at the same rate as dividends paid on Common Shares. No dividend equivalents will vest unless the associated Restricted Share Units also vest. In determining new grants of Restricted Share Units, the Compensation Committee and the Board consider factors similar to those contemplated when making new grants of stock options.

It is expected that stock options and Restricted Share Units held by management will be taken into consideration by the Compensation Committee at the time of any subsequent grants under the compensation plan in determining the amount or terms of any such subsequent award grants. The Compensation Committee will further consider the base salary, bonuses and competitive market factors. The size of a grant of an award is anticipated to be proportionate to the deemed ability of the individual to make an impact on our success, as determined by the Board.

We do not have a defined benefits plan, defined contribution plan, deferred compensation or pension or retirement plan applicable to our NEOs and no plans are currently in place in respect of change of control or termination.

Summary Compensation Table

The following table is a summary of annual compensation paid, or recognized as an expense in accordance with Accounting Standards Codification (“ASC”) Topic 718 (Compensation – Stock Compensation), to the NEOs for our two most recently completed fiscal years. All amounts are expressed in US Dollars:

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock awards ($)(1)	Option awards ($)	Non-equity incentive plan compensation ($)	Non-qualified deferred compensation earnings($)	All other compensation ($)(2)	Total($)
Larry Scheffler Co-Chief Executive Officer	2020 2019	280,062 288,000	- -	- 1,224,839	- -	28,800 21,600	- -	16,985(3) 16,985(3)	333,785 1,543,486
Robert Groesbeck Co-Chief Executive Officer	2020 2019	288,000 263,077	- -	- 1,224,839	- -	28,800 21,600	- -	17,106(4) 13,692(4)	333,906 1,523,208
Dennis Logan Chief Financial Officer	2020 2019	200,000 200,000	- -	- 454,415	- -	20,000 15,000	- -	12,523(5) 13,045(5)	232,523 682,460
Chris Wren Vice-President, Operations	2020 2019	240,000 253,597	- -	- 681,622	- -	24,000 18,000	- -	35,492(6) 34,366(6)	299,492 987,585

Notes:

(1)

The amounts reported in the Stock Awards column reflects the aggregate grant date fair value computed in accordance with ASC Topic 718 (Compensation – Stock Compensation). These amounts reflect our calculation of the value of these awards at the grant date and do not necessarily correspond to the actual value that may ultimately be realized by the named executive officer. Assumptions used in the calculation of these amounts are included in Note 13 to our audited consolidated financial statements for the fiscal year ended December 31, 2020. The values provided in this column are calculated based on the closing price of our Common Shares on the CSE on the date of grant of CAD$2.60 converted to US Dollars using the exchange rate provided by the Bank of Canada on the grant date of USD$1.00 = CAD$1.3087.

(2)

The values provided for Mr. Logan in this column are converted to US Dollars using the average exchange rate for the year indicated as provided by the Bank of Canada. For 2019 USD$1.00 = CAD$1.3269; for 2020 USD$1.00=CAD$1.3415.

(3)

The amounts consist of car allowance ($16,985 for each of 2020 and 2019).

(4)

The amounts consist of car allowance ($1,800 for each of 2020 and 2019) and health benefits ($15,306 for 2020; $11,892 for 2019).

(5)

The amounts consist of car allowance ($5,367 for 2020; $5,889 for 2019) and health benefits ($7,156 for each of 2020 and 2019).

(6)

The amounts consist of car allowance ($15,170 for each of 2020 and 2019) and health benefits ($20,322 for 2020; $19,196 for 2019).

Narrative Discussion

For a summary of the significant terms of each NEO’s employment agreement or arrangement, please see below under the heading “Employment Agreements and Termination and Change of Control Benefits”.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth outstanding equity awards for the NEOs at December 31, 2020. All amounts are expressed in US Dollars:

	Option Awards					Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable	Number of Securities underlying unexercised option (#) unexercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)	Option expiration date	Number of shares or units of stock that have not vested (#)	Market value of shares of units of stock that have not vested ($)	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)(1)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(2)
Robert Groesbeck	-	-	-	-	-	-	-	411,012	2,288,780
Larry Scheffler	-	-	-	-	-	-	-	411,012	2,288,780
Dennis Logan	-	-	-	-	-	-	-	152,485	849,135
Chris Wren	-	-	-	-	-	-	-	228,728	1,273,7055

Notes:

(1)

For each named executive officer 50% of the listed incentive awards vested January 1, 2021, and 50% vested on December 1, 2021.

(2)

Based on the closing share price of the Common Shares as traded on the CSE on December 31, 2020 of CAD$7.09 at an exchange rate of USD$1.00 = CAD$1.2732.

Employment Agreements and Termination and Change of Control Benefits

Summary of Employment Agreements

Larry Scheffler

In June 2018, we entered into an employment agreement with Larry Scheffler, our Co-CEO, for an initial term of five years. The agreement provides for payment of an annual base salary to Mr. Scheffler, which for the current fiscal year ending December 31, 2021 is USD$500,000 (subject to any further increases as may be approved by the Compensation Committee). Mr. Scheffler is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in our stock option plan, approved by the Board on May 22, 2018 (the “Stock Option Plan”) and other equity plans in effect from time to time. If Mr. Scheffler’s employment is terminated by us with “cause” or by Mr. Scheffler without “good reason” (as such terms are defined in the agreement), we will pay Mr. Scheffler any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr. Scheffler’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited. If Mr. Scheffler’s employment is terminated by us without cause or by Mr. Scheffler for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr. Scheffler his base salary and continue to provide him with health care benefits at a substantially similar level to the benefits provided to him while he was employed by us. In addition, Mr. Scheffler shall be paid any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination and all outstanding equity incentive awards granted to him would fully vest on the date of such termination of employment. The employment agreement also provides for, among other things, confidentiality, non-solicitation and non-competition covenants in favor of the Company. The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr. Scheffler’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Scheffler extending the term through December 31, 2025.

Robert Groesbeck

In June 2018, we entered into an employment agreement with Robert Groesbeck, our Co-CEO, for an initial term of five years. The agreement provides for payment of an annual base salary to Mr. Groesbeck, which for the current fiscal year ending December 31, 2021 is USD$500,000 (subject to any further increases as may be approved by the Compensation Committee). Mr. Groesbeck is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time. If Mr. Groesbeck’s employment is terminated by us with “cause” or by Mr. Groesbeck without “good reason” (as such terms are defined in the agreement), we will pay Mr. Groesbeck any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr. Groesbeck’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited. If Mr. Groesbeck’s employment is terminated by us without cause or by Mr. Groesbeck for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr. Groesbeck his base salary and continue to provide him with health care benefits at a substantially similar level to the benefits provided to him while he was employed by us. In addition, Mr. Groesbeck shall be paid any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination and all outstanding equity incentive awards granted to him would fully vest on the date of such termination of employment. The employment agreement also provides for, among other things, confidentiality, non-solicitation and non-competition covenants in favor of the Company. The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr. Groesbeck’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Groesbeck extending the term through December 31, 2025.

Dennis Logan

In June 2018, we entered into an employment agreement with Dennis Logan, our Chief Financial Officer, which agreement was amended in January 2019, for an initial term of five years. The amended agreement provides for payment of an annual base salary to Mr. Logan, which for the current fiscal year ending December 31, 2021 is USD$300,000 (subject to any further increases as may be approved by the Compensation Committee). Mr. Logan is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time. If Mr. Logan’s employment is terminated by us with “cause” or by Mr. Logan without “good reason” (as such terms are defined in the agreement), we will pay Mr. Logan any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr. Logan’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited. If Mr. Logan’s employment is terminated by us without cause or by Mr. Logan for good reason, including upon the change of control of the Company, we will, for a period of 18 months from the date of termination, continue to pay Mr. Logan his base salary and continue to provide him with health care benefits at a substantially similar level to the benefits provided to him while he was employed by us. In addition, Mr. Logan shall be paid any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination and all outstanding equity incentive awards granted to him would fully vest on the date of such termination of employment. The employment agreement also provides for, among other things, confidentiality, non-solicitation and non-competition covenants in favor of the Company. The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr. Logan’s employment.

Chris Wren

In June 2018, we entered into an employment agreement with Chris Wren, our Vice President, Operations, for an initial term of five years. The agreement provides for payment of an annual base salary to Mr. Wren, which for the current fiscal year ending December 31, 2021 is $415,000 (subject to any further increases as may be approved by the Compensation Committee). Mr. Wren is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time. If Mr. Wren’s employment is terminated by us with “cause” or by Mr. Wren without “good reason” (as such terms are defined in the agreement), we will pay Mr. Wren any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr. Wren’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited. If Mr. Wren’s employment is terminated by us without cause or by Mr. Wren for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr. Wren his base salary and continue to provide him with health care benefits at a substantially similar level to the benefits provided to him while he was employed by us. In addition, Mr. Wren shall be paid any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination and all outstanding equity incentive awards granted to him would fully vest on the date of such termination of employment. The employment agreement also provides for, among other things, confidentiality, non-solicitation and non-competition covenants in favor of the Company. The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr. Wren’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Wren extending the term through December 31, 2025.

Director Compensation Table

We do not provide separate or additional compensation to directors who are also executives in connection with their services as a director. Prior to January 1, 2021, non-employee directors did not receive any compensation, except for Stock Options under the Stock Option Plan or Restricted Share Units under the Amended and Restated Share Unit Plan. We adopted a director compensation plan effective January 1, 2021 which provides for the payment of annual base fees to non-employee directors of $100,000 each that is payable quarterly in arears. Other than as set out in the table below and prior to January 1, 2021, no non-employee director has received compensation pursuant to:

(a)

any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments;

(b)

any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors; or

(c)

any arrangement for the compensation of directors for services as consultants or experts.

The following table sets forth all compensation paid to or earned, or recognized as an expense in accordance ASC Topic 718, by each non-employee director during our fiscal year ended December 31, 2020. All amounts are expressed in US Dollars:

Name	FeesEarned or paid in cash($)	Stock awards ($)(1)	Option awards ($)	Non-equity incentive plan compensation ($)	Nonqualified deferred compensation earnings ($)	All OtherCompensation ($)	Total ($)
Michael Harman	-	116,859	-	-	-	-	116,859
Adrienne O’Neal	-	165,827	-	-	-	-	165,827

Notes:

(1)

The values provided in this column are calculated based on the closing price of our Common Shares on the CSE on the date of grant converted to US Dollars using the exchange rate provided by the Bank of Canada on the grant date. As of December 31, 2020, (a) Mr. Harman had an aggregate of 157,426 Common Shares and 101,555 RSUs outstanding, and (b) Ms. O’Neal had an aggregate of 93,965 Common Shares and 50,777 RSUs outstanding.

Compensation Committee Interlocks and Insider Participation

During 2020, our Compensation Committee members were Adrienne O’Neal (Chair) and Michael Harman, none of whom currently is, or formerly was, an officer or employee of the Company. None of our executive officers served as a member of the Board or Compensation Committee of any other company that had one or more executive officers serving as a member of our board of directors or Compensation Committee.

ITEM 7.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE

Transactions with Related Persons

The following is a description of each transaction since January 1, 2018 and each currently proposed transaction in which:

●

we have been or are to be a participant;

●

the amounts involved exceeded or will exceed $120,000; and

●

any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member of the foregoing persons, had or will have a direct or indirect material interest.

Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which are described where required under the section entitled “Executive Compensation” and “Director Compensation Table.”

Clark Country Cultivation Facility Lease

Prior to September 2018, we leased approximately 15,000 square feet of office and production space for our Clark County Cultivation facility from a limited partnership controlled by Larry Scheffler, co-CEO of the Company. On September 26, 2018, the property was acquired by an arm’s length third party. Related-party rents paid under this lease for the year ended December 31, 2018 equaled $384,010.

Office Space Sublease and Storage Space

We sub-let approximately 2,000 square feet of office space and purchase certain printed marketing collateral and stationery items from a company owned by Larry Scheffler, one of our co-CEOs. Amounts paid to such company for rent for the nine months ended September 30, 2021, equaled $16,027 and for the years ended December 31, 2020, 2019 and 2018 equaled $24,040, $24,040 and $24,040, respectively. Amounts paid for printed marketing collateral and stationery items for the nine months ended September 30, 2021, equaled $382,264 and for the years ended December 31, 2020, 2019 equaled $170,009, $279,457 and $8,769 respectively. As at September 30, 2021, there was $76,747 included in accounts payable that was owed to this related party.

From November 2020 to April 2021, we leased a 25,000 square foot cultivation facility from an entity owned by both our Co-CEOs. Rents paid for this facility for the nine months ended September 30, 2021 equaled $301,894. For the year ended December 31, 2020, equaled $339,688; $0 for the years ended December 31, 2019 and 2018 respectively.

2018 Financings

On June 20, 2018, Messrs. Groesbeck and Scheffler, through controlled companies, converted an aggregate of approximately US$3.4 million principal amount and accrued interest of unsecured promissory notes of the Company held by them into an aggregate of 5,532,940 Restricted Voting Shares, or 2,766,470 Restricted Voting Shares each, at a conversion price of C$0.80 per Restricted Voting Share. On October 15, 2015, an original member of MMDC, Ollehea, LLC, requested that MMDC repurchase its interest as allowed under an operating agreement then in effect. Consequently, the remaining members of MMDC at the time agreed to issue promissory notes to Ollehea LLC on behalf of MMDC in the amount of US $101,997 each to satisfy the repurchase requirement. The notes were repaid by us on July 9, 2018.

WCDN Acquisition

Concurrent with the first closing of the WCDN Acquisition previously described herein, RX Land, an entity that was owned by our Co-CEOs, acquired the WCDN Acquisition Facility for US$3.3 million and entered into Initial West Bell Lease. In accordance with the terms of the WCDN Asset Acquisition Agreement and approvals by our independent directors, WCDN assigned the Initial West Bell Lease to MMDC on November 25, 2020, and MMDC subsequently entered into an amending agreement with RX Land on November 27, 2020, to amend certain terms of such lease agreement including increasing the lease payments, extending the duration of the lease and, if desired, allowing for second floor installation by MMDC without a corresponding lease rate increase due to an increase in facility size. In April 2021, RX Land was sold to an arm’s length third party.

Related Person Transaction Policy

We have adopted a written related person transactions policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our voting securities, and any members of the immediate family of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our audit committee. The policy provides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates in which the amount involved exceeds $120,000 will be presented to our audit committee for review, consideration and approval, subject to exceptions for certain transaction for which there is standing pre-approval as described in the policy, including for employment of executive officers and director compensation. In approving or rejecting any such proposal, our audit committee shall take into account, among other factors it deems appropriate, (i) whether the transaction was undertaken in our ordinary course of business, (ii) whether the transaction was initiated by us, a subsidiary of us, or the related person, (iii) whether the transaction is proposed to be, or was, entered into on terms no less favorable to us than terms that could have been reached with an unrelated third party, (iv) the purpose of, and the potential benefits to us of, the transaction, (v) the approximate dollar value of the amount involved in the transaction, particularly as it relates to the related person, (vi) the related person’s interest in the transaction and (vii) any other information regarding the transaction or the related person that would be material to investors in light of the circumstances of the particular transaction.

Promoters

Robert Groesbeck and Larry Scheffler, the co-CEOs, co-Chairmen and each a director of the Company, are promoters of the Company. As of December 8, 2021: (i) Mr. Groesbeck owns, or controls or directs, directly or indirectly, a total of 38,819,587 Common Shares, and 562,511 RSUs, representing in the aggregate approximately 18.71% of the equity of the Company on a fully diluted basis; and (ii) Mr. Scheffler owns, or controls or directs, directly or indirectly, a total of 39,470,859 Common Shares and 562,511 RSUs, representing in the aggregate approximately 19.02 of the equity of the Company on a fully diluted basis.

Director Independence

Our board of directors is composed of two “independent directors” as defined under the rules of Nasdaq. We use the definition of “independence” of Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide that a director cannot be considered independent if:

● the director is, or at any time during the past three (3) years was, an employee of the company;

●

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);

●

the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);

●

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or

●

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Under such definitions, Adrienne O’Neil and Michael Harman are each independent directors. However, our shares are not currently quoted or listed on any U.S. national exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, we are not subject to any director independence requirements in the U.S.

ITEM 8.

LEGAL PROCEEDINGS

There are no actual or to our knowledge contemplated legal proceedings material to us or our subsidiaries or to which any of our or any of our subsidiaries’ property is the subject matter.

ITEM 9.

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Common Shares are listed and posted for trading on the CSE under the symbol “PLTH” and quoted on the OTCQX under the symbol “PLNHF.” The Common Shares commenced trading on the CSE effective June 21, 2018.

The following table indicates the high and low values with respect to trading activity for the Common Shares on the CSE for the periods indicated below (source: www.thecse.com and www.finance.yahoo.com).

Period Ended	Low Trading Price (C$)	High Trading Price (C$)
Third Quarter Ended September 30, 2021	5.36	8.78
Second Quarter Ended June 30, 2021	7.19	9.29
First Quarter Ended March 31, 2021	6.54	10.88
Fourth Quarter Ended December 31, 2020	3.57	8.20
Third Quarter Ended September 30, 2020	1.96	5.51
Second Quarter Ended June 30, 2020	1.26	2.69
First Quarter Ended March 31, 2020	0.99	2.62
Fourth Quarter Ended December 31, 2019	1.72	2.48
Third Quarter Ended September 30, 2019	2.12	2.86
Second Quarter Ended June 30, 2019	2.15	3.60
First Quarter Ended March 31, 2019	1.44	2.26

The following table indicates the high and low values with respect to trading activity for the Common Shares on the OTCQX for the periods indicated below (source: www.otcmarkets.com). Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

Period Ended	Low Trading Price (US$)	High Trading Price (US$)
Third Quarter Ended September 30, 2021	4.21	7.14
Second Quarter Ended June 30, 2021	5.72	7.37
First Quarter Ended March 31, 2021	5.1	8.67
Fourth Quarter Ended December 31, 2020	2.67	6.40
Third Quarter Ended September 30, 2020	1.5684	4.19
Second Quarter Ended June 30, 2020	0.8815	1.99
First Quarter Ended March 31, 2020	0.63	2.02
Fourth Quarter Ended December 31, 2019	1.2556	2.00
Third Quarter Ended September 30, 2019	1.60	2.18
Second Quarter Ended June 30, 2019	1.61	2.70
First Quarter Ended March 31, 2019	1.09	1.72

Shareholders

As of December 8, 2021, there were 47 holders of record of Common Shares and no holders of record of Restricted Voting Shares.

Dividends

We have not paid dividends since the completion of the Business Combination and currently intend to reinvest all future earnings to finance the development and growth of our business. As a result, we do not intend to pay dividends on the Common Shares or any Restricted Voting Shares in the foreseeable future. Any future determination to pay distributions will be at the discretion of the Board and will depend on the financial condition, business environment, operating results, capital requirements, any contractual restrictions on the payment of distributions and any other factors that the Board deems relevant. We are not bound or limited in any way to pay dividends in the event that the Board determined that a dividend was in the best interest of our shareholders.

Equity Compensation Plans

The shareholders and the Board approved the Stock Option Plan on May 22, 2018, and approved the Amended and Restated Share Unit Plan (“Unit Plan” and together with the Stock Option Plan, collectively the “Compensation Plans”) on May 22, 2018, as amended on July 11, 2018. The granting of awards under the Compensation Plans is intended to promote the interests of the Company and its shareholders by aiding us in attracting and retaining persons capable of assuring our future success, to offer such persons incentives to put forth maximum efforts for the success of our business and to compensate such persons through various stock based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with our shareholders. Eligible participants under the Compensation Plans include non-employee directors, officers (including the named executive officers), employees, consultants and advisors of the Company and its subsidiaries.

The following table provides information regarding compensation plans, previously approved by shareholders, under which securities of the Company are authorized for issuance in effect as of December 31, 2020:

Plan Category	Number of securities to be issued upon exercise of outstanding options and rights (a)	Weighted-average exercise price of outstanding options and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(c)
Stock Option Plan	293,838	CAD$1.52	10,599,237
Amended and Restated Share Unit Plan	1,764,250	-	10,599,237
Total	2,058,088	-	10,599,237

As of December 31, 2020: (i) options to purchase an aggregate of 293,838 Common Shares were outstanding, representing approximately 0.23% of the issued and outstanding Common Shares on such date; (ii) Restricted Share Units to acquire an aggregate of 1,764,250 Common Shares were outstanding, representing approximately 1.39% of the issued and outstanding Common Shares on such date, for a total of 2,058,088 Common Shares issuable pursuant to outstanding awards. As a result, Stock Options/ Restricted Share Units under our equity compensation plans to purchase/receive a total of 10,599,237 Common Shares, representing approximately 7.94% of the total issued and outstanding Common Shares, were available for grant as of December 31, 2020.

ITEM 10.

RECENT SALES OF UNREGISTERED SECURITIES

The following information represents securities sold by us within the past three years through October, 2021 which were not registered under the Securities Act. Included are new issuances of Common Shares and Restricted Voting Shares and issuances of securities convertible into or exchangeable, redeemable or exercisable for Common Shares. We sold all of the securities listed below pursuant to the exemption from registration provided by Section 3(a)(9) and Section 4(a)(2) of the Securities Act, and Rule 144A, Regulation D, Regulation S or Rule 701 promulgated thereunder.

Since January 1, 2021, we had the following issuances of unregistered securities:

●

On January 4, 2021, we issued 852,124 Common Shares to holders of RSUs that had vested. We did not receive any cash proceeds from the issuance.

●

On January 4, 2021, we issued 109,669 Common Shares to holders of options who exercised 109,669 options that resulted in $79,202 in cash proceeds to us from the exercise.

●

On June 10, 2021, we issued 3,704 Common Shares to holders of RSUs that vested. We did not receive any cash proceeds from the issuance.

●

On July 9, 2021, we issued 59,945 Common Shares to holders of RSUs that had vested. We did not receive any cash proceeds from the issuance.

●

On July 9, 2021, we issued 11,667 Common Shares to holders of options who exercised 11,667 options that resulted in $5,028 in cash proceeds to us from the exercise.

●

On December 9, 2021, we issued 2,212,974 Common Shares to holders of RSUs that had vested. We did not receive any cash proceeds from the issuance.

●

During the nine months ended September 30, 2021, we issued 3,758,940 Common Shares to warrant holders who exercised warrants during the period. We received $14,076,477 in cash proceeds from the exercises.

●

We issued 55,232,940 Common Shares to holders of Restricted Voting Shares who exercised their right to exchange Restricted Voting Shares into Common Shares. We did not receive any cash proceeds from the issuance.

●

On February 2, 2021, we completed the February 2021 Bought Deal for aggregate gross proceeds of $53,852,980 (C$69,028,750) at a price of C$7.00 per unit. The principal underwriters were Beacon Securities Limited (“Beacon”) and Canaccord Genuity Corp (“Canaccord”). We issued 9,861,250 units of the Company. Each unit was comprised of one Common Share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitles the holder to acquire one Common Share at an exercise price of C$9.00 per Common Share for a period of 24 months. We also issued 591,676 broker warrants that entitle the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$7.00 per Common Share.

●

Between October 1 and December 9, 2021, we issued 13,700 Common Shares on the exercise of Common Share purchase warrants and realized cash proceeds of $30,885.

During the year ended December 31, 2020, we had the following issuances of unregistered securities:

●

During the year ended December 31, 2020, we issued 2,685,344 Common Shares on the exercise of RSUs that had vested during the period. We did not receive any cash proceeds on the exercise and transferred $3,313,152 to share capital from the carrying value ascribed to the RSUs that were exercised.

●

On January 17, 2020, we issued 75,000 Common Shares on the exercise of options that had an exercise price of C$0.80 per common share resulting in cash proceeds of $45,966 (C$60,000).

●

On January 17, 2020, we issued 33,334 Common Shares on the exercise of options that had an exercise price of C$1.55 per common share resulting in cash proceeds of $37,064 (C$51,668).

●

On July 3, 2020, we issued 8,333 Common Shares on the exercise of options that had an exercise price of C$0.75 resulting in cash proceeds to us of $4,617 (C$6,249).

●

On July 3, 2020, we issued 116,334 Common Shares on the exercise of options that had an exercise price of C$0.80 resulting in cash proceeds to us of $68,771 (C$93,066).

●

On October 9, 2020, we issued 50,000 Common Shares on the exercise of options that had an exercise price of C$0.80 resulting in cash proceeds to us of $30,786 (C$40,000).

●

On October 14, 2020, we issued 50,000 Common Shares on the exercise of options that had an exercise price of C$0.80 resulting in cash proceeds to us of $30,786 (C$40,000).

●

During the year ended December 31, 2020, we issued 17,532,271 Common Shares to warrant holders who exercised 17,532,271 warrants resulting in cash proceeds of $32,653,449 (C$43,079,021).

●

On May 20, 2020, we issued 3,940,932 Restricted Voting Shares on the acquisition of Newtonian Principles Inc. to shareholders of Newtonian Principles. The shares were valued at $4,453,831 (C$6,187,263, C$1.57 per share based on the closing price of the Company’s shares).

●

On July 17, 2020, we issued 1,374,833 Common Shares on the acquisition of WCDN to shareholders of WCDN. The shares were valued at $2,918,277 (C$3,959,519, C$2.88 per share based on the closing price of the Company’s common shares on July 17, 2020).

●

On July 3, 2020, we completed the July 2020 Bought Deal for aggregate gross proceeds of $8,493,808 (C$11,521,850) at a price of C$2.15 per unit. The principal underwriters were Beacon and Canaccord. We issued 5,359,000 units of the Company. Each unit was comprised of one Common Share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitled the holder to acquire one common share at an exercise price of C$2.85 per Common Share for a period of 24 months. We also issued 321,540 broker warrants that entitle the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$2.15 per common share.

●

On September 10, 2020, we completed the September 2020 Bought Deal for aggregate gross proceeds of $17,489,401 (C$23,019,550) at a price of C$3.70 per unit. The principal underwriters were Beaconand Canaccord. We issued 6,221,500 units of the Company. Each unit was comprised of one Common Share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitled the holder to acquire one Common Share at an exercise price of C$5.00 per Common Share for a period of 24 months. We also issued 373,290 broker warrants that entitle the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$3.70 per common share.

●

On November 5, 2020, we completed the November 2020 Bought Deal for aggregate gross proceeds of $22,141,920 (C$28,804,625) at a price of C$4.30 per unit. The principal underwriters were Beacon and Canaccord. We issued 6,698,750 units of the Company. Each unit was comprised of one Common Share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitled the holder to acquire one Common Share at an exercise price of C$5.80 per Common Share for a period of 24 months. We also issued 401,925 broker warrants that entitle the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$4.30 per Common Share.

During the year ended December 31, 2019, we had the following issuances of unregistered securities:

●

On March 1, 2019, we issued 1,922,786 Common Shares on the exercise of RSUs that had vested during the period. We did not receive any cash proceeds on the issuance.

●

On March 20, 2019, we issued 15,002 Common Shares on the exercise of options that had an exercise price of C$0.80 per Common Share resulting in cash proceeds of C$12,002.

●

On July 9, 2019, we issued 205,660 Common Shares on the exercise of options that had an exercise price of C$0.80 per Common Share, issued 5,000 Common Shares on the exercise of options that had an exercise price of C$0.75 per Common Share and issued 33,332 Common Shares on the exercise of options with a strike price of C$1.55 resulting in cash proceeds of $175,474.

●

On July 9, 2019, we issued 1,833,732 Common Shares on the exercise of RSUs that had vested during the period. We did not receive any cash proceeds on the issuance.

●

During the period July 31 to December 31, 2019, we issued 198,000 Common Shares on the exercise of RSUs that had vested at a rate of 33,000 per month from June 30 to December 31, 2019. We did not receive any cash proceeds from the issuance.

●

During the year ended December 31, 2019, we issued 4,889,647 Common Shares to warrant holders who exercised 4,889,647 warrants resulting in cash proceeds of $4,854,711.

During the year ended December 31, 2018, we had the following issuances of unregistered securities:

●

On June 11, 2018, we closed the RTO transaction, and issued 5,250,000 Common Shares to former shareholders of Carpincho Capital Corp.

●

The RTO closing also triggered the closing of a private placement that was being held in escrow pending the closing of the RTO. We closed the private placement by issuing 31,458,400 units at a price of C$0.80 per unit to shareholders of Carpincho for gross proceeds of $19,508,445. Each unit was comprised of one Common Share and one-half of Common Share purchase warrant. Each whole warrant entitled the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$1.40 per Common Share. We also issued 1,485,645 broker warrants that entitled the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$0.80 per common share.

●

During the year ended December 31, 2018, we issued 2,580,810 Common Shares to warrant holders who exercised 2,580,810 warrants resulting in cash proceeds of $2,374,253.

●

On June 19, 2018, we issued 5,532,940 Restricted Voting Shares at a price of C$0.80 per share for total equity of $3,409,476 on the settlement of notes held by related parties that were converted to equity on closing of the RTO at the option of the note holder.

●

On December 4, 2018, we issued 8,735,250 Common Shares and 4,792,625 common share purchase warrants at a price of C$3.00 per unit with each unit consisting of one common share and one-half of a Common Share purchase warrant. Each whole warrant entitled the holder to purchase one Common Share of the Company at an exercise price of C$3.75 for a period of 36 months following the closing. The warrants could be accelerated by us in our sole discretion at any time in the event that the volume-weighted average closing price of the Common Shares on the CSE was greater than or equal to C$5.00 per share for a period of 20 consecutive trading days by giving notice to the warrant holders. In such a case the warrants expired at 4:00pm eastern time on the earlier of the 30th day after the date on which notice is given and the actual expiry date of the warrants. We also issued 524,115 broker warrants that entitle the holder to purchase one Common Share for a period of 24 months from the closing of the offering at a price of C$3.00 per common share for total aggregate gross proceeds of $19,965,769 (C$26,392,750).

ITEM 11.

DESCRIPTION OF THE REGISTRANT’S SECURITIES TO BE REGISTERED

We are authorized to issue an unlimited number of Common Shares and an unlimited number of Restricted Voting Shares. As of December 9, 2021, 198,674,245 Common Shares were issued and outstanding and no Restricted Voting Shares were issued and outstanding.

Common Shares

Holders of Common Shares are entitled to dividends, if, as and when declared by the Board, to one vote per share at meetings of shareholders of the Company and, upon dissolution, to share equally in such assets of the Company as are distributable to the holders of Common Shares. The Common Shares do not have pre-emptive or subscription rights, and there are no redemption or sinking-fund provisions applicable to the Common Shares.

Subject to the rights of the shares of any other class ranking senior to the Common Shares with respect to priority upon a liquidation event, in the event of a liquidation event, the holders of Common Shares and the holders of Restricted Voting Shares will participate ratably in equal amounts per share, without preference or distinction, in the remaining assets of the Company.

Restricted Voting Shares

As a condition to the completion of the Business Combination, we issued Restricted Voting Shares to former shareholders of MMDC who were resident in the United States. Unlike the Common Shares, the Restricted Voting Shares do not entitle the holder to exercise voting rights in respect of the election or removal of directors of the Company.

The restrictions on conversion of the Restricted Voting Shares were designed to prevent us from becoming a “domestic issuer” (“Domestic Issuer”) as defined under Rule 902(e) of Regulation S pursuant to the U.S. Securities Act of 1933 (the “1933 Act”). Generally, we would be a Domestic Issuer if: (A) 50% or more of the holders of Common Shares are U.S. Persons (as defined under the 1933 Act); and (B) (i) the majority of our executive officers or directors are United States citizens or residents; (ii) we have 50% or more of our assets located in the United States; or (iii) our business is principally administered in the United States. Holders of the Restricted Voting Shares were able to convert each issued and outstanding Restricted Voting Share into one Common Share (subject to customary adjustments) provided that we were not a Domestic Issuer or the conversion would not cause us to become a Domestic Issuer.

Upon review of the shareholder demographics in May 2021, we expected that substantially greater than 50% of our outstanding Common Shares would be held by United States residents as of the annual determination date of June 30, 2021, regardless of whether the Restricted Voting Shares were converted. On May 7, 2021, all of the outstanding Restricted Voting Shares were converted to Common Shares. As a result, there are currently no Restricted Voting Shares outstanding.

Special Majority

The majority of votes required to pass a special resolution at a general meeting of shareholders is two-thirds of the votes cast on the resolution.

ITEM 12.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

We are subject to the provisions of Part 5, Division 5 of the BCBCA.

Under Section 160 of the BCBCA, we may, subject to Section 163 of the BCBCA:

(a)

indemnify an individual who:

(i)

is or was a director or officer of our company,

(ii)

is or was a director or officer of another corporation (A) at a time when such corporation is or was an affiliate of our company; or (B) at our request, or

(iii)

at our request, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity,

including, subject to certain limited exceptions described below, the heirs and personal or other legal representatives of that individual (collectively, an “eligible party”), against all eligible penalties, defined below, to which the eligible party is or may be liable; and

(b)

after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding, where:

(i)

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding,

(ii)

“eligible proceeding” means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, our company or an associated corporation (A) is or may be joined as a party, or (B) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding,

(iii)

“expenses” includes costs, charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement of a proceeding, and

(iv)

“proceeding” includes any legal proceeding or investigative action, whether current, threatened, pending or completed.

Under Section 161 of the BCBCA, and subject to Section 163 of the BCBCA, we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding if the eligible party (a) has not been reimbursed for those expenses and (b) is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful on the merits in the outcome of the proceeding.

Under Section 162 of the BCBCA, and subject to Section 163 of the BCBCA, we may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of the proceeding, provided that we must not make such payments unless we first receive from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is prohibited under Section 163 of the BCBCA, the eligible party will repay the amounts advanced.

Under Section 163 of the BCBCA, we must not indemnify an eligible party against eligible penalties to which the eligible party is or may be liable or pay the expenses of an eligible party in respect of that proceeding under Sections 160, 161 or 162 of the BCBCA, as the case may be, if any of the following circumstances apply:

(a)

if the indemnity or payment is made under an earlier agreement to indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, we were prohibited from giving the indemnity or paying the expenses by our memorandum or Articles;

(b)

if the indemnity or payment is made otherwise than under an earlier agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, we are prohibited from giving the indemnity or paying the expenses by our memorandum or Articles;

(c)

if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of our company or the associated corporation, as the case may be; or

(d)

in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible party’s conduct in respect of which the proceeding was brought was lawful.

If an eligible proceeding is brought against an eligible party by or on behalf of our company or by or on behalf of an associated corporation, we must not either indemnify the eligible party under Section 160(a) of the BCBCA against eligible penalties to which the eligible party is or may be liable, or pay the expenses of the eligible party under Sections 160(b), 161 or 162 of the BCBCA, as the case may be, in respect of the proceeding.

Under Section 164 of the BCBCA, and despite any other provision of Part 5, Division 5 of the BCBCA and whether or not payment of expenses or indemnification has been sought, authorized or declined under Part 5, Division 5 of the BCBCA, on the application of our company or an eligible party, the court may do one or more of the following:

(a)

order us to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding;

(b)

order us to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding;

(c)

order the enforcement of, or any payment under, an agreement of indemnification entered into by us;

(d)

order us to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under Section 164 of the BCBCA; or

(e)

make any other order the court considers appropriate.

Section 165 of the BCBCA and our Articles provide that we may purchase and maintain insurance for the benefit of an eligible party or the heirs and personal or other legal representatives of the eligible party against any liability that may be incurred by reason of the eligible party being or having been a director, alternate director or officer of, or holding or having held a position equivalent to that of a director, alternate director or officer of, our company or an associated corporation.

Pursuant to our Articles, subject to the BCBCA, we must indemnify a director, former director or alternative director of our company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director and alternate director is deemed to have contracted with us on the terms of the indemnity contained in Article 21.2 of our Articles.

Subject to our Articles and any restrictions in the BCBCA, we may indemnify any person.

The failure of a director, alternative director or officer of our company to comply with the BCBCA or our Articles or, if applicable, any former Companies Act or former Articles, does not invalidate any indemnity to which such director, alternative director or officer is entitled under the Articles.

We have entered into employment agreements that include indemnification provisions with each of our executive officers. Under these provisions, each executive officer is entitled, subject to the terms and conditions thereof, to the right of indemnification and contribution for certain expenses to the fullest extent permitted by applicable law. We believe that these provisions are necessary to attract and retain qualified individuals to serve as executive officers.

We are obligated to purchase and maintain insurance for the benefit of any such executive officer who is party to the employment agreements.

We have an insurance policy covering our directors and officers, within the limits and subject to the limitations of the policy, with respect to certain liabilities arising out of claims based on acts or omissions in their capacities as directors or officers.

ITEM 13.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be included in this registration statement appear immediately following the signature page to this registration statement beginning on page F-1.

ITEM 14.

CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 15.

FINANCIAL STATEMENTS AND EXHIBITS

The financial statements required to be included in this registration statement appear immediately following the signature page to this registration statement beginning on page F-1.

100

EXHIBIT INDEX

Exhibit No.		Description of Exhibit
2.1*§		Acquisition Agreement, dated December 20, 2019, among BLC Management Company, LLC, Planet 13 Holdings Inc., Kyle Desmet, Newtonian Principles, Inc., Warner Management Group, LLC and Sarah Sibia, as amended by Amendment No. 1 to Acquisition Agreement, dated April 16, 2020, and Amendment No. 2 to Acquisition Agreement, dated May 20, 2020.
2.2§		Asset Purchase Agreement, dated July 17, 2020, among Planet 13 Holdings Inc., MM Development Company, Inc., W the Brand, LLC, West Coast Development Nevada, LLC and R. Scott Coffman.
2.3*		Share Exchange Agreement, dated April 26, 2018, among MM Development Company, Inc., Carpincho Capital Corp., PRMN Investments Ltd., Thirteen, LLC and 4 Degrees Higher, LLC.
2.4		Master Agreement, dated April 26, 2018, among Carpincho Capital Corp., 10713791 Canada Inc. and 10653918 Canada Inc.
2.5*		License Purchase Agreement, dated August 31, 2021, among Buyer, Planet 13 Holdings Inc., Seller and Harvest Health & Recreation Inc.
3.1		Certificate of Amalgamation, Notice of Articles and Articles dated September 24, 2019.
4.1		Warrant Indenture, dated July 3, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company.
4.2		Warrant Indenture, dated September 10, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company.
4.3		Warrant Indenture, dated November 5, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company.
4.4		Warrant Indenture, dated February 2, 2021, between Planet 13 Holdings, Inc. and Odyssey Trust Company.
4.5		Warrant Indenture, dated December 4, 2018, between Planet 13 Holdings Inc. and Odyssey Trust Company.
4.6		Warrant Indenture, dated April 26, 2018, among 10653918 Canada Inc., Odyssey Trust Company and Carpincho Capital Corp.
10.1*		Industrial Real Estate Lease, dated April 23, 2018, between MM Development Company, Inc. and Lessor.
10.2§		Lease Agreement, dated August 30, 2014, between Fargo District Holdings, LLC and MM Development Company, Inc., as amended by Amendment to Lease, dated January 1, 2018, and Second Amendment to Lease Agreement, dated September 14, 2018.
10.3		Lease Agreement, dated July 17, 2020, between RX Land, LLC and MM Development Company, Inc., as amended by Amendment to Lease, dated November 27, 2020.
10.4*		Standard Industrial/Commercial Multi-Tenant Lease – Net, dated May 1, 2018, between Lessor and BLC Management Company, LLC, as amended by First Amendment to Standard Industrial/Commercial Multi-Tenant Lease – Net, dated November 8, 2019, and Second Amendment to Standard Industrial/Commercial Multi-Tenant Lease – Net, dated April 17, 2020, and by Third Amendment to Standard Industrial/Commercial Multi-Tenant Lease – Net, dated September 8, 2020.
10.5		Agreement Regarding Release of Leasehold Estate, dated August 31, 2020, between LaBarre Chastang, Inc. and BLC Management Company, LLC.
10.6+		Planet 13 Holdings Inc. 2018 Stock Option Plan.
10.7+		Planet 13 Holdings Inc. 2018 Share Unit Plan, as amended on July 11, 2018 and May 20, 2020.
10.8+		Form of Stock Option Award Agreement.
10.9+		Form of Share Unit Plan Award Agreement.
10.10+		Employment Agreement, dated June 1, 2018, between Christopher Wren and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021.
10.11+		Employment Agreement, dated June 1, 2018, between Larry Scheffler and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021.
10.12+		Employment Agreement, dated June 1, 2018, between Robert Groesbeck and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021.
10.13+		Employment Agreement, dated June 1, 2018, between Dennis Logan and Planet 13 Holdings Inc.
21		List of Subsidiaries of Planet 13 Holdings Inc.

Certain information has been excluded from this exhibit because it is both (i) not material and (ii) private or confidential.

This filing omits exhibits and/or schedules pursuant to Item 601(a)(5) of Regulation S-K.

Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participate.

101

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

PLANET 13 HOLDINGS INC.

/s/ Robert Groesbeck

By: Robert Groesbeck

Title: Co-Chief Executive Officer

Date: December 13, 2021

/s/ Larry Scheffler

By: Larry Scheffler

Title: Co-Chief Executive Officer

Date: December 13, 2021

102

Index to Financial Statements

Audited Financial Statements		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated balance sheets		F-3
Consolidated statements of operations and comprehensive loss		F-4
Consolidated statements of changes in shareholders’ equity		F-5
Consolidated statements of cash flows		F-6
Notes to the consolidated financial statements		F-7

Unaudited Interim Financial Statements	Page
Consolidated balance sheets	F-44
Consolidated statements of operations and comprehensive loss	F-45
Consolidated statements of changes in shareholders’ (deficit) equity	F-46
Consolidated statements of cash flows	F-47
Notes to the consolidated financial statements	F-48

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Planet 13 Holdings Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Planet 13 Holdings Inc. and its subsidiaries (together, the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2020, 2019 and 2018 including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 and the results of its operations and its cash flows for the years ended December 31, 2020, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

/s/ DAVIDSON & COMPANY LLP

Chartered Professional Accountants

Vancouver, Canada

December 13, 2021

F-2

Planet 13 Holdings Inc.

Consolidated balance sheets

(in United States dollars except per share amounts) As at	Note	December 31, 2020	December 31, 2019

Assets
Current Cash		$79,000,850	$12,814,712
Accounts Receivable, net		436,874	214,964
Inventory	5	6,919,840	5,127,567
Prepaid expenses and other current assets	6	2,198,005	3,495,852
Total current assets		88,555,569	21,653,095

Property and equipment	7	32,073,925	30,211,154
Intangible assets	8	7,551,141	-
Right-of-use assets – operating	9	20,497,895	10,117,537
Right-of-use assets – finance	9	44,672	90,866
Long-term deposits and other assets		1,054,443	694,601
Total assets		$149,777,645	$62,767,253


Liabilities
Current
Accounts payable		$1,681,027	$861,455
Accrued expenses		2,844,714	1,910,046
Income taxes payable	15	1,446,235	7,159,753
Notes payable – current portion	10	884,000	884,000
Operating lease liability – current portion	9	161,021	48,906
Finance lease liability – current portion	9	46,372	45,952
Total current liabilities		7,063,369	10,910,112

Operating lease liabilities	9	22,365,892	10,895,921
Finance lease liabilities	9	-	46,372
Warrant liability	12	13,204,211	9,823,510
Other long-term liabilities		28,000	28,000
Deferred tax liability	15	410,359	-
Total liabilities		43,071,831	31,703,915
Commitments and contingencies (Note 19)

Shareholders’ equity
Common shares, no par value, unlimited Common Shares
authorized, 181,806,190 issued and outstanding at December
31, 2020 and 137,660,559 at December 31, 2019	11	-	-
Class A Restricted shares, no par value, unlimited Class A
Restricted share authorized, 5,619,119 issued and
outstanding at December 31, 2020 and 2019	11	-	-
Additional paid in capital		159,399,056	58,747,851
Deficit		(52,693,242)	(27,684,513)
Total shareholders’ equity		106,705,814	31,063,338
Total liabilities and shareholders’ equity		$149,777,645	$62,767,253

On behalf of the Board:

Michael Haran		Adrienne O’Neal
Director		Director

See accompanying notes to the consolidated financial statements

F-3

Planet 13 Holdings Inc.

Consolidated statements of operations and comprehensive loss

(In U.S. dollars, except share amounts)

	Note	December 31, 2020	December 31, 2019	December 31, 2018

Revenues, net of discounts	3(h)	$70,491,280	$63,595,036	$21,166,755
Cost of sales		(35,394,019)	(27,086,453)	(11,708,639)
Gross profit		35,097,261	36,508,583	9,458,116

Expenses
General and administrative	16	24,903,598	20,407,487	9,583,376
Sales and marketing		3,305,639	6,539,483	1,702,841
Lease expense	9	2,114,743	1,912,984	-
Depreciation	7, 9	3,674,907	2,287,249	400,116
Share-based compensation expense	13	2,512,568	4,822,787	2,663,679
Total expenses		36,511,455	35,969,990	14,350,012
(Loss) income from operations		(1,414,194)	538,593	(4,891,896)

Other income (expense)
Interest expense, net		(22,202)	(27,073)	(241,860)
Foreign exchange gain (loss)		398,524	(271,240)	(63,634)
Transaction costs	4, 11	(275,250)	-	(1,932,702)
Change in fair value of warrant liability	12	(16,805,941)	(5,541,590)	(3,579,934)
Other income		216,850	350,775	80,285
Loss on settlement of accounts payable	11	-	-	(96,340)
		(16,488,019)	(5,489,128)	(5,834,185)

Loss before income taxes		(17,902,213)	(4,950,535)	(10,726,081)

Current income tax expense	15	(7,239,936)	(7,352,808)	(2,279,017)
Deferred income tax recoveries	15	133,420	-	378,948
Net (loss) and comprehensive (loss) for the year		(25,008,729)	(12,303,343)	(12,626,150)


Loss per share
Basic and diluted loss per share	14	$(0.16)	$(0.09)	$(0.13)

Weighted average number of common shares
Basic and diluted	14	151,825,439	134,074,476	98,908,344

See accompanying notes to the consolidated financial statements

F-4

Planet 13 Holdings Inc.

Consolidated statements of changes in shareholders’ equity

(in U.S dollars)

		Number of
	Note	Common Shares	Class A restricted shares	Warrants	Additional Paid in Capital	Accumulated deficit	Total Shareholders’ Equity
Balance January 1, 2018		-	-	-	$-	$(3,182,528)	$(3,182,528)
Conversion of debt to Common shares	11	25,300,000	-	-	1,124,661	-	1,124,661
Conversion of debt for Class A shares	11	-	49,700,000	-	2,209,643	-	2,209,643
Shares issued in private placements and prospectus offerings - net	11	40,193,650	-	2,009,760	28,900,394	-	28,900,394
Shares issued to former Carpincho shareholders on RTO closing	4, 11	5,250,000	-	-	11,544	-	11,544
Class A shares issued on conversion of debt	11	-	5,532,940	-	3,409,476	-	3,409,476
Shares issued on exercise of broker warrants	11	813,935	-	(813,935)	501,712	-	501,712
Shares issued on exercise of other warrants	11, 12	1,766,875	-	-	4,208,084		4,208,084
Shares issued on settlement of RSUs	11, 13	-	-	-	2,800,335	-	2,800,335
Share based compensation - options	13	-	-	-	305,890	-	305,890
Net (loss) for the period		-	-	-	-	(12,626,150)	(12,626,150)

Balance December 31, 2018		73,324,460	55,232,940	1,195,825	$43,471,739	$(15,808,678)	$27,663,061

Impact of adoption of ASC 842	9	-	-	-	-	427,508	427,508
Shares issued on settlement of RSUs	11, 13	3,954,518	-	-	4,564,167	-	4,564,167
Shares issued on exercise of broker warrants	11	608,110	-	(608,110)	368,310	-	368,310
Shares issued on exercise of other warrants	11, 12	4,281,537	-	-	9,909,541	-	9,909,541
Shares issued on exercise of options	11, 13	258,994	-	-	175,474	-	175,474
Share based compensation - options	13	-	-	-	258,620	-	258,620
Net loss for the year		-	-	-	-	(12,303,343)	(12,303,343)

Balance, December 31, 2019		82,427,619	55,232,940	587,715	$58,747,851	$(27,684,513)	$31,063,338

Shares issued upon conversion	8, 11	3,940,932	(3,940,932)	-	4,453,831	-	4,453,831
Shares issued for acquisition	8, 11	1,374,833	3,940,932	-	2,918,277	-	2,918,277
Shares issued on settlement of RSUs	11, 13	2,685,344	-	-	2,456,018	-	2,456,018
Shares issued on exercise of broker warrants	11	1,533,507	-	(1,533,507)	3,220,099	-	3,220,099
Shares issued on exercise of other warrants	11, 12	15,998,764	-	-	45,155,719	-	45,155,719
Shares issuance on exercise of options	11, 13	333,001	-	-	217,990	-	217,990
Shares based compensation - options	13	-	-	-	56,550	-	56,550
Shares issued on private placement	11	18,279,250	-	1,096,755	42,172,721	-	42,172,721
Net loss for the year		-	-	-	-	(25,008,729)	(25,008,729)

Balance, December 31, 2020		126,573,250	55,232,940	150,963	$159,399,056	$(52,693,242)	$106,705,814

See accompanying notes to the consolidated financial statements

F-5

Planet 13 Holdings Inc.

Consolidated statements of cash flows

(in U.S dollars)
	Note	December 31, 2020	December 31, 2019	December 31, 2018
Cash provided by (used in)
Operating activities
Net loss		$(25,008,729)	$(12,303,343)	$(12,626,150)
Adjustments for items not involving cash
Share- based compensation expense	11,18	2,512,568	4,822,787	2,663,679
Non-cash lease expense		3,539,018	2,145,541	-
Non-cash interest expense		-	-	217,048
Depreciation	7,9	5,269,627	2,971,894	988,768
Loss on disposal of assets	7	-	82,882	-
Share base payment to Carpincho shareholders on reverse takeover	4	-	-	11,544
Deferred income tax recoveries	15	(133,420)	-	(378,948)
Loss on settlement of accounts payable		-	-	96,340
Change in fair value of warrant liability	12	16,805,941	5,541,590	3,579,934
(Gain) loss on translation of warrant liability	12	(293,450)	468,740	(742,451)
Transaction costs	11	275,250	-	1,259,191
Unrealized (gain) loss on foreign currency exchange		(542,000)	211,097	335,807
		2,424,805	3,941,188	(4,595,238)

Net changes in non-cash working capital items	17	(3,776,652)	2,007,378	(1,582,473)
Repayment of lease liabilities		(2,337,006)	(1,247,546)	(11,845)
Total operating		(3,688,853)	4,701,020	(6,189,556)

Financing activities
Proceeds from private placements	11	48,125,129	-	40,381,022
Proceeds from exercise of warrants and options	11	32,871,439	5,030,185	2,374,253
Financing issuance cost expense	11	(3,660,589)	-	(4,032,026)
Total financing		77,335,979	5,030,185	38,723,249

Investing activities
Purchase of property, plant and equipment	7	(4,481,058)	(16,061,582)	(13,313,401)
Purchase of licenses	8	(3,550,400)	-	-
Total investing		(8,031,458)	(16,061,582)	(13,313,401)

Effect of foreign exchange on cash		570,470	(218,997)	(308,075)

Net change in cash during the year		66,186,138	(6,549,374)	18,912,217

Cash
Beginning of year		$12,814,712	$19,364,086	$451,869

End of year		$79,000,850	$12,814,712	$19,364,086

See accompanying notes to the consolidated financial statements

F-6

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

Nature of operations

Planet 13 Holdings Inc. (formerly Carpincho Capital Corp.) ("P13" or the “Company") was incorporated under the Canada Business Corporations Act on April 26, 2002 and continued under the British Columbia Business Corporations Act on September 24, 2019.

MM Development Company, Inc. (“MMDC”) is a privately held corporation existing under the laws of the State of Nevada. MMDC, founded on March 20, 2014, is a vertically integrated cultivator and provider of cannabis and cannabis-infused products licensed under the laws of the State of Nevada, with two licenses for cultivation, two licenses for production, and two dispensary licenses (one medical license and one recreational license). On June 11, 2018 MMDC completed a reverse-takeover (“RTO”) of Carpincho Capital Corp. Upon completion of the RTO, the shareholders of MMDC obtained control of the consolidated entity of P13. In accordance with ASC 805 Business Combinations (“ASC 805”), MMDC was identified as the accounting acquirer, and, accordingly, P13 is considered to be a continuation of MMDC, with the net assets of the Company at the date of the RTO deemed to have been acquired by MMDC (Note 4).

The Company is a vertically integrated cultivator and provider of cannabis and cannabis-infused products licensed under the laws of the State of Nevada, with six licenses for cultivation (three medical and three recreational), six licenses for production (three medical and three recreational), and three dispensary licenses (one medical and two recreational). In addition, the Company holds one recreational dispensary license in the city of Santa Ana, California.

P13 is a public company which is listed on the Canadian Securities Exchange (“CSE”) under the symbol “PLTH” and the OTCQX exchange under the symbol “PLNHF”.

The Company’s registered office is located at 595 Howe Street, 10th floor, Vancouver, BC V6C 2T5 and the head office address is 2548 West Desert Inn. Rd, Las Vegas, NV 89109.

While cannabis and CBD-infused products are legal under the laws of several U.S. states (with varying restrictions applicable), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug, whether for medical or recreational use. Under U.S. 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 safety for use under medical supervision.

The federal government currently is prohibited by statute from prosecuting businesses that operate in compliance with applicable state and local medical cannabis laws and regulations; however, this does not protect adult use cannabis. In addition, if the federal government changes this position, it would be financially detrimental to the Company.

Basis of presentation

These consolidated financial statements reflect the accounts of the Company and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for all periods presented. These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies.

Failure to arrange adequate financing on acceptable terms and/or achieve profitability may have an adverse effect on the financial position, results of operations, cash flows and prospects of the Company. These consolidated financial statements do not give effect to adjustments to assets or liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material. These consolidated financial statements are presented in U.S. dollars, which is also the Company’s and its subsidiaries’ functional currency.

These consolidated financial statements were authorized for issuance by the Board of Directors of the Company on December 13, 2021.

F-7

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

2. Basis of presentation (continued)

Basis of consolidation

The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries. Subsidiaries are entities in which the Company has a controlling voting interest or is the primary beneficiary of a variable interest entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are de-consolidated from the date control ceases. All intercompany accounts and transactions have been eliminated on consolidation. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating intercompany balances and transactions.

These consolidated financial statements include the accounts of the Company and the following entities which are subsidiaries of the Company:

Subsidiaries as at December 31, 2020	Jurisdiction of incorporation	Ownership interest 2020	Ownership interest 2019	Ownership interest 2018	Nature of business
MM Development Company, Inc. (“MMDC”)	USA	100%	100%	100%	Vertically integrated cannabis operations
BLC Management Company LLC. (“BLC”)	USA	100%	100%	100%	Management company
10653918 Canada Inc. (“Finco”)	Canada	-	-	100%	Holding company
LBC CBD LLC. (“LBC”)	USA	100%	100%	-	CBD retail sales and marketing
Newtonian Principles Inc.	USA	100%	-	-	Cannabis retail sales
MM Development MI, Inc.	USA	100%	100%	-	Holding company
MM Development CA, Inc.	USA	100%	100%	-	Holding company
MMDC Casa Holdings, Inc	USA	-	100%	-	Holding company
PLTHCA SA, Inc.	USA	-	100%	-	Holding company
Planet 13 Illinois, LLC	USA	49%	-	-	Holding company
BLC NV Food, LLC	USA	100%	-	-	Food retailing
By The Slice, LLC	USA	100%	-	-	Food retailing

ii.

Variable interest entities

A variable interest entity ("VIE") is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to control the entity's activities or do not substantially participate in the gains and losses of the entity. Upon inception of a contractual agreement, and thereafter, if a reconsideration event occurs, the Company performs an assessment to determine whether the arrangement contains a variable interest in an entity and whether that entity is a VIE. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Where the Company concludes that it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE.

iii.

Functional currency

These consolidated financial statements are presented in U.S. dollars (“USD”), which is the Company’s and its subsidiaries' functional currency.

F-8

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

2. Basis of presentation (continued)

Foreign currency transactions are remeasured to the respective functional currencies of the Company’s entities at the exchange rates in effect on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are remeasured to the functional currency at the foreign exchange rate applicable at the statement of balance sheets date. Non-monetary items carried at historical cost denominated in foreign currencies are remeasured to the functional currency at the date of the transactions. Non-monetary items carried at fair value denominated in foreign currencies are remeasured to the functional currency at the date when the fair value was determined. Realized and unrealized exchange gains and losses are recognized through profit and loss.

iv.

Emerging growth company

The Company is an “Emerging Growth Company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it has taken advantage of certain exemptions from various reporting requirements that are not applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a Company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

3. Significant accounting policies

(a)

Cash

Cash is comprised of cash deposits in financial institutions plus cash held at the retail location and other deposits that are readily convertible to cash.

(b)

Inventory

Inventory is comprised of raw materials, finished goods and work-in-progress. Cost include expenditures directly related to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Cannabis: Inventory cost includes pre-harvest, post-harvest and shipment and fulfillment, as well as related accessories. Pre-harvest costs include labor and direct materials to grow cannabis, which includes water, electricity, nutrients, integrated pest management, growing supplies and allocated overhead. Post-harvest costs include costs associated with drying, trimming, blending, extraction, purification, quality testing and allocated overhead. Shipment and fulfillment costs include the costs of packaging, labelling, courier services and allocated overhead. Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At the end of each reporting period, the Company performs an assessment of inventory and records write-downs for excess and obsolete inventories based on the Company’s estimated forecast of product demand, production requirements, market conditions, regulatory environment, and spoilage. Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s balance sheets, statements of operations and comprehensive loss and statements of cash flows.

F-9

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

Property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Additions and improvements that materially increase the life of the assets are capitalized, while maintenance and repairs are expensed as incurred. Significant expenditures, which extend the useful lives of assets or increase productivity, are capitalized. When significant parts of one of our property and equipment have different useful lives, they are accounted for as separate items or components of property and equipment. When assets are retired or disposed of, the cost and accumulated amortization are removed from the respective accounts and any related gain or loss is recognized in the consolidated statement of operations.

Depreciation is calculated on a straight-line basis over the expected useful lives of the assets, which are as follows:

Land		Not depreciated
Land improvements		5 years
Building		5 – 40 years
Equipment		5 - 7 years
Leasehold improvements		Shorter of estimated useful life or remaining life of lease
Construction in progress		Not depreciated

An asset’s residual value, useful life and depreciation method are reviewed at each reporting period with the effect of any changes in estimate accounted for on a prospective basis. Depreciation of property and equipment commences when the asset is available for use.

Construction in progress includes construction progress payments, deposits, engineering costs and other costs directly related to the construction of the facilities. Expenditures are capitalized during the construction period and construction in progress is transferred to the relevant class of property and equipment when the assets are available for use, at which point in time the amortization of the asset commences.

Property and equipment acquired in a business combination is depreciated over the remaining useful life of the asset.

(d) Intangible assets

Intangible assets include licenses acquired as part of business combinations and other business transactions.

When there is no foreseeable limit on the period of time over which an intangible asset is expected to contribute to the cash flows of the Company, an intangible asset is determined to have an indefinite life. Indefinite life intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its’ carrying value, a quantitative impairment test is required to compare the fair value of the asset to its’ carrying value. An impairment charge is recorded if the carrying value exceeds the fair value. The Company elected to perform a qualitative assessment on November 1, 2020 and determined that the fair value of the intangible assets was greater than the carrying value.

Licenses acquired in a business combination are measured at fair value at the acquisition date. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

F-10

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(e) Impairment of long-lived assets

The Company reviews long-lived assets, including property and equipment and definite life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). When indicators of potential impairment are present the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group. If the sum of the undiscounted cash flow is less than the carrying value of the asset or asset group, an impairment loss is recognized equal to the excess of the carrying value over the fair value, if any. Fair value can be determined using a market approach, income approach or cost approach. The reversal of impairment losses is prohibited.

(f) Share-based compensation

The Company has an equity incentive plan which includes issuances of stock options and restricted share units (“RSUs”). From time to time, the Company also enters into share-based compensation arrangements with non-employees. The accounting for these arrangements typically aligns with those of employees.

After adopting ASU 2018-07 which made amendments to ASC Topic 718, Stock Compensation, an acquirer measures share-based compensation to non-employees in exchange for goods or services in the same manner as share-based payments to employees, using a fair-value based approach measured at the grant date. This guidance is followed if the acquirer considers the assets and goods to be used or consumed in its own operation. If not, the Company has elected to account for the equity interests issued in accordance with ASC 805, Business Combinations based on the fair value of the equity interests issued. The fair value of share-based compensation to non-employees is periodically re-measured until counterparty performance is complete, and any change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments. The corresponding amount is recorded to the share-based payment reserve for options and to restricted share units for RSUs.

The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense on a straight-line basis over the vesting period. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be satisfied, such that the amount ultimately recognized is based on the number of awards that ultimately vest.

The fair value of the options granted is measured using the Black Scholes option pricing model, taking into account the terms and conditions upon which the share-based payments were granted.

The fair value of RSUs is determined using the closing market price of the Company’s shares on the grant date. The number of RSUs expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Amounts recorded for forfeited or expired RSUs are transferred to deficit in the year of forfeiture or expiry. Upon the issuance of common shares in exchange for vested RSUs, the amount of the related Restricted Share Unit reserve is transferred to share capital.

(g) Warrant liability

Warrants are accounted for in accordance with the applicable authoritative accounting guidance in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815”), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreements. Liability-classified instruments are recorded at fair value at each reporting period with any change in fair value recognized as a component of the change in fair value of derivative liabilities in the consolidated statements of operations and comprehensive loss. Transaction costs allocated to warrants that are presented as a liability are expensed immediately within other expenses (income) in the consolidated statements of operations and comprehensive loss. Refer to paragraph (p) below as well as Note 12 for a discussion on the change in the warrant liability value.

F-11

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(h) Revenue recognition

The Company earns revenue from the sale of cannabis to customers. The Company recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the performance obligations.

In order to recognize revenue, the Company applies the following five (5) steps:

1) Identify the contract with a customer

2) Identify the performance obligation(s)

3) Determine the transaction price

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

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

Revenue from the sale of cannabis to customers is recognized at a point in time when control over the goods has transferred to the customer. This corresponds with when the Company satisfies its performance obligation. Revenue is recorded net of any point-of-sale discounts provided to the customer. The Company’s revenues are principally derived from arrangements with fixed consideration. Variable consideration, if any, is not material.

The majority of the Company’s revenue is cash at point of sale. Payment is due upon transferring the goods or providing services to the customer or within a specified time period permitted under the Company’s credit policy. In those cases where the Company provides goods or services on credit, the Company considers whether or not collection is probable in determining if a contract exists under ASC 606 Revenue from contracts with customers. Costs associated with goods or services is expensed in the year performance obligations are satisfied.

Loyalty Points Reward Programs

In certain of its markets, the Company offers a loyalty reward program to its dispensary customers that allows its customers to earn discounts on future purchases. Loyalty points are earned when a qualifying purchase is made. When a customer attains a certain number of points, the customer can redeem the credits on his/her next in-store purchase, up to a certain annual minimum. Loyalty points do not have an expiration date.

A portion of the revenue generated in a sale is allocated to the loyalty points earned. The amount allocated to the points earned is deferred until the loyalty points are redeemed.

Deferred Income

Deferred income represents cash payments received in advance of the Company's transfer of control of products or services to its customers and generally consists of unearned revenue from the Company’s loyalty programs. The Company's deferred income balances were $464,000 and $230,000 as of December 31, 2020 and 2019, respectively, and were recorded within accrued expenses in the consolidated balance sheets. During the years ended December 31, 2020 and 2019 and December 31, 2018, the Company recognized $187,056, $120,722 and $nil, respectively of net revenues from amounts recorded as deferred income in the earlier years. The deferred income balance as of December 31, 2020 is expected to be recognized as revenue within the next 12-18 months.

The Company determined that no provision for returns or refunds was necessary as at December 31, 2020 (2019 – $nil). State taxes remitted to tax authorities are government-imposed excise taxes on cannabis. Excise taxes are recorded as a reduction of sales in net revenue in the consolidated statements of operations and comprehensive loss and recognized as a current liability within accounts payable and other current liabilities on the consolidated balance sheets, with the liability subsequently reduced when the taxes are remitted to the tax authority. In addition, amounts disclosed as net revenue are net of state taxes, sales tax, duty tax, allowances, and discounts.

The Company concluded there is no requirement to disaggregate revenue.

F-12

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(i) Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right of use (“ROU”) assets and operating lease liability under operating lease in the consolidated balance sheets. Finance lease ROU assets are included in finance ROU assets and finance lease liability under finance lease liability in the consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are classified as a finance lease or an operating lease. A finance lease is a lease in which 1) ownership of the property transfers to the lessee by the end of the lease term; 2) the lessor grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; 3) the lease is for a major part of the remaining economic life of the underlying asset; 4) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value; or 5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. The Company classifies a lease as an operating lease when it does not meet any one of these criteria.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU assets also include any lease payments made prior to the commencement date and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

For finance leases, lease expenses are the sum of interest on the lease obligations and amortization of the ROU assets. ROU assets are amortized based on the lesser of the lease term and the useful life of the leased asset according to the property and equipment accounting policy. If ownership of the ROU assets transfers to the Company at the end of the lease term or if the Company is reasonably certain to exercise a purchase option, amortization is calculated using the estimated useful life of the leased asset.

For operating leases, the lease expenses are generally recognized on a straight-line basis over the lease term and recorded to general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The Company has elected to apply the practical expedient in ASC 842 Leases, for each class of the underlying asset, except real estate leases, to not separate non-lease components from the associated lease components of the lessee’s contract and account for both components as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Short-term leases include real estate and vehicles and are not significant in comparison to the Company’s overall lease portfolio. The Company continues to recognize the lease payments associated with these leases as expenses on a straight-line basis over the lease term.

(j) Income taxes

Income taxes are comprised of current and deferred taxes. These taxes are accounted for using the asset and liability method of accounting for income taxes under ASC 740 Income Taxes. Deferred tax is recognized on the difference between the carrying amount of an asset or a liability, as reflected in the consolidated financial statements, and the corresponding tax base used in the computation of income for tax purposes ("temporary difference"). Measurement of deferred tax is based on the enacted tax rates and laws as at the balance sheet date that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Management assesses the likelihood that a deferred tax asset will be realized, and a valuation allowance is provided to the extent that it is more likely than not that all or a portion of a deferred tax asset will not be realized. If it is subsequently determined that the Company will be able to realize deferred tax assets in excess of the net recorded amount, then the valuation allowance will be adjusted accordingly in the period in which this determination is made.

F-13

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(j) Income taxes (continued)

Current tax is recognized in connection with income for tax purposes, unrecognized tax benefits and the recovery of tax paid in a prior period and measured using the enacted tax rates and laws applicable to the taxation period during which the income for tax purposes arose. An unrecognized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority. A change in the recognition or measurement of an unrecognized tax benefit is reflected in the period during which the change occurs.

The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense (recovery) in the consolidated statements of operations and comprehensive loss.

Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense.

As the Company operates in the cannabis industry, it is subject to the limits of U.S. Internal Revenue Code (“IRC”) Section 280E (“Section 280E”) under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

(k) Sales and marketing

The Company expenses sales and marketing costs when the sales and marketing first take place. Sales and marketing expense was approximately $3,305,639 for the year ended December 31, 2020 (2019 - $6,539,483; 2018 - $1,702,841).

(l) Fair value

Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Fair value measurement for invested assets are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Levels 1, 2 or 3). The three levels are defined based on the observability of significant inputs to the measurement, as follows:

●

Level 1: quoted prices (unadjusted) in active markets for identical or liabilities;

●

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

●

Level 3: one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset or liability

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The carrying value of the Company’s cash, deposits, accounts payable, accrued expenses, and notes payable approximate their fair value due to their short-term nature.

The Company's prepaid and other current assets, long lived assets, including property and equipment, and intangible assets are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

(m) Cost of sales

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, the depreciation of certain property, plant and equipment, and tariffs. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. Cost of sales also includes inventory valuation adjustments. The Company recognizes the cost of sales as the associated revenues are recognized.

F-14

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(n) Earnings (loss) per share

Basic earnings per share (“Basic EPS”) is calculated by dividing the net earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) is calculated using the treasury method of calculating the weighted average number of common shares outstanding. The treasury method assumes that outstanding stock options with an average exercise price below the market price of the underlying shares are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average price of the common shares for the period.

(o) Operating segments

Operating segments are components of the Company that engage in business activities which generate revenues and incur expenses (including intercompany revenues and expenses related to transactions conducted with other components of the Company). The operations of an operating segment are distinct, and the operating results are regularly reviewed by the chief operating decision maker (“CODM”) for the purposes of resource allocation decisions and assessing its performance.

The Company operates in a single reportable operating segment as a vertically integrated cannabis company with cultivation, production and distribution operations in the state of Nevada and dispensary operations in both the state of Nevada and the state of California.

As at December 31, 2020 and 2019, all the Company’s non-current assets were located in the United States and 100% of the Company’s revenue was generated in the United States.

(p) Critical accounting estimates and judgements

The preparation of consolidated financial statements in conformity with GAAP requires the Company’s management to make judgements, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates. Estimates and judgements are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Leases

The Company applies judgement in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease.

The Company determines the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The lease term is used in determining classification between operating lease and finance lease, calculating the lease liability and determining the incremental borrowing rate. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date of the lease, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset).

The Company is required to discount lease payments using the rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate. The Company generally uses the incremental borrowing rate when initially recording real estate leases. Information from the lessor regarding the fair value of underlying assets and initial direct costs incurred by the lessor related to the leased assets is not available. The Company determines the incremental borrowing rate as the interest rate the Company would pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

F-15

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(p) Critical accounting estimates and judgements (continued)

Share-based compensation

The Company uses the Black-Scholes valuation model to determine the fair value of options and warrants granted to employees and non-employees under share-based payment arrangements, where appropriate. In estimating fair value, management is required to make certain assumptions and estimates such as the expected term of the instrument, volatility of the Company’s future share price, risk free rates, future dividend yields and estimated forfeitures at the initial grant date, by reference to the underlying terms of the instrument, and the Company’s experience with similar instruments. Changes in assumptions used to estimate fair value could result in materially different results. Refer to Note 13 for further information.

Estimated useful lives and depreciation of property and equipment, right-of-use assets

Depreciation and amortization of property and equipment, right-of-use assets and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. Impairment of definite long-lived assets is influenced by judgment in defining a reporting unit and determining the indicators of impairment, and estimates used to measure impairment losses. Refer to Notes 7 and 8 for further information.

Impairment of indefinite life intangible assets

Indefinite life intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset or the reporting unit is less than its carrying value, a quantitative impairment test is required to compare the fair value of the asset to its’ carrying value. An impairment charge is recorded if the carrying value exceeds the fair value. The assessment of whether an indication of impairment exists is performed at the end of each reporting period and requires the application of judgment, historical experience, and external and internal sources of information. The Company makes estimates in determining the future cash flows and discount rates in the quantitative impairment test to compare the fair value to the carrying value.

Valuation of inventory

Inventory is comprised of raw materials, work-in-progress and finished goods. Cannabis and hemp costs include expenditures directly related to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. At the end of each reporting period, the Company performs an assessment of inventory and record inventory valuation adjustments for excess and obsolete inventories based on the estimated forecast of product demand, production requirements, market conditions, regulatory environment, and spoilage. A reserve is estimated to ensure the inventory balance at the end of the year reflects the estimates of product the Company expect to sell in the next year. Changes in the regulatory structure, lack of retail distribution locations or lack of consumer demand could result in future inventory reserves.

Warrant liability

The fair value of the warrant liability is measured using a Black Scholes pricing model. Assumptions and estimates are made in determining an appropriate risk-free interest rate, volatility, term, dividend yield, discount due to exercise restrictions, and the fair value of common stock. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability.

F-16

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(p) Critical accounting estimates and judgements (continued)

Deferred tax assets and uncertain tax positions

The Company recognizes deferred tax assets and liabilities based on the differences between the consolidated financial statement carrying amounts and the respective tax bases of its assets and liabilities. The Company measures deferred tax assets and liabilities using current enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a valuation allowance if, based on all available evidence, it determines that some portion of the tax benefit will not be realized.

In evaluating the ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of operations. In projecting future taxable income, the Company considers historical results and incorporates assumptions about the amount of future pretax operating income adjusted for items that do not have tax consequences. The Company’s assumptions regarding future taxable income are consistent with the plans and estimates that are used to manage its underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income/(loss). The income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect the Company’s best assessment of estimated current and future taxes to be paid. Deferred tax asset valuation allowances and liabilities for unrecognized tax benefits require significant judgment regarding applicable statutes and their related interpretation, the status of various income tax audits and the Company’s particular facts and circumstances. Although the Company believes that the judgments and estimates discussed herein are reasonable, actual results, including forecasted COVID-19 business recovery, could differ, and the Company may be exposed to losses or gains that could be material. To the extent the Company prevails in matters for which a liability has been established or is required to pay amounts in excess of the established liability, the effective income tax rate in a given financial statement period could be materially affected.

(q) Accounting standards adopted

Revenue recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASC 606”). The new revenue recognition standard provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance was effective for non-public business entities for annual periods beginning after December 15, 2018 and is applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted, and as a result the Company has used the modified retrospective method to early adopt the new revenue recognition guidance on January 1, 2018. Adoption of the new standard did not have a material impact to revenue recognition.

Leases

In February 2016, the FASB issued ASU 2016-02 Leases (“ASC 842”) (“ASC 2016-02”), which modifies the classification criteria and requires lessees to recognize right-of-use assets and lease liabilities arising from most leases on the balance sheet with additional disclosures about leasing arrangements. The effective date was subsequently amended by ASU 2021-05 Leases for non-public business entities to be effective for fiscal years beginning after December 31, 2021, with earlier application permitted.

The Company had no leases until its completion of the RTO transaction discussed in Note 4. As a result, the Company elected to early adopt ASC 842 in accordance with the transition provisions of ASU 2016-02, with a date of initial application of January 1, 2019. There was no impact on the consolidated financial statements.

F-17

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(q) Accounting standards adopted (continued)

Financial instruments with down round features

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (“ASC 260”), Distinguishing Liabilities from Equity (“ASC 480”), Derivatives and Hedging (“ASC 815”) Part I. Accounting for Certain Financial Instruments with Down Round Features Part II Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. The ASU is effective for non-public business entities for fiscal periods beginning after December 15, 2020, however early adoption is permitted for all entities. The Company early adopted the standard effective January 1, 2018 and such adoption did not have a material effect on its consolidated financial statements.

Disclosure framework – fair value measurement

In August 2018, FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASC 820”) (“ASC 2018-13”). ASU 2018-13 removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC 820, (b) the policy for timing of transfers between levels, and (c) the valuation process used for Level 3 fair value measurements. ASU 2018-13 also adds, among other items, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The ASU is effective for all entities for fiscal periods beginning after December 15, 2019, however the amendments can be early adopted and should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 effective January 1, 2018 and such adoption did not have a material effect on its consolidated financial statements.

Codification improvements

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU amends a wide variety of Topics in the Codification, including revolving-debt arrangements and allowance for credit losses related to leases. The amendments in this ASU are effective for non-public business entities for fiscal periods beginning after December 15, 2019 and interim periods within those fiscal years beginning after December 15, 2020. The company has adopted issues 1 – 5 of the guidance in ASU 2020-03 on January 1, 2020. Issues 6 – 7 of the guidance in ASU 2020-03 relate to ASU 2016-13 including the same adoption date requirements, and as noted below have not yet been adopted by the Company. The adoption of ASU 2020-03 did not have a material impact on the consolidated financial statements.

Intangibles – Goodwill and Other

In March 2021, the FASB issued ASU 2021-03, Intangibles—Goodwill and Other (“ASC 350”): Accounting Alternative for Evaluating Triggering Events. The amendments in this ASU are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities for both interim and annual financial statements that have not yet been issued or made available for issuance. As a result, the Company has elected to early adopt ASU 2021-03, effective January 1, 2018, and such adoption did not have a material effect on its consolidated financial statements.

(r) Accounting standards issued but not yet effective

Allowance for credit losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments. This guidance was subsequently amended by ASU 2018-19, Codification Improvements, ASU 2019-04, Codification Improvements, ASU 2019-05, Targeted Transition Relief, ASU 2019-10, Effective Dates, and ASU 2019-11, Codification Improvements. These ASUs are referred to collectively as the new guidance on current expected credit loss (“CECL”). The standard is effective for non-public business entities for fiscal

F-18

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

3. Significant accounting policies (continued)

(r) Accounting standards issued but not yet effective (continued)

years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.

Income taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (“ASC 740”) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The standard is effective for non-public business entities for annual reporting periods beginning after December 15, 2021 and including interim periods within those fiscal years, which means that it will be effective for the Company in the first quarter of our year beginning January 1, 2022. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.

Debt with conversion options and other options

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (“ASC 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for public smaller reporting companies and non-public entities in fiscal years beginning after December 15, 2023. The Company is currently evaluating the effect of adopting this ASU.

Freestanding written call options

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (“ASC 260”), Debt - Modifications and Extinguishments (“ASC 470-50”), Compensation – Stock Compensation (“ASC 718”), and Derivatives and Hedging - Contracts in Entity's Own Equity (“ASC 815-40”), which clarifies existing guidance for freestanding written call options which are equity classified and remain so after they are modified or exchanged in order to reduce diversity in practice. The standard is effective for all entities in fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect of adopting this ASU.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contact Liabilities from Contracts with Customers (“ASU 2021-08”) (“ASC 805”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under ASC 606 in order to align the recognition of a contract liability with the definition of performance obligation. This approach differences from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 is effective for financial statements of non-public business entities issued for fiscal years beginning after December 15, 2023 and early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.

4. Reverse Takeover (“RTO”) transaction and listing expense

On June 11, 2018, MMDC and P13 (formerly Carpincho Capital Corp.) completed the definitive share exchange agreement entered into on April 26, 2018, (the “RTO Agreement”), whereby MMDC acquired all of the issued and outstanding shares of Carpincho Capital Corp, on the basis of 0.875 consolidated common shares of the resulting entity for every one (1) outstanding common share of Carpincho Capital Corp. In accordance with ASC 805, the transaction is categorized as a reverse takeover (“RTO”) of a non-operating company. The transaction does not constitute a business combination since Carpincho Capital Corp did not meet the definition of a business under ASC 805.

F-19

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

4. Reverse Takeover (“RTO”) transaction and listing expense (continued)

These types of transactions are considered to be capital transactions of the legal acquiree and are equivalent to the issuance of shares by the private entity for the net monetary assets of the public shell corporation accompanied by a recapitalization. As a result, the transaction has been accounted for as an asset acquisition with MMDC being identified as the acquirer (legal subsidiary) and Carpincho Capital Corp. being treated as the accounting acquiree (legal parent) with the transaction being measured at the fair value of the equity consideration issued to Carpincho Capital Corp shareholders. The excess of the fair value of the shares issued over the value of the net monetary assets acquired has been recognized as a reduction of equity. The fair value of the net assets acquired was $11,544 as per the below:

	June 11, 2018
Net assets acquired
Cash and cash equivalents	$34,678
HST receivable	8,020
Accounts payable and accrued liabilities	(31,154)
Net assets acquired	$11,544
Shares issued and transaction costs incurred recorded
Fair value of 5,250,000 shares issued by MMDC at CAD $1.00 per share	4,040,637
Less net assets acquired	(11,544)
Net cost of shares issued on RTO recorded within additional paid in capital	$4,029,093

Transaction costs of $673,511 were incurred as part of the transaction and recorded within transaction costs.

5. Inventory

Finished goods inventory consists of dried cannabis, concentrates, edibles, and other products that are complete and

available for sale (both internally generated inventory and third-party products purchased in the wholesale market). Work in process inventory consists of cannabis after harvest, in the processing stage. Packaging and miscellaneous consist of consumables for use in the transformation of biological assets and other inventory used in production of finished goods. Raw materials consist of harvested cannabis. The Company’s inventory is comprised of:

	December 31, 2020	December 31, 2019

Raw materials	$1,292,310	$1,030,349
Packaging and miscellaneous	566,157	500,109
Work in progress	1,801,434	1,254,118
Finished goods	3,259,939	2,342,991
	$6,919,840	$5,127,567

Cost of Inventory is recognized as an expense when sold and included in cost of goods sold. During the year ended December 31, 2020, the Company recognized $35,394,019 (2019 - $27,086,453, 2018 - $11,708,639) of inventory expensed to cost of goods sold.

F-20

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

6. Prepaid expenses and other current assets

	December 31, 2020	December 31, 2019
Security deposits	1,031,255	2,210,249
Funds awaiting settlement	1,263	481,214
HST receivable	103,445	16,544
Insurance	550,946	356,531
Prepaid rent and other	511,096	431,314
	$2,198,005	$3,495,852

7. Property and equipment

	Land and land Improvements	Buildings and structures	Equipment	Leasehold improvements	Construction in progress	Total
Gross carrying amount

Balance as at December 31, 2019	625,146	1,698,077	4,075,085	27,094,559	1,778,283	35,271,150
Additions	-	9,817	2,096,736	2,110,612	3,174,371	7,391,536
Transfers	-	-	65,435	1,242,871	(1,308,306)	-
Disposals	-	-	-	-	(277,093)	(277,093)
Balance as at December 31, 2020	$625,146	$1,707,894	$6,237,256	$30,448,042	$3,367,255	$42,385,593

Depreciation

Balance as at December 31, 2019	76,737	161,258	1,242,945	3,579,056	-	5,059,996
Additions	51,194	42,492	1,034,935	4,141,006	-	5,269,627
Disposals	-	-	(17,955)	-	-	(17,955)
Balance as at December 31, 2020	$127,931	$203,750	$2,259,925	$7,720,062	$-	$10,311,668

Carrying amount

December 31, 2019	$548,409	$1,536,819	$2,832,140	$23,515,503	$1,778,283	$30,211,154
December 31, 2020	$497,215	$1,504,144	$3,977,331	$22,727,980	$3,367,255	$32,073,925

As at December 31, 2020, costs related to the construction of facilities were capitalized as construction in progress and not depreciated. Depreciation will commence when the facility is available for its intended use. The contractual construction commitment on the Superstore Entertainment Complex at December 31, 2020 was $nil (2019 – $4,516,513). On December 14, 2020, the Company entered into a Guaranteed Maximum Price Construction Agreement for the phase I build out of its planned Planet 13 Orange County cannabis entertainment complex in Santa Ana, California. The construction commitment as at December 31, 2020, was $7,084,300 (December 31, 2019 - $Nil) (Note 19).

For the year ended December 31, 2020 depreciation expense was $5,269,627 (2019- $2,971,894) of which $1,637,415 (2019 - $730,839) was included in cost of goods sold.

During the year ended December 31, 2020 on completion of Construction in Progress, the Company transferred $1,242,871 (2019 - $5,146,336) to Leasehold Improvements and transferred $65,435 (2019 - $950,535) to Equipment.

F-21

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

8. Intangible assets

	Retail Dispensary Santa Ana	Retail Dispensary Clark County	Cultivation and Production Clark County	Total
Carrying amount
Balance, December 31, 2019	$-	$-	$-	$-
Additions	6,151,343	690,000	709,798	7,551,141
Balance, December 31, 2020	$6,151,343	$690,000	$709,798	$7,551,141

Santa Ana acquisition

On May 20, 2020, the Company closed on its acquisition of Newtonian Principles, Inc. resulting in the Company acquiring a California cannabis sales license held by Newtonian Principles, Inc and a 30-year lease for a dispensary in Santa Ana, California. The acquisition was accounted for as an asset purchase acquisition as Newtonian Principles, Inc. was deemed to not be a business under ASC 805 Business Combinations. The facility became operational in July 2021.

The following table summarizes the allocation of consideration exchanged to the estimated fair value of identifiable intangible assets acquired assumed:

Consideration paid:
Cash	$1,153,733
Issuance of 3,940,932 Class A shares (Note 11)	4,453,831
	$5,607,564
Fair value of net assets acquired:
Right of use asset	$4,395,037
Right of use liability	(4,395,037)
Deferred tax liability	(543,779)
Intangible asset-License	6,151,343
	$5,607,564

WVapes acquisition

On July 17, 2020, the Company entered into an asset purchase agreement with West Coast Developments Nevada, LLC and W The Brand, LLC (together “WCDN”) pursuant to which the Company acquired cannabis inventory, equipment and tenant improvements located in Las Vegas, Nevada. The acquisition was accounted for as an asset purchase acquisition as WCDN assets acquired was deemed to not be a business.

The following table summarizes the allocation of consideration exchanged to the estimated fair value of tangible and

intangible assets acquired:

Consideration paid:
Cash	$1,706,667
Issuance of 1,374,833 Common shares (Note 11)	2,918,277
	$4,624,944
Fair value of net assets acquired:
Inventory	$1,632,872
Fixed assets	2,282,274
Intangible asset - License	709,798
	$4,624,944

The Company acquired two cultivation licenses (one medical and one recreational), two production licenses (one medical and one recreational) and one conditional distribution license. The transaction was scheduled to close in two parts, the first closing being cash transferred for the equipment and cannabis inventory which occurred on July 17, 2020, and the second closing (the “Second Closing”) being contingent on the approval to transfer the license and receipt of the cultivation and production licenses from the State of Nevada’s Cannabis Control Board (“CCB”).

F-22

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

8. Intangible assets (continued)

On August 25, 2020, the CCB conditionally approved the transfer of the cultivation and production licenses to MMDC, and on September 3, 2020, the Company received the cultivation and production licenses pursuant to a letter from the CCB.

On September 11, 2020, the Company mutually agreed with WCDN that the receipt by the Company of a business license issued by unincorporated Clark County which would permit the Company to conduct business in Clark County (the “Clark County Business License”) was a necessary condition precedent to the Second Closing. As a result, the Second Closing occurred, and the 1,374,833 common shares in the Capital of the Company were released from escrow to WCDN, on November 27, 2020 upon receipt by the Company of the Clark County Business License.

Concurrent with the first closing of the WCDN assets acquired, RX Land, LLC (“RX Land”), an entity owned by the Corporation’s co-CEOs, acquired the WCDN facility for US$3.3 million and entered into a lease agreement with WCDN in respect of such facility (the “Initial West Bell Lease”). In accordance with the terms of the WCDN asset acquisition and approvals by the independent directors of Planet 13, WCDN assigned the Initial West Bell Lease to MMDC on November 25, 2020, and MMDC subsequently entered into an amending agreement with RX Land on November 27, 2020, to amend certain terms of such lease agreement including increasing the lease payments, extending the duration of the lease and, if desired, allowing for second floor installation by MMDC without a corresponding lease rate increase due to an increase in facility size. The entering into by MMDC of the assignment agreement and the amending agreement with RX Land constitutes a “related party transaction”.

By way of an October 10, 2020 letter from the CCB, the Company received a conditional distribution license from WCDN.

Medizin license acquisition

On July 31, 2020, the Nevada Tax Commission approved a settlement agreement between the Nevada Tax Commission, the Corporation and other plaintiffs, and intervening defendants (the “Nevada License Settlement”) in connection with a lawsuit filed by the Company and other defendants after the defendants were notified in December 2018 that no licenses had been awarded to any of the defendants as part of a competitive application process that the Company and the other defendants had participated in for Nevada cannabis dispensary licenses in September 2018.

On August 7, 2020, the CCB convened and approved the Nevada License Settlement.

On September 3, 2020, the CCB transferred the conditional Clark County dispensary license to MMDC.

On November 20, 2020, the Corporation opened the Medizin store location, having received CCB final inspection approvals and a Clark County business license. The Company has capitalized $690,000 in costs incurred to secure the license under the Nevada License Settlement.

9. Leases

On January 1, 2019, the Company adopted ASC 842, Leases (“ASC 842”) using the modified retrospective transition method. Topic 842 requires the recognition of lease assets and liabilities for operating and finance leases. Beginning on January 1, 2019, the Company’s consolidated financial statements are presented in accordance with the revised policies.

Management elected to utilize the practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered prior to adoption of Topic 842. Additionally, management elected not to separate lease and non-lease components for all of the Company’s leases. For leases with a term of 12 months or less, management elected the short-term lease exemption, which allowed the Company to not recognize right-of-use assets (“ROU”) or lease liabilities for qualifying leases existing at transition and new leases the Company may enter into in the future.

F-23

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

9. Leases (continued)

utilities, or insurance and maintenance. Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

On initial recognition, the Company recorded operating right-of-use assets of $8,708,316, operating lease liabilities of $8,639,028 and finance ROU assets and finance lease liabilities of $133,561. On initial recognition, operating ROU assets were adjusted for prepaid rent and deferred rent was reversed which resulted in the Company recording $427,508 to opening accumulated deficit. The Company’s incremental borrowing rate was used in determining the present value of future payments at the commencement date of the lease.

The following table provides the components of lease cost recognized in the consolidated statement of operations and comprehensive loss for 2020 and 2019:

	December 31, 2020	December 31, 2019
Operating lease costs	$3,227,428	$2,019,931
Finance lease cost:
Amortization of lease assets	46,194	42,695
Interest on lease liabilities	10,774	15,489
Finance lease cost	56,968	58,184
Short term lease expense	17,154	6,080
Total lease costs	$3,301,550	$ 2,084,195

Other information related to operating and finance leases as of and for the year end December 31, 2020 and 2019 are as follows:

	December 31, 2020		December 31, 2019
	Finance Lease	Operating Lease	Finance Lease	Operating Lease
Weighted average discount rate	15.00%	15.00%	15.00%	15.00%
Weighted average remaining lease term (in years)	0.88	12.80	1.88	17.10

The maturity of the contractual undiscounted lease liabilities as of December 31, 2020 and 2019 are:

	December 31, 2020		December 31, 2019
	Finance Lease	Operating Lease	Finance Lease	Operating Lease
2020	$-	$-	$56,726	$1,353,594
2021	49,803	3,180,999	49,803	1,539,901
2022	-	3,354,437	-	1,611,855
2023	-	3,482,126	-	1,687,256
2024	-	3,614,972	-	1,766,272
2025	-	3,694,021	-	1,789,854
2026	-	3,757,894
Thereafter	-	54,138,155	-	27,009,842
Total undiscounted lease liabilities	49,803	75,222,604	106,529	36,758,574
Interest on lease liabilities	(3,431)	(52,695,691)	(14,205)	(25,813,747)
Total present value of minimum lease payments	46,372	22,526,913	92,324	10,944,827
Lease liability – current portion	(46,372)	(161,021)	(45,952)	(48,906)
Lease liability	$-	$22,365,892	$46,372	$10,895,921

F-24

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

9. Leases (continued)

Additional information on the right-of-use assets by class of assets is as follows:

	Finance lease	Operating lease

Gross carrying amount
Balance, January 1, 2019	$133,561	$8,708,316
Additions	-	2,024,771
Balance, December 31, 2019	133,561	10,733,087
Lease modifications	-	335,798
Additions	-	10,893,679
Balance, December 31, 2020	$133,561	$21,962,564

Depreciation

Balance, January 1, 2019	$-	$-
Additions	42,695	615,550
Balance, December 31, 2019	42,695	615,550
Additions	46,194	849,119
Balance, December 31, 2020	$88,889	$1,464,669


Carrying amount December 31, 2019	$90,866	$10,117,537
Carrying amount December 31, 2020	$44,672	$20,497,895

For the year ended December 31, 2020, the Company incurred $3,227,428 of operating lease costs (2019 - $2,019,931), of which $1,112,685 (2019 - $106,947) was capitalized to inventory.

During the year ended December 31, 2020, two leases were modified to increase the space under lease and one lease was modified to increase lease payments after the building under lease was sold by the lessor. The modifications were treated as continuations of the existing leases.

10. Notes payable

Non-related parties

	December 31, 2020	December 31, 2019
Promissory note dated November 4, 2015, with semi-annual interest at 5.0%, secured by deed of trust, due December 1, 2019	$884,000	$884,000
Less: current portion	(884,000)	(884,000)
Long-term portion of promissory notes	$-	$-

Stated maturities of debt obligations are as follows:

Next 12 months promissory note

$ 884,000

The promissory note with an outstanding balance at December 31, 2020 of $884,000 (December 31, 2019 - $884,000) is collateralized by a deed of trust on the related land.

F-25

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

11. Share capital

Unlimited number of common shares and unlimited number of Class A shares.

	Number of Common Shares
		December 31, 2020	December 31, 2019	December 31, 2018
Common shares
Balance at January 1		82,427,619	73,324,460	25,300,000
Shares issued to former Carpincho Capital Corp Shareholders	i.	-	-	5,250,000
Shares issued on private placement		-	-	31,458,400
Shares issued on prospectus offering		-	-	8,735,250
Shares issued on settlement of RSUs		2,685,344	3,954,518	-
Shares issued on exercise of options	v.	333,001	258,994	-
Shares issued on exercise of warrants		17,532,271	4,889,647	2,580,810
Shares issued on financing - July 2020		5,359,000	-	-
Shares issued on financing - September 2020		6,221,500	-	-
Shares issued on financing - November 2020		6,698,750	-	-
Shares issued on conversion of Class A shares (Note 8)		3,940,932	-	-
Shares issued on acquisition (Note 8)		1,374,833	-	-
Total common shares outstanding on December 31		126,573,250	82,427,619	73,324,460

i. Shares issued to former Carpincho Capital Corp Shareholders

On June 11, 2018 the Company closed the RTO transaction, and it issued 5,250,000 common shares to former shareholders of Carpincho Capital Corp. at fair value. The Company recorded Share capital in the amount of $11,544 associated with the issuance of shares to the former shareholders of Carpincho (Note 4).

ii. Shares issued in private placement

The RTO closing also triggered the closing of a private placement that was being held in escrow pending the closing of the RTO. The Company closed the private placement by issuing 31,458,400 units at a price of CAD$0.80 per unit for gross proceeds of $20,205,692 (CAD$26,253,256). Each unit was comprised of one common share and one-half of common share purchase warrant. Each whole warrant entitles the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$1.40 per common share.

The Company also issued 1,485,645 broker warrants that entitled the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$0.80 per common share. The broker warrants were measured based on the fair value of the warrants using a Black Scholes valuation model.

The Company incurred $2,309,453 in cash share issuance costs and $647,406 in broker warrant costs. The warrants are initially measured at fair value (Note 12) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

	Gross Proceeds	Issuance Costs
June 11, 2018 Financing
Common Shares (APIC)	12,132,370	(1,775,426)
Warrant Liability (Note 12)	8,073,322	(1,181,433)
Total	20,205,692	2,956,859

F-26

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

11. Share capital (continued)

iii. Shares issued on prospectus offering

On December 4, 2018, the Company issued 8,735,250 common shares and 4,792,625 common share purchase warrants at a price of CAD$3.00 per unit with each unit consisting of one common share and ½ of a common share purchase warrant. Total aggregate gross proceeds on the financing were $20,175,329 (CAD$26,669,767). Each whole warrant entitles the holder to purchase one common share of the Company at an exercise price of CAD$3.75 for a period of 36 months following the closing. The warrants may be accelerated by the Company in its sole discretion at any time in the event that the volume-weighted average closing price of the common shares on the Canadian Securities Exchange is greater than or equal to CAD$5.00 per share for a period of 20 consecutive trading days by giving notice to the warrant holders. In such a case the warrants will expire at 4:00pm Eastern Time on the earlier of the 30th day after the date on which notice is given and the actual expiry date of the warrants.

The Company also issued 524,115 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$3.00 per common share. The broker warrants were measured based on the fair value of the warrants using a Black Scholes valuation model.

The Company incurred $1,722,572 in cash share issuance costs and $750,012 in broker warrant costs. The warrants are initially measured at fair value (Note 12) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

	Gross Proceeds	Issuance Costs
December 4, 2018 Financing
Common Shares (APIC)	19,540,856	(2,394,824)
Warrant Liability (Note 12)	634,473	(77,760)
Total	20,175,329	2,472,584

iv. Shares issued for Restricted Share Units

During the year ended December 31, 2020, the Company issued 2,685,344 common shares on the settlement of Restricted Share Units (“RSUs”) that had vested during the period. The Company did not receive any cash proceeds on the settlement and transferred $3,313,152 to share capital from the carrying value ascribed to the RSUs that were settled.

During the year ended December 31, 2019, the Company issued 3,954,518 common shares on the settlement of RSUs that had vested during the year. The Company did not receive any cash proceeds on the settlement and transferred $3,245,017 to share capital from the carrying value ascribed to the RSUs that were settled.

v. Shares issued for Stock Options

During the year ended December 31, 2020, the Company issued 333,001 common shares on the exercise of options that had a strike price in the range of CAD$0.75 to CAD$1.55 per common share resulting in cash proceeds of $217,990 (CAD$290,983).

During the year ended December 31, 2019, the Company issued 258,994 common shares on the exercise of options with a strike price in the range of CAD$0.75 to CAD$1.55 per common share resulting in cash proceeds of $175,474 (CAD$231,945).

F-27

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

11. Share capital (continued)

vi. Shares issued on the exercise of Warrants

During the year ended December 31, 2020, the Company issued 17,532,271 common shares to warrant holders who exercised 17,532,271 warrants resulting in cash proceeds of $32,653,449 (CAD$43,079,021).

During the year ended December 31, 2019, the Company issued 4,889,647 common shares to warrant holders who exercised 4,889,647 warrants resulting in cash proceeds of $4,854,711 (CAD$6,480,875).

During the year ended December 31, 2018, the Company issued 2,580,810 common shares to warrant holders who

exercised 2,580,810 warrants resulting in cash proceeds of $2,374,253 (CAD$3,124,773).

vii. Shares issued on Financing – July 2020

On July 3, 2020, the Company completed a bought deal financing for aggregate gross proceeds of $8,493,808 (CAD$11,521,850) at a price of CAD$2.15 per unit. The Company issued 5,359,000 units of the Company. Each unit was comprised of one common share in the capital of the Company and one-half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$2.85 per common share for a period of 24 months.

The Company also issued 321,540 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$2.15 per common share. The broker warrants were measured based on the fair value of the warrants using a Black Scholes valuation model.

The Company incurred $825,359 in cash share issuance costs and $222,398 in broker warrant costs. The warrants are initially measured at fair value (Note 12) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

	Gross Proceeds	Issuance Costs
July 3, 2020 Financing
Common Shares (APIC)	8,118,500	(1,001,461)
Warrant Liability (Note 12)	375,308	(46,296)
Total	8,493,808	(1,047,757)

viii. Shares issued on Financing – September 2020

On September 10, 2020, the Company completed a bought deal financing for aggregate gross proceeds of $17,489,401 (CAD$23,019,550) at a price of CAD$3.70 per unit. The Company issued 6,221,500 units of the Company. Each unit was comprised of one common share in the capital of the Company and one-half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$5.00 per common share for a period of 24 months.

The Company also issued 373,290 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$3.70 per common share. The broker warrants were measured based on the fair value of the warrants using a Black Scholes valuation model.

F-28

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

11. Share capital (continued)

The Company incurred $1,291,216 in cash share issuance costs and $585,816 in broker warrant costs. The warrants are initially measured at fair value (Note 12) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

	Gross Proceeds	Issuance Costs
September 10, 2020 Financing
Common Shares (APIC)	16,662,200	(1,788,253)
Warrant Liability (Note 12)	827,201	(88,779)
Total	17,489,401	(1,877,032)

ix. Shares issued on Financing – November 2020

On November 5, 2020, the Company completed a bought deal financing for aggregate gross proceeds of $22,141,920 (CAD$28,804,625) at a price of CAD$4.30 per unit. The Company issued 6,698,750 units of the Company. Each unit was comprised of one common share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$5.80 per common share for a period of 24 months.

The Company also issued 401,925 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$4.30 per common share. The broker warrants were measured based on the fair market value of the warrants using a Black Scholes valuation model.

The Company incurred $1,544,014 in cash share issuance costs and $730,523 in broker warrant costs. The warrants are initially measured at fair value (Note 12) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

	Gross Proceeds	Issuance Costs
November 5, 2020 Financing
Common Shares (APIC)	20,777,360	(2,134,362)
Warrant Liability (Note 12)	1,364,560	(140,175)
Total	22,141,920	(2,274,537)

	Number of Class A Shares
	December 31, 2020	December 31, 2019	December 31, 2018
Class A shares
Balance at January 1	55,232,940	55,232,940	49,700,000
Shares issued on exchange of notes payablei.	-	-	5,532,940
Shares issued on acquisition (Note 8)	3,940,932	-	-
Conversion of Class A to Common (Note 8)	(3,940,932)	-	-
Total Class A shares outstanding on December 31	55,232,940	55,232,940	55,232,940

F-29

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

11. Share capital (continued)

In March 2014, the Company entered into agreements with its founders (who are now shareholders) in order to provide funds to support operations of the Company. The notes matured on December 31, 2019 and interest accrues on each advance on the day an advance is made at a rate of 15%. On January 1, 2018, the holders of the notes converted 50% of the notes outstanding for an aggregate of $3,334,304 of principal into members' contributions at carrying value. On March 14, 2018, MMDC LLC, the predecessor company of MMDC underwent a statutory conversion to a Nevada domestic corporation, converting from a member based limited liability company to a Corporation. The members’ equity in MMDC LLC was converted into common voting shares of 25,300,000 amounting to $1,124,661 and 49,700,000 non-voting capital stock amounting to $2,209,643. The common stock of MMDC were then exchanged for 25,300,000 common shares of P13 and 49,700,000 Class A restricted shares of P13 on closing of the RTO (Note 4).

On closing of the RTO on June 11, 2018, the holders of the notes converted the remaining amounts of principal and accrued interest due to them of $3,409,476, into 5,532,940 shares of Class A restricted shares of the Company.

The Class A restricted shares have equal ratable rights as the Company’s common shares to dividends, all of the Company’s assets that are available for distribution upon liquidation, dissolution or winding up of the Company’s affairs, do not have pre-emptive rights, are entitled to receive notice and attend shareholders meetings and to exercise one vote for each Class A share held at all meetings of shareholders of the Company other than with respect to the vote for the election or removal of directors. Each Class A shareholder is able to convert each outstanding Class A share at the option of the holder thereof into one common share at any time provided that such conversion would not cause the Company to become a US Domestic Issuer. The restriction on conversion of Class A shares are designed to prevent the Company from becoming a US Domestic Issuer. Generally, a company will be considered to be a US Domestic Issuer if:

(A) 50% or more of the holders of a company’s common voting shares are U.S. Persons; and either (B) (i) the majority of the executive officers or directors of the Issuer are United States citizens or residents; (ii) the company has 50% or more of its assets located in the United States; or (iii) the business of the company is principally administered in the United States.

As there are no restrictions on issue or transfer of the Company’s common shares, there is no guarantee that the Company will not become a US Domestic Issuer in the future. The Company’s Class A Shares were issued to all shareholders of the Company who were resident in the United States on the date of the closing of the RTO. During fiscal 2021, the Company has failed the foreign private issuer (“FPI”) test (Note 22).

i. Shares issued on exchange of notes payable

The Company issued 5,532,940 Class A restricted shares at a price of CAD$0.80 per share for total equity of $3,409,476 on the settlement of notes held by related parties that were converted to equity on closing of the RTO at the option of the note holder.

12. Warrants

The following table summarizes the fair value of the warrant liability at December 31, 2020, 2019 and 2018:

	2020	2019	2018
Opening balance as at January 1	$9,823,510	$9,237,466	$-
Additions	2,567,069	-	8,707,794
Exercise	(15,698,859)	(5,424,285)	(2,307,811)
Foreign exchange	(293,450)	468,739	(742,451)
Change in fair value	16,805,941	5,541,590	3,579,934
Closing balance as at December 31	$13,204,211	$9,823,510	$9,237,466

The warrant liability is adjusted to fair value on the date the warrants are exercised and at the end of each reporting period. The amount that is reclassified to equity on the date of exercise is the fair value at that date.

F-30

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

12. Warrants (continued)

The following table summarizes the number of warrants outstanding at December 31, 2020, 2019 and 2018:

	December 31, 2020	Weighted average exercise price – CAD	December 31, 2019	Weighted average exercise price - CAD	December 31, 2018	Weighted average exercise price - CAD
Balance – beginning of year	15,061,078	$2.20	19,950,725	$1.99	-	-
Issued	10,236,380	$4.53	-	-	22,531,535	$1.90
Exercised	(17,532,271)	$2.46	(4,889,647)	$1.33	(2,580,810)	$1.21
Expired	(606,850)	$1.40	-	-	-	-
Balance – end of year	7,158,337	$4.98	15,061,078	$2.20	19,950,725	$1.99

The Company received cash proceeds of $32,653,449 (CAD$43,079,021) from the exercise of warrants (2019 - $4,854,711 (CAD$6,480,875), 2018 - $2,374,253 (CAD$3,124,773)).

The following assumptions were used to arrive at the fair value of the level 3 Warrants issued on June 11, 2018 using a Black Scholes Option Pricing model as at December 31, 2019 ($Nil – 2020):

	December 31, 2019
Share price – CAD$	$2.57
Strike price – CAD$	$1.40
Risk-free rate	1.71%
Expected dividend yield	0.00%
Expected volatility	70.00%
Warrant life in years	0.45

Fair values

The Company complies with ASC 820, Fair Value Measurement, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. Financial instruments recorded at fair value in the consolidated balance sheet are classified using a fair value hierarchy that reflects the observability of significant inputs used in making the measurements. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability. 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.

F-31

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020, 2019 and 2018:

	Quoted prices in active markets for identical assets (Level 1)	Significant unobservable inputs (Level 3)	Total
December 31, 2020:
Warrant liability	$(13,204,211)	$-	$(13,204,211)

December 31, 2019:
Warrant liability	$(737,993)	$(9,085,518)	$(9,823,510)

December 31, 2018:
Warrant liability	$(843,153)	$(8,394,313)	$(9,237,466)

12. Warrants (continued)

Warrants issued on June 11, 2018 were calculated using the Black Scholes model. This issuance therefore has significant unobservable inputs and are considered level 3 financial instruments. All warrants issued post-June 2018 are publicly traded and therefore are considered level 1 financial instruments.

Any significant adjustments to the unobservable inputs disclosed in the table below would have a direct impact on the fair value of the warrant liability. A 15% change in the following assumption will have the following impact on the fair value of the level 3 warrant liability:

		Fair value at December 31, 2019		Valuation technique		Unobservable input	Range (weighted average)	+15%	-15%
June 2018 warrants	$	(9,085,518)		Black Scholes		Volatility	70%	(9,353,526)	(8,900,085)

13. Share based compensation

(a) Stock options

The Company has established an incentive stock option plan (the “Plan”) for employees, management, directors, and consultants of the Company, as designated and administered by a committee of the Company’s Board of Directors. Under the Plan, the Company may grant options for up to 10% of the issued and outstanding common shares of the Company.

During the year ended December 31, 2020

No incentive stock options were granted during the period.

During the year ended December 31, 2019

On January 7, 2019, the Company granted 100,000 incentive stock options to employees of the Company. These options are exercisable at a price of CAD$1.55 per common share for a period of 5 years from the grant date.

On June 30, 2019, the Company granted 22,500 incentive stock options to employees of the Company. These options are exercisable at a price of CAD$2.60 per common share for a period of 5 years from the grant date.

On July 4, 2019, the Company granted 100,000 incentive stock options to consultants of the Company. The options are exercisable at a price of CAD$2.65 per common share for a period of 3 years from the grant date.

During the year ended December 31, 2018

On June 11, 2018 the Company granted 625,000 incentive stock options to employees of the Company. These options are exercisable at a price of CAD$0.80 per common share for a period of five years from the grant date.

F-32

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

13. Share based compensation (continued)

On June 11, 2018 the Company granted 175,000 incentive stock options to consultants of the Company. These options are exercisable at a price of CAD$0.80 per common share for a period of three years from the grant date. The incentive options granted to consultants were measured based on the fair market value of the options at the date of granting using a Black Scholes valuation model as the fair market value of the services received cannot be reliably measured.

On July 31, 2018 the Company granted 25,000 incentive stock options to an employee of the Company. These options are exercisable at a price of CAD$0.75 per common share for a period of 5 years from the grant date.

The following table summarizes information about stock options outstanding at December 31, 2020, 2019 and 2018:

Expiry date	Exercise price CAD$	December 31, 2020 outstanding	December 31, 2020 exercisable	December 31, 2019 outstanding	December 31, 2019 exercisable	December 31, 2018 outstanding	December 31, 2018 exercisable
June 11, 2021	$0.80	-	-	175,000	175,000	175,000	131,250
July 4, 2022	$2.65	100,000	100,000	100,000	550,000	-	-
June 11, 2023	$0.80	158,004	158,004	282,674	139,332	590,002	196,668
July 31, 2023	$0.75	11,667	11,667	20,000	11,667	25,000	8,333
January 7, 2024	$1.55	16,667	-	66,668	33,334	-	-
June 30, 2024	$2.60	7,500	-	22,500	7,500	-	-
		293,838	269,671	666,842	916,833	790,002	336,251

The employee options vest one third on the grant date and one third on the first and second anniversary of the grant date. The fair value ascribed to the options issued was $nil (2019: $625,947, 2018: $625,947) and is being recognized as non-cash compensation expense over the vesting period of the options. The following assumptions were used to arrive at the value ascribed to the options issued using a Black Scholes Option Pricing model:

	June 11, 2018	June 11, 2018	July 31, 2018
Closing share price in CAD the day prior to granting	$1.00	$1.00	0.75
Risk-free rate	2.14%	1.99%	2.21%
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	98.10%	98.10%	98.10%
Option life in years	5.00	3.00	5.00

	January 7, 2019	June 30, 2019	July 4, 2019
Closing share price in CAD the day prior to granting	$1.55	$2.60	2.65
Risk-free rate	1.87%	1.40%	1.62%
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	110.41%	98.86%	98.29%
Option life in years	5.00	5.00	3.00

Volatility was estimated by comparing the volatility of publicly traded companies that operate in the US cannabis market. The expected life in years represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the Government of Canada Bond yields on the date of the option grant with a remaining term equal to the expected life of the options.

Share based compensation expense attributable to employee options was $56,550 for the year ended December 31, 2020, (2019: $258,620, 2018: $357,974).

F-33

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

13. Share based compensation (continued)

	December 31, 2020	Weighted average CAD$ exercise price	December 31, 2019	Weighted average CAD$ exercise price	December 31, 2018	Weighted average CAD$ exercise price
Balance – beginning of year	666,842	$1.22	790,002	$0.80	-	$-
Granted	-	-	222,500	2.15	820,000	0.80
Exercised	(333,001)	0.87	(258,994)	0.88	-	-
Expired	(40,003)	1.79	-	-	-	-
Forfeited	-	-	(86,666)	0.80	(29,998)	0.80
Balance – end of year	293,838	$1.52	666,842	$1.22	790,002	$0.80

	December 31, 2020	December 31, 2019	December 31, 2018
The outstanding options have a weighted-average CAD$ exercise price of $	$1.52	$1.22	0.80
The weighted average remaining life in years of the outstanding options is:	2.19	2.88	4.01

(c)

Restricted Share Units

The Company has established a Restricted Share Unit incentive plan (the “RSU Plan”) for employees, management, directors, and consultants of the Company, as designated and administered by a committee of the Company’s Board of Directors. Under the RSU Plan, the Company may grant RSUs and/or options for up to 10% of the issued and outstanding common shares of the Company.

The following table summarizes the RSUs that are outstanding as at December 31, 2020, 2019 and 2018:

RSU Activity	December 31, 2020	December 31, 2019	December 31, 2018

Balance - beginning of the year	4,355,742	5,367,691	-
Granted	100,518	3,259,624	5,663,358
Exercised	(2,685,344)	(3,954,518)	-
Cancelled	(6,666)	(317,055)	(295,667)
Balance – end of the year	1,764,250	4,355,742	5,367,691

The Company recognized $2,456,018 in share-based compensation expense attributable to RSUs vesting during the year ended December 31, 2020 ($4,564,167 for the year ended December 31, 2019, $2,305,705 for the year ended December 31, 2018).

During the year ended December 31, 2020

On January 1, 2020, the Company issued 50,000 RSUs under the RSU plan. The value ascribed to the RSUs issued was CAD$2.57 per share, the closing share price of the Company’s common shares on December 31, 2019.

On June 30, 2020, 6,666 RSUs that were previously granted on June 11, 2018 were cancelled as a result of an employee resignation.

On July 3, 2020, the Company issued 50,518 RSUs under the RSU plan. The value ascribed to the RSUs issued was CAD$2.04 per share, the closing share price of the Company’s common shares on July 3, 2020.

F-34

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

13. Share based compensation (continued)

During the year ended December 31, 2019

On June 24, 2019, 82,362 RSUs that were previously granted on June 11, 2018 were cancelled as a result of a Director not standing for re-election.

On June 30, 2019 the Company issued 3,259,624 RSUs under the RSU plan. The value ascribed to the RSUs issued was CAD$2.60 per share, the closing share price of the Company’s common shares on June 28, 2019. 136,278 of the RSUs vested immediately and the balance of the RSUs vest 1/3 on January 1, 2020, 1/3 on January 1, 2021 and 1/3 on January 1, 2022.

On August 29, 2019, 82,362 RSUs that were previously granted on June 11, 2018 were cancelled and 152,331 RSUs that were previously granted on June 30, 2019 were cancelled as a result of a Director resignation.

During the year ended December 31, 2018

On June 11, 2018, the Company granted Management and Directors and Consultants of the Company 5,638,358 Restricted Share Units under the RSU plan. The value ascribed to the RSU issued was CAD$1.00 per share, the closing share price of the Company’s common shares on June 11, 2018. The RSUs vest 1/3 on the grant date and 1/3 on each of the first and second anniversaries of the grant date. 575,000 of the RSUs granted were issued to a consultant of the Company as payment of an outstanding accounts payable in the amount of $346,206. The fair value of the RSUs issued was $442,546. The Company recorded a loss on settlement of the accounts payable of $96,340. The RSUs issued on settlement of the accounts payable amount vest on the same terms as the rest of the RSU grant.

On July 31, 2018, the Company granted a member of Management of the Company 25,000 Restricted Share Units under the RSU plan. The value ascribed to the RSU issued was CAD$0.75 per share, the closing share price of the Company’s common shares on July 31, 2018. The RSUs vest 1/3 on the grant date and 1/3 on each of the first and second anniversaries of the grant date.

On November 9, 2018, 295,667 RSUs that were previously granted on June 11, 2018 were cancelled as a result of an

employee resignation.

On June 24, 2019, 82,362 RSUs that were previously granted on June 11, 2018 were cancelled as a result of a Director

not standing for re-election.

On June 30, 2019 the Company issued 3,259,624 Restricted Share Units under the RSU plan. The value ascribed to the RSUs issued was CAD$2.60 per share, the closing share price of the Company’s common shares on June 28, 2019. 136,278 of the RSU’s vested immediately and the balance of the RSUs vest 1/3 on January 1, 2020, 1/3 on January 1, 2021 and 1/3 on January 1, 2022.

The Company issued 2,685,345 common shares on the exercise of 2,685,345 RSUs during the year ended December 31, 2020 (3,954,518 common shares on the exercise of 3,954,518 RSUs for the year ended December 31, 2019, nil common shares on the exercise of nil RSUs for the year ended December 31, 2018).

F-35

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

14. Loss per share

	December 31, 2020	December 31, 2019	December 31, 2018
(Loss) available to common shareholders	$(25,008,729)	$(12,303,343)	$(12,626,150)

Weighted average number of shares, basic and diluted	151,825,439	134,074,476	98,908,344

Basic and diluted (loss) per share	$(0.16)	$(0.09)	$(0.13)

Approximately 9,216,425, 20,083,662 and 26,108,428 of potentially dilutive securities for the periods ended December 31, 2020, December 31, 2019 and December 31, 2018 respectively were excluded in the calculation of diluted EPS as their impact would have been anti-dilutive due to net loss in the year.

15. Income taxes

The components of income tax expense (benefit) of the Company are summarized as follows:

	December 31, 2020	December 31, 2019	December 31, 2018

Current tax expense (recovery)
Current period	$7,239,936	$7,352,808	$2,279,017

Deferred tax expense (recovery)
Origination and reversal of temporary differences	(2,478,308)	(1,139,833)	(1,064,788)
Change in unrecognized temporary differences	2,344,888	1,139,833	685,840
Income tax expense	$7,106,516	$7,352,808	$1,900,069

The actual income tax provision differs from the expected amount calculated by applying the statutory income tax rate to the loss before tax. These differences result from the following:

	December 31, 2020	December 31, 2019	December 31, 2018

Loss before income tax	$(17,902,213)	$(4,950,535)	$(10,726,081)
Statutory income tax rate	21.0%	21.0%	21.0%
Increase tax expense statutory rate	(3,759,465)	(1,039,612)	(2,252,477)
Increase (reduction) in income taxes resulting from:
Change in fair value of warrant liability	4,453,574	1,468,521	948,683
Other non-taxable amounts	6,071,951	6,921,569	2,939,080
Change in valuation allowance	2,344,888	1,083,292	685,840
Foreign exchange impacts	(575,595)	(327,920)	100,337
Difference in rates	(1,317,876)	(753,552)	(511,159)
Other	(110,961)	510	(10,235)
Income tax expense (benefit)	$7,106,516	$7,352,808	$1,900,069

F-36

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

15. Income taxes (continued)

Section 280E prohibits businesses engaged in the trafficking of Schedule I or Schedule II controlled substances from deducting normal business expenses, such as payroll and rent, from gross income (revenue less cost of goods sold). Section 280E was originally intended to penalize criminal market operators, but because cannabis remains a Schedule I controlled substance for Federal purposes, the Internal Revenue Service (“IRS”) has subsequently applied Section 280E to state-legal cannabis businesses. Cannabis businesses operating in states that align their tax codes with the IRC are also unable to deduct normal business expenses from taxable income subject to state taxes. The non-taxable amounts shown in the effective rate reconciliation above include the impact of applying IRC Section 280E to the Company's businesses that are involved in selling cannabis, along with other typical non-deductible expenses. As the application and IRS interpretations on Section 280E continue to evolve, the impact of this cannot be reliably estimated. Any changes to the application of Section 280E may have a material effect on the Company’s interim financial statements.

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. Deferred tax assets (liabilities) are attributable to the following:

	December 31, 2020	December 31, 2019	December 31, 2018

Loss carryforwards	$5,303,168	$3,173,256	$708,094
Share issue costs	1,381,446	795,041	977,881
Exchange rate difference on monetary assets	563,080	125,520	(100,337)
Accrued expenses	49,129	-	-
Property and equipment	(1,251,229)	(1,424,886)	-
Licenses	(543,779)	-	-
Deferred tax assets (liabilities)	$5,501,814	$ 2,668,931	$1,585,638
Valuation allowance	$(5,912,173)	$ (2,668,931)	$(1,585,638)
Net deferred tax liability	$(410,359)	$-	$-

As at December 31, 2020, the Company has $12,013,192 (December 31, 2019 - $6,810,981) in Canadian non-capital loss carryforwards that expire between 2035 and 2040. In addition, as at December 31, 2020, the Company has U.S. federal Net Operating Losses of $9,692,291 (December 31, 2019 - $6,515,931). The U.S federal Net Operating Losses attributable to 2019 will expire in 2039 and the losses attributable to 2020 onward will have an indefinite carry forward. As at December 31, 2020, the Company has California state Net Operating Losses of $953,517. The California State Net Operating will expire in 2040.

In March 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the “Act”). The Act, among other provisions, reinstates the ability of corporations to carry net operating losses back to the five preceding tax years, has increased the excess interest limitation on modified taxable income from 30 percent to 50 percent. The Company has made a reasonable estimate of the effects on existing deferred tax balances and has concluded that the Act has not had a significant on the deferred tax balances.

F-37

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

The Company believes that, pursuant to Section 7874 of the Code, even though it is organized as a Canadian corporation, the Company should be treated as a U.S. domestic corporation for U.S. federal income tax purposes. Because the Company is a taxable corporation in Canada, it is likely to be subject to income taxation in both the United States and Canada on the same income, which in turn, may reduce the amount of income available for distribution to shareholders. The balance of this discussion assumes the Company is a U.S. domestic corporation for U.S. federal income tax purposes. However, no tax opinion or ruling from the Internal Revenue Service (“IRS”) concerning the U.S. federal income tax characterization of the Company has been obtained and none will be requested. Thus, there can be no assurance that the IRS will not challenge the characterization of the Company as a domestic corporation, or that if challenged, a U.S. court would not agree with the IRS. If the Company is not treated as a U.S. domestic corporation, then the acquisition, ownership and disposition of common shares, warrants and common shares received on the exercise of warrants may have materially different implications for Non-U.S. Holders.

16. General and administrative

	December 31, 2020	December 31, 2019	December 31, 2018
Salaries and wages	$9,611,047	$6,941,111	$3,151,509
Executive compensation	1,204,925	874,598	553,814
Licenses and permits	1,957,183	1,704,755	589,178
Payroll taxes and benefits	1,971,215	1,531,261	641,906
Supplies and office expenses	960,456	1,184,401	1,222,053
Subcontractors	1,569,921	1,272,414	1,024,175
Professional fees (legal, audit and other)	2,944,706	2,723,555	600,877
Miscellaneous general and administrative expenses	4,684,145	4,175,392	1,799,864
	$24,903,598	$20,407,487	$9,583,376

17. Supplemental cash flow information

	Years ended
Change in working capital	December 31, 2020	December 31, 2019	December 31, 2018

HST receivable	$(91,533)	$85,287	$(101,831)
Inventory	(159,401)	(284,626)	(2,071,808)
Prepaid expenses and other assets	1,160,976	(2,357,578)	(1,299,148)
Long term deposits and other assets	(359,842)	(100,262)	(594,339)
Accounts payable	451,998	(859,267)	798,672
Accrued expenses	934,668	603,902	250,318
Income tax payable	(5,713,518)	4,891,922	1,008,155
Other liabilities	-	28,000	427,508
	$(3,776,652)	$2,007,378	$(1,582,473)
Cash paid
Income taxes	$12,953,454	$-	$1,270,862

Non-cash financing and investing activities
Carrying value of warrants exercised	$15,708,309	$5,684,960	$2,307,811
Carrying value of RSUs settled	$3,313,149	$3,245,016	$-
Carrying value of options exercised	$179,908	$165,071	$-
Licenses and intangible assets	$4,997,610	$-	$-
MMDC conversion of notes payable to equity	$-	$-	$6,743,780
Shares issued to former Carpincho shareholders	$-	$-	$4,040,637
Construction in progress in accounts payable	$369,066	$-	$589,935
Lease Liabilities and Right of use assets	$11,229,477	$2,024,771	$-
Additions to buildings and structures on ASC 842 adoption	$-	$8,789,741	$-
Addition to lease liabilities on ASC 842 adoption	$-	$8,307,650	$-
Reclassification of prepaid rent to lease liabilities on ASC 842 adoption	$-	$54,584	$-

F-38

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

18. Related party transactions and balances

Related party transactions are summarized as follows:

a) Building Lease

The Company is the sub-lessee of approximately 2,000 square feet of office space and purchases certain printed marketing collateral and stationery items from a company owned by one of the Company’s Co-CEO. Amounts paid for rent for each of the years ended December 31, 2020, 2019 and 2018 was $24,040 each year. Amounts paid for printed marketing collateral and stationery items to the same company were $170,009, $279,457, and $8,769 for the years ended December 31, 2020, 2019 and 2018 respectively.

The Company leased a cultivation facility from an entity owned by the Company’s co-CEOs. Rent paid for this facility for the years ended December 31, 2020, 2019 and 2018 was $339,688, $nil, and nil. On April 30, 2021, the Company’s Co-CEOs sold this building to an arm’s length third party who assumed the lease.

Prior to September 2018, the Company leased approximately 15,000 square feet of office and production space for the Company’s Clark County Cultivation facility from a limited partnership controlled by one of the Co-CEOs of the Company. On September 26, 2018, the property was acquired by an arm’s length third party. Related-party rents paid under this lease for the year ended December 31, 2020, 2019 and 2018 totaled $nil, $nil and $384,010, respectively.

(b) Officer Compensation

The Company’s key management personnel have the authority and responsibility for planning, directing and controlling the activities of the Company and consists of the Company’s executive management team and board of directors. The following table summarizes amounts paid to related parties as compensation for the year ended December 31, 2020, 2019 and 2018:

	Year ended December 31,	Remuneration or fees	Share based payments	Included in accounts payable
Management compensation	$2020	$1,796,223	$1,803,894	29,202
	2019	1,526,638	3,259,729	-
	2018	1,622,682	1,851,747	4,000
Director Compensation	2020	-	282,687	-
	2019	-	407,598	-
	2018	-	332,795	-

On or around June 28, 2018, the landlord for the Company’s Clark County cultivation facility, who is also one of the Company’s Co-CEOs, notified that the Company that the mortgage holder of the loan secured by such location was considering foreclosure action against the facility due to the Company’s business conducted therein. The landlord further indicated that the building was listed for sale and that it was anticipated that a sale would be completed before December 31, 2018. In connection therewith, and in order to ensure the Company’s ability to continue to use the leased premises, the Company made a strategic disbursement of $1,254,862 to the holder of the note secured by the facility. This disbursement was secured by a promissory note bearing interest at 3.95% from July 18, 2018 to July 17, 2019 and then 8% annually after, a deed of trust and a personal guarantee. The note and accrued interest thereon, was repaid on September 28, 2018. Interest earned on the promissory note is included in Interest expense, net on the consolidated statements of operations and comprehensive loss.

(d) Other

A company owned by one of the Company’s executives pays the Company for storage space. Amounts paid to the Company for storage space was $62,720 for the year ended December 31, 2020, respectively (2019 and 2018 – nil).

F-39

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

19. Commitments and contingencies

(a) Construction Commitments

On December 31, 2020 the Company had construction commitments outstanding of $nil (2019 – $4,516,513, 2018 - $281,150) related to the Phase II build-out of the Company’s Planet 13 cannabis entertainment complex. On December 14, 2020 the Company entered into a Guaranteed Maximum Price Construction Agreement for the phase I build out of its planned Planet 13 Orange County cannabis entertainment complex in Santa Ana California.

The construction commitment as at December 31, 2020 was $7,084,300 (December 31, 2019 and 2018- $nil).

(b)

Contingencies

The Company's operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state regulations at December 31, 2020, medical and adult use cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties, or restrictions in the future.

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. At December 31, 2020, 2019, and 2018, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

(d) Operating Licenses

Although the possession, cultivation, and distribution of marijuana for medical and adult use is permitted in Nevada, marijuana is a Schedule-I controlled substance and its use remains a violation of federal law. Since federal law criminalizing the use of marijuana pre-empts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in the Company’s inability to proceed with our business plans. In addition, the Company’s assets, including real property, cash, equipment, and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

F-40

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

20. Risks

Credit risk

Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial instrument. Credit risk arises from cash with banks and financial institutions. It is management's opinion that the Company is not exposed to significant credit risk arising from these financial instruments. The Company limits credit risk by entering into business arrangements with high credit-quality counterparties.

The Company evaluates the collectability of its accounts receivable and maintains an allowance for credit losses at an amount sufficient to absorb losses inherent in the existing accounts receivable portfolio as of the reporting dates based on the estimate of expected net credit losses.

Concentration risk

The Company operates exclusively in Southern Nevada. Should economic conditions deteriorate within that region, its results of operations and financial position would be negatively impacted.

20. Risks (continued)

Banking Risk

Notwithstanding that a majority of states have legalized medical marijuana, there has been no change in US federal banking laws related to the deposit and holding of funds derived from activities related to the marijuana industry. Given that US federal law provides that the production and possession of cannabis is illegal, there is a strong argument that banks cannot accept for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty accessing the US banking system and traditional financing sources. The inability to open bank accounts with certain institutions may make it difficult to operate the business of the Company and leaves their cash holdings vulnerable.

Asset Forfeiture Risk

Because the cannabis industry remains illegal under US federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property was never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which with minimal due process, it could be subject to forfeiture.

Currency rate risk

As at December 31,2020, a portion of the Company’s financial assets and liabilities held in Canadian dollars consist of cash and cash equivalents of $21,771,531 (2019 - $1,093,191, 2018 - $17,801,634). The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in the functional currency. The Company is exposed to currency rate risk in other comprehensive income, relating to foreign subsidiaries which operate in a foreign currency. The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time.

21. COVID-19

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. The outbreak of this contagious disease, along with the related adverse public health developments, have negatively affected workforces, economies, and financial markets on a global scale. The Company incurred lower revenues, and additional expenditures related to COVID-19 during the first half of 2020. During the first half of 2020 the Company’s operations in Nevada were mandated as an essential service but were restricted to delivery only, with no curb-side pickup or instore sales permitted until such delivery-only order was lifted on May 30, 2020. The Company’s operating results were not materially impacted during the second half of 2020. Currently, the Company is closely monitoring the impact of the pandemic on all aspects of its business and it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations.

F-41

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

22. Subsequent events

During fiscal 2021, the Company has failed the FPI test in accordance with Rule 405 of Regulation C under the Securities Act and Rule 3b-4 under the Exchange Act. As a result, the Company expects to become subject to the same registration and disclosure requirements applicable to U.S. domestic issuers effective January 1, 2022.

On December 22, 2020, the Company issued a Notice of Accelerated Expiry to the Odyssey Trust Company, the warrant agent, and all registered holders of the December 4, 2018 warrants effective on that date. The Company has chosen to accelerate the expiry time of the warrants to 5:00 PM EST on January 28, 2021.

On January 8, 2021, the Company issued 93,002 common shares on the exercise of options that had a strike price of CAD$0.80 per common share resulting in cash proceeds of $58,758 (CAD$74,402).

On January 8, 2021, the Company issued 16,667 common shares on the exercise of options that had a strike price of CAD$1.55 per common share resulting in cash proceeds of $20,444 (CAD$25,835).

F-42

Planet 13 Holdings Inc.

Notes to the consolidated financial statements

(in United States dollars)

For the years ended December 31, 2020, 2019 and 2018

22. Subsequent events (continued)

On July 9, 2021, the Company issued 11,667 common shares on the exercise of options that had a strike price of CAD$0.75 per common share resulting in cash proceeds of $7,014 (CAD$8,750)

On February 2, 2021, the Company completed a bought deal financing for aggregate gross proceeds of $53,852,980 (CAD$69,028,750). A total of 9,861,250 units of the Company were issued at a price of CAD$7.00 per unit. Each unit consists of one common share in the capital of the Company and one-half (1/2) of one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$9.00 for a period of 24 months from the closing of the financing.

Between January 1, 2021 and December 9, 2021, the Company issued 3,772,640 common shares on the exercise of common share purchase warrants and realized cash proceeds of $14,110,566.

On January 8, 2021, the Company issued 852,154 common shares on the vesting of RSU that were outstanding. The Company did not receive any cash proceeds from the issuance.

On April 19, 2021, the Company granted 4,082,474 RSUs to officers, directors, and employees pursuant to the Company’s RSU Plan. The RSUs granted vest in three equal tranches on November 1, 2021, November 1, 2022, and November 1, 2023, unless otherwise varied pursuant to the terms of the plan.

On June 10, 2021, the Company granted 3,704 RSUs to a consultant of the Company. Pursuant to the Company’s RSU Plan. The RSUs vested immediately and were exercised on June 10, 2021. The company issued 3,704 common shares on the exercise and did not receive any cash proceeds from the issuance.

On July 9, 2021, the Company issued 59,945 common shares on the exercise of Restricted Share Units that had vested during the period.

In total the Company transferred $1,898,979 to share capital from Restricted Share Units, representing the carrying value of the RSUs that were exercised during the period January 1, 2021 and November 30, 2021

On August 5, 2021, the Company’s subsidiary, Planet 13 Illinois LLC, won a Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Illinois Department of Financial and Professional Regulation. Planet 13 Illinois LLC is owned 51% by Frank Cowan and 49% by the Company.

On October 1, 2021, the Company completed the purchase of a license issued by the Florida Department of Health to operate as a Medical Marijuana treatment Center (the “License”) in the state of Florida for $55,000,000 in cash.

On December 9, 2021, the Company issued 2,212,974 common shares on the exercise of Restricted Share Units that had vested during the period.

F-43

Planet 13 Holdings Inc.

Interim condensed consolidated balance sheet

(Unaudited, in United States dollars except per share amounts) As at	Note	September 30, 2021	December 31, 2020

Assets
Current Cash		$73,694,308	$79,000,850
Restricted cash	5	55,000,000	-
Accounts receivable, net		831,158	436,874
Income taxes receivable	13	168,251	-
Inventory	3	13,223,061	6,919,840
Prepaid expenses and other current assets	7	5,823,259	2,198,005
Total current assets		148,740,037	88,555,569

Property and equipment	4	42,506,758	32,073,925
Intangible assets	5	7,809,201	7,551,141
Right-of-use assets – operating	6	20,648,053	20,497,895
Right-of-use assets – finance	6	6,499	44,672
Long-term deposits and other assets		1,066,819	1,054,443
Deferred tax asset	13	3,654	-
Total asset		$220,781,021	$149,777,645


Liabilities
Current
Accounts payable		$4,134,376	$1,681,027
Accrued expenses	8	6,821,741	2,844,714
Income taxes payable	13	-	1,446,235
Notes payable – current portion	8	884,000	884,000
Operating lease liability – current portion	6	394,331	161,021
Finance lease liability – current portion	6	7,122	46,372
Total current liabilities		12,241,570	7,063,369

Operating lease liabilities	6	23,156,583	22,365,892
Warrant liability	10	9,910,509	13,204,211
Other long-term liabilities		28,000	28,000
Deferred tax liabilities	13	-	410,359
Total liabilities		45,336,662	43,071,831
Commitments and contingencies	17
Shareholders’ equity
Common shares, no par value, unlimited Common Shares authorized, 196,463,519 issued and outstanding at September 31, 2021 and 181,806,190 at December 31, 2020	9	-	-
Class A Restricted shares, no par value, unlimited Class A Restricted share authorized, nil issued and outstanding at September 30, 2021 and 5,619,119 at December 31, 2020	9	-	-
Additional paid in capital		242,458,423	159,399,056
Deficit		(67,014,064)	(52,693,242)
Total shareholders’ equity		175,444,359	106,705,814
Total liabilities and shareholders’ equity		$220,781,021	$149,777,645

On behalf of the Board:

Michael Harman		Adrienne O’Neal
Director		Director

See accompanying notes to the interim condensed consolidated financial statements

F-44

Planet 13 Holdings Inc.

Interim condensed consolidated statements of operations and comprehensive loss

(Unaudited, in United States dollars, except per share amounts)

		Three months ended		Nine months ended
	Note	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020

Revenues, net of discounts		$32,952,254	$22,797,338	$89,612,050	$50,351,336
Cost of goods sold		(15,235,120)	(10,244,725)	(39,827,876)	(23,853,435)
Gross profit		17,717,134	12,552,613	49,784,174	26,497,901

Expenses
General and administrative	14	13,174,781	6,223,792	31,974,118	17,547,769
Sales and marketing		1,959,579	991,215	4,162,934	2,684,174
Lease expense	6	673,878	612,329	1,934,138	1,502,412
Depreciation and amortization	4 & 6	1,376,520	945,537	3,325,524	2,753,936
Share-based compensation expense	11	6,613,846	569,227	12,211,567	2,006,067
Total expenses		23,798,604	9,342,100	53,608,281	26,494,358
(Loss) income from operations		(6,081,470)	3,210,513	(3,824,107)	3,543

Other income (expense)
Interest expense, net		(8,111)	(13,367)	(23,698)	(23,914)
Foreign exchange gain/(loss)		362,402	(169,684)	1,805,953	266,003
Transaction costs	10	-	(135,075)	(256,666)	(135,075)
Change in fair value of warrant liability	10	6,240,073	(3,959,128)	(2,728,386)	423,917
Other income		152,466	174,145	338,890	250,212
		6,746,830	(4,103,109)	(863,907)	781,143

Income (loss) before income taxes		665,360	(892,596)	(4,688,014)	784,686

Current income tax expense	13	(3,601,904)	(4,819,639)	(10,046,821)	(7,757,805)
Deferred income tax recoveries	13	203,273	65,621	414,013	175,833
Net loss and comprehensive loss for the period		$(2,732,461)	$(5,646,614)	$(14,320,822)	$(6,797,286)

Loss per share
Basic and diluted loss per share	12	$(0.01)	$(0.03)	$(0.07)	$(0.05)

Weighted average number of common shares
Basic and diluted	12	196,457,950	162,624,567	194,576,544	148,587,612

See accompanying notes to the interim condensed consolidated financial statements

F-45

Planet 13 Holdings Inc.

Interim condensed consolidated statements of changes in shareholders’ (deficit) equity

(Unaudited, in United States dollars, except per share amounts)

			Number of
	Note	Common share capital	Class A restricted shares	Warrants	Additional Paid in Capital	Accumulated Deficit	Total Equity
Balance January 1, 2020		82,427,619	55,232,940	587,715	$58,747,851	$(27,592,605)	$31,155,246
Shares issued for acquisition	5, 9	3,940,932	(3,940,932)	-	4,453,831	-	4,453,831
Shares issued for acquisition	5, 9	1,374,833	3,940,932	-	2,918,277	-	2,918,277
Shares issued on settlement of RSUs	9, 11	2,685,344	-	-	1,954,834	-	1,954,834
Shares issued on exercise of broker warrants	9	548,501	-	(548,501)	1,035,194	-	1,035,194
Shares issued on exercise of warrants	9, 10	11,771,867	-	-	22,783,870	-	22,783,870
Shares issued on exercise of options	9, 11	233,001	-	-	156,419	-	156,419
Issuance of share options	11	-	-	-	51,233	-	51,233
Shares issued on bought deal financings - net	9	11,580,500	-	694,830	22,799,200	-	22,799,200
Net (loss) for the period		-	-	-	-	(6,797,286)	(6,797,286)
Balance September 30, 2020		114,562,597	55,232,940	734,044	$114,900,709	$(34,389,891)	$80,510,818

Balance, January 1, 2021		126,573,250	55,232,940	150,963	$159,399,056	$(52,601,334)	$106,797,722
Shares issued on conversion	9	55,232,940	(55,232,940)	-	-	-	-
Shares issued on settlement of RSUs	9, 11	915,803	-	-	12,208,463	-	12,208,463
Shares issued on exercise of broker warrants	9	446,801	-	(446,801)	2,163,065	-	2,163,065
Shares issued on exercise of other warrants	9, 10	3,312,139	-	-	20,868,784	-	20,868,784
Shares issued on exercise of options	9, 11	121,336	-	-	86,216	-	86,216
Share based compensation - options	11	-	-	-	3,104	--	3,104
Shares issued in private placements - net	9	9,861,250	-	591,676	47,729,735		47,729,735
Net (loss) for the period		-	-	-	-	(14,320,822)	(14,117,549)

Balance, September 30, 2021		196,463,519	-	295,838	$242,458,423	$(67,014,064)	$175,444,359

See accompanying notes to the interim condensed consolidated financial statements

F-46

Planet 13 Holdings Inc.

Interim condensed consolidated statements of cash flows

(Unaudited, in United States dollars, except per share amounts)
		Nine months ended
	Note	September 30, 2021	September 30,2020

Cash provided by (used in)
Operating activities
Net loss		$(14,320,822)	$(6,797,286)
Adjustments for items not involving cash
Non-cash compensation expense	9 & 16	12,211,567	2,006,067
Non-cash lease expense		3,332,858	2,329,065
Depreciation and amortization	4 & 5	4,725,546	3,884,497
Deferred tax liability	13	(414,013)	(175,833)
Fair value change on warrant liability	10	2,728,386	(423,917)
Change in fair value of warrant liability	10	48,924	(555,118)
Transaction costs	9	256,666	135,074
Unrealized (gain) loss on foreign currency exchange		(35,558)	(145,000)
		8,533,554	257,549

Net changes in non-cash working capital items	15	(6,290,402)	9,961,575
Repayment of lease liabilities	6	(2,469,078)	(1,463,920)
Total operating		(225,926)	8,755,204

Financing activities
Proceeds from private placements	9	53,852,980	25,983,029
Proceeds from exercise of warrants and options	9	14,162,689	16,941,543
Financing issuance cost expense	9	(3,494,930)	(2,116,575)
Total financing		64,520,739	40,807,997

Investing activities
Purchase of property, plant and equipment	4	(14,560,627)	(3,027,445)
Purchase of licenses	5	(258,060)	(2,760,020)
Proceeds on disposal of property and equipment	4	194,214	-
Total investing		(14,624,473)	(5,787,465)

Effect of foreign exchange on cash		23,118	170,412

Net change in cash during the period		49,693,458	43,946,148

Cash
Beginning of period		79,000,850	12,814,712

End of period		$128,694,308	$56,760,860

Cash		$73,694,308	$56,760,860
Restricted cash and cash equivalents		55,000,000	-
Cash, restricted cash and cash equivalents		$128,694,308	$56,760,860

Supplemental cash-flow information (Note 15)

See accompanying notes to the interim condensed consolidated financial statements

F-47

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

Nature of operations

P13 is a public company which is listed on the Canadian Securities Exchange (“CSE”) under the symbol “PLTH” and the OTCQX exchange under the symbol “PLNHF”.

The Company’s registered office is located at 595 Howe Street, 10th floor, Vancouver, BC V6C 2T5 and the head office address is 2548 West Desert Inn. Rd, Las Vegas, NV 89109.

Basis of presentation and summary of significant accounting policies

These unaudited interim condensed consolidated financial statements reflect the accounts of the Company and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the audited annual consolidated financial statement prepared in accordance with U.S. GAAP have been omitted or condensed. The information included in the interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in this Form 10 for the year ended December 31, 2020 (the “Annual Financial Statements”). These financial statements reflect all adjustments (consisting of normal recurring adjustments), which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

These interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

F-48

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

2. Basis of presentation and summary of significant accounting policies (continued)

Failure to arrange adequate financing on acceptable terms and/or achieve profitability may have an adverse effect on the financial position, results of operations, cash flows and prospects of the Company. These interim condensed consolidated financial statements do not give effect to adjustments to assets or liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material. These interim condensed consolidated financial statements are presented in U.S. dollars, which is also the Company’s and its subsidiaries’ functional currency.

These interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company on December 13, 2021.

Basis of consolidation

The accompanying interim condensed consolidated financial statements include the accounts of the Company and all subsidiaries. Subsidiaries are entities in which the Company has a controlling voting interest or is the primary beneficiary of a variable interest entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are de-consolidated from the date control ceases. All intercompany accounts and transactions have been eliminated on consolidation. The interim condensed consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating intercompany balances and transactions.

These consolidated financial statements include the accounts of the Company and the following entities which are subsidiaries of the Company:

Subsidiaries as at September 30, 2021	Jurisdiction of incorporation	Ownership interest 2021	Ownership interest 2020	Nature of business
MM Development Company, Inc. (“MMDC”)	USA	100%	100%	Vertically integrated cannabis operations
BLC Management Company LLC. (“BLC”)	USA	100%	100%	Management company
LBC CBD LLC. (“LBC”)	USA	100%	100%	CBD retail sales and marketing
Newtonian Principles Inc.	USA	100%	-	Cannabis retail sales
MM Development MI, Inc.	USA	100%	100%	Holding company
MM Development CA, Inc.	USA	100%	100%	Holding company
MMDC Casa Holdings, Inc	USA	-	100%	Holding company
PLTHCA SA, Inc.	USA	-	100%	Holding company
Planet 13 Illinois, LLC	USA	49%	-	Holding company
Planet 13 Florida, LLC	USA	100%	-	Holding company
BLC NV Food, LLC	USA	100%	100%	Food retailing
By The Slice, LLC	USA	100%	-	Food retailing

ii.

Functional currency

The Company’s functional currency is the United States dollar (“USD”), and management has chosen to present these consolidated financial statements in USD. The functional currency of the Company’s subsidiaries is USD. All amounts are presented in USD values unless otherwise stated.

Canadian currency transactions are translated into USD at exchange rates in effect on the date of the transaction. Monetary assets and liabilities denominated in Canadian dollars are translated to USD at the foreign exchange rate applicable at the end of each reporting period.

Realized and unrealized exchange gains and losses are recognized in the consolidated statement of operations and comprehensive loss. Non-monetary assets and liabilities that are measured in terms of historical cost in CAD are translated using the exchange rate at the date of the transaction.

F-49

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

2. Basis of presentation and summary of significant accounting policies (continued)

The assets and liabilities are translated into US dollars at period end exchange rates. Income and expenses, and cash flows are translated into USD using the average exchange rate. Exchange differences resulting from the translation of Canadian operations are recognized in the interim condensed consolidated statement of operations and comprehensive loss.

iii.

Use of estimates

The preparation of these consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

iv.

Restricted cash

Restricted cash includes cash held in escrow by third-party escrow agent.

3. Inventory

Finished goods inventory consists of dried cannabis, concentrates, edibles, and other products that are complete and available for sale (both internally generated inventory and third-party products purchased in the wholesale market). Work in process inventory consists of cannabis after harvest, in the processing stage. Packaging and miscellaneous consist of consumables for use in the transformation of biological assets and other inventory used in production of finished goods. The Company’s inventories are comprised of:

	September 30, 2021	December 31, 2020

Raw materials	$2,216,916	$1,292,310
Packaging and miscellaneous	1,348,892	566,157
Work in progress	2,864,236	1,801,434
Finished goods	6,793,017	3,259,939
	$13,223,061	$6,919,840

Cost of inventory is recognized as an expense when sold and included in cost of goods sold. During the three and nine months ended September 30, 2021, the Company recognized $15,235,120 and $39,827,876 (September 30, 2020 - $10,244,725 and $23,853,435) of inventory expensed to cost of goods sold.

F-50

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

4. Property and equipment

	Land and land Improvements	Buildings and structures	Equipment	Leasehold improvements	Construction in progress	Total
Gross carrying amount

Balance as at December 31, 2020	$625,146	$1,707,894	$6,237,256	$30,448,042	$3,367,255	$42,385,593
Additions	-	-	1,683,229	1,365,921	12,286,430	15,335,580
Transfers	-	-	1,810,355	12,047,542	(13,857,897)	-
Disposals	-	-	-	-	(190,759)	(190,759)
Balance as at September 30, 2021	$625,146	$1,707,894	$9,730,840	$43,861,505	$1,605,029	$57,530,414

Depreciation

Balance as at December 31, 2020	$127,931	$203,750	$2,259,925	$7,720,062	$-	$10,311,668
Additions	38,396	32,023	1,014,950	3,640,177	-	4,725,546
Disposals	-	-	(1,197)	(12,361)	-	(13,558)
Balance as at September 30, 2021	$166,327	$235,773	$3,273,678	$11,347,878	$-	$15,023,656

Carrying amount

December 31, 2020	$497,215	$1,504,144	$3,977,331	$22,727,980	$3,367,255	$32,073,925
September 30, 2021	$458,819	$1,472,121	$6,457,162	$32,513,627	$1,605,029	$42,506,758

As at September 30, 2021, costs related to the construction of facilities were capitalized as construction in progress and not depreciated. Depreciation will commence when construction is completed, and the facility is available for its intended use. Once construction is completed, the construction in progress balance is moved to the appropriate account and depreciation commences. The contractual construction commitment as of September 31, 2021 was $6,610,568 (December 31, 2020 – $7,084,300) (Note 17).

For the nine months ended September 30, 2021, depreciation expense was $4,725,546 (2020 - $3,886,973) of which $1,378,124 (2020 - $1,167,206) was included in cost of goods sold.

5. Intangible assets

	Retail Dispensary Santa Ana	Retail Dispensary Clark County	Cultivation and Production Clark County	Florida Master License	Total
Gross carrying amount
Balance, December 31, 2020	$6,151,343	$690,000	$709,798	$-	$7,551,141
Additions	-	-	-	258,060	258,060
Balance, September 30, 2021	$6,151,343	$690,000	$709,798	$258,060	$7,809,201

F-51

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

5. Intangible assets (continued)

Florida license acquisition and restricted cash

On September 28, 2021, the Florida Department of Health’s Office of Medical Marijuana Use (“OMMU”) approved the Company to acquire a license to operate as a Medical Marijuana Treatment Center issued by the Florida Department of Health from a subsidiary of Harvest Health & Recreation Inc. As of September 30, 2021, the Company deposited $55,000,000 with an escrow agent per the terms of the license acquisition agreement. The acquisition closed with an effective date of October 1, 2021, and the Company released $55,000,000 of restricted cash that was being held in escrow to the seller in exchange for receipt of the Medical Marijuana Treatment Center license (Note 20).

The Company capitalized costs associated with the pending license acquisition in the amount of $258,060 that had been incurred up to that date

6. Leases

The Company’s lease agreements are for cultivation, manufacturing, retail, and office premises and for vehicles. The property lease terms range between 7 years and 21 years depending on the facility and are subject to an average of 2 renewal periods of equal length as the original lease. Leases for vehicles are typically between 4 years and 6 years with no renewal terms. Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities, or insurance and maintenance. Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table provides the components of lease cost recognized in the interim condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021:

	Three months ended		Nine months ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
Operating lease costs	$1,131,328	$999,247	$3,306,488	$2,171,921
Finance lease cost:
Amortization of lease liabilities	13,086	11,700	38,173	34,166
Interest on lease liabilities	608	2,488	3,295	8,731
Finance lease cost	13,694	14,188	41,468	42,897
Short term lease expense	4,289	1,520	12,866	4,560
Total lease costs	$1,149,311	$1,014,955	$3,360,822	$2,219,387

Other information related to operating and finance leases as of and for the nine months ended September 30, 2021 are as follows:

	Operating Lease	Finance Lease
Weighted average discount rate	15.00%	15.00%
Weighted average remaining lease term (in years)	16.21	0.14

F-52

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

6. Leases (continued)

The maturity of the contractual undiscounted lease liabilities as of September 30, 2021:

	Financing Lease	Operating Lease

2021	$7,258	$3,562,176
2022	-	3,695,766
2023	-	3,834,683
2024	-	3,953,471
2025	-	3,910,993
Thereafter	-	55,089,826
Total undiscounted lease liabilities	7,258	74,046,914
Interest on lease liabilities	136	50,496,000
Total present value of minimum lease payments	7,122	23,550,914
Lease liability – current portion	7,122	394,331
Lease liability	$-	$23,156,583

Additional information on the right-of-use assets by class of assets is as follows:

	Finance lease	Operating lease

Gross carrying amount
Balance, December 31, 2020	$133,561	$21,962,564

Additions	-	867,561
Balance, September 30, 2021	$133,561	$22,830,125

Depreciation

Balance, December 31, 2020	$88,889	$1,464,669

Additions	38,173	717,403
Balance, September 30, 2021	$127,062	$2,182,072


Carrying amount December 31, 2020	$44,672	$20,497,895
Carrying amount September 30, 2021	$6,499	$20,648,053

For the three and nine months ended September 30, 2021, the Company incurred $1,131,328 and $3,306,448 of operating lease costs respectively (September 30, 2020 - $999,247 and $2,171,920), of which $457,450 and $1,372,350 (September 30, 2020 - $386,918 and $669,508) was capitalized to inventory or included within cost of goods sold.

7. Prepaid expenses and other current assets

	September 30, 2021	December 31, 2020
Security deposits	$4,382,369	$1,031,255
Funds awaiting settlement	-	1,263
HST receivable	49,144	103,445
Insurance	587,764	550,946
Prepaid rent and other	803,982	511,096
	$5,823,259	$2,198,005

F-53

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

8. Accrued expenses

	September 30, 2021	December 31, 2020
Payroll	$2,776,842	$368,032
Excise and other taxes	2,255,637	940,892
Loyalty program	651,432	230,638
Other	1,137,830	1,305,152
	$6,821,741	$2,844,714

9. Share capital

Unlimited number of common shares and unlimited number of Class A shares.

		Number of Common Shares
		September 30, 2021	December 31, 2020
Common shares
Balance at January 1		126,573,250	82,427,619
Shares issued on settlement of RSUs	i.	915,803	2,685,344
Shares issued on exercise of options		121,336	333,001
Shares issued on exercise of warrants		3,758,940	17,532,271
Shares issued on financing - July 2020		-	5,359,000
Shares issued on financing - September 2020	v.	-	6,221,500
Shares issued on financing - November 2020		-	6,698,750
Shares issued on financing – February 2021		9,861,250	-
Shares issued on conversion of Class A shares (Note 5)		55,232,940	3,940,932
Shares issued on acquisition (Note 5)		-	1,374,833
Total common shares outstanding		196,463,519	126,573,250

i. Shares issued for Restricted Share Units

During the nine months ended September 30, 2021, the Company issued 915,803 common shares on the settlement of Restricted Share Units (“RSUs”) that had vested during the period. The Company did not receive any cash proceeds on the settlement and transferred $1,898,979 to share capital from the carrying value ascribed to the RSUs that were settled.

ii. Shares issued for Stock Options

During the nine months ended September 30, 2021, the Company issued 121,336 common shares on the exercise of options that had a strike price in the range of CAD$0.75 to CAD$1.55 per common share resulting in cash proceeds of $86,216 (CAD$108,987).

F-54

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

9. Share capital (continued)

iii. Shares issued on the exercise of Warrants

During the nine months ended September 30, 2021, the Company issued 3,758,940 common shares to warrant holders who exercised 3,758,940 warrants resulting in cash proceeds of $14,076,473 (CAD$17,809,039).

During the year ended December 31, 2020, the Company issued 17,532,271 common shares to warrant holders who exercised 17,532,271 warrants resulting in cash proceeds of $32,653,449 (CAD$43,079,021).

iv. Shares issued on Financing – July 2020

The Company incurred $825,359 in cash share issuance costs and $222,398 in broker warrant costs. The warrants are initially measured at fair value (Note 10) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

July 3, 2020 Financing	Gross Proceeds	Issuance Costs

Common Shares (APIC)	8,118,500)	(1,001,461
Warrant Liability (Note 10)	375,308	(46,296)
Total	8,493,808	(1,047,757)

v. Shares issued on Financing – September 2020

F-55

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

9. Share capital (continued)

The Company incurred $1,291,216 in cash share issuance costs and $585,816 in broker warrant costs. The warrants are initially measured at fair value (Note 10) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

September 10, 2020 Financing	Gross Proceeds	Issuance Costs

Common Shares (APIC)	16,662,200	(1,788,253)
Warrant Liability (Note 10)	827,201	(88,779)
Total	17,489,401	(1,877,032)

vi. Shares issued on Financing – November 2020

The Company incurred $1,544,014 in cash share issuance costs and $730,523 in broker warrant costs. The warrants are initially measured at fair value (Note 10) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

November 5, 2020 Financing	Gross Proceeds	Issuance Costs

Common Shares (APIC)	20,777,360	(2,134,362)
Warrant Liability (Note 10)	1,364,560	(140,175)
Total	22,141,920	(2,274,537)

vii. Shares issued on Financing – February 2021

On February 2, 2021, the Company completed a bought deal financing for aggregate gross proceeds of $53,852,980 (CAD$69,028,750) at a price of CAD$7.00 per unit. The Company issued 9,861,250 units of the Company. Each unit was comprised of one common share in the capital of the Company and one-half of one Common Share purchase warrant. Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$9.00 per common share for a period of 24 months.

The Company also issued 591,676 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$7.00 per common share. The broker warrants were measured based on the fair market value of the warrants using a Black Scholes valuation model.

F-56

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

9. Share capital (continued)

The Company incurred $3,494,930 in cash share issuance costs and $1,296,170 in broker warrant costs. The warrants are initially measured at fair value (Note 10) with residual proceeds being allocated to the common shares. Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred. The net proceeds were allocated as follows:

February 2, 2021 Financing	Gross Proceeds	Issuance Costs

Common Shares (APIC)	50,967,999	(4,534,434)
Warrant Liability (Note 10)	2,884,981	(256,666)
Total	53,852,980	(4,791,100)

viii. Shares issued on conversion of Class A Shares

On May 6, 2021, the Company issued 55,232,940 common shares on the conversion of 55,232,940 Class A shares. As of September 30, 2021, there were no longer any Class A shares outstanding.

	Number of Class A Shares
	September 30. 2021	December 31, 2020
Class A shares

Balance at January 1	55,232,940	55,232,940
Shares issued on acquisition (Note 5)	-	3,940,932
Conversion of Class A to Common	(55,232,940)	(3,940,932)
Total Class A shares outstanding	-	55,232,940

On May 6, 2021, the Company issued 55,232,940 common shares on the conversion of 55,232,940 Class A shares. As of September 30, 2021, there were no longer any Class A shares outstanding.

F-57

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

10. Warrant liability

The following table summarizes the fair value of the warrant liability for the periods presented:

	September 30, 2021	December 31, 2020
Opening balance as at January 1	$13,204,211	$9,823,510
Additions	2,884,981	2,567,069
Exercise	(8,955,993)	(15,698,859)
Foreign exchange	48,925	(293,450)
Change in fair value	2,728,386	16,805,941
Closing balance end of period	$9,910,510	$13,204,211

The following table summarizes the number of warrants outstanding for the periods presented:

	September 30, 2021	Weighted average exercise price – CAD	December 31, 2020	Weighted average exercise price - CAD
Balance – beginning of period	7,158,337	$4.98	15,061,078	$2.20
Issued	5,522,301	$8.79	10,236,380	$4.53
Exercised	(3,758,940)	$4.74	(17,532,271)	$2.46
Expired	(46,047)	$3.75	(606,850)	$1.40
Balance – end of period	8,875,651	$7.46	7,158,337	$4.98

The Company received cash proceeds of $14,076,473 (CAD$17,809,039) from the exercise of warrants for the nine-month period ended September 31, 2020 (December 31, 2020 - $32,653,449 (CAD$43,079,021)).

The following table present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis for the periods presented:

	Quoted prices in active markets for identical assets (Level 1)
September 30, 2021:
Warrant liability	$(9,910,510)

December 31, 2020:
Warrant liability	$(13,204,211)

11. Share based compensation

(a) Stock options

F-58

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

11. Share based compensation (continued)

During the nine months ended September 30, 2021

No incentive stock options were granted during the period.

During the year ended December 31, 2020

No incentive stock options were granted during the year.

The following table summarizes information about stock options outstanding at September 30, 2021:

Expiry date	Exercise price CAD$	September 30, 2021 outstanding	(September 30, 2021 exercisable

July 4, 2022	$2.65	100,000	100,000
June 11, 2023	$0.80	61,668	61,668
July 31, 2023	$0.75	-	-
January 7, 2024	$1.55	-	-
June 30, 2024	$2.60	7,500	7,500
		169,168	169,168

The employee options vest one third on the grant date and one third on the first and second anniversary of the grant date. The following table reflects the continuity of stock options for the period presented:

	September 30, 2021	Weighted average CAD$ exercise price

Balance – beginning of period	293,838	$1.52
Granted	-	-
Exercised	(121,336)	0.91
Expired	(3,334)	0.80
Forfeited	-	-
Balance – end of period	169,168	$1.97

	September 30, 2021
The outstanding options have a weighted-average CAD$ exercise price of $	1.97

The weighted average remaining life in years of the outstanding options is:	1.19

The company recorded $3,104 of share-based compensation expense attributable to employee options for the nine months ended September 30, 2021 ($51,233 for the nine months ended September 30, 2020).

F-59

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

11. Share based compensation (continued)

(b)

Restricted Share Units

The following table summarizes the RSUs that are outstanding as at September 30, 2021:

RSU Activity	September 30, 2021

Balance - beginning of the period	1,764,250
Granted to Participants	4,086,178
Exercised	(915,801)
Cancelled	-
Balance – end of the period	4,934,627

The Company recorded $12,208,463 in share-based compensation expense attributable to RSUs for the nine months ended September 30, 2021 ($1,954,834 for the nine months ended September 20, 2020).

During the nine months ended September 31, 2021

On January 4, 2021, the Company issued 852,154 common shares to settle 852,154 RSUs that had vested. The Company did not receive any cash proceeds from the issuance.

In total the Company transferred $1,898,979 to share capital from Restricted Share Units, representing the carrying value of the RSUs that were exercised during the period.

During the year ended December 31, 2020

On September 30, 2020, 6,666 RSUs that were previously granted on June 11, 2018 were cancelled as a result of an employee resignation.

F-60

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

12. Loss per share

	Three months ended		Nine months ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
Loss available to common shareholders	$(3,783,626)	$(5,646,614)	$(15,371,987)	$(6,797,286)

Weighted average number of shares, basic and diluted	196,457,950	162,624,567	194,576,544	148,587,612

Basic and diluted (loss) per share	$(0.02)	$(0.03)	$(0.08)	$(0.05)

Approximately 13,979,446 of potentially dilutive securities for the three and nine months ended September 30, 2021 and 10,817,031 of potentially dilutive securities for the three and nine months ended September 30, 2020 were excluded in the calculation of diluted EPS as their impact would have been anti-dilutive due to net loss in the period.

13. Income taxes

The components of income tax expense (benefit) of the Company are summarized as follows:

	Three months ended		Nine months ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
Current tax expense (recovery)
Current period	$3,601,094	$4,819,639	$10,046,821	$7,757,805

Deferred tax expense (recovery)
Origination and reversal of temporary differences	$(123,621)	$(79,388)	$(2,204,751)	$(240,716)
Change in unrecognized temporary differences	(79,652)	13,767	1,790,738	64,883
Income tax expense	$3,397,821	$4,754,018	$9,632,808	$7,581,972

The actual income tax provision differs from the expected amount calculated by applying the statutory income tax rate to the loss before tax. These differences result from the following:

	Three months ended		Nine months ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020

Income/(loss) income before income tax	$665,360	$(892,596)	$(4,688,014)	$784,686
Statutory income tax rate	21.0%	21.0%	21.0%	21.0%
Income tax expense (benefit) at statutory rate	139,726	(187,445)	(984,483)	164,784

Increase (reduction) resulting from:
Non-taxable items	3,454,566	4,803,575	10,333,697	6,321,993
Change in valuation allowance	(79,652)	471,967	1,790,739	1,391,126
Foreign exchange impacts	144,701	-	(226,066)	-
Difference in rates	(261,519)	(334,079)	(1,281,079)	(295,931)
Income tax expense	$3,397,821	$4,754,018	$9,632,808	$7,581,972

F-61

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

13. Income taxes (continued)

Any changes to the application of Section 280E may have a material effect on the Company’s interim condensed consolidated financial statements.

	September 30, 2021	December 31, 2020
Deferred tax assets
Loss carryforwards $	8,584,506	$5,303,168
Share issue costs	1,832,234	1,381,446
Exchange rate differences on monetary assets	8,108	563,080
Accrued expenses	129,516	49,128
Deferred tax assets	10,554,364	7,296,822
Valuation allowance	(8,561,453)	(5,912,173)
Set off of tax	(1,863,395)	(1,384,649)
Net deferred tax asset	129,516	-

Deferred tax liabilities
Property and equipment	(1,445,478)	(1,251,229)
Licenses	(543,779)	(543,779)
Deferred tax liabilities	(1,989,257)	(1,795,008)
Set off of tax	1,863,395	1,384,649
Net deferred tax liability $	(125,862)	$(410,359)

As at December 31, 2020, the Company has $15,821,242 (December 31, 2020 - $12,013,192) in Canadian non-capital loss carryforwards that expire between 2035 and 2041. In addition, as at December 31, 2020, the Company has U.S. federal Net Operating Losses of $14,976,543 (December 31, 2020 - $9,692,291). The U.S federal Net Operating Losses attributable to 2019 will expire in 2039 and the losses attributable to 2020 onward will have an indefinite carry forward. As at September 30, 2021, the Company has California state Net Operating Losses of $5,916,883 (December 31, 2020 - $953,517). The California state Net Operating will expire in 2040 and 2041.

F-62

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

13. Income taxes (continued)

14. General and administrative

	Three months ended		Nine months ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
Salaries and wages	$6,134,539	$2,420,126	$14,481,158	$6,546,241
Executive compensation	447,800	392,142	1,385,009	897,203
Licenses and permits	969,610	301,707	2,258,551	1,296,695
Payroll taxes and benefits	931,950	451,497	2,380,171	1,370,969
Supplies and office expenses	621,642	275,107	1,562,832	641,796
Subcontractors	953,356	444,175	2,166,299	1,056,499
Professional fees (legal, audit and other)	938,028	848,726	2,842,599	2,592,331
Miscellaneous general and administrative expenses	2,177,856	1,090,312	4,897,499	3,146,035
	$13,174,781	$6,223,792	$31,974,118	$17,547,769

15. Supplemental cash flow information

	Nine months ended
Change in working capital	September 30, 2021	September 30, 2020

Accounts receivable, net	$(394,191)	$(47,316)
Inventory	(6,303,221)	(1,453,161)
Prepaid expenses and other assets	(3,620,412)	1,690,717
Long term deposits and other assets	(12,376)	(336,751)
Accounts payable	1,677,256	1,231,431
Accrued expenses	3,977,028	1,116,045
Income tax payable	(1,614,486)	7,760,610
	$(6,290,402)	$9,961,575
Cash paid
Income taxes	$11,631,307	$-

Non-cash activities
Settlement of warrants liability by issuing warrants	$8,955,993	$7,008,759
Acquisition of licenses and intangible assets in exchange for shares	$-	$7,372,108
Initial recognition of ROU assets and lease liabilities	$867,561	$10,893,679

F-63

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

16. Related party transactions and balances

Related party transactions are summarized as follows:

(a) Officer Compensation

	Nine Months ended September 30,	Remuneration or fees	Share based payments	Included in Accounts payable

Management compensation	2021	$1,945,223	$9,875,693	$-
	2020	1,194,466	1,404,237	8,176
Director compensation	2021	$150,000	$1,227,580	$-
	2020	-	199,254	-

*Amounts disclosed were paid or accrued to the related party during the nine months ended September 30, 2021 and 2020

(b) Other

The Company sub-lets approximately 2,000 square feet of office space and purchases certain printed marketing collateral and stationery items from a company owned by one of the Company’s Co-CEOs. Amounts paid to such company for rent for the nine months ended September 30, 2021, and 2020 equaled $16,027 and $18,030, respectively. Amounts paid for printed marketing collateral and stationery items equaled $382,264 and $215,069 respectively for the nine months ended September 30, 2021, and 2020. As at September 30, 2021, there was $22,682 (2020-$61,407) included in accounts payable that was owed to this related party.

A company owned by one of the Company’s executives pays the Company for storage space. Amounts paid to the Company for storage space equaled $122,447 for the nine months ended September 30, 2021 (2020 – nil).

Through to April 30, 2021, the Company leased a cultivation facility from an entity owned by the Company’s co-CEOs. Rents paid for this facility for the nine months ended September 30, 2021, equaled $301,894 (2020 – nil). On April 30, 2021, the Company’s Co-CEOs sold this building to an arm’s length third party who assumed the lease.

17. Commitments and contingencies

(a) Construction Commitments

At September 30, 2021, the Company had construction commitments outstanding of $6,610,568 (December 31, 2020 - $7,084,300), $2,904,562 related to the build-out of the Company’s Planet 13 Santa Ana cannabis entertainment complex and $3,706,006 related to the build out of the Company’s Planet 13 Las Vegas Superstore.

(a)

Contingencies

The Company's operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state regulations as at September 30, 2021, medical and adult use cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties, or restrictions in the future.

F-64

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

17. Commitments and contingencies (continued)

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. At September 30, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

(d) Operating Licenses

Although the possession, cultivation, and distribution of marijuana for medical and adult use is permitted in Nevada, marijuana is a Schedule-I controlled substance and its use remains a violation of federal law. Since federal law criminalizing the use of marijuana pre-empts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in the Company’s inability to proceed with our business plans. In addition, the Company’s assets, including real property, cash, equipment and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

(e) Employment Agreements

The Company has employment agreements in place with its Executive Management team and certain key employees. The annual salaries pursuant to such agreements range from $100,000 to $500,000.

18. Risks

Credit risk

Concentration risk

The Company operates exclusively in Southern Nevada. Should economic conditions deteriorate within that region, its results of operations and financial position would be negatively impacted.

Banking Risk

Asset Forfeiture Risk

F-65

Planet 13 Holdings Inc.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars, except per share amounts)

18. Risks (continued)

Currency rate risk

As at September 30, 2021, a portion of the Company’s financial assets and liabilities held in Canadian dollars consist of cash and cash equivalents of $1,621,021 (2020 - $21,771,531). The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in the functional currency. The Company is exposed to currency rate risk in other comprehensive income, relating to foreign subsidiaries which operate in a foreign currency. The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time.

19. COVID-19

20. Subsequent events

Between October 1, 2021 and December 9, 2021, the Company issued 13,700 common shares on the exercise of common share purchase warrants and realized cash proceeds of $30,885.

On December 9, 2021, the Company issued 2,212,974 common shares on the exercise of Restricted Share Units that had vested during the period.

F-66

Exhibit 2.2

THIS AGREEMENT IS SUBJECT TO STRICT REQUIREMENTS FOR ONGOING REGULATORY COMPLIANCE BY THE PARTIES HERETO, INCLUDING, WITHOUT LIMITATION, REQUIREMENTS THAT THE PARTIES TAKE NO ACTION IN VIOLATION OF THE NEVADA CANNABIS LAWS OR THE GUIDANCE OR INSTRUCTION OF THE REGULATORY AUTHORITIES. SECTION 10.3(D) OF THIS AGREEMENT CONTAINS SPECIFIC REQUIREMENTS AND COMMITMENTS BY THE PARTIES TO MAINTAIN FULLY THEIR RESPECTIVE COMPLIANCE WITH THE NEVADA CANNABIS LAWS AND THE REGULATORY AUTHORITIES. THE PARTIES HAVE READ AND FULLY UNDERSTAND THE REQUIREMENTS OF SECTION 10.3(D).

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”), dated as of July 17, 2020 (the “Effective Date”), is entered into by Planet 13 Holdings Inc., a corporation organized under the Business Corporations Act (British Columbia) (“Planet 13”), MM Development Company, Inc., a Nevada corporation (“Buyer”, and together with Planet 13 the “Planet 13 Parties”), and W the Brand, LLC, a Delaware limited liability company (“W Vapes”), and West Coast Development Nevada, LLC, a Nevada limited liability company (“Seller”) and R. Scott Coffman, a North Carolina resident (“Coffman” and together with Seller and W Vapes, the “Transferors”). Buyer, Planet 13, Seller, W Vapes and Coffman are sometimes referred to individually as a “Party” and collectively as the “Parties.”

RECITALS

A. Buyer desires to purchase certain assets relating to the Business of Seller, and Seller desires to sell such assets to Buyer on the terms herein.

B. W Vapes is treated as the parent company of Seller by virtue of a certain Beneficial Holding Agreement effective as of February 28, 2017 by and between Coffman, and W Vapes.

C. Planet 13 is the parent company of Buyer.

D. On the First Closing Date, Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, the Purchased Assets except for the Second Closing MRB Assets, free and clear of all Encumbrances except for Permitted Encumbrances, and Seller wishes to assign to Buyer, and Buyer wishes to assume from Seller, the Assumed Liabilities, but excluding the Second Closing Assumed Liabilities, all upon the terms and conditions contained in this Agreement.

E. On the Second Closing Date, Seller desires to sell to Buyer, the Second Closing MRB Assets, and Buyer desires to purchase from Seller, the Second Closing MRB Assets, subject to the Regulatory Approval and the assumption by Buyer of the Second Closing Assumed Liabilities.

AGREEMENT:

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1

DEFINITIONS; RECITALS

1.1.

Definitions. For all purposes, capitalized terms in this Agreement shall have the respective meanings set forth below in this Agreement in Schedule 1 to this Agreement.

1.2.

Recitals. The Recitals are hereby incorporated herein by this reference.

1.3.

Usage of Terms. Except where the context otherwise requires, words importing the singular number will include the plural number and vice versa. Use of the word “including” means “including, without limitation.”

1.4.

References to Articles, Sections, Exhibits and Schedules. All references in this Agreement to Articles, Sections (and other subdivisions), Exhibits and Schedules refer to the corresponding Articles, Sections (and other subdivisions), Exhibits and Schedules of or attached to this Agreement, unless expressly provided otherwise.

ARTICLE 2

PURCHASE AND SALE OF PURCHASED ASSETS AND MRB ASSETS

2.1.

Purchase of Assets at First Closing.

(a) In accordance with the terms and upon the conditions of this Agreement, on the First Closing Date, Buyer shall purchase and accept from Seller, and Seller shall sell, transfer, assign, convey and deliver to Buyer, all of its right, title and interest in and to the following assets, properties, rights and claims of Seller, and, free and clear of all Encumbrances (other than Permitted Encumbrances) (collectively, the “Purchased Assets”):

(i) all Tangible Personal Property;

(ii) the MRB Inventory;

(iii) all equipment owned or leased (to the extent assignable) in connection with Business and the additional equipment set forth on Schedule 2.1(a)(iii) (but excluding MRB Assets described in Section 2.2(a)(i)(v);

(iv) all Contracts and agreements between Seller and third parties set forth on Schedule 2.1(a)(iv) (the “Assumed Contracts”) other than the MRB Contracts;

(v) books, records and other documents and information in Seller's possession pertaining solely to the Purchased Assets;

(vi) all transferable Permits (excluding the MRB Licenses set forth on Schedule 2.1(a)(vi); and

(vii) all rights, claims and causes of action against third parties arising on or after the First Closing Date related solely to the operation of the Business.

(b) Excluded Assets. Notwithstanding anything to the contrary herein, Seller shall not contribute, sell, transfer, or assign to Buyer, and Buyer shall not receive, any of Seller’s right, title and interest in, any assets other than the Purchased Assets as set forth in Section 2.1(a) above on the First Closing Date and the MRB Assets set forth in Section 2.2(a) below on the Second Closing Date (collectively, the “Excluded Assets”), including, without limitation, any of the following assets:

(i) all cash, cash equivalents and securities existing on the First Closing Date;

(ii) all accounts arising from the provision of goods to customers, billed and unbilled, recorded and unrecorded, for products provided by Seller/Indus (pursuant to the Excluded Management Agreement) prior to the First Closing Date;

(iii) all rights, claims, and causes of action against third parties arising prior to the First Closing Date, or not related solely to the operation of the Business;

(iv) all refunds of Taxes and tax loss carry-forwards of Seller relating to the Purchased Assets and the Business with respect to any Pre-Closing Tax Period;

(v) all bank and other depository accounts and safe deposit boxes of Seller;

(vi) the organizational charter or other governing documents of Seller and all qualifications to conduct business as a foreign entity, taxpayer identification numbers, seals, minute books, and other books, records, correspondence and documents relating to the organization, maintenance, existence, or tax matters of Seller;

(vii) any employee benefit plans currently or formerly offered by the Seller;

(viii) all Excluded MRB Inventory;

(ix) the Excluded Management Agreement; and

(x) any and all books, records, correspondence and documents solely relating to the Excluded Assets.

(c) Assumed Liabilities at First Closing. Buyer agrees to assume, effective as of the First Closing, all liabilities related to the Assumed Contracts but only to the extent that such liabilities (i) are required to be performed after the First Closing Date; and (ii) do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller on or prior to the First Closing Date (collectively, the “First Closing Assumed Liabilities”). All liabilities related to the Seller, W Vapes, Indus, the Purchased Assets and the MRB Assets, other than the First Closing Assumed Liabilities and Second Closing Assumed Liabilities (as defined below) (the “Excluded Liabilities”), shall not be assumed by Buyer.

2.2.

Transfer of MRB Assets at Second Closing.

(a) In accordance with the terms and upon the conditions of this Agreement, on the Second Closing Date and upon issuance of the Regulatory Approvals, Buyer will purchase and accept from Seller and Seller will sell, transfer, assign, convey and deliver to Buyer all of its right, title and interest in and to the following assets of Seller, free and clear of all Encumbrances (other than Permitted Encumbrances) (the “Second Closing MRB Assets”):

(i) the then existing MRB Inventory;

(ii) the MRB Licenses;

(iii) all Contracts entered into by Seller related to the Business to the extent that Seller must be authorized to hold any MRB License or MRB Inventory under the terms of such Contract or applicable Laws (the “MRB Contracts”), a list of which is set forth on Schedule 2.2(a)(iii);

(iv) any assets, tangible or intangible, related to the Business which are required to be held by a Person authorized to hold any MRB License or MRB Inventory under applicable Laws; and

(v) all books, records and other documents and information pertaining solely to the MRB Assets in Seller's possession, but excluding books, records and other documents and information pertaining to the Excluded Assets.

(b) For the avoidance of doubt, the MRB Assets shall not include the Excluded Assets. Buyer and Seller will enter into all customary instruments of transfer, assumption, filings, assignments or other documents, in form and substance reasonably satisfactory to the Parties, to evidence the transfer of the MRB Assets from Seller to Buyer on the Second Closing Date.

(c) Assumed Liabilities at Second Closing. Buyer agrees to assume, effective as of the Second Closing, any and all liabilities arising from the Lease and from operations under the Management Agreement, including, without limitation, all accounts payable, all obligations under Contracts and other agreements and arrangements, tort claims, and all other liabilities and obligations relating to the operations under the Management Agreement. Collectively, the assumption and, if applicable, cancellation of Liability set forth in this Section 2.2(c) are referred to herein as the “Second Closing Assumed Liabilities”, and, collectively with the First Closing Assumed Liabilities, the “Assumed Liabilities”. For purposes of this Agreement and the Transferors’ obligation of indemnity set forth herein, delivery by the Planet 13 Parties of an “Estoppel Certificate” to the Regulatory Authorities in connection with the Planet 13 Parties application for the Regulatory Approvals shall not be deemed an assumption of the Excluded Liabilities by the Planet 13 Parties.

2.3.

Purchase Price. The total aggregate purchase price (collectively, the “Purchase Price”) to be paid by Buyer to Seller, in consideration for delivery of the Purchased Assets on the First Closing Date and the Second Closing MRB Assets on the Second Closing Date consists of the following:

(a) the Cash Purchase Price; plus

(b) a certificate representing that number of Planet 13 common shares having a value of Two Million Five Hundred Thousand U.S. Dollars (US$2,500,000) measured on the basis of the volume weighted average trading price of the common shares of Planet 13 for the ten (10) trading days preceding the First Closing Date (the “Consideration Shares”).

2.4.

Payment and Delivery of Purchase Price.

(a) First Closing Payments. Upon the First Closing Date, Buyer shall cause the following to occur:

(i) Payment of the Cash Purchase Price to Seller minus the sum of (i) the aggregate amount of the Closing Indebtedness set forth on the Pre-Closing Statement and (ii) the aggregate amount of the Transaction Expenses set forth on the Pre-Closing Statement, payable to an account designated in writing by Seller prior to the Closing, in cash by wire transfer of immediately available funds to such accounts and in such amounts as Seller designates in writing to Buyer; and

(ii) Payment of the Closing Indebtedness to the respective lenders as set forth on the Pre-Closing Statement;

(iii) Payment of the Transaction Expenses to the Persons as set forth on the Pre-Closing Statement; and

(iv) A certificate representing that number of Consideration Shares having an aggregate value of Two Million Five Hundred Thousand US Dollars (US$2,500,000.00) as established pursuant to Section 2.3(b) has been issued in the name of Seller and has been deposited with the Escrow Holder to be held pursuant of the terms of the Share Escrow Agreement to be released to Seller on the Second Closing Date or returned to Planet 13 if the Second Closing Date shall not occur as provided in Section 8.2.

(b) On the Second Closing Date, the Escrow Holder shall release to the Seller the certificate representing the Consideration Shares issued in the name of Seller.

(c) Payments. Unless otherwise stated herein, all payments pursuant to this Section 2.4 will be paid by Buyer to Seller, lenders or service providers, as applicable, by wire transfer of immediately available funds to such account(s) designated by Seller, lenders or service providers, as applicable, in writing in advance of the First Closing Date.

(d) Withholding. Buyer and any other applicable withholding agent will be entitled to deduct and withhold from any amounts payable pursuant to or as contemplated by this Agreement any Taxes or other amounts required under the Code or any applicable Law to be deducted and withheld, as a result of the purchase and sale transactions provided for in this Agreement, and to the extent that any amounts are so deducted or withheld, such amounts shall be promptly and timely paid over to such taxing authority and be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

2.5.

Transfer Taxes / Stock Transfer Taxes.. Seller will be responsible for the payment of any and all Transfer Taxes associated with the transfer of the Purchased Assets and the MRB Assets and any deficiency, interest or penalty with respect to such Taxes. The Parties will reasonably cooperate with respect to the preparation and filing of all Tax Returns required to be filed in connection with any such Transfer Taxes. Buyer will be responsible for the payment of any and all costs, including, but not limited to, Stock Transfer Taxes, associated with the issuance and transfer of the Consideration Shares, both to Seller and into and out of the Escrow Holder.

2.6.

Allocation of Purchase Price, Buyer will propose the allocation of the Purchase Price among the Purchased Assets and the MRB Assets in accordance with Section 1060 of the Code (the “Purchase Price Allocation”) which shall allocate not less than $1,100,000 to inventory purchased on the First Closing Date, and will deliver such Purchase Price Allocation to Seller within ninety (90) days after the First Closing Date or as soon as reasonably practicable. The Parties agree to confer and to mutually approve the Purchase Price Allocation and to timely file IRS Form 8594 based upon the Purchase Price Allocation The Parties shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with the Purchase Price Allocation, and shall not contend or represent that such allocation is not a correct allocation in any action, arbitration, audit, hearing, investigation, litigation, suit or other proceeding related to the determination of any Tax, except as may otherwise be (i) required pursuant to a final determination within the meaning of Section 1313(a)(1) of the Code or any corresponding provision of state, local or foreign Law or (ii) agreed to by the Parties in writing. Each Party agrees to notify the other if any Governmental Authority proposes to reallocate the Purchase Price.

2.7.

Lease; Management Agreement. As of the First Closing Date, Seller will shall enter into the Lease and the Option Agreement with Rx Land, and Buyer and Seller shall enter into the Management Agreement.

2.8.

Pre-Closing Statement. At least five Business Days prior to the First Closing Date, Seller shall prepare and deliver to Buyer a statement (the “Pre-Closing Statement”) setting forth (i) the amount of Indebtedness of Seller immediately prior to the First Closing Date(collectively, the “Closing Indebtedness”) and (ii) the amount of the Transaction Expenses, including a list of the payees and the amounts payable to each.

ARTICLE 3

FIRST AND SECOND CLOSINGS

3.1.

First Closing. The first closing of the Transaction, when the ownership of the Purchased Assets is transferred to Buyer as described in Section 2.1 (the “First Closing”), will take place remotely via the electronic exchange of documents and signatures as soon as practicable following the satisfaction or waiver of the applicable conditions set forth in Article 7 and in any event not later than the earlier of: (i) fourteen (14) Business Days thereafter, (ii) July 17, 2020, or (iii) or on such later date as Buyer and Seller may mutually agree upon (the “First Closing Date”). The First Closing will be deemed to have occurred at 12:01 a.m., Pacific Time, on the First Closing Date.

3.2.

Second Closing. The second and final closing of the Transaction, when ownership of the Second Closing MRB Assets will be transferred to Buyer as described in Section 2.2 (the “Second Closing”), will take place remotely via the electronic exchange of documents and signatures as soon as practicable following the satisfaction or waiver of the applicable conditions set forth in Article 7 and in any event within 14 days after the receipt of the last of the Regulatory Approvals, or on such other date as Buyer and Seller may mutually agree upon (the “Second Closing Date”). The Second Closing will be deemed to have occurred at 12:01 a.m., Pacific Time, on the Second Closing Date.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

OF SELLER AND W VAPES

Except as set forth on the disclosure schedules delivered by Seller to Buyer on the Effective Date (the “Disclosure Schedules”) and subject to the Cannabis Carve Out set forth in Section 10.11 below, Seller represents and warrants to Buyer that the representations and warranties set forth in this Article 4 are true and correct as of the Effective Date and shall be true and correct on the First Closing Date and on the Second Closing Date, as may be applicable. Notwithstanding anything to the contrary provided in this Agreement (in addition to any specific exception to Federal Cannabis Laws and any similar Law set forth in this Article 4), all representations, warranties, covenants and disclosures of Seller in this Article 4 are being made with exception to and not with respect to Federal Cannabis Laws.

4.1.

Organization and Authority to Conduct Business; Power and Authority; Binding Effect. Seller is duly organized, validly existing and in good status under the Laws of the State of Nevada. Seller has full limited liability company power and authority to conduct its business and to own and lease its properties and assets (except under Federal Cannabis Laws). Seller has, subject to the Parties obtaining all required Regulatory Approvals relating to the MRB Assets, all necessary power and authority to execute, deliver and perform its obligations under this Agreement and consummate the Transaction (except under Federal Cannabis Laws). This Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforcement may be limited by Federal Cannabis Laws.

4.2.

Consents and Approvals. Subject to the requirements under the Nevada Cannabis Laws, except as set forth on Schedule 4.2 of the Disclosure Schedules, no consent, approval or authorization of, or declaration, filing or registration with, any Person is required to be made or obtained by Seller in connection with the execution, delivery and performance of this Agreement and the consummation of the Transaction or will be necessary to ensure the continuing validity and effectiveness immediately following the First Closing or the Second Closing of any Permit, Assumed Contract and MRB Contract of Seller, as applicable. This Agreement and each other Transaction Document has been duly and validly executed and delivered by Seller and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) constitutes the legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.3.

No Violation; Consents and Approvals. The execution and delivery by the Seller and W Vape of this Agreement and all other instruments and agreements to be delivered by each such Transferor as contemplated hereby do not and the performance by it of its obligations hereunder and thereunder, do not and will not (a) conflict with or violate any provision of Law applicable to such Transferor or by which any property or asset of such Transferor is bound or affected, (b) conflict with or violate any Order to which such Transferor is subject, (c) require a registration, filing, application, notice, consent, approval, order, qualification, or waiver with, to or from any Governmental Authority or any other Person; (d) except as set forth on Schedule 4.3,require a consent, approval or waiver from, or notice to, any party to any contract to which such Transferor is a party or in a breach of, constitute change of control or a default under, or result in the acceleration of material obligations, loss of benefit or increase in any liabilities or fees under, or create in any party the right to terminate, vest in, cancel or modify, any contract to which such Transferor is a party; or (e) result in the creation of any Encumbrance on any property or asset of such Transferor (including the Purchased Assets) or give any Person the right to prevent, or to cause any delay to, the Transactions contemplated by this Agreement.

4.4.

Financial Statements. Schedule 4.4 sets forth copies of (i) the tax basis balance sheet (the “Balance Sheet”) each of Seller as of December 31, 2018 and December 31, 2019 (the “Balance Sheet Date”) and the related statements of profit and loss for each of the years then ended (collectively, the “Annual Financial Statements”), (ii) the tax basis balance sheets of the Seller as of May 31, 2020 (the “Interim Balance Sheet” and the date of such balance sheet the “Interim Balance Sheet Date”) and the related unaudited statements of profit and loss for the three- and one-month periods then ended (collectively, the “Interim Financial Statements” and, together with the Annual Financial Statements,, the “Financial Statements”). The Financial Statements fairly present the financial condition and the results of operations and cash flows of the Seller at the respective dates of and for the periods referred to in such Financial Statements; provided, however, that the Financial Statements are subject to normal and non recurring year-end adjustments (the effect of which will not have Material Adverse Effect). The Financial Statements reflect the consistent application of Seller’s accounting practices throughout the periods involved. The parties recognize that some of the Financial Statements include results of operations of a Seller Affiliated Oregon entity, and that the Oregon entity results of operations should not be deemed to include in Financial Statements for purposes of the representation made in this Section 4.4.

4.5.

No Undisclosed Liabilities. To the Knowledge of Seller, Seller has no Liabilities except for (i) Liabilities reflected and accrued for or reserved against on the face of the Interim Balance Sheet, (ii) future performance obligations arising under the terms of any executory contracts that are listed on Schedule 4.11 or entered into in the Ordinary Course of Business that are not required to be listed thereon, excluding Liabilities for any breach of any Contract, breach of warranty, tort, infringement or violation of Law, and (iii) Liabilities incurred in the Ordinary Course of Business since the Interim Balance Sheet Date consistent in amount and kind with past practice (none of which results from, arises out of, relates to, is in the nature of or was caused by any breach of Contract, breach of warranty, tort, infringement or violation of Law). Seller does not engage in or maintain any off-balance sheet arrangements (as defined in Item 303 of Regulation S-K of the United States Securities Act of 1933, as amended (the “Securities Act”).

4.6.

Intentionally omitted.

4.7.

Title to Assets; Encumbrances. Seller owns good and transferable title to, or in the case of property held under a lease or other contract, a valid and enforceable leasehold interest in or right to use, all of the Purchased Assets, free and clear of any Encumbrances other than Permitted Encumbrances. Schedule 4.7 lists the Tangible Personal Property included on the Interim Financial Statements.

4.8.

Absence of Certain Developments. Since the Balance Sheet Date, there has not been any Material Adverse Effect and, no event has occurred or circumstances exist that are reasonably expected to result in a Material Adverse Effect.

4.9.

Taxes.

(a) Seller at all times has been treated as a disregarded entity for federal income tax purposes.

(b) All Tax Returns that were required to be filed by or on behalf of Seller and W Vapes, pursuant to applicable requirements of any Governmental Authority, were timely filed or extended, and all such Tax Returns were true, correct and complete and were prepared in substantial compliance with all applicable requirements of the relevant Governmental Authority. The Seller and W Vapes (or its members) have paid all Taxes that have or may have become due to be paid by them for all periods covered by the Tax Returns or otherwise, or pursuant to any assessment received by Seller or W Vapes, except such Taxes, if any, as are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP consistently applied) have been provided in the Balance Sheet and the Interim Balance Sheet. There are no Encumbrances on any of the Assets that arose as a result of any failure (or alleged failure) to pay any Tax.

(c) There are no audits, claims, proceedings or assessments regarding Taxes pending or threatened in writing against Seller or the Business. Seller has received no written notification from any other state that it is subject to income tax in such state.

(d) The Seller has withheld and paid over to the proper Governmental Authority all Taxes required to have been withheld and paid over by Seller with respect to the Business operations, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto.

(e) The Seller has reserved the required amounts necessary to pay all unemployment Taxes and/or other Taxes due by the Seller based on taxable wages paid by Seller through the First Closing Date, and such amounts have been segregated for later payment to the appropriate Governmental Authorities and all Forms W-2 and 1099 required with respect to employees and independent contractors have been, or will be, properly completed and timely filed.

4.10.

Intellectual Property.

(a) To the Knowledge of Seller, the operations of Seller do not infringe, misappropriate or otherwise violate any Intellectual Property owned by any other Person. During the last three years, Seller has not received notice from any Person claiming the operations of Seller infringe, misappropriate or otherwise violate any Intellectual Property of such Person.

(b) Schedule 4.10(b) contains a complete list of all material licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, waivers, releases, permissions and other Contracts, whether written or oral, relating to the Intellectual Property to which Seller is a party, beneficiary or otherwise bound, whether as grantor or grantee, licensor or licensee or in any other capacity (“IP Agreements”). Each IP Agreement is valid and binding and is in full force and effect. No party to an IP Agreement is, or to the Knowledge of Seller is alleged to be, in breach of or default under, or has provided or received any notice of breach of, default under, or intention to terminate (including by non-renewal) any IP Agreement.

4.11.

Contracts. (a) Schedule 4.11(a) (arranged in subsections corresponding to the subsections set forth below) contains an accurate and complete list Material Contracts previously disclosed on the Indus Purchase Agreement (the "Indus Disclosed Contracts") which continue to be in effect together with, to the Knowledge of Seller, additional Contracts entered into subsequent to the date of the Indus Purchase Agreement the “Material Contracts”):

(b) Except as set forth on Schedule 4.11(b):

(i) neither the execution and delivery or performance of this Agreement by Seller nor the consummation or performance of the Transaction contemplated hereby will, directly or indirectly (with or without notice or lapse of time) (x) violate or conflict with, or result in a breach of any provision of or forfeiture of any rights under, or require any consent, waiver or approval (not otherwise obtained in connection herewith), or result in a default or give rise to any right of termination, cancellation, modification or acceleration (or an event that, with the giving of notice, the passage of time or otherwise, would constitute a default or give rise to any such right) under, any of the terms, conditions or provisions of such Indus Disclosed Contracts or (y) result in the imposition or creation, pursuant to the terms of such Indus Disclosed Contracts, of any Encumbrance upon or with respect to any of the Purchased Assets;

(ii) to the Knowledge of Seller, the Seller is in compliance in all material respects with the terms and requirements of the Material Contracts;

(iii) to the Knowledge of Seller, each other Person that has or had any obligation or liability under such Material Contract is in material compliance with all terms of such Material Contract;

(iv) to the Knowledge of Seller, no event has occurred or circumstance exists that may contravene, conflict with or result in a breach of, or give Seller or, to the Knowledge of Seller, any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, such Material Contract; and

(v) Seller has not given to or, to the Knowledge of Seller, received from any other Person any notice regarding (x) any actual or alleged violation or breach of, or default under, such Material Contract or (y) any event or circumstances that would reasonably be expected to constitute or result in a violation, breach or default under such Material Contract;

4.12.

Labor Matters.

(a) Schedule 4.12(a) contains a complete and accurate list of the following information for each employee of Seller, including each employee on leave of absence or layoff status, each former employee of Seller receiving benefits under COBRA, and each consultant and independent contractor of Seller: name; job title; classification as exempt or non-exempt; date of hire; current salary and bonus paid or payable; other compensation and fringe benefits that such employee is entitled to receive; sick and vacation leave that is accrued but unused; service credited for purposes of vesting and eligibility to participate in any Benefit Plan; and whether such employee, consultant or independent contractor is engaged directly or through a staffing agency or other third Person. All employees have provided the required documentation and have attested that they are either U.S. citizens or residents specifically authorized to engage in employment in the United States in accordance with all applicable Laws.

(b) Schedule 4.12(b) contains a complete and accurate list of the following information for each retired employee of Seller, and each of their dependents, that as of the First Closing Date is receiving benefits or is scheduled to receive benefits in the future from Seller: name, Benefit Plan benefits, and other benefits.

(c) Seller is not a party to any collective bargaining agreement or collective bargaining relationship with any labor organization. To the Knowledge of Seller, no union, other labor organization or similar entity is engaged in any organizing activity with respect to any employees of Seller and no such organizing activity is threatened. There is not, and in the past five years there has not been, any, (i) unfair labor practice charge or complaint or material labor grievance or labor arbitration pending or, to the Knowledge of Seller, threatened in writing against Seller before the National Labor Relations Board or any Governmental Authority or arbitrator, (ii) except as set forth in Schedule 4.12(c) charge of discrimination or complaint against Seller pending or, to the Knowledge of Seller, threatened, before the Equal Employment Opportunity Commission, U.S. Department of Labor, or any similar Governmental Authority or other federal, local or state agency that enforces Laws related to labor and employment, or (iii) other Proceeding pending, or, to the Knowledge of Seller, threatened, against Seller pertaining to the employment of labor, including those relating to wages, hours, collective bargaining, employment discrimination, sexual harassment, workers’ compensation, and the payment or withholding of Taxes.

(d) To the Knowledge of Seller, Seller is, and during the past three years has been, in material compliance with all Laws and other applicable requirements of Governmental Authorities relating to employment, employment practices, terms and conditions of employment, equal employment opportunity, nondiscrimination, immigration, wages, overtime, classification, temporary workers, independent contractors, leave, hours, benefits, worker’s compensation, labor relations, plant closings or layoffs, the payment of social security and similar Taxes and occupational safety and health Laws (“Labor and Employment Legal Requirements”). To the Knowledge of Seller, Seller is not liable for any outstanding payments of any Taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing requirements. To the Knowledge of Seller, no employee, consultant or independent contractor has been misclassified with respect to application of any Labor and Employment Legal Requirements. Seller has not implemented any plant closing or mass layoff of employees as those terms are defined in the Worker Adjustment Retraining and Notification Act of 1988 Act or any similar Law. To the Knowledge of Seller, there is no, and during the prior three years has not been, any Proceeding or Order pending or, to the Knowledge of Seller, threatened by or against Seller alleging any violation of or failure to comply with Labor and Employment Legal Requirements, and no event has occurred, and no circumstance exists, that would reasonably be expected to give rise to or serve as a basis for the commencement of any such Proceeding or Order against Seller.

4.13.

Employee Benefits. Seller does not and has never been required to operate a Benefit Plan.

4.14.

Litigation. There is no, and during the prior five years there has not been, any Proceeding or Order pending or, to the Knowledge of Seller, threatened by or against Seller or that otherwise directly pertains to the Business or any of the Purchased Assets. To the Knowledge of Seller, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any Proceeding or Order against Seller.

4.15.

Compliance with Laws; Permits.

(a)

Except as set forth on Schedule 4.15(a):

(i) Seller has not received, at any time in the last five years, any notice or communication from any Governmental Authority or any other Person regarding (x) any actual, alleged, possible or potential violation of, or failure to comply with, any Law or (y) any actual, alleged, possible or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and

(ii) Seller is not now and has not during the last five years been bound by an Order of any Governmental Authority.

(b) Neither Seller, nor to the Knowledge of Seller, any director, manager, officer, employee, agent or other Person acting on behalf of Seller has, directly or indirectly, (i) used any funds of any Transferor for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expense relating to political activity; (ii) made any unlawful payment or gift, promise to pay, or authorization of any payment or gift of anything of value to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns; (iii) violated or is in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any other applicable Law that relates to bribery or corruption; (iv) established or maintained any unlawful fund of monies or other assets of Seller; (v) made any fraudulent entry on the books or records of a Transferor; or (vi) made any unlawful bribe, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business to obtain special concessions for a Transferor.

4.16.

Privacy and Data Security. To the Knowledge of Seller, Seller is in compliance with all applicable Laws relating to Personal Data and any terms of Contracts to which it is a party relating to Personal Data, data privacy, security or breach notification. To the Knowledge of Seller, Seller has established and implemented policies, programs and procedures as required by applicable Laws or otherwise necessary and appropriate, including administrative, technical and physical safeguards, to protect the confidentiality, integrity and security of Personal Data in its possession, custody or control against unauthorized access, use, modification, disclosure or other misuse. To the Knowledge of Seller, in the past three years Seller has not experienced any unauthorized access, disclosure, use or breach of security of any Personal Data in its possession, custody or control, or otherwise held or processed on its behalf or received any written claim, complaint, inquiry, or request for information from any Governmental Body related to Seller’s collection, processing, use, storage, security, and/or disclosure of Personal Data.

4.17.

Environmental Matters. Except as set forth in Schedule 4.17, (a) to the Knowledge of Seller, Seller is in compliance with all applicable Environmental Laws, including the possession of all Permits required under Environmental Laws and compliance with such Permits; (b) to the Knowledge of Seller, no Hazardous Materials related to Seller’s operation of the Business are present in or under the land, ground water and surface water at the Real Property; and (c) to the Knowledge of Seller, Seller has not received any written notice of any actual or alleged noncompliance with or Liability under any Environmental Law or Permit. Seller has provided to Buyer complete copies of all environmental audits, reports and other documents relating to Environmental Liabilities within Sellers’ actual possession relating to the Business or the Purchased Assets.

4.18.

Insurance. Schedule 4.18 contains a complete and correct list of all insurance policies maintained by the Seller (specifying the insurer, policy number, amount of and nature of coverage, the risk insured against, the deductible amount (if any) and the date through which coverage will continue by virtue of premiums already paid). All such insurance policies are in full force and effect, all premiums owed thereunder have been paid and Seller is not in default regarding its obligations under any of such insurance policies. To the Knowledge of Seller, Seller has not failed to give any notice or present any claim under any insurance policy in a timely fashion or in the manner required by such insurance policies. Except for workers’ compensation insurance claims incurred in the Ordinary Course of Business, Schedule 4.18(a) contains a list of all pending claims under such insurance policies, any instances in the past five years of a denial or limitation of coverage or claim by Seller under any such policy, and all claims paid by the insurers of such policies during the last five years. There is no claim by Seller pending under any such insurance policies as to which coverage has been questioned, denied or disputed by the relevant insurer.

4.19.

Brokers. The Transferors have not entered into any agreement, arrangement or understanding with any Person which will result in the obligation to pay any finder’s fee, brokerage commission or similar payment in connection with the Transaction.

4.20.

W Vapes and Coffman Representations and Warranties. W Vapes and Coffman jointly and severally represent and warrant to Buyer that the representations and warranties set forth in this Section 4.20 are true and correct as of the Effective Date.

(a) W Vapes Organization and Authority to Conduct Business. W Vapes is duly organized, validly existing and in good status under the Laws of the State of Delaware. W Vapes has full limited Liability company power and authority to conduct its business and to own and lease its properties and assets (except under Federal Cannabis Laws).

(b) W Vapes Power and Authority; Binding Effect. W Vapes has all necessary power and authority and has taken all action necessary to authorize, execute and deliver this Agreement, to consummate the Transaction, and to perform its obligations under this Agreement. This Agreement has been duly executed and delivered by W Vapes and constitutes a legal, valid and binding obligation of W Vapes enforceable against W Vapes in accordance with its terms, except as such enforcement may be limited by Federal Cannabis Laws.

(d) W Vapes No Conflict or Violation. The execution and delivery of this Agreement, the consummation of the Transaction, and the fulfillment of the terms of this Agreement, do not and will not result in or constitute (a) a violation of or conflict with any provision of the organizational or other governing documents of W Vapes, (b) a violation by W Vapes of any statute, rule, regulation, ordinance, by-law, code, order, judgment, writ, injunction, decree or award applicable to W Vapes which could result in a penalty or a loss of privilege or (c) an imposition of any Encumbrance (other than a Permitted Encumbrance) on the assets of W Vapes.

(e) W Vapes Consents and Approvals. Except as set forth on Schedule 4.2, no consent, approval or authorization of, or declaration, filing or registration with, any Person is required to be made or obtained by W Vapes or Coffman in connection with the execution, delivery and performance of this Agreement and the consummation of the Transaction other than from the Regulatory Authorities in connection with the Second Closing.

4.21.

Securities Matters. The Transferors jointly and severally represent and warrant to Buyer that the representations, warranties and acknowledgments set forth in this Section 4.21 are true and correct as of the Effective Date.

(i) No Prior Holdings; Acquisition for Investment. No Transferor is the registered or beneficial holder of any securities of Planet 13. The Transferors acknowledge they will be acquiring the Consideration Shares issuable pursuant to this Agreement for investment for their own account and not as nominees or agents, and not with a view to the resale or distribution of any part thereof, and further represent that they have no present intention of selling, granting any participation in, or otherwise distributing the same. The Transferors further represent that they do not have any Contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Consideration Shares. The Transferors understand that any Consideration Share issuable hereunder will not be registered under the Securities Act, on the ground that the sale and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof, and that Planet 13’s reliance on such exemption is predicated on the Transferors’ representation set forth herein, including the Transferors’ completion and execution of the Questionnaire. The Transferors further understand that any Consideration Share issuable hereunder will constitute a distribution of securities that is exempt from the prospectus requirement of applicable Canadian Securities Laws.

(ii) Investment Experience. Each Transferor acknowledges that it can bear the economic risk of the investment, and it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Consideration Shares. Each Transferor (x) is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act (as amended by Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act), and has duly completed and executed the Questionnaire, in the form attached hereto as Exhibit H (the” Questionnaire”), and (y) agrees that it will not take any action that could negatively impact the availability of the exemption from registration provided by Section 4(a)(2) of the Securities Act with respect to the sale and the issuance of securities hereunder.

(iii) Information. The Transferors have carefully reviewed such information as they have deemed necessary with respect to the Consideration Shares. The Consideration Shares shall be subject to a hold period of four months and a day commencing not later than five Business Days after the First Closing Date under Canadian Securities Laws (depending upon the actual effective date of the issuance of the Certificate), and shall not be registered under Securities Act, and may not be offered or sold within the United States absent registration under United States federal and state securities laws or an applicable exemption from such United States registration requirements. To the Transferors’ full satisfaction, each Transferor has been furnished all materials requested by such Transferor relating to Planet 13, and the issuance of Consideration Shares hereunder, and each Transferor has been afforded the opportunity to ask questions of representatives of Planet 13, to obtain any information necessary to verify the accuracy of any representations or information made or given to such Transferor.

(iv) Restricted Securities. The Transferors understand that the Consideration Shares issuable pursuant to this Agreement may not be sold, transferred, or otherwise disposed of without registration under the Securities Act and applicable state and federal securities laws or an exemption therefrom, and that in the absence of an effective registration statement covering the Consideration Shares or any available exemption from registration under the Securities Act and applicable state and federal securities laws, the Consideration Shares must be held indefinitely. Without limitation of the foregoing, each of the Purchased Assets (excluding the MRB Inventory) and MRB Assets sold to the Buyer hereunder by Seller have a fair value of not less than CDN$150,000 and each Transferor understands that the Consideration Shares may not be resold under applicable Canadian Securities Laws before the date that is four (4) months plus one (1) day following the First Closing Date (subject to release of the Consideration Shares to the Seller pursuant to the Share Escrow Agreement (the “Stock Release”)), is aware that the certificate which it shall receive evidencing the Consideration Shares will bear a legend with respect to the resale restrictions under applicable Canadian Securities Laws in substantially the following form:

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE FIRST CLOSING DATE.

and, understands that after the date that is four (4) months plus one (1) day following the First Closing Date, subject to the occurrence of the Stock Release, the Consideration Shares may be resold under applicable Canadian Securities Laws in each Province and Territory of Canada, provided: (i) the trade is not a “control distribution” as defined in National Instrument 45-102 – Resale of Securities; (ii) no unusual effort is made to prepare the market or create a demand for the Consideration Shares; (iii) no extraordinary commission or consideration is paid in respect of such trade; and (iv) if the selling securityholder is an “insider” or “officer” of Planet 13 (as such terms are defined by applicable Canadian Securities Laws), the insider or officer has no reasonable grounds to believe that Planet 13 is in default of applicable Canadian Securities Laws. Unless registered under the Securities Act and applicable state securities laws, the certificate representing the Consideration Shares shall also bear a legend in the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO OR FOR THE BENEFIT OF ANY NATIONAL, CITIZEN OR RESIDENT OF THE UNITED STATES, ANY CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE UNITED STATES, EXCEPT: (A) TO THE ISSUER, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT AND WITH APPLICABLE STATE SECURITIES LAWS, (C) IN COMPLIANCE WITH (1) RULE 144 OR (2) RULE 144A UNDER THE SECURITIES ACT AND WITH APPLICABLE STATE SECURITIES LAWS, (D) IN CONNECTION WITH ANOTHER EXEMPTION UNDER THE SECURITIES ACT, OR (E) WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER, UPON THE ISSUER RECEIVING, IN THE CASE OF CLAUSES (C)(1) AND (D) ABOVE, AN OPINION OF COUNSEL FOR THE HOLDER, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

Notwithstanding the foregoing, (i) at any time Planet 13 or its successor company is a “foreign issuer”, as defined in Rule 902(e) of Regulation S of the Securities Act, if such securities are being sold in accordance with the requirements of Rule 904 of Regulation S of the Securities Act, as referred to above, and in compliance with local Laws and regulations, the legend may be removed by providing a declaration to the Planet 13’s transfer agent for such securities, in the form as may be prescribed by Planet 13 or its successor company from time to time, together with any other evidence, which may include an opinion of counsel of recognized standing reasonably satisfactory to Planet 13 or its successor company to the effect that such legend is no longer required under applicable requirements of the Securities Act, required by Planet 13 or its successor company or such transfer agent; and (ii) if any such securities are being sold pursuant to Rule 144 under the Securities Act, the legend may be removed by delivery to the registrar and transfer agent for such securities of an opinion of counsel of recognized standing reasonably satisfactory to Planet 13 or its successor company to the effect that such legend is no longer required under applicable requirements of the Securities Act or applicable state securities laws.

The Seller is acquiring the Consideration Shares as principal for its own account and not with a view toward, or for sale in connection with, any distribution thereof, or with any present intention of distributing or selling the Consideration Shares in any Province or Territory of Canada. The Seller is an “accredited investor” as defined in National Instrument 45-106 Prospectus Exemptions of the Canadian Securities Administrators and is able to bear the economic risk of an investment in the Consideration Shares.

The Transferors acknowledge that Planet 13 may be required to file a report with the Canadian securities regulatory authorities containing personal information about Coffman and the other beneficial owners of Seller and W Vapes, including their full names, addresses and telephone numbers, the number and type of securities purchased, the total purchase price paid for the securities, the date of the closing and the exemption relied upon under applicable Canadian Securities Laws.

(v) Rule 144. Transferors understand and acknowledge that (i) if Planet 13 or any successor company is deemed to have been at any time previously an issuer with no or nominal operations and no or nominal assets other than cash and cash equivalents, other than a Capital Pool Company (as such term is defined in the TSXV Corporate Finance Manual), Rule 144 under the Securities Act may not be available for resales of the Consideration Shares and (ii) Planet 13 is not obligated to make Rule 144 under the Securities Act available for resales of such Consideration Shares.

(vi) No Registration Statement. Transferors understand and acknowledge that Planet 13 has no obligation or present intention of filing with the United States Securities and Exchange Commission or with any state securities administrator any registration statement in respect of resales of the Consideration Shares in the United States.

(vii) Foreign Issuer. Transferors understand and acknowledge that Planet 13 or any successor company (i) is not obligated to remain a “foreign issuer” within the meaning of Rule 902(e) of Regulation S of the Securities Act, (ii) may not, at the time the Consideration Shares are resold by it or at any other time, be a foreign issuer, and (iii) may engage in one or more transactions which could cause Planet 13 or any successor company not to be a foreign issuer, and if Planet 13 or any successor company is not a foreign issuer at the time of sale or transfer of the Consideration Shares pursuant to Rule 904 of Regulation S of the Securities Act, the certificate representing the Consideration Shares may continue to bear the legend described above.

(viii) Financial Statements. Each Transferor understands and acknowledges that the financial statements of Planet 13 have been prepared in accordance with International Financial Reporting Standards, which differ in some respects from United States generally accepted accounting principles, and thus may not be comparable to financial statements of United States companies.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

Each of Buyer and Planet 13 represents and warrants to Transferors that each of the representations and warranties set forth in this Article 5 are true and correct as of the Effective Date and shall be true and correct on the First Closing Date and on the Second Closing Date. Notwithstanding anything to the contrary provided in this Agreement (in addition to any specific exception to Federal Cannabis Laws and any similar Law set forth in this Article 5), all representations, warranties, covenants and disclosures of Buyer and Planet 13 in this Article 5 are being made with exception to and not with respect to Federal Cannabis Laws.

5.1.

Organization and Good Standing. Buyer is a corporation, duly organized, validly existing

and in good standing under the Laws of the State of Nevada. Buyer has full corporate power and authority to conduct its business and to own and lease its properties and assets (except under Federal Cannabis Laws). Planet 13 Holdings Inc is a corporation duly organized, validly existing and in good standing under the Business Corporations Act (British Columbia). Planet 13 has full corporate power and authority to conduct its business and to own and lease its properties and assets (except under Federal Cannabis Laws).

5.2.

Authority; Authorization; Binding Effect. Each of Buyer and Planet 13 have all necessary

power and authority to execute and deliver this Agreement and to consummate the Transaction and to perform its obligations under this Agreement (except under Federal Cannabis Laws). This Agreement has been duly executed and delivered by Buyer and Planet 13 and constitutes a legal, valid and binding obligation of Buyer and Planet 13 respectively, enforceable against Buyer and Planet 13 in accordance with its terms, except as such enforcement may be limited by Federal Cannabis Laws.

5.3.

Consents and Approvals. Subject to the requirements under the Nevada Cannabis Laws,

and applicable Canadian Securities Laws and U.S. securities laws filings and Canadian Securities Exchange requirements, and except as set forth on Schedule 5.3 of the Disclosure Schedules, no consent, approval or authorization of, or declaration, filing or registration with, any Person is required to be made or obtained by Buyer or Planet 13 in connection with the execution, delivery and performance of this Agreement and the consummation of the Transaction.

5.4.

No Brokers. The Planet 13 Parties have not entered into any agreement, arrangement or

understanding with any Person which will result in the obligation to pay any finder’s fee, brokerage commission or similar payment in connection with the Transaction.

ARTICLE 6

PRE-CLOSING COVENANTS

6.1. Reasonable Best Efforts. During the period from the Effective Date and continuing until the earlier of the termination of this Agreement or the Second Closing Date:

(a) Each Party will cooperate with the other Party and use its commercially reasonable efforts to promptly (i) take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable under this Agreement and the ancillary documents referenced in this Agreement and applicable Law to consummate and make effective the Transaction as soon as practicable, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, (ii) obtain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any third party and/or Governmental Authority necessary, proper or advisable to consummate the Transaction, and (iii) execute and deliver such documents, certificates and other papers as a Party may reasonably request to evidence the other Party’s satisfaction of its obligations hereunder. Subject to applicable Law relating to the exchange of information and in addition to Section 6.1(b), the Parties will have the right to review in advance, and, to the extent practicable, each will consult the other Party on, any information relating to Seller or Buyer and their respective Affiliates, as the case may be, that appears in any filing made with, or written materials submitted to, any third party and/or any Governmental Authority in connection with the Transaction.

(b) Without limiting the forgoing Section 6.1(a), the Parties will: (i) cooperate with one another promptly to determine whether any filings are required to be or should be made or consents, approvals, permits or authorizations are required to be or should be obtained under any applicable Law, and (ii) in promptly making any such filings, furnishing information required in connection therewith and seeking to obtain timely any such consents, permits, authorizations or approvals.

(c) Without limiting Section 6.1(a), Seller shall not voluntarily mortgage, pledge, or subject to any lien any of the Purchased Assets or MRB Assets. Transferors hereby undertake and agree that until the earlier of Second Closing Date or the valid termination of this Agreement, neither Transferor or their respective affiliates shall, and shall cause their respective officers, owners, directors, employees, investment bankers, attorneys, accountants, financial advisors, agents and other representatives (collectively, “Representatives”) not to, directly or indirectly:

(i) Initiate, solicit, encourage or knowingly facilitate or induce the submission of any inquiries, proposals or offers that constitute, or may reasonably be expected to lead to, any “Alternative Transaction” (defined as a proposal with respect to the purchase of the Purchased Assets, any equity in the owner of such assets, or a merger, exchange, recapitalization, reorganization, or other transaction resulting in a change of control of the subsidiaries which own the Purchased Assets.

(ii) Engage or participate in any discussions or negotiations regarding, or provide or cause to be provided any non-public information or data relating to the Business or the Purchased Assets or have any discussions with any person relating to, an actual or proposed Alternative Transaction; or

(iii) Enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar statement of intention or agreement relating to any Alternative Transaction.

(d) Each Party will keep the other Party reasonably apprised of the status of matters relating to the completion of the Transaction and work cooperatively in connection with obtaining all required approvals or consents of any Governmental Authority. In that regard, each Party will without limitation: (i) promptly notify the other Parties of, and if in writing, furnish the other Party with copies of (or, in the case of material oral communications, advise the other Party orally of) any communications from or with any Governmental Authority with respect to the Transaction, (ii) permit the other Party to review and discuss in advance, and consider in good faith the views of the other Party in connection with,

any proposed written (or any material proposed oral) communication with any such Governmental Authority, (iii) not participate in any meeting with any such Governmental Authority unless it consults with the other Party in advance and, to the extent permitted by such Governmental Authority, gives the other the opportunity to attend and participate, (iv) furnish the other Party with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and any such Governmental Authority with respect to this Agreement, any ancillary documents and the Transaction, and (v) furnish the other Party with such necessary information and reasonable assistance as the other Party may reasonably request in connection with its preparation of necessary filings or submissions of information to any such Governmental Authority. Notwithstanding the foregoing, Seller shall not be required to disclose any information it reasonably believes is subject to any applicable privilege or obligations of confidentiality.

(e) Seller shall not amend any Assumed Contracts or enter into any new Contracts or other agreements with any third party related to the Purchased Assets or MRB Assets without giving Buyer the opportunity to review such amendments, Contracts or other agreements and receiving the consent of Buyer, which consent shall not be unreasonably, withheld, conditioned or delayed.

6.2.

Intentionally Omitted.

6.3.

Confidentiality and Publicity. The Parties to this Agreement acknowledge, covenant and

agree that each Party and such Party’s Representatives and Affiliates will keep all information relating to the Parties confidential, and no Party, its Representatives or Affiliates will disclose or allow to be disclosed any confidential information with respect to the other Party, directly or indirectly, to any third party without the prior written approval of all Parties, except where the information is already generally available to the public through no act of a Party or where a Party is required by any applicable Law to disclose confidential information (and then prior notice of such disclosure shall be given to the other Parties). Notwithstanding the foregoing, the Mutual Non-Disclosure Agreement between the Parties dated June 12, 2020, shall also continue in effect.

6.4.

Access. During the period from the Effective Date and continuing until the earlier of the

termination of this Agreement or the First Closing Date, Seller will permit Representatives of Buyer (including legal counsel and accountants) to have, upon prior written notice, reasonable access during normal business hours and under reasonable circumstances, and in a manner so as not to interfere with the normal business operations of Seller, to the premises, personnel, books, records (including Tax records (but excluding income Tax Returns of any federal consolidated (and state combined or unitary) group of which Seller is a member and limited with respect to all other Tax Returns and correspondence with accountants to the portions of such Tax Returns and correspondence with accountants that specifically relate to Seller)), material Contracts, Permits and documents of or pertaining to the Business, subject to applicable Laws and security procedures of Seller and the Company. Neither Buyer, Planet 13, nor any of their Representatives will contact any employee, customer, supplier or landlord of Seller without the prior approval of Seller prior to the First Closing Date.

6.5.

Notification of Certain Matters. During the period from the Effective Date and continuing

until the earlier of the termination of this Agreement or the Second Closing Date, except as prohibited by applicable Law, each Party will give prompt notice to the other Parties of (a) the occurrence or nonoccurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of such Party contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the First Closing or Second Closing such that the conditions set forth in Section 7.2(a), Section 7.2(o) or Section 7.3(a) would not be satisfied, and (b) any material failure of such Party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by

such Party hereunder such that the conditions set forth in Section 7.2(e), 7.2(p) or Section 7.3(b) would not be satisfied.

6.6.

Applications for Regulatory Approval. Promptly following the First Closing, Buyer will

prepare, and Buyer and Seller will submit the applicable Applications with the Regulatory Authorities in order to obtain the consent and approval of the Regulatory Authorities for the transfer or substitution of Buyer as the owner of the MRB Licenses. Seller will cooperate in good faith with Buyer and take all actions necessary to support the timely submission of the Applications. Buyer and Seller agree to execute and deliver any forms required by the Regulatory Authorities for the transfer or substitution of Buyer as the owner of the MRB Licenses. Buyer and Seller shall promptly respond to requests for additional information, documents, forms or fees from any Regulatory Authorities with jurisdiction to approve the transfer or substitution of Buyer as owner of the MRB Licenses. Seller’s obligation to seek the Regulatory Approvals will be an ongoing post-First Closing covenant until successful completion thereof and the Second Closing occurs. Notwithstanding the foregoing, in no event shall Seller be obligated to incur any costs, including, but not limited to, any filing fees with respect to the foregoing activities.

6.7.

Disclosure Schedules. Between the Effective Date and the First Closing Date, Transferors

shall use Transferors’ reasonable best efforts to promptly correct and supplement the information set forth on the Disclosure Schedules delivered by Transferors pursuant to this Agreement in order to cause such Disclosure Schedule to remain correct and complete in all respects. Transferors’ delivery to the Planet 13 Parties of any corrections or supplements shall, without further notice or action on the part of Transferors or Buyer, immediately and automatically constitute an amendment to the Disclosure Schedule to which such corrections and supplements relate; provided, however, that solely for purposes of determining whether the condition precedent pursuant to Section 7.3.(a) has been satisfied, or whether Buyer has the right to terminate this Agreement pursuant to Section 8.1), any such amendment to the Disclosure Schedule shall be disregarded.

(a) The information in the Disclosure Schedules constitutes: (i) exceptions to particular representations, warranties, covenants and obligations of Transferors as set forth in this Agreement; or (ii) descriptions or lists of assets and other items referred to in this Agreement. If there is any inconsistency between the statements in this Agreement and those in the Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the Disclosure Schedules shall control.

(b) The Disclosure Schedules shall be deemed to be a part of this Agreement and are fully incorporated into this Agreement by reference. Any capitalized terms used in the Disclosure Schedules but not otherwise defined therein shall have the meanings ascribed to such terms in this Agreement. The inclusion of any item referenced in one section or subsection of the Disclosure Schedules shall be deemed to refer to (a) the corresponding section or subsection of this Agreement and (b) any other section or subsection of the Disclosure Schedules (and accordingly to the applicable sections or subsections of this Agreement), whether or not an explicit cross-reference appears, if the applicability of such item to the other section or subsection is reasonably apparent on the face of such disclosure

ARTICLE 7

CONDITIONS TO FIRST CLOSING AND SECOND CLOSING

7.1

Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each Party to effect the Transaction will be subject to the satisfaction at or prior to the First Closing Date and/or the Second Closing Date, as applicable, of the following conditions, any or all of which may be waived in writing by a

Party with respect only to itself, in whole or in part, to the extent permitted by applicable Law:

(a)

Proceedings.

(i) No Governmental Authority of competent jurisdiction will have enacted, issued, promulgated, enforced or entered, other than the Federal Cannabis Laws, any statute, rule, regulation, or Order (whether temporary, preliminary or permanent) that is in effect and has the effect of making the Transaction illegal or otherwise prohibiting consummation of the Transaction.

(ii) No Proceeding will have been commenced against any Party which could reasonably prevent the First Closing or Second Closing to occur (either by way of injunction or other legal remedy).

(iii) There will be no other legal impediment to the First Closing or Second Closing, except for the existence of the Federal Cannabis Laws.

(iv) There will be no Nevada-state or local mandated closure of the cannabis dispensaries located in Las Vegas, Nevada.

(v) The Excluded Management Agreement will be terminated on terms acceptable to Seller.

7.2. Additional Conditions to Obligations of Buyer. The obligations of Buyer to effect the Transaction are subject to satisfaction of the following additional conditions, any or all of which may be waived in writing by Buyer, in whole or in part, to the extent permitted by applicable Law:

(a) Representations and Warranties. The representations and warranties of Seller set forth in this Agreement will be true and correct in all material respects (giving effect to the applicable exceptions set forth in the Disclosure Schedules but without giving effect to any limitation as to “materiality”) as of the First Closing Date and Second Closing Date, as if made as of such time (except to the extent that such representations and warranties expressly speak as of another date, in which case such representations and warranties will be true and correct as of such date). Buyer will have received a certificate signed on behalf of Seller to such effect.

(b) Title to Purchased Assets and MRB Assets. As of the First Closing Date Seller shall have good and valid title to, or a valid leasehold in, all of the Purchased Assets (except for the Second Closing MRB Assets), free and clear of all Encumbrances except for Permitted Encumbrances. With respect to the Second Closing, subject to the Nevada Cannabis Laws and satisfaction of all other conditions precedent hereunder to transfer of the Second Closing MRB Assets to Buyer on the Second Closing Date, Seller shall have on or before the Second Closing Date, good and valid title to, or a valid leasehold in, all of the Second Closing MRB Assets, free and clear of all Encumbrances, other than Permitted Encumbrances and the full and unrestricted power to sell, assign, transfer and deliver the Second Closing MRB Assets pursuant to the terms of this Agreement.

(c) Organization and Authority of Seller to Conduct Business. As of the First Closing Date, Seller shall be duly organized, validly existing and in good status under the Laws of the State of Nevada. Seller shall have full limited liability company power and authority to conduct the Business and to own and lease its properties and assets (except under Federal Cannabis Laws).

(d) Good Standing. Seller shall have delivered to Buyer a certificate of the secretary or an officer of Seller, in form and substance reasonably satisfactory to Buyer, certifying as to (i) the certificate of formation of Seller, as amended, certified by the Secretary of State of the State of Nevada, as of a recent date, and stating that no amendment has been made to such articles since such date; (ii) its

operating agreement or equivalent; (iii) the resolutions or authority of its respective members and/or managers authorizing the execution and performance of the Transaction Documents and the transactions contemplated thereby; (iv) a certificate of good standing, as of a recent date, certified by the Secretary of State of the State of Nevada, and (v) incumbency and signatures of its respective officers executing the Transaction Documents.

(e) MRB Licenses. As of the First Closing Date and the Second Closing Date, the MRB Licenses shall constitute all Permits used in the operation of and necessary to conduct the Business and all MRB Licenses shall be valid and in full force and effect with no Proceeding pending or, to the Knowledge of Seller, threatened to revoke or limit any of the MRB Licenses.

(f) Agreements and Covenants. Transferors shall have performed and complied with all of their covenants hereunder in all material respects through the First Closing Date and the Second Closing Date, respectively, and Buyer will have received a certificate signed on behalf of Seller to such effect.

(g) Documents. As of the First Closing Date, the Management Agreement and all of the documents, instruments and agreements to be executed and/or delivered pursuant to this Agreement at the First Closing, including the First Closing Documents and such other customary instruments of transfer, assumption, filings, assignments or other documents, in form and substance reasonably satisfactory to Buyer and Seller, will have been executed by the Parties thereto other than Buyer and delivered to Buyer. As of the Second Closing Date, all of the Second Closing Date Documents, to be executed and/or delivered pursuant to this Agreement, in form and substance reasonably satisfactory to Buyer and Seller, will have been executed by the Parties thereto other than Buyer and delivered to Buyer.

(h) UCC Release/Payoffs Required at First Closing. Seller shall have delivered to Buyer releases or pay-off letters from the applicable lenders with respect to all outstanding Closing Indebtedness of Seller and evidence satisfactory to Buyer that all Encumbrances affecting Seller or the Purchased Assets will be released upon the consummation of the First Closing (including, where applicable, UCC termination statements authorized to be filed by Buyer upon the consummation of the Closing);

(i) Designation of Point of Contact. As of the First Closing Date, Buyer shall have the right to designate an individual to serve as the new point of contact to manage all communications with the Regulatory Authorities regarding the MRB Licenses, and Seller shall take all necessary steps to ensure that the individual designated by Buyer is listed as the point of contact with the Regulatory Authorities for the MRB Licenses.

(j) Consents and Approvals. As of the First Closing Date and the Second Closing Date, as applicable, Seller will have received all of the consents and approvals set out in Schedule 4.2 of the Disclosure Schedules, on terms satisfactory to Buyer and Seller in their reasonable discretion.

(k) Material Adverse Change. As of the First Closing Date, there shall have occurred no Material Adverse Effect between the Effective Date and the First Closing Date.

(l) Lease and Option Agreement. As of the First Closing Date, Rx Land shall have acquired the Leased Premises, and Seller and Rx Land shall have entered into the Lease and the Option Agreement.

(m) Regulatory Confirmation. With respect to the First Closing only, Buyer shall have received assurances reasonably satisfactory to Buyer that the MRB Licenses are, subject to approval from the Regulatory Authorities, transferable to Buyer under the Nevada Cannabis Laws.

(n) Regulatory Approvals. With respect to the Second Closing only, Buyer and Seller shall have received the Regulatory Approvals. Any waiver of the closing condition set forth in this Section 7.2(n) as to any individual MRB Licenses will not result in a reduction in the Purchase Price.

(o) Destruction of Excluded MRB Inventory. On or prior to the First Closing, Indus shall have destroyed or sold as the case may be, the Excluded Inventory in compliance with Nevada Cannabis Laws.

7.3. Additional Conditions to Obligations of Transferors. The obligations of Transferors to effect the Transaction are subject to satisfaction of the following additional conditions, any or all of which may be waived in writing by Transferors, in whole or in part, to the extent permitted by applicable Law:

(a) Representations and Warranties. The representations and warranties of the Planet 13 Parties set forth in this Agreement will be true and correct in all material respects (without giving effect to any limitation as to “materiality”) as of the First Closing Date and the Second Closing Date, as if made as of such time (except to the extent that such representations and warranties expressly speak as of another date, in which case such representations and warranties will be true and correct as of such date). Transferors will have received a certificate signed on behalf of the Planet 13 Parties to such effect.

(b) Agreements and Covenants. The Planet 13 Parties will have performed and complied with all of their covenants hereunder in all material respects through the First Closing Date and the Second Closing Date. Transferors will have received a certificate signed on behalf of Planet 13 Parties to such effect.

(c) Documents. As of the First Closing Date, the Management Agreement and all of the documents, instruments and agreements to be executed and/or delivered at the First Closing pursuant to this Agreement, including the First Closing Documents and such other customary instruments of transfer, assumption, filings, assignments or other documents, in form and substance reasonably satisfactory to Seller, will have been executed by the parties thereto other than Seller and delivered to Seller. As of the Second Closing Date, all of the Second Closing Date Documents, instruments and agreements to be executed and/or delivered pursuant to this Agreement, including customary instruments of transfer, assumption, filings, assignments or other documents, in form and substance reasonably satisfactory to Seller, will have been executed by the parties thereto other than Seller and delivered to Seller.

(d) Consents and Approvals. As of the First Closing Date and the Second Closing Date, as applicable, Seller will have received all of the consents and approvals set out in Schedule 4.2 of the Disclosure Schedules, on terms satisfactory to Buyer and Seller in their reasonable discretion.

(e) Regulatory Approvals. With respect to the Second Closing only, Buyer and Seller shall have received the Regulatory Approvals. Any waiver of the closing condition set forth in this Section 7.3(e) as to any individual MRB Licenses will not result in a reduction in the Purchase Price.

(f) Termination of Indus Transaction. Transferors shall have terminated (i) their obligation to sell the Purchased Assets and the MRB Assets to Indus and its Affiliates (the “Prior APA”), (ii) the current lease between Seller and Indus, and (iii) the Excluded Management Agreement, on terms acceptable to Transferors.

ARTICLE 8

TERMINATION

8.1. Termination Prior to First Closing Date.

(a) This Agreement may be terminated and the Transaction may be abandoned at any time prior to the First Closing Date:

(i)

By mutual written consent of Buyer and Seller;

(ii)

By either Buyer or Seller if:

(A) the First Closing Date has not occurred on or before August 31, 2020 or another date mutually agreed to in writing by Buyer and Seller; provided, that the right to terminate this Agreement under this Section 8.1(a)(ii)(A) will not be available to any Party whose failure to fulfill any material obligation under this Agreement has been the cause of the failure of the First Closing Date to have occurred on or before such date;

(B) a Governmental Authority shall have issued an Order or taken any other action (excluding any Order or action arising under, relating to or in connection with the Federal Cannabis Laws), in each case that has become final and non-appealable and that restrains, enjoins or otherwise prohibits the Transaction or any part of it; provided that this Agreement shall not be terminated unless the Party terminating this Agreement has utilized commercially reasonable efforts to oppose the issuance of such Order, decree or ruling or the taking of such action;

(iii) By Buyer, if (i) any of the representations and warranties of Seller or W Vapes in this Agreement become untrue or inaccurate in any material respect such that Section 7.2(a) would not be satisfied or (ii) there has been a material breach on the part of Seller or W Vapes of any of their respective covenants or agreements contained in this Agreement such that Section 7.2(e) would not be satisfied; or

(iv) By Seller if (i) any of the representations and warranties of Buyer or Planet 13 in this Agreement become untrue or inaccurate in any material respect such that Section 7.3(a) would not be satisfied or (ii) there has been a material breach on the part of Buyer or Planet 13 of any of its covenants or agreements contained in this Agreement such that Section 7.3(b) would not be satisfied.

(b) Notice of Termination. If Buyer intends to terminate this Agreement under Sections 8.1(a)(ii)(A), 8.1(a)(ii)(B), or 8.1(a)(iii , or if Seller intends to terminate this Agreement under Sections 8.1(a)(ii)(A), 8.1(a)(ii)(B) or 8.1(a)(iv), such Person will provide the other Party with written notice of their intent, indicating in reasonable detail the deficiencies relied upon to terminate this Agreement.

(c) Effect of Termination. In the event of the termination of this Agreement pursuant to any provision of Section 8.1(a), this Agreement (other than this Section 8.1(c), Section 6.3 and Article 10, which will survive such termination) will forthwith become void, and there will be no Liability on the part of any Party or any of their respective officers or managers to the other and all rights and obligations of any Party will cease; provided, however, that nothing in this Section 8.1(c) will relieve any Party from Liability for fraud in the giving of any representations or warranties or for any willful and material breach, prior to termination of this Agreement.

8.2.

Termination After First Closing Date and Prior to Second Closing Date.

(a) If the Regulatory Authorities deny the issuance of the Regulatory Approvals prior the first anniversary of the First Closing Date, then, the Seller, in its sole discretion, may elect to terminate this Agreement and unwind the Transaction (except for the purchase of the MRB Inventory on the First Closing Date), and exercise its option to under the Option Agreement to reacquire the Real Property and Tangible Personal Property in which case the parties shall take the action described below:

(A) The Consideration Shares issued on the First Closing Date shall be returned to Planet 13, the Share Escrow Agreement cancelled and such Consideration Shares cancelled by Planet 13;

(B) all ancillary documents executed in connection with this Agreement, (including the First Closing Documents) shall be terminated;

(D) all of Tangible Personal Property transferred to Buyer pursuant to this Agreement shall be returned to the full ownership and control of Seller, free and clear of any Encumbrances other than Encumbrances existing as of the First Closing Date or approved in writing by Seller and the Buyer; provided, however, that to the extent Buyer no longer owns certain Tangible Personal, reasonable replacement assets may be transferred to Seller in substitution, as determined in good faith by mutual agreement of the Parties;

(E) If permitted by the Regulatory Authorities, the Parties will work together in good faith to take such actions as are commercially reasonable to return the Parties to the situation and condition existing immediately prior to the First Closing; and

(F) Buyer will terminate the Management Agreement, and will be responsible for the cancellation, payment, or satisfaction of any liabilities and obligations incurred by Buyer under the Management Agreement which are not automatically cancelled or terminated upon the termination of the Management Agreement, unless Seller, in its sole discretion, elects in writing to assume such liabilities and/or obligations;

(G) the Parties will work together in good faith to execute and deliver and take such additional actions as are reasonably necessary to return the Parties to the situation and condition existing immediately prior to the First Closing,

(b) If the Regulatory Authorities have not issued all Regulatory Approvals within six (6) years of the First Closing Date for any reason (and if Section 8.2(a) has not previously applied) then, this Agreement shall terminate and:

(A) The Consideration Shares shall be returned to Planet 13, the Share Escrow Agreement terminated, and such Consideration Shares cancelled by Planet 13;

(B) all ancillary documents executed in connection with this Agreement, (including the First Closing Documents) shall be terminated;

(D) all of the Tangible Personal Property transferred to Buyer pursuant to this Agreement (subject to changes reflecting the operation of the Business in the ordinary course) shall be returned to the full ownership and control of Seller, free and clear of any Encumbrances other than Encumbrances existing as of the First Closing Date or approved in writing by Seller and the Buyer; provided, however, that to the extent Buyer no longer owns certain Tangible Personal Property, reasonable replacement assets may be transferred to Seller in substitution, as determined in good faith by mutual agreement of the Parties;

(c) In the event of the termination of this Agreement pursuant to Section 8.2(a)(ii), this Agreement (other than Section 8.2(a)(ii), this Section 8.2(c), Section 6.3 and Article 10, which will survive such termination) will forthwith become void, and there will be no Liability on the part of any Party or any of their respective officers or managers to the other and all rights and obligations of any Party will cease; provided, however, that nothing in this Section 8.2(c) will relieve any Party from Liability for fraud in the giving of any representations or warranties or for any willful and material breach, prior to termination of this Agreement in accordance with its terms, of any covenant or agreement contained in this Agreement.

ARTICLE 9

COVENANTS AND CONDUCT OF THE PARTIES AFTER THE FIRST CLOSING AND

SECOND CLOSING

9.1.

Survival and Indemnification.

(a) Survival of Representations, Warranties, Covenants and Agreements. All representations and warranties of Seller and Buyer contained in this Agreement will survive the Second Closing Date for a period of two (2) years. Any claim made by Buyer or Seller based on fraud in the giving of any representations and warranties will survive indefinitely. All covenants and agreements made by Seller and Buyer contained in this Agreement (including the obligation of Buyer and Seller to submit the Applications (pursuant to Section 6.6) and to convey the MRB Assets (pursuant to Section 2.2) to Buyer), will survive the First Closing Date and Second Closing Date until fully performed or discharged. Any written claim for breach of representation and warranty delivered prior to the above-referenced applicable expiration date to the Party against whom such indemnification is sought will survive thereafter and, as to any such claim, such expiration, if any, will not affect the rights to indemnification under this Article 9 of the Party making such claim.

(b)

Indemnification by Seller.

(i) Seller agrees to defend, indemnify and hold harmless the Planet 13 Parties and their Affiliates, and the managers, directors, officers and employees of the Planet 13 Parties and their respective Affiliates (each a “Buyer Party” and collectively, the “Buyer Parties”), from, against, and in respect of:

(A) any and all Losses suffered or incurred by a Buyer Party by reason of any breached or untrue representation or warranty of Seller contained in Article 4 of this Agreement;

(B) any and all Losses suffered or incurred by a Buyer Party by reason of the breach of or non-compliance with any covenant or agreement by Seller contained in this Agreement or any ancillary agreements executed in connection with this Agreement;

(C) any and all Losses suffered or incurred by a Buyer Party attributable to (1) any and all Taxes of Seller, (2) without duplication, and subject to Section 2.5 (Transfer Taxes), any and all Taxes (or the non-payment thereof) imposed on Buyer with respect to the Purchased Assets and MRB Licenses attributable to any Pre-Closing Tax Period or any MRB Pre-Closing Tax Period, and (3) any and all withholding, payroll, social security, unemployment or similar Taxes attributable to any payments made by Seller that are contingent upon or payable as a result of the transactions contemplated by this Agreement;

(D) any and all Losses suffered or incurred by a Buyer Party by reason of any Excluded Liabilities or Excluded Assets or Taxes which are the responsibility of Seller pursuant to Section 9.2;

(E) any and all Losses suffered or incurred by a Buyer Party by reason of any Third-Party Claim based upon, resulting from or arising out of the business, operations, properties, assets or obligations of Seller (other than the Purchased Assets or Assumed Liabilities) conducted, existing or arising on or prior to the Second Closing Date, except to the extent indemnified by Buyer as set forth in Section 9.1(c)(iv) below; and

(F) any and all Losses suffered or incurred by a Buyer Party by reason of fraud by Seller.

(ii) W Vapes and Coffman jointly and severally agree to defend, indemnify and hold harmless the Buyer Parties from, against, and in respect of:

(A) any and all Losses suffered or incurred by a Buyer Party by reason of any breached or untrue representation or warranty of W Vapes and Coffman contained in Article 4 of this Agreement;

(B) any and all Losses suffered or incurred by a Buyer Party by reason of the breach of or non-compliance with any covenant or agreement by W Vapes and Coffman contained in this Agreement or any ancillary agreements executed in connection with this Agreement; and

(D) any and all Losses suffered or incurred by a Buyer Party by

reason of fraud by Transferors.

agree to indemnify and hold harmless the Transferors and their Affiliates, and the managers, officers and employees of Seller and their respective Affiliates (each a “Seller Party”), and collectively, the “Seller Parties”) from, against, and in respect of:

(i) any and all Losses suffered or incurred by a Seller Party by reason of any breach of a representation or warranty by a Planet 13 Party contained in Article 5 of this Agreement;

(ii) any and all Losses suffered or incurred by a Seller Party by reason of the breach of or non-compliance with any covenant or agreement by a Planet 13 Party contained in this Agreement or any ancillary agreements executed in connection with this Agreement;

(iii) any and all Losses suffered or incurred by a Seller Party by reason of any Assumed Liabilities, or Taxes which are the responsibility of the Planet 13 Parties pursuant to Section 9.2.

(iv) any and all Losses suffered or incurred by a Seller Party by reason of any Third-Party Claim based upon, resulting from or arising out of the business, operations, properties, assets or obligations of the Business (including the Purchased Assets, and Assumed Liabilities) conducted, existing or arising after the First Closing Date (to the extent that such Third-Party Claim does not relate to the MRB Assets or the actions of Seller after the First Closing Date and prior to the Second Closing Date); and

(v) any and all Losses suffered or incurred by a Seller Party by reason of fraud by a Planet 13 Party.

(d) Notification of Claims. In the event that any party hereto entitled to indemnification pursuant to this Agreement (the “Indemnified Party”) proposes to make any claim for such indemnification, the Indemnified Party will deliver to the indemnifying party (the “Indemnifying Party”), which delivery with respect to the Losses arising from breaches of representations and warranties will be on or prior to the date upon which the applicable representations and warranties expire pursuant to Section 9.1(a) hereof, a signed certificate, which certificate will (i) state that Losses have been incurred or that a claim has been made for which Losses may be incurred, (ii) specify the sections of this Agreement under which such claim is made, and (iii) specify in reasonable detail each individual item of Loss or other claim including the amount thereof and the date such Loss was incurred. In addition, each Indemnified Party will give notice to the Indemnifying Party promptly following its receipt of service of any suit or proceeding initiated by a third party which pertains to a matter for which indemnification may be sought (a “Third Party Claim”); provided, however, that the failure to give such notice will not relieve the Indemnifying Party of its obligations hereunder if the Indemnifying Party has not been prejudiced thereby.

(e) Defense of Third Party Claims. Any Indemnified Party will in good faith cooperate and assist the Indemnifying Party in defending against any claims or asserted claims with respect to which the Indemnified Party seeks indemnification under this Agreement. If requested by the Indemnifying Party, the Indemnified Party will join in any action, litigation, arbitration or proceeding, provided that the Indemnified Party will pay its own costs caused by such joinder. The Indemnified Party will not settle or compromise any claim or asserted claim, nor agree to extend any statute of limitations applicable to any claim or asserted claim, for which the Indemnified Party seeks indemnification under this

Agreement, without the prior written consent of the Indemnifying Party, which consent will not be unreasonably withheld.

(f)

Other Indemnification Matters.

(i) All indemnification payments made pursuant to this Section 9.1 by the Transferors will be treated as an adjustment to the Purchase Price unless otherwise required by applicable Law.

(ii) Except (A) with respect to claims based upon fraud, (B) for remedies that cannot be waived as a matter of Law and (C) injunctive and provisional relief in accordance with the terms of this Agreement, if the First Closing occurs, this Section 9.1 will be the sole and exclusive remedy for breach of, inaccuracy in, or failure to comply with, any representation, warranty, or covenant contained in this Agreement, or otherwise in respect of the transactions contemplated by this Agreement.

(iii) With respect to any indemnification payment obligations of Seller, W Vapes or Coffman under this Section 9.1 that is determined to be a Final Indemnification Claim, a Buyer Party shall be entitled to recover such amounts from Seller, W Vapes or Coffman, as applicable, under this Agreement. provided, that, such recovery shall come from the following sources in the following order of priority: first, from the Consideration Shares, and second, from Seller, W Vapes or Coffman, as applicable. Any Consideration Shares that is used in satisfaction of such indemnification obligation shall be valued at the greater of: (i) the volume weighted average trading price of the Consideration Shares on the Canadian Securities Exchange during the 10-trading day period preceding such payment date, and (ii) the value of such Restricted Shares established at the First Closing. A “Final Indemnification Claim” shall mean any claim by any Transferor against Seller or W Vapes pursuant to Section 9.1(b) with respect to any Losses suffered or incurred by any Transferor that is (i) subject to a written agreement between Seller and any Transferor, (ii) a final settlement between Seller and any Transferor; or (iii) a final adjudication determined by a court of competent jurisdiction that an indemnification obligation is owing by Seller to a Buyer Party.

(iv) No Buyer Party shall be entitled to indemnification with respect to the breach or inaccuracy of any representation or warranty unless, until and only to the extent that any Buyer Party (individually or collectively with all other Buyer Parties) has suffered or incurred actual Losses in respect aggregating in excess of $75,000 (the “Basket”), in which case Buyer Parties shall be entitled to recover all Losses to the extent they exceed the Basket, subject to the other limitations set forth herein.

(v) In no event shall Seller Parties be obligated to indemnify Buyer Parties with respect to the breach or inaccuracy of any representation or warranty for amounts in excess of $4,100,000 (the “Purchase Price Cap”).

9.2.

Tax Matters.

(a) The amount of any Taxes based on or measured by income, receipts, profits, including, without limitation sales, use, value added, excise, employment, payroll or withholding taxes arising prior to or First Closing Date applicable, shall be the obligation of Seller.

(b) Buyer and Seller will cooperate fully, as and to the extent reasonably requested by the other Parties, in connection with the filing of Tax Returns and any audit, litigation, or other proceeding with respect to Taxes. Such cooperation will include the retention and (upon the other Party’s request) the provision of records and information that are available and reasonably relevant to any such audit, litigation, or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

9.3.

Agreement Not To Compete.

(a) For a period ending on the earlier of: (i) the termination of this Agreement, or (ii) five (5) years from and after the First Closing Date (the “Restricted Period”), each Transferor and A. Todd Justice (the “Obligated Parties”) shall not, and shall cause its Affiliates not to, directly or indirectly, own, operate, lease, manage, control, engage in, invest in, lend to, own any debt or equity security of, permit its or his name to be used by, act as consultant or advisor to, render services for (alone or in association with any person, firm, corporate or other business organization) or otherwise assist in any manner or be involved in any other capacity with any business that engages in business activities competitive with the Business (a “Competing Business”) (including any Person engaged in whole or in part in any Competing Business) from a physical location anywhere in Nevada; provided, however, that nothing herein shall prohibit any Obligated Party from (i) taking any of the foregoing actions or acting in any of the foregoing capacities with respect to a business that is a Competitive Business solely by reason of producing, manufacturing, marketing and selling hemp CBD products or (ii) being a passive beneficial owner (including “group” that is a beneficial owner) of less than two percent (2%) of any class of securities of any entity that is registered pursuant to the Securities Act and traded on a national securities exchange.

(b) During the Restricted Period, no Obligated Party shall, and each shall cause its Affiliates not to, directly or indirectly: (i) induce or attempt to induce any of employee or consultant to leave the employ of, or engagement with, Buyer, or materially interfere with the relationship between Buyer and any employee or consultant, (ii) hire or engage any employee or consultant of the Planet 13 Parties or any of their Affiliates (or any person who was an employee or consultant of any Planet 13 Party or any of its Affiliates within the preceding 12 months, unless such employment or consulting relationship was terminated by Buyer) or (iii) induce or attempt to induce any person or entity who is or was within the prior two years a customer, supplier, licensee, licensor, franchisee or other business relation of any Transferor to cease doing business with any of the Planet 13 Parties or materially interfere with the relationship between any Planet 13 Party and any such Person.

(c) During the Restricted Period, each Obligated Party shall not, and shall cause its Affiliates not to, make or publish any statement or communication which is disparaging, negative or unflattering with respect to any of the Planet 13 Parties or any of their respective Affiliates, members, officers, managers, directors or employees. For purposes of this Section 9.3(c), a statement shall be deemed to be made by an Obligated Party only if made by an individual Obligated Party or by a member, officer, manager, director or senior managerial employee of a non-individual Obligated Party.

(d) Obligated Parties acknowledge and agree that the covenants and agreements set forth in this Section 9.3 were a material inducement to the Planet 13 Parties to enter into this Agreement and to perform its obligations hereunder and that the Planet 13 Parties would not have entered into this Agreement but for each Obligated Party’s agreement to the restrictions set forth in this Section 9.3. Obligated Parties further acknowledge and agree that the Planet 13 Parties would be irreparably damaged if any Obligated Party were to engage directly or indirectly in any Competing Business, that any such competition by any Obligated Party would result in a significant loss of goodwill by the Planet 13 Parties and that money damages would not be an adequate remedy for any such breach. Therefore, in the event a breach or threatened breach of this Section 9.3, the Planet 13 Parties and each of their Affiliates or their respective successors and assigns, in addition to other rights and remedies existing in their favor, shall be entitled to specific performance, injunctive and other equitable relief from a court of competent jurisdiction in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other surety and at the expense of such Obligated Party, including reasonable attorneys’ fees and expenses). The restrictive covenants set forth in this Section 9.3 shall be construed as agreements independent of any other provision in this Agreement, and the existence of any claim or cause of action of any Obligated Party against The Planet 13 Parties, whether predicated upon this Agreement or otherwise,

shall not constitute a defense to the enforcement by The Planet 13 Parties of any restrictive covenant contained in this Section 9.3. In the event of a breach or violation by any Obligated Party of this Section 9.3, the Restricted Period shall be tolled with respect to such Obligated Party until such breach or violation has been duly cured.

(e) Each Obligated Party agrees that the restrictions contained in this Section 9.3 are reasonable. If the final judgment of a court of competent jurisdiction nevertheless declares any term or provision of this Section 9.3 to be invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified to cover the maximum duration, scope or area permitted by Law.

ARTICLE 10

MISCELLANEOUS

10.1. Further Assurances. Following the First Closing and Second Closing, each Party will cooperate in good faith with each other Party and will take all appropriate action and execute any agreement, instrument or other writing of any kind which may be reasonably necessary or advisable to carry out and consummate the Transaction.

10.2. Notices. Unless otherwise provided in this Agreement, any agreement, notice, request, instruction or other communication to be given hereunder by any Party to the other will be in writing and (a) delivered personally (such delivered notice to be effective on the date it is delivered), (b) deposited with a reputable overnight courier service for next Business Day delivery (such couriered notice to be effective one (1) Business Day after the date it is sent by courier; provided it is actually sent to be delivered on one (1) Business Day after the date it is sent; otherwise, when actually delivered), (c) sent by e-mail (with electronic confirmation of delivery or receipt), as follows:

To any Planet 13 Party: Planet 13 Holdings, Inc.

BLC Management Company, LLC

2548 West Desert Inn Road

Las Vegas, Nevada 89109

Attn: Leighton Koehler

Fax: 702

[REDACTED]

with a mandatory copy to (which shall not constitute Notice):

Holley Driggs Ltd.

400 S. Fourth Street, Third Floor

Attn: Michael Kearney, Esq.

[REDACTED]

If to Seller or W Vapes, to:

W the Brand, LLC

West Coast Development Nevada, LLC

[REDACTED]

c/o A. Todd Justice

[REDACTED]

If to Coffman: R. Scott Coffman

[REDACTED]

With a copy (which shall not constitute notice) to:

Gavigan Law, PLLC

10700 Sikes Place, Suite 375

Charlotte, NC 28277

Fax: N/A

Attn: Timothy Gavigan, Esq.

Any Party may designate in a writing to any other Party any other address or facsimile number to which, and any other Person to whom or which, a copy of any such notice, request, instruction or other communication should be sent.

10.3. Governing Law: Dispute Resolution.

(a) Governing Law. All issues and questions concerning the application, construction, validity, interpretation, and enforcement of this Agreement shall be governed by and construed in accordance with the internal Laws of the State of Nevada, without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Nevada.

(b) Jurisdiction: Venue. The Parties hereby agree that any suit, action, or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort, or otherwise, shall be brought exclusively in the state courts of the State of Nevada located in Clark County thereafter. Each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action, or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding in any such court or that any such suit, action, or proceeding which is brought in any such court has been brought in an inconvenient forum.

(c) Waiver of July Trial. EACH OF THE PARTIES WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OR RELATED TO THIS AGREEMENT IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AFFILIATE OF ANY OTHER SUCH PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PARTIES AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL

WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

(d)Cannabis Laws. This Agreement is subject to strict requirements for ongoing

regulatory compliance by the Parties, including, without limitation, requirements that the Parties take no action in violation of either the marijuana establishment Laws of any jurisdiction or jurisdictions to which Seller or any of its subsidiaries are, or may at any time become, subject, including, without limitation, the Nevada Cannabis Laws. The Parties acknowledge and understand that the Nevada Cannabis Laws and/or the requirements of the Regulatory Authorities are subject to change and are evolving as the marketplace for state-compliant cannabis businesses continues to evolve. If necessary to comply with the requirements of the Nevada Cannabis Laws and/or the Regulatory Authorities, the Parties hereby agree to (and to cause their respective Affiliates and Representatives to) use their respective commercially reasonable efforts to take all actions reasonably requested to ensure compliance with the Nevada Cannabis Laws and/or the Regulatory Authorities, including, without limitation, negotiating in good faith to amend, restate, amend and restate, supplement, or otherwise modify this Agreement to reflect terms that most closely approximate the Parties’ original intentions but are responsive to and compliant with the requirements of the Nevada Cannabis Laws and/or the Regulatory Authorities. In furtherance of the foregoing, the Parties further agree to cooperate with the Regulatory Authorities to promptly respond to any informational requests, supplemental disclosure requirements, or other correspondence from the Regulatory Authorities and, to the extent permitted by the Regulatory Authorities, keep all other parties hereto fully and promptly informed as to any such requests, requirements, or correspondence.

10.4. Expenses. Except as expressly provided otherwise in this Agreement, (a) Seller will pay all legal, accounting and other expenses of Seller related to this Agreement and (b) Buyer will pay all legal, accounting and other expenses of Buyer related to this Agreement; provided, however, that any costs incurred to consummate the Transaction pursuant to the Nevada Cannabis Laws, including any costs required to be reimbursed to the Regulatory Authority (but excluding fees or penalties assessed against the Transferors arising out of or related to the sole act or omission by a Transferor) shall be paid by the Buyer.

10.5. Titles. The headings of the articles and sections of this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement.

10.6. Waiver. No failure of any Party to require, and no delay by any Party in requiring, any other Party to comply with any provision of this Agreement will constitute a waiver of the right to require such compliance. No failure of any Party to exercise, and no delay by any Party in exercising, any right or remedy under this Agreement will constitute a waiver of such right or remedy. No waiver by any Party of any right or remedy under this Agreement will be effective unless made in writing. Any waiver by any Party of any right or remedy under this Agreement will be limited to the specific instance and will not constitute a waiver of such right or remedy in the future.

10.7. Effective; Binding. This Agreement will be effective upon the due execution hereof by all of the Parties. Upon becoming effective, this Agreement will be binding upon each Party and upon each successor and assignee of each Party and will inure to the benefit of, and be enforceable by, each Party and each successor, designee and assignee of each Party; provided, however, that, except as provided for in the immediately following sentence, no Party may assign any right or obligation arising pursuant to this Agreement without first obtaining the written consent of the other Party. Buyer may assign all or a portion

of its rights and obligations under this Agreement to one or more designees of Buyer upon prior written notice to Seller, provided that: (i) the assignment to any designee of Buyer will not materially negatively affect the ability to perform the obligations of Buyer under this Agreement, (ii) the designee of Buyer purchasing the Purchased Assets and paying the Purchase Price shall have the requisite resources and funds to perform Buyer’s obligations hereunder and any designee of Buyer purchasing the Assets shall have the necessary qualifications to obtain all necessary consents and approvals under Nevada Cannabis Laws; and (iii) the designee shall assume the obligations under the respective ancillary agreements hereto to the extent the designee succeeds to the interests and obligations of Buyer that are the subject of such ancillary agreements. Buyer will remain liable hereunder notwithstanding any such assignment to one or more designees.

10.8. Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes each course of conduct previously pursued, accepted or acquiesced in, and each written or oral agreement and representation previously made, by the Parties with respect to the subject matter of this Agreement.

10.9. Modification. No course of performance or other conduct hereafter pursued, accepted or acquiesced in, and no oral agreement or representation made in the future, by any Party, whether or not relied or acted upon, and no usage of trade, whether or not relied or acted upon, will modify or terminate this Agreement, impair or otherwise affect any obligation of any Party pursuant to this Agreement or otherwise operate as a waiver of any such right or remedy. No modification of this Agreement or waiver of any such right or remedy will be effective unless made in writing duly executed by the Parties.

10.10. Counterparts; Electronic Copies. This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which taken together will constitute one and the same instrument. Documents executed, scanned and transmitted electronically and electronic signatures shall be deemed original signatures for purposes of this Agreement and all matters related thereto, with such scanned and electronic signatures having the same legal effect as original signatures. The Parties agree that this Agreement or any other document necessary for the consummation of the transactions contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act ("E-Sign Act"), Title 15, United States Code, Sections 7001 et seq., the Uniform Electronic Transaction Act ("UETA") and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all Parties the same as if it were physically executed and each Party hereby consents to the use of any third party electronic signature capture service providers as may be chosen and utilized by any Party.

10.11. Cannabis Carve-Out. Notwithstanding any provision in this Agreement to the contrary, the Parties acknowledge that they are aware of and fully understand that despite the medical and retail cannabis laws of the State of Nevada and the terms, conditions and covenants of this Agreement, individuals and entities engaged in the cultivation, transportation, sale, distribution or possession of medical and retail cannabis may still be arrested by federal and some state officers and prosecuted under Federal Cannabis Law; consequently, such activities are expressly excluded from any and all representations, warranties, obligations and covenants applicable to the Transferors under this Agreement. The Parties hereby waive illegality as a defense to any contract enforcement action.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Parties have caused this Asset Purchase Agreement to be executed as of the Effective Date.

Planet 13 Parties:

Planet 13 Holdings Inc.

By: /s/ Larry Scheffler

Name: Larry Scheffler

Title: Co-CEO

By: /s/ Robert Groesbeck

Name: Robert Groesbeck

Title: Co-CEO

MM Development Company, Inc.

By: /s/ Larry Scheffler

Name: Larry Scheffler

Title: Manager

By: /s/ Robert Groesbeck

Name: Robert Groesbeck

Title: Manager

Transferors:

West Coast Development Nevada, LLC

By: /s/ R. Scott Coffman

Name: R. Scott Coffman

Title: Manager

W the Brand, LLC

By: /s/ R. Scott Coffman

Name: R. Scott Coffman

Title: Manager

Execution

EXHIBITS

Exhibit A

Management Agreement

Exhibit B

Intentionally Omitted

Exhibit C

Lease

Exhibit D

Bill of Sale

Exhibit E

Assignment and Assumption Agreement

Exhibit F

Share Escrow Agreement

Exhibit G

Release Agreement

Exhibit H

Questionnaire

SCHEDULES

Schedule 1

Defined Terms

Schedule 1.1(u)

MRB Licenses

Schedule 2.1(a)(iii)

Additional Equipment

Schedule 2.1(a)(iv)

Assumed Contracts

Schedule 2.1(a)(vi)

Permits

Schedule 2.2(a)(iii)

MRB Contracts

Schedule 2.4(b)

Nevada Licenses

Schedule 4.2

Seller Consent and Approvals

Schedule 4.4

Financial Statements

Schedule 4.7

Tangible Personal Property

Schedule 4.8

Subsequent Events

Schedule 4.11

Material Contracts

Schedule 4.12

Labor Matters

Schedule 4.15

Compliance with Law

Schedule 4.17

Environmental

Schedule 4.18

Insurance

Schedule 5.3

Buyer’s Consents and Approvals

SCHEDULE 1

DEFINED TERMS

Defined Terms. As used in this Agreement, the following terms will have the following meanings:

(a) “Affiliate” means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

(b) “Affiliate Agreements” means each of the following documents in substantially the forms attached hereto: (i) the Management Agreement in the form attached hereto as Exhibit A, and (ii) the Lease Agreement in the form attached hereto as Exhibit C.

(c) “Agreement” means, unless the context otherwise requires, this Asset Purchase Agreement, as it may be amended from time to time, together with the Schedules and Exhibits attached hereto.

(d) “Applications” means any and all applications, documentation, change requests and correspondence provided to, and received from, the Regulatory Authorities or a state, county, city or local Governmental Authority involving the applications for, issuance of, or transfer of the Permits or MRB Licenses.

(e) “Benefit Plan” includes all “employee benefit plans” as defined in Section 3(3) of ERISA, and any other pension plans or employee benefit agreements, arrangements, programs or payroll practices (including severance pay, other termination benefits or compensation, vacation pay, salary, company awards, stock option, stock purchase, salary continuation for disability, sick leave, retirement, deferred compensation, bonus or other incentive compensation, stock purchase arrangements or policies, hospitalization, medical insurance, life insurance and scholarship programs) (whether funded or unfunded, written or oral, qualified or nonqualified), sponsored, maintained or contributed to or required to be contributed to by Seller or by any trade or business, whether or not incorporated, that together with a Seller would be deemed a “single employer” within the meaning of Section 4001 of ERISA for the benefit of any employee, leased employee, director, officer, shareholder or independent contractor (in each case either current or former) of Seller or Seller ERISA Affiliate.

(f) “Business” means the cultivation, manufacture, internal testing, marketing, promotion, and wholesale distribution of products containing cannabis and products that enable persons to consume cannabis in different forms, and other cannabis related products, for both medicinal and recreational uses, in each case within the State of Nevada.

(g) “Business Day” means any day other than a Saturday, Sunday or a legal holiday on which banks are not open for general business in the State of Nevada.

(h) “Cash Purchase Price” means the sum of (i) One Million Six Hundred Thousand U.S. Dollars (US$1,600,000), plus (ii) Three Thousand Three Hundred Thirty-Three and 33/100 U.S.

Dollars (US$3,333.33) for every day after June 30, 2020 up to and including the First Closing Date (the “Per Diem”).

(i) “Code” means the Internal Revenue Code of 1986, as amended.

(j) “Consideration Shares” has the meaning given such term in Section 2.3.

(k) “Contract” means all contracts, agreements and obligations currently in force relating to the Purchased Assets, and Seller including, without limitation, all sale, management, construction, insurance, commission, architectural, engineering, operating, employment, service, supply and maintenance agreements.

(l) “Encumbrance” means any claim, lien, mortgage, pledge, option, charge, security interest, right of way, encroachment, Tax, reservation, restriction, encumbrance, or other right of any Person, or any other restriction or limitation of any nature whatsoever, affecting title to, any assets of Seller.

(m) “Escrow Holder” means Odyssey Trust Company.

(n) “Environmental Liabilities” means any Liability arising from or under any Environmental Law (including as a result of any breach thereof or compliance therewith).

(o) “Environmental Law” means any Law as now or hereafter in effect in any way relating to the protection of the environment or natural resources or, in relation thereto, human health and safety, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as those Laws have been amended, any analogous state and local Laws and the regulations promulgated pursuant thereto.

(p) “ERISA” means the Employment Retirement Income Security Act of 1974 and the regulations promulgated pursuant thereto, each as amended.

(q) “Excluded Management Agreement” means the Management Services Agreement between Seller, W Vapes. and Indus, effective January 31, 2020.

(r) “Excluded MRB Inventory” means expired or otherwise unsaleable MRB inventory that is scheduled for destruction, and any cannabis distillate or vape oil products.

(s) “Federal Cannabis Laws” means any U.S. federal laws, civil, criminal or otherwise, as such relate, either directly or indirectly, to the cultivation, harvesting, production, distribution, sale and possession of cannabis, marijuana or related substances or products containing or relating to the same, including, without limitation, the prohibition on drug trafficking under 21 U.S.C. § 841(a), et seq., the conspiracy statute under 18 U.S.C. § 846, the bar against aiding and abetting the conduct of an offense under 18 U.S.C. § 2, the bar against misprision of a felony (concealing another’s felonious conduct) under 18 U.S.C. § 4, the bar against being an accessory after the fact to criminal conduct under 18 U.S.C. § 3, and federal money laundering statutes under 18 U.S.C. §§ 1956, 1957, and 1960 and the regulations and rules promulgated under any of the foregoing.

(t) “First Closing Documents” means each of the following documents, in substantially the forms attached hereto, to be entered into on the First Closing Date: (i) the Affiliate Agreements in the forms attached hereto as Exhibits A and C, (ii) a bill of sale for the Purchased Assets in the form attached hereto as Exhibit D (the “Bill of Sale”), (iii) an assignment and assumption agreement in the form attached hereto as Exhibit E the “Assignment and Assumption Agreement”), (iv) evidence that a certificate representing that number of Consideration Shares having an aggregate value of Two Million Five Hundred Thousand U.S. Dollars (US$2,500,000) as established pursuant to Section 2.3(b) has been issued in the name of Seller and has been deposited with the Escrow Holder to the held pursuant to the terms of the Share Escrow Agreement (v) the escrow agreement for the Consideration Shares in the form attached hereto as Exhibit F (the “Share Escrow Agreement”), (vi) a release and indemnity agreement from Indus in the form attached hereto as Exhibit G (the “Release Agreement”), and (vii) all other ancillary agreements, contracts and documents to be entered into in connection with this Agreement.

(u) “Governmental Authority” means any federal, state, commonwealth, provincial, municipal, local or foreign government, or any political subdivision thereof, or any court, agency or other entity, body, organization or group, exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government, or any supranational body, arbitrator, court or tribunal of competent jurisdiction.

(v) “Hazardous Material” means any substance, material or waste that is regulated, classified or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” “medical waste,” “biohazard” or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold or other fungi, and urea formaldehyde insulation.

(w) “Indebtedness” shall mean all obligations of: (i) for borrowed money; (ii) evidenced by notes, bonds, debentures or similar instruments; (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the Ordinary Course of Business); (iv) under capital leases; and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person.

(x) “Indus” shall mean Indus Nevada, LLC, a Nevada limited liability company.

(y) “Intellectual Property” means any and all intellectual property and rights in or to intellectual property, including (a) any and all trademarks, service marks, brand names, certification marks, trade dress, assumed names, trade names, logos and other indications of origin, sponsorship or affiliation, together with the goodwill associated therewith (whether the foregoing are registered or unregistered); registrations thereof in any jurisdiction and applications to register any of the foregoing in any jurisdiction, and any extension, modification or renewal of any such registration or application; (b) any and all inventions, developments, improvements, discoveries, know how, concepts and ideas, whether patentable or not in any jurisdiction; (c) any and all patents, revalidations, industrial designs, industrial models and utility models, patent applications (including reissues, continuations, divisions, continuations in-part and extensions) and patent disclosures; (d) any and all mask works and other semiconductor chip rights and registrations thereof; (e) any and all non-public information, trade secrets and proprietary or confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any Person; (f) any and all writings and other works, whether copyrighted, copyrightable or not in any jurisdiction, such works including computer programs and software (including source code, object code, data and databases); (g) any and all copyrights, copyright registrations and applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; (h) any and all other intellectual property or proprietary rights; (i) any and all agreements, licenses, immunities, covenants not to sue and

the like relating to any of the foregoing; and (j) any and all claims or causes of action arising out of or related to any infringement or misappropriation of any of the foregoing. Notwithstanding the foregoing, “Intellectual Property” shall not mean any and all of the foregoing to the extent it relates to or pertains to any of the Excluded Assets.

(z) “Inventory” means all raw materials, ingredients and finished cannabis goods inventory of the Business.

(aa) “Knowledge” and similar phrases using the term “Knowledge” means the actual knowledge of the subject Person with respect to the matters which are relevant to the representation, warranty, covenant or agreement being made or given.

(bb) “Knowledge of Seller” mean the Knowledge of A. Todd Justice, R. Scott Coffman, Lance Blundell, or Eric Richardson

(cc) “Law” means any federal, state, local, municipal, provincial, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, consent order, consent decree, decree, Order, judgment, rule, regulation, ruling, guideline, notice, protocol, directive, regulatory guidance, agreement or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or with or under the authority of any Governmental Authority, whether or not having the force of law.

(dd) “Lease” means the lease agreement relating to the Leased Premises between Seller and Rx Land in the form attached hereto as Exhibit C.

(ee) “Leased Premises” means the real property located at 4801 West Bell Drive, Las Vegas, Nevada, Assessor’s Parcel No. 162-20-104-003.

(ff) “Liabilities” shall mean all Indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due).

(gg) “Losses” mean all out-of-pocket, losses, liabilities, obligations, Taxes, Encumbrances, deficiencies and damages, encumbrances, fines, penalties, claims, demands, orders, dues, costs and other expenses (including all fines, interest, penalties and other amounts paid pursuant to a judgment, compromise or settlement, or costs associated with enforcing any right to indemnification hereunder), court costs and reasonable legal and accounting fees and disbursements; provided, however, that “Losses” will not include incidental or consequential damages, or punitive damages, except to the extent such punitive damages are payable to a third party.

(hh) “Material Adverse Effect” shall mean any event or circumstance that has or will have, or could reasonably be expected to have, a material adverse effect on the Business, Purchased Assets, operations, financial condition, or results of operations of the Seller taken as a whole, after the First Closing Date or Second Closing Date, it being understood that in no event shall any of the following be deemed by itself or by themselves, either individually or in the aggregate, to constitute a Material Adverse Effect: (a) a failure by Seller to meet internal earnings, revenue or other projections or earnings, revenue or other predictions of any analyst, (b) any event, circumstance or market condition occurring as a general economic or financial conditions or other developments that are not unique to Seller, or (c) the appointment of a receiver to operate the Business, the operation of the Business by such a receiver and the results of operations of the Business during such period of operation, the imposition of monetary penalties that shall constitute Excluded Liabilities.

(ii) “MRB Inventory” means any and all Inventory of Seller to be transferred to Buyer at the First Closing, including but not limited to all items listed as held by the Seller on their Metrc system as of June 16, 2020, and all flower, trim, bud, kief, and all biological assets and all intellectual property rights to those biological assets such as strains and genetics currently located within the Leased Premises of Seller, and any biological assets or inventory resulting therefrom entered into Metrc following June 16, 2020 and up through the Effective Date of this Agreement.

(jj) “MRB Licenses” means any and all Permits required by or requested from any Regulatory Authority for the conduct of the Business, excluding the Excluded Assets, that cannot, without Regulatory Approvals, be transferred to Buyer at the First Closing, a list of which are set forth on Schedule 1.1(u).

(kk) “Nevada Cannabis Laws” means the marijuana establishment laws of any jurisdictions within the State of Nevada to which Seller is or may at any time become, subject, including, without limitation, Chapter 453A of the Nevada Revised Statutes, as amended, 453D of the Nevada Revised Statutes, as amended, Title 60 of the Nevada Revised Statutes codifying NV AB533 and the rules and regulations adopted by the Nevada Division of Public and Behavioral Health, the Nevada Department of Taxation, the Nevada Cannabis Compliance Board, the City of Las Vegas, NV or any other state or local government agency with authority to regulate any marijuana operation (or proposed marijuana operation) including the guidance or instruction of any other state or local government agency with authority to regulate any marijuana operation (or proposed operation).

(ll) “Option Agreement” means an option agreement whereby Rx Land and Buyer grants to Seller the option to reacquire the Real Property for $3,3000,00 and the Tangible Personal Property for $500,000, respectively, upon the happening of certain events.

(mm) “Order” means any order, writ, assessment, decision, injunction, decree, judgment, ruling, award, settlement or stipulation issued, promulgated or entered into by or with any Governmental Authority.

(nn) “Ordinary Course of Business” means actions taken by a Person in the ordinary and usual course of normal day-to-day operations of such Person’s business, consistent with past practice.

(oo) “Permits” mean all permits, licenses, consents, franchises, approvals, registrations, certificates, variances and other authorizations required to be obtained from any Governmental Authority or other Person in connection with the operation of the Business and necessary to conduct the Business presently conducted or planned to be conducted.

(pp) “Permitted Encumbrances” means any easement, right of way, encroachment, conflict, discrepancy, overlapping of improvements, protrusion, lien, encumbrance, restriction, condition, covenant, exception, including the Lease and Assumed Liabilities, or other matter with respect to the Real Property, Premises, Purchased Assets or the Business approved by the Planet 13 Parties.

(qq) “Personal Data” shall mean a person’s name, street address, telephone number, email address, date of birth, gender, photograph, Social Security Number or Tax identification number, driver’s license number, passport number, credit card number, bank account information and other financial information, account numbers, account access codes and passwords, or any other piece of information that allows the identification of such person or enables access to such person’s financial information, or as that term is otherwise defined by applicable Law.

(rr)“Person” means any Governmental Authority, individual, association, joint

venture, partnership, corporation, limited liability company, trust or other entity.

(ss)“Proceeding” means any claim, demand, action, suit, litigation, dispute, order,

writ, injunction, judgment, assessment, decree, grievance, arbitral action, investigation or other proceeding.

(tt)“Real Property” means the Leased Premises together with (i) all buildings and

improvements located thereon and (ii) all rights, privileges, interests, easements, hereditaments and appurtenances thereunto in any way incident, appertaining or belonging thereto.

(uu) “Regulatory Approvals” shall mean the consent and approval of the Regulatory Authorities to the sale, transfer, conveyance, substitution and/or delivery of the MRB Licenses to Buyer or, issuance of any new MRB Licenses to Buyer to the extent any such MRB License is non-transferable (as submitted in the Applications to the Regulatory Authorities in accordance with Section 6.6).

(vv) “Regulatory Authorities” or “Regulatory Authority” means any Governmental Authorities with actual authority over the Applications for or sale, transfer, conveyance, issuance, substitution and/or delivery of the MRB Licenses.

(ww) “Representative” means any manager, officer, director, principal, attorney, accountant, agent, employee or other representative of any Person.

(xx)‘Second Closing Documents” shall mean a (i) Bill of Sale for MRB Assets to be

purchased on the Second Closing, (ii) an Assignment and Assumption Agreement for the MRB Contracts assumed on the Second Closing, (iii) instructions to the Escrow Holder to release all Consideration Shares to Seller, and (iv) all other ancillary agreements, contracts and documents to be entered into in connection with this Agreement.

(yy) “Rx Land” means Rx Land, LLC, a Nevada limited liability company.

(zz)“Tangible Personal Property” means all tangible personal property (other than

Inventory) owned or leased by Seller or in which Seller has any interest and relating to the Business, including vehicles and production and processing equipment, warehouse equipment, computer hardware, furniture and fixtures, leasehold improvements, supplies and other tangible assets, together with any transferable manufacturer or vendor warranties related thereto.

(aaa) “Tax” or “Taxes” means any federal, state, local or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, startup, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), health, unemployment, disability, real property, personal property, intangible property, abandoned property or escheat, sales, use, ad valorem, transfer, registration, value added, goods and services, harmonized, alternative or add-on minimum, estimated, or other tax or similar obligation of any kind whatsoever to any Tax authority, including any interest, penalty or addition thereto, whether disputed or not.

(bbb) “Tax Return” means any return, declaration, report, form, claim for refund, election or information return or statement relating to Taxes, including any schedule or attachment thereto, and any amendment thereof.

(ccc) “Transaction” means the asset purchases contemplated under this Agreement.

(ddd) “Transaction Documents” means this Agreement and any other document, agreement, certificate or instrument required to be delivered at the Closing pursuant to the terms hereof. For the avoidance of doubt, the Management Agreement shall not be deemed to be a Transaction Document.

(eee) “Transaction Expenses” means the aggregate amount of all fees, costs and expenses incurred or subject to reimbursement by Seller in connection with this Agreement or the transactions contemplated hereby (whether incurred prior to or after the date hereof) and not previously paid, including: (i) all fees, expenses, costs, commissions and disbursements of any broker, finder, financial advisor, consultant, accountant or legal counsel incurred by or on behalf of Seller in connection with this Agreement and the transactions contemplated hereby, (ii) any and all transaction, success, change-of-control or similar bonuses payable to employees, directors, managers or consultants of Seller (including any applicable payroll Taxes related thereto) as a result of the Transaction contemplated hereby; and (iii) expenses or payments resulting from the change of control of Seller or otherwise payable in connection with receipt of any consent or approval in connection with the transactions contemplated hereby (but excluding, for the avoidance of doubt, any expenses of the Planet 13 Parties).

(fff) “Transfer Taxes” means any sales, use, stock transfer, value added, real property transfer, transfer, stamp, registration, documentary, recording or similar duties or taxes together with any interest thereon, penalties, fines, costs, fees, additions to tax or additional amounts with respect thereto incurred in connection with the transactions contemplated by this Agreement. Notwithstanding the foregoing, "transfer Taxes" shall specifically exclude any and all of the foregoing described taxes that pertain to or result from the issuance and transfers of the Consideration Shares (the "Stock Transfer Taxes").

Additional Definitions

Term

Section

Agreement

Preamble

Alternative Transaction

6.1(c)

Annual Financial Statement

4.9

Assignment and Assumption Agreement

Definition (l)

Assumed Contracts

2.1(a)

Balance Sheet

4.4

Balance Sheet Date

4.4

Basket

9.1(f)

Bill of Sale

Definition (l)

Buyer

Preamble

Closing Indebtedness

2.8

Coffman

Preamble

Competing Busines

9.3(a)

Consideration Shares

2.3(b)

Disclosure Schedules

Article 4

Effective Date

Preamble

Excluded Assets

2.1(b)

Excluded Liabilities

2.1(c)

Financial Statements

4.4

Final Indemnification Claim

9.1(e)

First Closing

3.1

First Closing Assumed Liabilities

2.1(c)

First Closing Date

3.1

Indemnified Party

9.1(d)

Indemnifying Parties

9.1(d)

Interim Balance Sheet

4.4

Interim Balance Sheet Date

4.4

Interim Financial Statements

4.4

IP Agreements

4.10

Labor and Employment legal Requirements 4.12

Material Contracts

4.11

MRB Assets

2.2(a)

MRB Contracts

2.2(a)

Obligated Parties

9.3(a)

Party

Preamble

Parties

Preamble

Per Diem

Definition (h)

Planet 13

Preamble

Planet 13 Parties

Preamble

Pre-Closing Statement

2.8

Prior APA

7.3(f)

Purchase Price Allocation

2.6

Purchase Price Cap

9.1(f)

Purchased Assets

2.1(a)

Questionnaire

4.4(c)(ii)

Release Agreement

Definition (l)

Representatives

6.1(c)

Restricted Period

9.3(a)

Second Closing

3.2(b)

Second Closing MRB Assets

2,2(a)

Second Closing Date Assumed Liabilities 2.2(a)

Second Closing Date

3.2(b)

Seller

Preamble

Seller Parties

9.1(c)

Share Escrow Agreement

Definition (l)

Third-Party Claim

9.1(d)

Transfer Taxes

9.1(b)

Transferors

Preamble

W Vapes

Preamble

DISCLOSURE SCHEDULES

ASSET PURCHASE AGREEMENT

BY AND AMONG

PLANET 13 HOLDINGS INC., AND MM DEVELOPMENT COMPANY, INC.

AND

W THE BRAND, LLC, WEST COAST DEVELOPMENT NEVADA, LLC,

AND R. SCOTT COFFMAN.

SELLER’S DISCLOSURE SCHEDULE

Schedule 1.1(jj)

MRB Licenses

Schedule 2.1(a)(iii)

Equipment

Schedule 2.1(a)(iv)

Assumed Contracts

Schedule 2.1(a)(vi)

Permits

Schedule 2.2(a)(iii)

MRB Contracts

Schedule 2.4(b)

Nevada Licenses

Schedule 4.2

Seller Consent and Approvals

Schedule 4.4

Financial Statements

Schedule 4.7

Tangible Personal Property

Schedule 4.10(b)

Intellectual Property

Schedule 4.11

Material Contracts

Schedule 4.12

Labor Matters

Schedule 4.15

Compliance with Law

Schedule 4.17

Environmental

Schedule 4.18

Insurance

Schedule 5.3

Buyer’s Consents and Approvals

ASSET PURCHASE AGREEMENT

BY AND AMONG

PLANET 13 HOLDINGS INC., AND MM DEVELOPMENT COMPANY, INC.,

AND

W THE BRAND, LLC, WEST COAST DEVELOPMENT NEVADA, LLC,

AND R. SCOTT COFFMAN.

SELLER’S DISCLOSURE SCHEDULE

INTRODUCTION

This Disclosure Schedule (the “Disclosure Schedule”) is delivered in connection with the execution of that certain Asset Purchase Agreement between and among Planet 13 Holdings Inc., a corporation organized under the Business Corporations Act (British Columbia) (“Planet 13”), MM Development Company, Inc., a Nevada corporation (“Buyer”, and together with Planet 13 the “Planet 13 Parties”), and W the Brand, LLC, a Delaware limited liability company (“W Vapes”), and West Coast Development Nevada, LLC, a Nevada limited liability company (“Seller”) and R. Scott Coffman, a North Carolina resident (“Coffman” and together with Seller and W Vapes, the “Transferors”). Capitalized terms used herein but not defined shall have the identical meaning assigned to such terms in the Agreement. The numbers below correspond to the section numbers of the Agreement.

Schedule 1.1(jj)

MRB Licenses

State of Nevada - Marijuana Cultivation Facility License No. C06757708763289160503743 and License No. RC067-17755737390295686365 (Expires 6/30/19)

State of Nevada - Marijuana Product Manufacturing License No. P03417968777460576775552 and License No. RP034-13351121953140240442 (Expires 6/30/19)

Clark County Business License No. 2000024.MMR-301, and License No. 20000251MMR-301 issued in the names of Sweet Goldy, LLC and Sweet Goldy Production, LLC, respectively.

Schedule 2.1(a)(iii)

Computer Hardware; Furniture; Vehicles

Nevada

Furniture

1. L-Office Desk - 3

2. Admin Desk - 1

3. Couch- 2

4. Lounge Chair - 2

5. Coffee Table - 1

6. Conference Table - 2

7. 4 Desk cubicle - 1

8. Uline Desk - 1

9. Desk Chairs - 10

10. Chair - 8

11. Folding Chair - 8

12. Lab Bench - 2

13. Lab Island - 2

14. Lab Stool- 2

15. Tables - 2

16. Folding Table - 3

17. Microwave - 2

18. Water Dispenser - 2

19. Small Step Ladder - 2

20. Step Ladder - 2

21. File Cabinet - 2

Computer Hardware

1. Printer - 3

2. Desktop Computer - 3

3. Laptops - 6

4. Monitors - 8

5. Label Printer - 3

6. TVs-4

7. DVR-2

8. Data Center - 1

(See Additional Specific Description Schedule 4.7(b))

Vehicles

1. 2017 Ford F-150 owned by West Coast Development Nevada, LLC.

Equipment

1. Waters SFE Bio-Botanical Extraction Systems - 2

2. Argus Nutrient Water Application System

Schedule 2.1(a)(iv)

Assumed Contracts

Waters Tech Lease for Waters SFE Bio-Botanical Extraction System with TAW dated April 7, 2017.

Schedule 2.1(a)(vi)

Transferable Permits

MRB Licenses – State of Nevada licenses subject to CCB Approval

2. State of Nevada - Marijuana Cultivation Facility License No. C06757708763289160503743 and License No. RC067-17755737390295686365 (Expires 6/30/19)

4. State of Nevada - Marijuana Product Manufacturing License No. P03417968777460576775552 and License No. RP034-13351121953140240442 (Expires 6/30/19)

5. Clark County Business License No. 2000024.MMR-301, and License No. 20000251MMR-301 issued in the names of Sweet Goldy, LLC and Sweet Goldy Production, LLC, respectively.

Schedule 2.1(c)

Excluded Liabilities

The Restricted Equity Grant dated February 1,2018 outstanding to Sean Corrigan that provides for an award of up to 300,000 Membership Units in W The Brand, LLC. Such Units vest 50% after his 18th month employment anniversary, and 50% after his 36th month employment anniversary. There is also an acceleration provision that vests the Units in their entirety upon a sale of all or substantially all of the assets of W The Brand, LLC.

The Sean Corrigan Employment Agreement. that That certain Executive Employment Agreement, dated February 1, 2018, by and between Sean Corrigan and W The Brand, LLC (the "Sean Corrigan Employment Agreement").

Asset Purchase Agreement dated as of May 14, 2019, as amended, among Indus Brand Management LLC, a Delaware limited liability company (“Brand Purchaser”), Indus Nevada LLC, a Nevada limited liability company (“Nevada Purchaser”), and Indus Oregon LLC, an Oregon limited liability company (“Oregon Purchaser”, and collectively with Brand Purchaser and Nevada Purchaser, the “Purchaser Parties”), and W The Brand, LLC (“W”), West Coast Development Nevada LLC (“WCDN”) and West Coast Development Oregon LLC (WCDO”), each a Delaware limited liability company (collectively, W, WCDN and WCDO are referred to herein as the “Sellers”).

Excluded Management Agreement (as defined in Agreement)

The Release (as defined in the Agreement)

Termination Agreement among Indus Brand Management LLC, a Delaware limited liability company (“Brand Purchaser”), Indus Nevada LLC, a Nevada limited liability company (“Nevada Purchaser”), and Indus Oregon LLC, an Oregon limited liability company (“Oregon Purchaser”, and collectively with Brand Purchaser and Nevada Purchaser, the “Purchaser Parties”), and W The Brand, LLC (“W”), West Coast Development Nevada LLC (“WCDN”) and West Coast Development Oregon LLC (WCDO”), each a Delaware limited liability company (collectively, W, WCDN and WCDO are referred to herein as the “Sellers”).

The DCL Loan (as hereinafter defined).

The B Nevada Loan. Loan Agreement, dated April 17, 2017 (as amended, the "B Nevada Loan"), by and between West Coast Development Nevada, LLC and B Nevada, LLC ("B Nevada"), as amended by that certain First Amendment to Loan Agreement, effective as of April 17, 2017, B Nevada has been awarded a 30% equity interest in West Coast Development Nevada, LLC with such award having vested upon the completion of the transfer of certain marijuana licenses from Sweet Goldy, LLC and Sweet Goldy Production, LLC. The grant of the award is conditioned upon the State of Nevada's approval of B Nevada to be qualified to conduct marijuana cultivation and

manufacturing activities and is also immediately triggered upon a sale of all or substantially all of the assets of Seller.

The Dominick Loan (as hereinafter defined).

10.

The Edge Loan (as hereinafter defined).

11.

The Jeff Nagel Settlement Agreement (as hereinafter defined).

12.

Offer Letter Re: State of Nevada v. W The Brand, LLC, et at, dated March 18, 2019, by The State of Nevada Office of the Attorney General, to W The Brand, LLC.

13.

All liabilities as disclosed by WCDN to Planet 13 Holdings, Inc. and MM Development Company, Inc. in the 5/31/2020 dated WCDN Balance Sheet, as such may be or have been updated through the Effective Date of this Agreement, an extract of which is provided below:

Liabilities Current Liabilities Accounts Payable (A!P) Credit Cards Credit Card - CC Master Card Credit Card - CC Visa	01 NV 76,751.58 7,615.13 9,558.94	10 OR 35,590.79	Not Specified	Total 112,342.37 7,615.13 9,558.94
	$	$	$	$
Total Credit Cards	17,174.07	0.00	0.00	17,174.07
Other Current Liabilities
Insurances Payable	23,186.35			23,186.35
Loan from Scott Coffman			287,600.00	287,600.00
Scott Coffman Interest
Payable			51,242.55	51,242.55
Total Loan from Scott	$	$	$	$
Coffman	0.00	0.00	338,842.55	338,842.55
Related Party - Indus
Holdings	1,987,133.12	228,344.86		2,215,477.98
Related Party - Sweet Goldy	-161,589.50			-161,589.50
	$	$	$
Total Other Current Liabilities	1,848,729.97	228,344.86	338,842.55	$2,415,917.38
	$	$	$
Total Current Liabilities	1,942,655.62	263,935.65	338,842.55	$2,545,433.82
Long-Term Liabilities Due to B Nevada			5,000,000.00	5,000,000.00
Interest Payable to BV			924,999.95	924,999.95
	$	$	$
Total Due to B Nevada	0.00	0.00	5,924,999.95	$5,924,999.95
Due to W The Brand (0308 !
1738)			6,043,290.69	6,043,290.69
Interest Payable to W The
Brand			408,960.43	408,960.43
Total Due to W The Brand (0308 !	$	$	$
1738)	0.00	0.00	6,452,251.12	$6,452,251.12
	$	$	$
Total Long-Term Liabilities	0.00	0.00	12,377,251.07	$12,377,251.07
	$	$	$
Total Liabilities	1,942,655.62	263,935.65	12,716,093.62	$14,922,684.89

Schedule 2.2(a)(iii)

MRB Contracts

Schedule 4.2

Sellers' Required Consents

1. The consent of the landlord under the Nevada Lease.

2. The consent of Waters Technologies Corporation under the Nevada Waters Tech Agreement .

3. Recreational Marijuana Retail Application, upon completion of application within 7 days of Effective Date of APA. The cover-letter to this application shall also re-confirm the withdrawal of the previous WCDN request to transfer ownership to Indus Parties.

Schedule 4.4

Financial Statements

See attached.

Schedule 4.7

Property, Plant, and Equipment

Nevada

Count

Equipment

2” Pope Distiller + equipment

4” Pope Distiller + equipment

Accucold FFAR1-=<ED

Bio Lion XC-CSA

BR Instruments Distiller + computer

Cascade TVO 5 oven

Chemtech Distiller

Computer

Camp2Dry Dehumidifier

Data Center w/security DVRs

Dropbox’ safe

EL Cold EL51XLLT Freezer

Futurola SH-110 Shredder

Gas Chromatograph

Hurricane fans

Hyperlogic CWF Hydro-44A-216

IKIA MVP 10 B

IKA RC2 C control

IKA RV10 C rotovap

Large gun safe

Leader Ecojet R110 Pump

Leader Ecojet R240 Pump

Leader Ecojet R90 Pump

Locker

Multifan

Oman LAR 25PMB

Paychex Punch station

Printer

Quest air movers

Quest Dry 150 Dehumidifier

Quest Dry 180 Dehumidifier

Quest Dry 240 Dehumidifier

Quest Dry 40 Dehumidifier

Sasquash Rosin Press

Security computer

Small safe

180

Soleil Model 50/hps lights

Solistek A1 277V Lights

STM RB 453 pre roll machine

Sun System LEC315

Sun System T5HO48

Televisions

Thompson Duke MCF1 Filling machine

Water SFE Bio-Botanical Extraction Systems + computer

Whirlpool Refrigerators

Schedule 4.7(b) continued: Generally, all assets represented by the accounting schedule on the following two pages showing cost basis of assets as at 12/31/2018, and as such may have been updated through 07/17/2020, notwithstanding whether such asset is included of the named assets listed above under Schedules 4.7(b) “Property, Plant, and Equipment” and 2.1(a)(iii) “Computer Hardware; Furniture; Vehicles”, exclusive of the “Licenses” asset listed as item 42 on the schedule below.

			Beginning Balance 12/31/2017		Audit Additions DisposalsAdjustments		Ending Balance 12/31/2018	Beginning Balance 12/31/2017 IRC 179 Bonus		Audit Additions Disposals Adjustments		Ending Balance 12/31/2018 NBV
9 Cultivation5/17/2017			61,353.00		- - -		61,353.00	(35,060.00) -		- (7,512.00) - -		(42,572.00) 18,781.00
Equipment
10 Cultivation5/31/2017			4,772.00		- - -		4,772.00	(2,727.00) -		- (584.00) - -		(3,311.00) 1,461.00
Equipment
11 Cultivation8/7/2017			11,640.00		- - -		11,640.00	(6,652.00) -		- (1,425.00) - -		(8,077.00) 3,563.00
Equipment
12 Cultivation8/8/2017			3,394.00		- - -		3,394.00	(1,940.00) -		- (415.00) - -		(2,355.00) 1,039.00
Equipment
13 Cultivation8/23/2017			3,086.00		- - -		3,086.00	(1,764.00) -		- (378.00) - -		(2,142.00) 944.00
Equipment
14 Cultivation8/24/2017			4,725.00		- - -		4,725.00	(2,701.00) -		- (578.00) - -		(3,279.00) 1,446.00
Equipment
15 Cultivation8/29/2017			3,151.00		- - -		3,151.00	(1,801.00) -		- (386.00) - -		(2,187.00) 964.00
Equipment
16 Cultivation8/31/2017			2,722.00		- - -		2,722.00	(1,556.00) -		- (333.00) - -		(1,889.00) 833.00
Equipment
17 Cultivation9/12/2017			10,500.00		- - -		10,500.00	(6,000.00) -		- (1,286.00) - -		(7,286.00) 3,214.00
Equipment
18 Cultivation9/14/2017			3,227.00		- - -		3,227.00	(1,845.00) -		- (395.00) - -		(2,240.00) 987.00
Equipment
19 Cultivation9/21/2017			2,326.00		- - -		2,326.00	(1,329.00) -		- (285.00) - -		(1,614.00) 712.00
Equipment
20 Lab 4/7/2017			97,736.00		- - -		97,736.00	(58,642.00) -		- (15,638.00) - -		(74,280.00) 23,456.00
Equipment
21 Lab 4/27/2017			3,750.00		- - -		3,750.00	(2,250.00) -		- (600.00) - -		(2,850.00) 900.00
Equipment
22 Lab 4/28/2017			3,968.00		- - -		3,968.00	(2,381.00) -		- (635.00) - -		(3,016.00) 952.00
Equipment
23 Lab 5/9/2017			9,068.00		- - -		9,068.00	(5,441.00) -		- (1,451.00) - -		(6,892.00) 2,176.00
Equipment
24 Lab 5/12/2017			15,613.00		- - -		15,613.00	(9,368.00) -		- (2,498.00) - -		(11,866.00) 3,747.00
Equipment
25 Lab 5/19/2017			33,418.00		- - -		33,418.00	(20,051.00) -		- (5,347.00) - -		(25,398.00) 8,020.00
Equipment
26 Lab 5/23/2017			6,331.00		- - -		6,331.00	(3,799.00) -		- (1,013.00) - -		(4,812.00) 1,519.00
Equipment
27 Lab 5/26/2017			6,247.00		- - -		6,247.00	(3,749.00) -		- (999.00) - -		(4,748.00) 1,499.00
Equipment
28 Lab 5/30/2017			13,552.00		- - -		13,552.00	(8,131.00) -		- (2,168.00) - -		(10,299.00) 3,253.00
Equipment
29 Lab 6/23/2017			26,054.00		- - -		26,054.00	(15,633.00) -		- (4,168.00) - -		(19,801.00) 6,253.00
Equipment
30 Lab 7/24/2017			5,387.00		- - -		5,387.00	(3,233.00) -		- (862.00) - -		(4,095.00) 1,292.00
Equipment
31 Lab 8/1/2017			31,065.00		- - -		31,065.00	(18,640.00) -		- (4,970.00) - -		(23,610.00) 7,455.00
Equipment
32 Office 5/10/2017			2,558.00		- - -		2,558.00	(1,535.00) -		- (409.00) - -		(1,944.00) 614.00
Equipment
33 Office 5/23/2017			3,407.00		- - -		3,407.00	(2,045.00) -		- (545.00) - -		(2,590.00) 817.00
Equipment
34 Office 5/23/2017			2,806.00		- - -		2,806.00	(1,684.00) -		- (449.00) - -		(2,133.00) 673.00
Equipment
35 Truck 5/1/2017			41,000.00		- - -		41,000.00	(24,600.00) -		- (6,560.00) - -		(31,160.00) 9,840.00
36 Warehouse5/12/2017			17,080.00		- - -		17,080.00	(9,760.00) -		- (2,091.00) - -		(11,851.00) 5,229.00
Equipment
37 Warehouse7/5/2017			46,312.00		- - -		46,312.00	(26,464.00) -		(5,671.00) - -		(32,135.00) 14,177.00
Equipment
38 Warehouse8/8/2017			3,694.00		- - -		3,694.00	(2,111.00) -		- (452.00) - -		(2,563.00) 1,131.00
Equipment
39 Building 3/13/2017			306,726.00		- - -		306,726.00	(6,226.00) -		- (7,865.00) - -		(14,091.00)292,635.00
Improvements
40 3/30/2017			15,000.00		- - -		15,000.00	(305.00) -		- (385.00) - -		(690.00) 14,310.00
Architectural Costs
41 Building 4/7/2017			100,000.00		- - -		100,000.00	(1,816.00) -		- (2,564.00) - -		(4,380.00) 95,620.00
Improvements
43 Leasehold5/31/2017			980,953.00		- - -		980,953.00	(515,001.00) -		- (46,595.00) - -		(561,596.00)419,357.00
Improvements
44 Building 4/25/2017			25,000.00		- - -		25,000.00	(454.00) -		- (641.00) - -		(1,095.00) 23,905.00
Improvements
45 Building 4/26/2017			43,198.00		- - -		43,198.00	(785.00) -		- (1,108.00) - -		(1,893.00) 41,305.00
Improvements - Alarm
46 Land 5/25/2017			3,926.00		- - -		3,926.00	(2,061.00) -		- (187.00) - -		(2,248.00) 1,678.00
Improvements
47 6/5/2017			14,661.00		- - -		14,661.00	(204.00) -		- (376.00) - -		(580.00) 14,081.00
Architectural Costs
48 7/25/2017			5,359.00		- - -		5,359.00	(63.00) -		- (137.00) - -		(200.00) 5,159.00
Architectural Costs
49 Building 6/23/2017			78,610.00		- - -		78,610.00	(1,092.00) -		- (2,016.00) - -		(3,108.00) 75,502.00
Improvements
50 Machinery8/11/2017			5,200.00		- - -		5,200.00	(3,120.00) -		- (832.00) - -		(3,952.00) 1,248.00
& Equipment
51 Machinery8/18/2017			2,925.00		- - -		2,925.00	(1,756.00) -		- (468.00) - -		(2,224.00) 701.00
& Equipment
52 Building 8/23/2017			2,550.00		- - -		2,550.00	(24.00) -		- (65.00) - -		(89.00) 2,461.00
Improvements
53 Building 9/5/2017			7,538.00		- - -		7,538.00	(56.00) -		- (193.00) - -		(249.00) 7,289.00
Improvements
54 HVAC's 5/31/2017			128,016.00		- - -		128,016.00	(2,051.00) -		- (3,282.00) - -		(5,333.00) 122,683.00
55 Water 5/31/2017			17,307.00		- - -		17,307.00	(10,385.00) -		- (2,769.00) - -		(13,154.00) 4,153.00
Filtration
56 Bench 5/31/2017			21,595.00		- - -		21,595.00	(12,341.00) -		- (2,644.00) -		( 14,985.00) 6,610.00
System
57 Lighting 5/31/2017			29,133.00		- - -		29,133.00	0 (16,648.00) -		- (3,567.00) - -		(20,215.00) 8,918.00
63 Leasehold 02/27/2018			-		8,990.00 - -		8,990.00	- -		(202.00) - -		(202.00) 8,788.00
Improvements								-
64 Leasehold 03/15/2018			-		5,981.50 - -		5,981.50	- -		(121.00) - -		(121.00) 5,860.50
Improvements								-
65 Leasehold 04/17/2018			-		5,981.50 - -		5,981.50	- -		(108.00) - -		(108.00) 5,873.50
Improvements								-
66 Leasehold 06/04/2018			-		350,000.00 - -		350,000.00	- -		(4,861.00) - -		(4,861.00) 345,139.00
Improvements								-
67 Leasehold 06/13/2018			-		150,000.00 - -		150,000.00	- -		(2,083.00) - -		(2,083.00) 147,917.00
Improvements								-
68 Leasehold 06/18/2018			-		9,500.00 - -		9,500.00	- -		(132.00) - -		(132.00) 9,368.00
Improvements								-
69 Leasehold 07/16/2018			-		128,315.29 - -		128,315.29	- -		(1,508.00) - -		(1,508.00) 126,807.29
Improvements								-
70 Leasehold 07/26/2018			-		26,470.23 - -		26,470.23	- -		(311.00) - -		(311.00) 26,159.23
Improvements								-
71 Leasehold 07/27/2018			-		200,000.00 - -		200,000.00	- -		(2,350.00) - -		(2,350.00) 197,650.00
Improvements								-
72 Leasehold 07/30/2018			-		3,200.00 - -		3,200.00	- -		(38.00) - -		(38.00) 3,162.00
Improvements								-
73 Leasehold 08/03/2018			-		100,000.00 - -		100,000.00	- -		(962.00) - -		(962.00) 99,038.00
Improvements								-
74 Leasehold 08/08/2018			-		6,546.03 - -		6,546.03	- -		(63.00) - -		(63.00) 6,483.03
Improvements								-
75 Leasehold 08/08/2018			-		12,694.34 - -		12,694.34	- -		(122.00) - -		(122.00) 12,572.34
Improvements								-
76 Leasehold 08/09/2018			-		400,000.00 - -		400,000.00	- -		(3,846.00) - -		(3,846.00) 396,154.00
Improvements								-
77 Leasehold 08/17/2018			-		140,000.00 - -		140,000.00	- -		(1,346.00) - -		(1,346.00) 138,654.00
Improvements								-
78 Leasehold 08/17/2018			-		200,000.00 - -		200,000.00	- -		(1,923.00) - -		(1,923.00) 198,077.00
Improvements								-
79 Leasehold 08/23/2018			-		5,089.59 - -		5,089.59	- -		(49.00) - -		(49.00) 5,040.59
Improvements								-
80 Leasehold 08/31/2018			-		100,000.00 - -		100,000.00	- -		(962.00) - -		(962.00) 99,038.00
Improvements								-
81 Leasehold 10/12/2018			-		2,725.00 - -		2,725.00	- -		(15.00) - -		(15.00) 2,710.00
Improvements								-
82 Leasehold 11/01/2018			-		147,560.00 - -		147,560.00	- -		(473.00) - -		(473.00) 147,087.00
Improvements								-
83 Leasehold 11/16/2018			-		14,905.00 - -		14,905.00	- -		(48.00) - -		(48.00) 14,857.00
Improvements								-
84 Leasehold 11/20/2018			-		25,800.00 - -		25,800.00	- -		(83.00) - -		(83.00) 25,717.00
Improvements								-
85 Leasehold 12/14/2018			-		100,000.00 - -		100,000.00	- -		(107.00) - -		(107.00) 99,893.00
Improvements								-
86 Cultivation 03/06/2018			-		19,193.00 - -		19,193.00	- -		(390.00) - -		(390.00) 18,803.00
Expansion								-
87 Cultivation 03/26/2018			-		100,000.00 - -		100,000.00	- -		(2,030.00) - -		(2,030.00) 97,970.00
Expansion								-
88 Cultivation 05/17/2018 Expansion			-		100,000.00 - -		100,000.00	- - -		(1,603.00) - -		(1,603.00) 98,397.00
89 Lab Equipment	02/22/2018			30,674.0		- - 30,674.00			- - (30,674 00)		- (30,674.00)
		0
90 Lab	02/28/2018					- -			- -		-
Equipment				10,100.0		10,100.00			(10,100 00)		(10,100.00)
		0
91 Lab	06/12/2018					- -			- -		-
Equipment				52,167.1		52,167.16			(52,167 16)		(52,167.16)
		6
92 Lab	06/12/2018

Equipment			10,100.0	10,100.00		(10,100 00)		(10,100.00)
	0
93 Lab	06/15/2018			-		-	-	-	-
Equipment			7,036.2	7,036.25		(7,036.25)		(7,036.25)
	5 -		- -	- -		- -	-	- -	-
42 Licenses	5/31/2017	1,443,224.00	- -	- 1,443,224.00	(56,125.00) -	-	(96,215.00) -		- (152,340.00) 1,290,884.00
		3,710,863.00	2,473,028.89 -	- 6,183,891.89	(913,405.00) -	(110,077.41)	(267,748.00) -		- (1,291,230.41) 4,892,661.48

Schedule 4.10(b)

Intellectual Property

All intellectual property rights to those biological assets such as strains and genetics currently located within the Leased Premises of Seller, and any biological assets or inventory resulting therefrom entered into Metrc following June 16, 2020 and up through the Effective Date of this Agreement.

Schedule 4.11

Contracts

(i)

None.

(ii)

1.Lease Agreement, dated April 7, 2017, by and between Waters Technologies Corporation and West Coast Development Nevada, LLC (the "Nevada Waters Tech Agreement").

(iii)

1. The Option.

(iv)

1. The Option

2. The Nevada Lease.

4. The Nevada Waters Tech Agreement.

(iv)

None.

(vi)

None.

(vii)

None.

(viii)

1. The Jeff Nagel Settlement Agreement.

2. The Option.

(ix)

1. The DCL Loan.

2. The B Nevada Loan.

3. Promissory Note, dated May 2, 2017, by W The Brand LLC, in favor of Brian M. Dominick, as modified by that certain Loan Modification Agreement, dated September 7, 2017, by and among W The Brand, LLC, Brian M. Dominick, R. Scott Coffman, Morehead Food & Beverage, Inc. KCD Holdings, LLC, BDWK, LLC, Morehead Tyron Properties, LLC, and Midnight Diner, LLC, and that certain Second Loan Modification, dated October 31, 2018 (collectively, the "Dominick Loan").

4. The Nevada Lease.

(x)

None.

(xi)

1. The Sean Corrigan Employment Agreement

2. The Restricted Equity Grant.

(xii)

None.

(xiii)

1. The Restricted Equity Grant.

2. The DCL Loan.

3. The B Nevada Loan.

(xiv)

None

(xv)

None.

(xvi)

None

(xvii)

None.

(xviii)

1. The Nevada Lease.

(xix)

None.

(xx)

None.

(xxi)

None.

Schedule 4.12(a) and (b)

Employee Census

(a) Employee Census

1. See attached.

(b) Fringe Benefits

1. See attached.

Schedule 4.12(c)

Labor Matters

1. On March 4, 2019, Mindy Coats, a former Regional Sales Manager of W Vapes and Seller, filed a complaint in the Eighth Judicial District Court of Clark County, Nevada (Case No. A-19790393-C), alleging that she was owed 5% in commissions on her gross sales and was only paid 2.5% commission. The complaint seeks relief for (i) wage and benefits deprivation; (ii) failure to timely pay all wages due and owing upon termination pursuant to NRS 608.140 and 608.020.050; and (iii) unjust enrichment/quantum meruit.

Schedule 4.15(a)

Compliance with Laws; Permits

1. Seller may be in violation of Clark County law requiring a Clark County Marijuana Support Business License be obtained by a purchaser of a business during the transition period after its purchase of the Nevada licenses from the Sweet Goldy, LLC and Sweet Goldy Production, LLC until such time as those licenses are transferred to West Coast Development Nevada, LLC. To date, Nevada Seller has not obtained such Clark County Marijuana Support Business License.

Schedule 4.17

Environmental Matters

None.

Schedule 4.18(a)

Insurance Policies

Insurer	Policy No.	Nature of Coverage	Risk Insured	Deductible	Policy Period
Traveler’s	6JUB-	Workers	Bodily Injury	N/A	06/30/2018 –
Property and	1K47406-A-	Compensation	by Accident;		06/30/2019
Casualty Company of	18	and Employers	Bodily Injury by Disease
America		Liability
		Policy
Country	P27A5108162	Automobile	Bodily Injury	$500	05/27/2019 –
Preferred		Policy	Liability;		11/27-2019
Insurance			Property
Company			Damage
			Liability

Exhibit 2.3

Certain identified information has been excluded from the exhibit because it is both not material and is the type that the registrant treats as private or confidential.

THIS SHARE EXCHANGE AGREEMENT made as of the 26th day of April, 2018. AMONG:

MM DEVELOPMENT COMPANY, INC., a corporation existing under the laws of the State of Nevada

(hereinafter called the “Corporation”)

OF THE FIRST PART

AND:

CARPINCHO CAPITAL CORP., a corporation existing under the federal laws of the Canada

(hereinafter called the “Acquiror”)

OF THE SECOND PART

AND:

ALL OF THE SHAREHOLDERS OF THE CORPORATION AS SET OUT IN SCHEDULE “A” HERETO

(hereinafter called the “Shareholders”)

WHEREAS the Shareholders wish to transfer, and the Acquiror wishes to acquire from the Shareholders all of the Acquired Corporation Shares (as defined below), for the consideration and upon the terms and conditions set forth in this Agreement;

AND WHEREAS the parties intend that the Transaction will constitute as a single integrated transaction qualifying for tax-deferred treatment under Section 351 of the U.S. Internal Revenue Code (“Code”) and that, upon completion of the Transaction, the Acquiror shall be treated as a U.S. domestic corporation for U.S. federal income tax purposes under Section 7874(b) of the Code.

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1

Where used herein or in any amendments or schedules hereto, the following terms shall have the following meanings:

“Accounts Receivable” means accounts receivable, bills receivable, trade accounts, book debts and insurance claims recorded as receivable in the Books and Records and other amounts due or deemed to be due to the Corporation including refunds and rebates receivable to the extent reflected in the Financial Statements of the Corporation;

“Acquiror Public Disclosure Record” means the Acquiror’s publically filed documents, as filed on the System for Electronic Document Analysis and Retrieval (SEDAR);

“Acquiror Shareholder Approval” means the approval by the shareholders of the Acquiror of the Transaction Resolutions by unanimous written consent resolution;

“Acquiror Shares” means the common shares in the capital of the Acquiror as currently constituted;

“Acquiror Special Warrants” means special warrants to acquire Acquiror Shares;

“Acquired Corporation Shares” means, collectively, the 25,300,000 Corporation Shares and the 49,700,000 Corporation Non-Voting Shares to be held collectively by the Shareholders as of the Closing Date, as set out in Schedule “A” hereto;

“Acquisition Price” has the meaning ascribed to such team in Section 2.3 hereof;

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any bona fide offer, proposal, expression of interest, or inquiry from any Person (other than the Acquiror or any of its affiliates) made after the date hereof relating to:

(a)

any acquisition or sale, direct or indirect, whether in a single transaction or a series of related transactions, of: (i) assets of the Corporation or the Acquiror, as the case may be, that constitutes 50% or more of the fair market value of the assets of the Corporation or the Acquiror, as the case may be; or (ii) 50% or more of any voting or equity securities of the Corporation or the Acquiror; or

(b)

any plan of arrangement, merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Corporation or the Acquiror;

“Agreement” means this Agreement and all amendments made hereto by written agreement signed by the parties and includes the schedules hereto;

“Amalco” means the company resulting from the Amalgamation;

“Amalgamation” means the amalgamation of a wholly-owned subsidiary of the Acquiror with Finco, to be set out in an agreement among Acquiror, a wholly-owned subsidiary of the Acquiror, and Finco, in connection with the completion of the Transaction;

“Applicable Laws” means, in relation to any person or persons, applicable Securities Laws and all other statutes, regulations, statutory rules, orders, by-laws, codes, ordinances, decrees, the terms and conditions of any grant of approval, permission, authority or licence, or any judgment, order, decision, ruling, award, policy or guideline, of any Governmental Entity that are applicable to such person or persons or its or their business, undertaking, property or securities and emanate from a Governmental Entity, having jurisdiction over the person or persons or its or their business, undertaking, property or securities;

“Assets” includes all assets of the Corporation, including Intellectual Property, having a fair market value in excess of $5,000, and includes, but is not limited to, all of the assets to be described in the Financial Statements of the Corporation;

“Authorizations” means all required corporate, regulatory and shareholder approvals, consents, authorizations and waivers relating to (i) the consummation of the transactions contemplated by this Agreement, (ii) the Transaction, (iii) the Amalgamation; and (iv) the Stock Exchange Listing, shall have been obtained on terms and conditions satisfactory to the parties, acting reasonably;

“Books and Records” means books and records of the Corporation relating to the Corporation, including financial, corporate, operations and sales books, records, books of account, sales and purchase records, lists of suppliers and customers, formulae, business reports, plans and projections and all other documents, surveys, plans, files, records, assessments, correspondence, and other data and information, financial or otherwise, including all data, information and databases stored on computer-related or other electronic media;

“Brokered Financing” means the brokered financing of Finco Subscription Receipts to be completed prior to the Closing for gross proceeds of up to $25 million; the net proceeds of which will be placed in escrow and released to Finco, and the Finco Subscription Receipts will automatically be converted into Finco Units, on satisfaction of certain escrow release conditions, and each Finco Share will then be exchanged for one Resulting Issuer Share and each Finco Warrant will then be exchanged for one Resulting Issuer Warrant, respectively, in connection with the Transaction and the Amalgamation;

“Business” means the business carried on by the Corporation which involves the cultivation, extraction, production, and sale of cannabis and cannabis-related products including ancillary activities related thereto, as more particularly described in the Listing Statement;

“Business Day” means any day which is not a Saturday, Sunday or a statutory holiday in the Province of Ontario;

“CBCA” means the Canada Business Corporations Act, R.S.C., 1985, c. C-44, as amended and any legislation enacted in substitution therefor;

“CSE” means the Canadian Securities Exchange;

“Closing Date” has the meaning ascribed to such term in Section 2.9 hereof; “Closing” has the meaning ascribed to such term in Section 2.9 hereof; “Code” means the United States Internal Revenue Code of 1986, as amended;

“Consideration Shares” means, collectively, the Resulting Issuer Shares and the Restricted Shares, all as more particularly set forth in Schedule “A” hereto;

“Consolidation” means the consolidation of the Acquiror Shares on the basis of 0.875 of a new Acquiror Share for every one existing Acquiror Share;

“Copyright” means all rights, titles, interests and benefits in and to (a) all copyright and neighbouring rights in the Works, (b) all registrations for copyright and neighbouring rights, pending applications for registrations of copyright and neighbouring rights, and rights to file applications for registrations of copyright and neighbouring rights for the Works, and (c) all sui generis rights in the Databases.

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

“Corporation Nominee” means each director of the Resulting Issuer who is nominated by the Acquiror, on the recommendation of the Corporation, prior to the completion of the Transaction;

“Corporation Non-Voting Shares” means the class B common non-voting shares in the capital of the Corporation;

“Corporation Shareholder Approval” means the approval by the shareholders of the Corporation of the Corporation Transaction Resolution by unanimous written consent resolution;

“Corporation Shares” means the class A common voting shares in the capital of the Corporation;

“Corporation Transaction Resolution” means the resolution of the Shareholders approving the Transaction;

“Databases” has the meaning set out in the definition of Works.

“Encumbrances” means any and all claims, liens, security interests, mortgages, pledges, preemptive rights, charges, options, equity interests, encumbrances, proxies, voting agreements, voting trusts, leases, tenancies, easements or other interests of any nature or kind whatsoever, howsoever created, but shall not include: (i) an encumbrance for Taxes not yet due and delinquent; (ii) inchoate or statutory encumbrances of contractors, subcontractors, mechanics,

workers, suppliers, materialmen, carriers and others in respect of the construction, maintenance, repair or operation of the Assets, provided that such encumbrances are related to obligations not due or delinquent and in respect of which adequate holdbacks are being maintained as required by Applicable Law; and (iii) the right reserved to or vested in any Governmental Entity by any statutory provision or by the terms of any lease, licence, franchise, grant or permit of either Party, to terminate any such lease, licence, franchise, grant or permit, or to require annual or other payments as a condition of their continuance;

“Environmental Laws” means all applicable federal, provincial, state, local and foreign laws, imposing liability or standards of conduct for, or relating to, the regulation of activities, materials, substances or wastes in connection with, or for, or to, the protection of human health, safety, the environment or natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation);

“Environmental Liabilities” means, with respect to any Person, all liabilities, remedial and removal costs, investigation costs, capital costs, operation and maintenance costs, losses, damages, (including punitive damages, property damages, consequential damages and treble damages), costs and expenses, fines, penalties and sanctions incurred as a result of, or related to, any claim, suit, action, administrative order, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law arising under, or related to, any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Substance whether on, at, in, under, from or about or in the vicinity of any real or personal property;

“Environmental Permits” means all permits, licenses, written authorizations, certificates, approvals, program participation requirements, sign-offs or registrations required by or available with or from any Governmental Entity under any Environmental Laws;

“Financial Statements of the Corporation” means the audited financial statements of the Corporation for the fiscal years ended December 31, 2017 and December 31, 2016, consisting of the balance sheet and the income statement, to be prepared in accordance with Applicable Laws and the regulations of the CSE in connection with the listing of the Resulting Issuer Shares and to be filed in the listing statement of the Acqurior on SEDAR in connection with the Transaction;

“Finco” means 10653918 Canada Inc., a company existing under the federal laws of Canada;

“Finco Financing” means, collectively, the Brokered Financing and the Non-Brokered Financing;

“Finco Shares” means common shares in the authorized share capital of Finco;

“Finco Subscription Receipts” means subscription receipts of Finco issued in the Finco Financing at a price of $0.80 per subscription receipt, which will automatically be converted into Finco Units immediately prior to the completion of the Transaction;

“Finco Units” means the units of Finco to be issued on exercise or deemed exercise of the Finco Subscription Receipts, each such unit consisting of one (1) Finco Share and one-half of one Finco Warrant;

“Finco Warrants” means the whole share purchase warrants issued to holders of Finco Subscription Receipts upon satisfaction of certain escrow release conditions, each whole such Finco Warrant entitling the holder thereof to purchase one (1) Finco Share at a price of $1.40 per share for a period of 24 months following the satisfaction of certain escrow release conditions;

“Governmental Entity” means any applicable: (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (b) subdivision, agent, commission, board or authority of any of the foregoing; (c) quasi-governmental or private body, including any tribunal, commission, regulatory agency or self-regulatory organization, exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; or (d) stock exchange, including the CSE;

“Hazardous Substance” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous or deleterious substance, or material, including petroleum, polychlorinated biphenyls, asbestos and urea-formaldehyde insulation, and any other material or contaminant regulated or defined under any Environmental Law;

“IFRS” means the International Financial Reporting Standards as issued by the International Accounting Standards Board;

“Information Technology” means computer hardware, software in source code and object code form (including documentation, interfaces and development tools), programs, websites for the Corporation, databases, telecommunications equipment and facilities and other information technology systems owned, used or held by the Corporation;

“Intellectual Property” means intellectual property rights, whether registered or not, owned, licensed or used, throughout the world, including:

(c)

inventions, algorithms, methods, procedures, techniques, instructions, guides, manuals, samples, specifications, schematics, invention disclosures, statutory invention registrations, trade secrets and confidential business information, know-how, manufacturing and product processes and techniques, research and development information, records, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, whether patentable or non-patentable, whether copyrightable or non-copyrightable and whether or not reduced to practice;

(d)

patents, pending patent applications, utility models, design registrations and certificates of invention and other governmental grants for the protection of

inventions or industrial designs (including divisionals, reissues, renewals, reexaminations, continuations, continuations-in-part and extensions);

(e)

trade-marks and service marks, trade dress, trade-names, corporate names, business names, doing business designations, logos, slogans, distinguishing guises, other indicia of origin and all registrations and applications for registration thereof, common law trademarks and service marks and all goodwill associated with the foregoing;

(f)

all rights, titles, interests and benefits in and to the Works, including the Copyright and the moral rights and all waivers of moral rights in the Works;

(g)

all rights, titles, interests and benefits in and to the Know-How;

(h)

industrial designs and all registrations thereof;

(i)

Information Technology and all registrations thereof;

(j)

mask works, semiconductor topologies, integrated circuit topographies and registrations and applications for registration thereof; and

(k)

other proprietary rights relating to any of the foregoing, whether recognized by statutory law or common or civil law (including remedies against infringement thereof and rights of protection of interest therein under Applicable Laws);

(l)

income and proceeds from any of the intellectual property listed in paragraphs (c) to (k) above;

(m)

rights to damages and profits by reason of the infringement of any of the intellectual property described in items (c) to (k) above; and

(n)

goodwill associated with any of the foregoing;

“Know-How” means all know-how, trade secrets, proprietary information, confidential information and information of a sensitive nature used by the Corporation in the Business that have value to the Business or relate to business opportunities for the Corporation, in whatever form communicated, maintained or stored, including (a) all formulae, recipes, algorithms, business methods, technical processes, specifications, manuals, drawings, prototypes, models, corporate plans, management systems and techniques, (b) all information relating to the research, development, manufacture, marketing, sales or post-sales activities of any past, present or future goods or services, including lab journals, notebooks, design documentation, engineering documentation, manufacturing documentation, costing information, advertising plans, pricing information, customer names, customer lists and other details of customers, supplier names, supplier lists and other details of suppliers, sales targets, sales statistics, market share information, market research and survey information;

“Leased Real Property” means lands and/or premises which are used by the Corporation and which are leased, subleased, licensed to or otherwise occupied by the Corporation;

“Letter Agreement” means the letter agreement dated February 13, 2018 between the Acquiror and Corporation, as amended on March 8, 2018;

“Licensed IP” means the Intellectual Property that is necessary and material to the business of the Corporation as presently conducted or as proposed to be conducted and that is owned by any person other than the Corporation;

“Listing Statement” means the listing statement of the Acquiror in accordance with requirements of the CSE in respect of the Transaction;

“Material Adverse Change” means a change with respect to a Person that would have a Material Adverse Effect;

“Material Adverse Effect” means, in respect of any Person, any change, effect, event, circumstance, fact or occurrence that individually or in the aggregate with other such changes, effects, events, circumstances, facts or occurrences, is or would reasonably be expected to be, material and adverse to the business, condition (financial or otherwise), properties, prospects, assets (tangible or intangible), liabilities (including any contingent liabilities), operations or results of operations of that Person and its subsidiaries, taken as a whole, except any change, effect, event, circumstance, fact or occurrence resulting from or relating to: (i) the announcement of the execution of this Agreement or the transactions contemplated hereby; (ii) general political, economic or financial conditions in Canada or the United States of America; (iii) the state of securities or commodity markets in general (provided that it does not have a materially disproportionate effect on that Person relative to comparable cannabis companies); (iv) any natural disaster or the commencement or continuation of any war, armed hostilities or acts of terrorism (provided that it does not have a materially disproportionate effect on that Person relative to comparable cannabis companies); or (v) any decrease in the trading price or any decline in the trading volume of that Person’s common shares (it being understood that the causes underlying such change in trading price or trading volume (other than those in items (i) to (v) above) may be taken into account in determining whether a Material Adverse Effect has occurred);

“Material Contract” is any contract material to the business, prospects or affairs of the Corporation and includes but is not limited to, those Material Contracts listed in Schedule “B” attached hereto;

“Non-Brokered Financing” means the non-brokered financing of Finco Subscription Receipts to be completed prior to the Closing for gross proceeds of up to $5 million; the gross proceeds of which will be placed in escrow and released to Finco, and the Finco Subscription Receipts will automatically be converted into Finco Units, on satisfaction of certain escrow release conditions, and each Finco Share will then be exchanged for one Resulting Issuer Share and each Finco Warrant will then be exchanged for one Resulting Issuer Warrant, respectively, in connection with the Transaction and the Amalgamation;

“Owned Real Property” means real property owned by the Corporation, and real property, other than Leased Real Property, in which the Corporation has an ownership interest;

“Permit” means any license, permit, certificate, consent, order, grant, approval, classification, registration or other authorization of and from any Governmental Entity;

“Person” includes an individual, partnership, association, unincorporated organization, trust and corporation and a natural person acting in such person’s individual capacity or in such person’s capacity as trustee, executor, administrator, agent or other legal representative;

“Personally Identifiable Information” means any information that alone or in combination with other information held by the Corporation can be used to specifically identify a person including but not limited to a natural person’s name, street address, telephone number, e-mail address, photograph, social insurance number, driver’s license number, passport number, credit or debit card number or customer or financial account number or any similar information that is treated as “Personally Identifiable Information” under any Applicable Laws;

“Real Property Leases” means contracts pursuant to which the Corporation uses or occupies the Leased Real Property;

“Release” means any release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Substance in the indoor or outdoor environment, including the movement of Hazardous Substance through or in the air, soil, surface water, groundwater or property;

“Representatives” means, collectively, in respect of a Person, (a) its directors, officers, employees, agents, representatives and any financial advisor, law firm, accounting firm or other professional firm retained to assist the Person in connection with the transactions contemplated in this Agreement, and (b) the Person’s affiliates and subsidiaries and the directors, officers, employees, agents and representatives and advisors thereof;

“Restricted Shares” means the Class A Restricted Voting Shares in the capital of the Resulting Issuer having the terms and conditions in substantially the form set out in Schedule “C” hereto and to be received by the Shareholders as set forth in Schedule “A” hereto;

“Resulting Issuer” means the Acquiror following the Consolidation and the completion of the Transaction, and to be renamed “Planet 13 Holdings Inc.”, or such other name as determined by the directors of the Acquiror;

“Resulting Issuer Shares” means common shares in the capital of the Resulting Issuer;

“Resulting Issuer Warrant” means common share purchase warrants to acquire Resulting Issuer Shares;

“Securities Authorities” means the securities commissions or other securities regulatory authorities in Alberta, British Columbia, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Quebec, and each of the other provinces and territories of Canada;

“Securities Act” means the Securities Act (Ontario) and the rules, regulations and published policies made thereunder, as now in effect and as they may be promulgated or amended from time to time;

“Securities Laws” means the Securities Act, together with all applicable Canadian provincial securities laws, rules and regulations and published policies thereunder as now in effect and as they may be promulgated or amended from time to time;

“Shareholders” means, collectively, the holders of an aggregate of 25,300,000 Corporation Shares and 49,700,000 Corporation Non-Voting Shares, as listed in Schedule “A”;

“Software” means all computer programs and all updates, upgrades and all versions thereof owned or licensed, by the Corporation and developed, sold, licensed to third parties, marketed or supported by the Corporation in its normal course of business, including but not limited to all computer software code, applications, utilities, development tools, diagnostics, databases and embedded systems, whether in source code, interpreted code or object code form, program files, data files, computer related data, field and data definitions and relationships, data definitions specifications, data models, programs and systems logic, interfaces, program modules, routines, sub-routines, algorithms, program architecture, design concepts, system designs, program structure, sequence and organization, screen displays and report layouts;

“Stock Exchange Listing” means the conditional approval of CSE for the listing of the Consideration Shares on the CSE;

“Tangible Personal Property” means machinery, equipment, furniture, furnishings, office equipment, computer hardware, vehicles and tangible assets owned and currently used by the Corporation, excluding all obsolete and non-functional assets of the Corporation;

“Tax Act” means the Income Tax Act (Canada), as amended from time to time;

“Taxes” in respect of a Party means: any and all taxes, imposts, levies, withholdings, duties, fees, premiums, assessments and other charges of any kind, however denominated and instalments in respect thereof, including any interest, penalties, fines or other additions that have been, are or will become payable in respect thereof, imposed by any Governmental Entity, including for greater certainty all income or profits, taxes (including federal, provincial, state, municipal and territorial income taxes), payroll and employee withholding taxes, employment taxes, unemployment insurance, disability taxes, social insurance taxes, sales and use taxes, ad valorem taxes, excise taxes, goods and services taxes, harmonized sales taxes, franchise taxes, gross receipts taxes, capital taxes, business license taxes, alternative minimum taxes, estimated taxes, abandoned or unclaimed (escheat) taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, severance taxes, workers’ compensation, Canada, United States, Nevada, Ontario, and other government pension plan premiums or contributions and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which such Party or any of its subsidiaries is required to pay, withhold or collect, together with any interest, penalties or other additions to tax that may

become payable in respect of such taxes, and any interest in respect of such interest, penalties and additions whether disputed or not;

“Technical Information” means know-how and related technical knowledge owned, used or held by the Corporation, including: (a) trade secrets, confidential information and other proprietary know-how; (b) public information and non-proprietary know-how; (c) information of a scientific, technical, financial or business nature regardless of its form; (d) uniform resource locators, domain names, telephone, telecopy, internet protocol and email addresses, and UPC consumer packaging codes; and (e) documented research, forecasts, studies, marketing plans, budgets, market data, developmental, demonstration or engineering work, information that can be used to define a design or process or procure, produce, support or operate material and equipment, methods of production and procedures, all formulas and designs and drawings, blueprints, patterns, plans, flow charts, parts lists, manuals and records, specifications, and test data;

“Technology” means Intellectual Property, Technical Information and Information Technology;

“Termination Date” has the meaning ascribed to such term in Section 13.1(d) hereof;

“Time of Closing” has the meaning ascribed to such term in Section 2.9 hereof;

“Transaction” means, together with the Amalgamation, the exchange by the Shareholders of the Acquired Corporation Shares for the Consideration Shares as contemplated in Sections 2.1 and 2.3, and the liquidation of Amalco under Section 2.4;

“Transaction Resolutions” has the meaning set out in Section 6.1(a);

“U.S. Securities Act” means the United States Securities Act of 1933, as amended; and

“Works” means all works and subject matter used by the Corporation in the Business, in which copyright, neighbouring rights or moral rights subsist, including (a) all Software, (b) all databases and database layouts (the “Databases”), (c) all documents and other works relating to the Software or the Databases, (d) all other literary, artistic, pictorial, graphic, musical, dramatic and audio-visual works, (e) all performer’s performances, sound recordings, and other neighbouring works, (f) all compilations of the foregoing, and (g) all derivatives, enhancements and modifications of the foregoing.

1.2

Parties

The Corporation, the Acquiror and each person or entity that becomes a party hereto in accordance with the terms hereof are collectively referred to as “Parties” and individually as a “Party”.

1.3

Interpretation Not Affected by Headings

The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect in any way the meaning or

interpretation of this Agreement. Unless the contrary intention appears, references in this Agreement to an Article, Section or Schedule by number or letter or both refer to the Article, Section or Schedule, respectively, bearing that designation in this Agreement.

1.4

Number and Gender

In this Agreement, unless the contrary intention appears, words importing the singular include the plural and vice versa, and words importing gender include all genders.

1.5

Date for Any Action

If the date on or by which any action is required or permitted to be taken hereunder by a Party is not a Business Day, such action shall be required or permitted to be taken on the next succeeding day which is a Business Day.

1.6

Currency

Unless otherwise stated, all references in this Agreement to sums of money are expressed in lawful money of Canada and “$” refers to Canadian dollars.

1.7

Accounting Matters

Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings attributable thereto under IFRS and all determinations of an accounting nature required to be made shall be made in a manner consistent with IFRS consistently applied.

1.8

Knowledge

In this Agreement, references to “the knowledge of the Corporation” means the actual collective knowledge of Robert A. Groesbeck and Larry Scheffler, in their respective capacities as Co-Chief Executive Officers of the Corporation.

In this Agreement, references to “the knowledge of the Acquiror” means the actual knowledge of Lonnie Kirsh in his capacity as President, Chief Executive Officer, and acting Chief Financial Officer of the Acquiror.

1.9

Schedules

The following Schedules are annexed to this Agreement and are incorporated by reference into this Agreement and form a part hereof:

Schedule “A”

Shareholders of the Corporation

Schedule “B”

Material Contracts of the Corporation

Schedule “C”

Restricted Share Terms

Schedule “D”

Consents and Approvals

Schedule “E”

Owned and Leased Real Property

ARTICLE 2

AGREEMENT TO EXCHANGE AND CANCEL

2.1

Subject to the terms and conditions hereof, and immediately after the completion of the Amalgamation, at the Time of Closing, and for greater certainty, concurrently with the closing of the Transaction and the Stock Exchange Listing, the Shareholders shall transfer to the Acquiror, and the Acquiror shall accept from the Shareholders, the Acquired Corporation Shares held by the Shareholders and the Shareholders shall deliver to the Acquiror certificates representing the Acquired Corporation Shares, duly endorsed in blank for transfer, registered in the name of the Acquiror or accompanied by duly executed powers of attorney in respect thereof for the transfer of Acquired Corporation Shares to the Acquiror.

2.2

U.S. Tax Treatment. The parties to this Agreement intend that the Transaction contemplated by this Agreement shall constitute a single integrated transaction which qualifies as tax-deferred exchange pursuant to Section 351 of the Code. In connection with the Transaction and at all times from and after the Closing, the parties agree to treat Resulting Issuer as a United States domestic corporation for U.S. federal income tax purposes pursuant to Section 7874(b) of the Code. No party shall take any action, fail to take any action, cause any action to be taken or cause any action to fail to be taken that could reasonably be expected to prevent: (i) the Transaction from qualifying as a tax-deferred transaction within the meaning of Section 351 of the Code; or (ii) the Resulting Issuer from being treated as a United States domestic corporation for U.S. federal income tax purposes pursuant to Section 7874(b) of the Code. Each party hereto agrees to act in good faith, consistent with the intent of the parties and the intended U.S. federal income tax treatment of the Transaction as set forth in this Section 2.2 and Section 2.3. Notwithstanding the foregoing, none of the Shareholders, the Acquiror, the Corporation nor the Resulting Issuer makes any representation, warranty or covenant to any other party or to any Shareholder equity holder, Acquiror equity holder, Corporation equity holder or Resulting Issuer equity holder (including, without limitation, stock, membership interests, options, warrants, debt instruments or other similar rights or instruments) regarding the U.S. tax treatment of the transactions contemplated by this Agreement.

2.3

The acquisition price (the “Acquisition Price”) for the Acquired Corporation Shares shall be paid and satisfied by the issuance and delivery at the Time of Closing of the Consideration Shares by the Acquiror to the Shareholders in accordance with Schedule “A” hereto, and no other consideration.

2.4

As soon as reasonably practicable following the completion of the Transaction, the Resulting Issuer shall take all such necessary and reasonable steps required to effect a voluntary liquidation of Amalco under the CBCA.

2.5

The Parties acknowledge and agree that the maximum number of Consideration Shares issuable in exchange for the Acquired Corporation Shares pursuant to Section 2.1 shall be approximately 25,300,000 Resulting Issuer Shares and approximately 49,700,000 Restricted Shares. The Consideration Shares to be issued hereunder shall be issued as fully paid and non-assessable shares in the Resulting Issuer, free and clear of any and all Encumbrances.

2.6 The Shareholders acknowledge and agree with the Acquiror that a portion of the Consideration Shares to be issued as part of the Transaction will be subject to escrow requirements of the CSE, resale restrictions under applicable Securities Laws, the securities laws of the United States and/or the policies of the CSE, and that any escrowed Consideration Shares will not be transferable if such Consideration Shares are subject to resale restrictions and CSE escrow requirements, until the Consideration Shares are no longer subject to escrow restrictions and are released from escrow.

2.7 Restricted Share Provisions. The Restricted Shares of the Resulting Issuer shall have the rights, privileges, conditions and restrictions set forth in Schedule “C”.

2.8 The Acquiror does not assume and shall not be liable for any taxes under the Tax Act, the

Code or any other taxes whatsoever which may be or become payable by the Shareholders including, without limiting the generality of the foregoing, any taxes resulting from or arising as a consequence of the sale by the Shareholders to the Acquiror of the Acquired Corporation Shares herein contemplated, and the Shareholders shall indemnify and save harmless the Acquiror from and against all such taxes.

2.9 The Transaction shall be closed (the “Closing”), at the offices of the Corporation’s

Canadian counsel, Cassels Brock & Blackwell LLP, at 8:30 a.m. local time in Toronto, Ontario (the “Time of Closing”) on the day that all conditions contained in this Agreement have been met or waived (the “Closing Date”).

2.10 Any cheque, document, instrument or thing which is to be delivered by any Party hereto at the Closing shall be tabled at a pre-Closing at the place of Closing referred to above by the Party which is to deliver such cheque, document, instrument or thing, and any cheque, document, instrument or thing so tabled by a Party hereto shall be held in escrow by counsel for such Party until the Time of Closing and released from escrow at the Time of Closing provided all cheques, documents, instruments and things which are to be delivered at the Closing are tabled in accordance with this section at the Closing.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

3.1 The Corporation hereby represents and warrants to the Acquiror as at the date hereof and

as at the Closing Date and acknowledges and confirms that the Acquiror is relying upon such representations and warranties in connection with the acquisition by the Acquiror of the Acquired Corporation Shares from the Shareholders as follows:

(a)

Organization and Qualification. The Corporation is a corporation duly incorporated and validly existing under the Applicable Laws of the State of Nevada and has all necessary corporate or legal power and capacity to own its property and assets as now owned and to carry on its business as it is now being conducted. A true and complete copy of the constating documents of the Corporation has been provided to the Acquiror. The Corporation is duly registered, licensed or otherwise authorized and qualified to do business and is in good standing in each jurisdiction in which

the character of its properties, owned, leased, licensed or otherwise held, or the nature of its activities, makes such qualification necessary, except where the failure to be so registered or in good standing or to have such permits would not have a Material Adverse Effect on the Corporation.

(b)

Authority Relative to this Agreement. The Corporation has all necessary corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by the Corporation as contemplated by this Agreement, and to perform its obligations hereunder and under such agreements and instruments. The execution and delivery of this Agreement by the Corporation and the performance by the Corporation of its obligations under this Agreement have been duly authorized by the Corporation Board in the manner contemplated herein, and subject to providing the Nevada Secretary of State under Chapter 78 of the Nevada Revised Statues any records, information or other documents required by it in connection with the Transaction, no other corporate proceedings on its part are necessary to authorize this Agreement. This Agreement has been duly executed and delivered by the Corporation and constitutes a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

(c)

No Violation. Neither the authorization, execution and delivery of this Agreement by the Corporation nor the completion of the Transaction, nor the performance of its obligations herein, nor compliance by the Corporation with any of the provisions hereof will:

(i) result in a violation or breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), require any consent or approval to be obtained or notice to be given under, or give rise to any third party right of termination, cancellation, suspension, acceleration, penalty or payment obligation or right to acquire or sale under, any provision of:

(A)

its articles, charters or by-laws or other comparable organizational documents;

(B)

any Permit or Material Contract to which the Corporation is a party or to which it, or any of its properties or assets, may be subject or by which it is bound; or

(C)

any laws, regulation, order, judgment or decree applicable to the Corporation or any of its respective properties or assets;

(ii)

give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, Material Contract, license, franchise or Permit, except, to the extent that any of the foregoing instruments are material to the Corporation, where waivers to such rights have been obtained by the Corporation;

(iii)

give rise to any termination or acceleration of indebtedness, or cause any third party indebtedness to come due before its stated maturity or cause any available credit to cease to be available;

(iv)

result in the imposition of any Encumbrance upon any of the property or assets of the Corporation or restrict, hinder, impair or limit the ability of the Corporation to conduct the Business which would reasonably be expected to have a Material Adverse Effect on the Corporation; or

(v)

result in any material payment (including retention, severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of the Corporation, or increase any benefit payable to such director, officer or employee by the Corporation, or result in the acceleration of the time of payment or vesting of any such benefits.

Capitalization. The authorized share capital of the Corporation consists of 50,000,000 Corporation Shares with a par value of US$0.001 per Corporation Share, and 100,000,000 Corporation Non-Voting Shares with a par value of US$0.001 per Corporation Non-Voting Share, of which a total of 25,300,000 Corporation Shares (and no more) and the 49,700,000 Corporation Non-Voting Shares (and no more) will be will be validly issued and outstanding as fully paid and non-assessable shares in the capital of the Corporation immediately prior to the Time of Closing. As of the date hereof, there are 25,300,000 Corporation Shares and 49,700,000 Corporation Non-Voting Shares issued and outstanding Corporation Shares. There are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) of any character whatsoever requiring or which may require the issuance, sale or transfer by the Corporation of any securities of the Corporation (including Corporation Shares), or any securities or obligations convertible into, or exchangeable or exercisable for, or otherwise evidencing a right or obligation to acquire, any securities of the Corporation (including Corporation Shares), provided, however, there may be options exercisable into Corporation Shares (at an exercise price not less than $0.80 per Corporation Share) and restricted share units of the Corporation outstanding immediately prior to the Closing Date. All outstanding Corporation Shares have been duly authorized and validly issued, are fully paid and non-assessable. All securities of the Corporation (including the Corporation Shares) have been issued in compliance with all Applicable Laws and Securities Laws. There are no securities of the Corporation outstanding which have the right to vote

generally (or are convertible into or exchangeable for securities having the right to vote generally) with the Shareholders on any matter. There are no outstanding contractual or other obligations of the Corporation to repurchase, redeem or otherwise acquire any of its securities. There are no outstanding bonds, debentures or other evidences of indebtedness of the Corporation having the right to vote with the holders of the outstanding Corporation Shares on any matters.

(d)

Ownership of Subsidiaries. The Corporation does not beneficially own, or exercise control or direction over, 10% or more of the outstanding voting shares of any company and does not own any securities or, have any interest in any joint venture entity or other Person.

(e)

Non-reporting issuer. The Corporation is not a reporting issuer, as that term is defined by Securities Laws, there is no published market for the Acquired Corporation Shares and the number of holders of common shares in the capital of the Corporation as at the date hereof is not more than 50, exclusive of holders who

(i) are in the employment of the Corporation or an affiliate of the Corporation, or

(ii) were formerly in the employment of the Corporation or in the employment of an entity that was an affiliate of the Corporation at the time of that employment and who while in that employment were, and have continued after that employment to be, security holders of the Corporation.

(f)

Books and Records. The financial books, records and accounts of the Corporation: (i) have been maintained in accordance with Applicable Laws; and (ii) are stated in reasonable detail and accurately and fairly reflect the material transactions, acquisitions and dispositions of the assets of the Corporation.

(g)

Minute Books. The corporate minute books of the Corporation contain resolutions of the Corporation Board and committees thereof, and shareholders or members, as applicable, held according to Applicable Laws and are complete and accurate in all material respects.

(h)

No Proceedings. No proceedings have been taken, instituted or are pending for the dissolution, winding-up or liquidation of the Corporation and no board approvals have been given to commence any such proceedings.

(i)

No Undisclosed Liabilities. At the time of Closing, the Corporation shall have no outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work, to give any guarantees or for Taxes due), whether accrued, absolute, contingent or otherwise, and are not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any Person which shall not be disclosed or reflected in the Financial Statements of the Corporation, other than those incurred in the ordinary course of business.

(j)

No Material Change. Since March 31, 2018, except as contemplated by this Agreement, or otherwise disclosed to the Acquiror:

(i)

the Corporation has conducted its business only in the ordinary and regular course of business;

(ii)

there has not occurred any event that constituted or with the passage of time would constitute a Material Adverse Effect in respect of the Corporation;

(iii)

other than in the ordinary and regular course of business consistent with past practice, there has not been any incurrence, assumption or guarantee by the Corporation of any debt for borrowed money, any creation or assumption by the Corporation of any Encumbrance or any making by the Corporation of any loan, advance or capital contribution to or investment in any other Person;

(iv)

there has been no dividend or distribution of any kind declared, paid or made by the Corporation on any Corporation Shares;

(v)

the Corporation has not affected or passed any resolution to approve a split, consolidation or reclassification of any of the outstanding Corporation Shares; and

(vi)

there has not been any material increase in or modification of the compensation payable to or to become payable by the Corporation to any of its directors, officers, employees or consultants or any grant to any such director, officer, employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement made to, for or with any of such directors, officers, employees or consultants.

(k)

Litigation. There is no claim, action, suit, grievance, complaint, proceeding or investigation that has been commenced or, to the knowledge of the Corporation, is threatened affecting the Corporation or affecting any of its property or assets at law or in equity before or by any Governmental Entity, including matters arising under Environmental Laws, which, individually or in the aggregate, if determined adversely to the Corporation, as the case may be, has or could reasonably be expected to result in liability to the Corporation. Neither the Corporation nor its respective assets or properties is subject to any outstanding judgment, order, writ, injunction or decree.

(l)

Accuracy of Information. The Corporation has made available to the Acquiror all material information concerning the Corporation, and all such information as made available to the Acquiror is accurate, true and correct in all material respects.

(m)

No Payments. There are no payments required to be made to directors, officers and employees of the Corporation as a result of the Transaction under any contract, settlements, bonus plans, retention agreements, change of control agreements and severance obligations (whether resulting from termination, change of control or alteration of duties).

(n)

Taxes.

(i) Other than [REDACTED – COMMERCIALLY SENSITIVE INFORMATION], the Corporation has filed, caused, or will cause to be filed all returns required to be filed by Applicable Law on or before the Closing Date. All such filed returns are correct and complete in all material respects. Other than described above, the Corporation has timely paid all material Taxes that are due and payable by the Corporation, including all instalments on account of taxes for the current year that are due and payable by the Corporation whether or not assessed (or reassessed) by the appropriate Governmental Entity, and has, as applicable, timely remitted such Taxes to the appropriate Governmental Entity under Applicable Law. There are no Encumbrances for Taxes upon any of the assets or properties of the Corporation.

(ii)

There is no material dispute or claim, including any audit, investigation or examination by any Governmental Entity, actual, pending or, to the knowledge of the Corporation, threatened, concerning any Tax liability of the Corporation, no written notice of such an audit, investigation, examination, material dispute or claim has been received by the Corporation.

(iii)

The Corporation has not requested, or entered into any agreement or other arrangement, or executed any waiver providing for, any extension of time within which:

(A)

the Corporation is required to pay or remit any Taxes or amounts on account of Taxes (which have not since been paid or remitted); or

(B)

any Governmental Entity may assess or collect Taxes for which the Corporation is liable.

(iv) Other than [REDACTED – COMMERCIALLY SENSITIVE INFORMATION], the Corporation has duly and timely deducted, collected or withheld from any amount paid or credited by it to or for the account or benefit of any Person and has duly and timely remitted the same (or is properly holding for such remittance) to the appropriate Governmental Entity all Taxes and amounts it is required by Applicable Law to so deduct or collect and remit. Any outstanding tax liability will

be accurately reflected in the audited financial statements of the Corporation for the fiscal years ended December 31, 2016 and 2017, and the Corporation has a plan for payment of all outstanding tax liabilities in place.

(v)

The Corporation has not acquired property or services from, or disposed of property or provided services to, any Person with whom it does not deal at arm’s length for an amount that is other than the fair market value of such property or services.

(vi)

No written claim has ever been made by any Governmental Entity in a jurisdiction where the Corporation does not file returns that the Corporation is or may be subject to Taxes or is required to file returns in that jurisdiction.

(vii)

There are no rulings or closing agreements issued to the Corporation which could affect the Corporation’s liability for Taxes for any taxable period after the Closing Date other than rulings of general application. The Corporation has not requested an advance tax ruling from the Canada Revenue Agency or comparable rulings from other taxing authorities.

(o)

Permits.

(i)

To the knowledge of the Corporation, the Corporation has obtained and is in material compliance with all material Permits required by Applicable Laws, necessary to conduct its Business as now being conducted and as proposed to be conducted in the next 12 month period; and

(ii)

to the knowledge of the Corporation, there are no facts, events or circumstances that would reasonably be expected to result in a failure to obtain or be in material compliance with such material Permits as are necessary to conduct the Business;

(p)

Assets. Except with respect to Technology of which the Corporation is not the sole beneficial and registered owner and leased assets to be described in the Financial Statements of the Corporation, the Corporation is the beneficial owner of its Assets or interests therein, has good and marketable title to all of its Assets, no person has any contract or any right or privilege capable of becoming a right to purchase any personal property from the Corporation, and any and all agreements pursuant to which the Corporation holds any such interest in its Assets are valid and subsisting agreements in full force and effect, enforceable in accordance with their respective terms, and the Corporation is not, and will not be at the Time of Closing, in material default of any of the provisions of any such agreement nor has any default been alleged and, such Assets are in good standing under the applicable statutes, rules,

regulations, licenses and permits of the jurisdiction in which they are situated and all leases pursuant to which the Corporation derives its interest in such Assets are in good standing and there has been no default under any of such leases.

(q)

Condition of Certain Assets. To the knowledge of the Corporation, the Tangible Personal Property is in good condition, repair and (where applicable) proper working order, reasonable wear and tear excepted having regard to its use and age, subject to normal maintenance and repair.

(r)

Collectability of Accounts Receivable. To the knowledge of the Corporation and the Shareholders, the Accounts Receivable are good and collectible at the aggregate recorded amounts within one hundred and eighty (180) days from the Closing Date, except to the extent of any reserves and allowances for doubtful accounts provided for such Accounts Receivable to be set out in the Financial Statements of the Corporation, and are not subject to any defence, counterclaim or set off.

(s)

Qualification to do Business. The Corporation is registered, licensed or otherwise qualified to do business under the Applicable Laws of Nevada and neither the character nor the location of the properties and assets owned by the Corporation nor the nature of the Business requires registration, licensing or other qualification under the Applicable Laws of any other jurisdiction, except where the failure to be so registered, licensed or otherwise qualified to do business would not have a Material Adverse Effect on the Corporation.

(t)

Sanctions. neither the Corporation nor, to the knowledge of the Corporation, any director, officer, agent, employee or affiliate of the Corporation, has had any sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department, the Government of Canada or any other relevant sanctions authority (collectively, “Sanctions”) imposed upon such Person, and the Corporation is not in violation of any of the Sanctions or any law or executive order relating thereto, or is conducting business with any person subject to any Sanctions.

(u)

Compliance with Anti-Corruption Laws. The Corporation has not violated the Corruption of Foreign Public Officials Act (Canada) or the U.S. Foreign Corrupt Practices Act, or the anti-corruption laws of any other jurisdiction where the Business is carried on.

(v)

Anti-Money Laundering. The operations of the Corporation are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, and the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any

court or Governmental Entity or any arbitrator involving the Corporation with respect to the Money Laundering Laws is pending or, to the best knowledge of the Corporation, threatened.

(w)

Intellectual Property.

(i)

to the best of the Corporation’s knowledge, the Corporation owns, or have obtained valid and enforceable licenses for, or other rights to use, the Intellectual Property; the Corporation has no knowledge that the Corporation lacks or will be unable to obtain any rights or licenses to use all Intellectual Property necessary and material for the conduct of the business of the Corporation; to the best of the Corporation’s knowledge, no third parties have rights to any Intellectual Property of the Corporation, except for the ownership rights of the owners of the Licensed IP or except for any licenses of use granted by the Corporation therein; there is no pending or, to the best of the Corporation’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or enforceability of any Intellectual Property or the Corporation’s rights in or to any Intellectual Property, the Corporation has no knowledge of any facts which form a reasonable basis for any such claim, and to the best of the Corporation’s knowledge, there has been no finding of unenforceability or invalidity of the Intellectual Property; to the best of the Corporation’s knowledge, there is no patent or published patent application that contains claims that interfere with the issued or pending claims of any of the Intellectual Property of the Corporation; and to the best of the Corporation’s knowledge, there is no prior art that necessarily renders any patent application owned by the Corporation unpatentable that has not been disclosed to the US Patent and Trademark Office or any similar office in any other jurisdiction;

(ii)

to the best of the Corporation’s knowledge, other than Licensed IP, the Corporation is the legal and beneficial owners of, have good and marketable title to, and own all right, title and interest in all Intellectual Property free and clear of all Encumbrances or adverse interests whatsoever, covenants, conditions, options to acquire and restrictions or other adverse claims of any kind or nature which could, individually or in the aggregate, have a Material Adverse Effect, and the Corporation has no knowledge of any claim of adverse ownership in respect thereof; other than the Licensed IP, no consent of any person is necessary to make, use, reproduce, license, sell, modify, update, enhance or otherwise exploit any Intellectual Property and none of the Intellectual Property of the Corporation comprises an improvement to Licensed IP that would give any person any rights to any such Intellectual Property, including, without limitation, rights to license any such Intellectual Property;

(iii)

the Corporation has not received any notice or claim (whether written, oral or otherwise) challenging the ownership or right to use of any of the Intellectual Property or suggesting that any other person has any claim of legal or beneficial ownership or other claim or interest with respect thereto, nor is there a reasonable basis for any claim that any person other than the Corporation have any claim of legal or beneficial ownership or other claim or interest in any of the Intellectual Property; and

(iv)

to the best of the Corporation’s knowledge, the conduct of the business of the Corporation (including, without limitation, the sale of their respective services, or the use or other exploitation of the Intellectual Property by the Corporation or any customers, distributors or other licensees thereof) has not infringed, violated, misappropriated or otherwise conflicted with any Intellectual Property right of any person; there is no pending or threatened action, suit, proceeding or claim by others that the Corporation infringes or otherwise violates any Intellectual Property of others, and the Corporation has no knowledge of any facts which form a reasonable basis for any such claim;

(x)

Material Contracts. Each Material Contract of the Corporation is set out in Schedule “B” hereto and is a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms and neither the Corporation nor any other party to a Material Contract is in default thereunder;

(y)

Owned Real Property. The Owned Real Property is accurately described in Schedule “E” hereto.

(z)

Leased Real Property.

(i)

The Leased Real Property is accurately described in Schedule “E” hereto;

(ii)

Except as described in Schedule “E” hereto, the Real Property Leases have not been altered or amended and are in full force and effect. There are no Contracts between the landlord and tenant, or sub-landlord and subtenant, or other relevant parties relating to the use and occupation of the Leased Real Property, other than as contained in the Real Property Leases; and

(iii)

The Corporation has a good and valid leasehold interest in and to the Leased Real Property of which it is a tenant, free and clear of all Encumbrances.

(aa) Environmental Matters.

(i)

the Corporation has carried on its Business and operations in compliance with all applicable Environmental Laws and all terms and conditions of all Environmental Permits;

(ii)

except in compliance with Applicable Laws, the Corporation has not used any of its property or facilities to generate, manufacture, process, distribute, use, treat, store, dispose of, transport or handle any Hazardous Substance in a manner that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; except in compliance with Applicable Laws, the Corporation has not caused or permitted the release, in any manner whatsoever, of any Hazardous Substances on or from any of its properties or assets or any such release on or from a facility owned or operated by third parties but with respect to which the Corporation is or may reasonably be alleged to have material liability or has received any notice that it is potentially responsible for a federal, state, municipal or local clean-up site or corrective action under any Applicable Laws, statutes, ordinances, bylaws, regulations or any orders, directions or decisions rendered by any ministry, department or administrative regulatory agency relating to the protection of the environment, occupational health and safety or otherwise relating to or dealing with Hazardous Substances in a manner that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect;

(iii)

the Corporation has not received any order, request or notice from any Person alleging a material violation of any Environmental Law;

(iv)

the Corporation (i) is not a party to any litigation or administrative proceeding, nor is any litigation or administrative proceeding threatened against it or its property or assets, which in either case (1) asserts or alleges that it violated any Environmental Laws, (2) asserts or alleges that it is required to clean up, remove or take remedial or other response action due to the Release of any Hazardous Substances, or (3) asserts or alleges that it is required to pay all or a portion of the cost of any past, present or future cleanup, removal or remedial or other response action which arises out of or is related to the Release of any Hazardous Substances, and (ii) is not subject to any judgment, decree, order or citation related to or arising out of applicable Environmental Law and has not been named or listed as a potentially responsible party by any Governmental Entity in a matter arising under any Environmental Laws; and

(v)

is not involved in remediation operations and does not know of any facts, circumstances or conditions, including any release of Hazardous

Substance, that would reasonably be expected to result in any Environmental Liabilities.

(bb) Compliance with Laws. The Corporation has complied with and is not in violation of any Applicable Laws, other than non-compliance or violations which would not, individually or in the aggregate, have a Material Adverse Effect on the Corporation, with the exception of any U.S. federal laws, statutes, and/or regulations which deal with the production, trafficking, distribution, processing, extraction or sale of cannabis and related substances, and it has not received any written notices or other correspondence from any Governmental Entity regarding any circumstances that have existed or currently exist which would lead to a loss, suspension, or modification of, or a refusal to issue, any material license, permit, authorization, approval, registration or consent of a Governmental Entity relating to its activities which would reasonably be expected to restrict, curtail, limit or adversely affect the ability of the Corporation to operate its Business in a manner proposed and which would have a Material Adverse Effect on the Corporation.

(cc) Employment Matters.

(i)

Other than with respect to a written employment agreement between the Corporation and Christopher Brian Wren, Vice-President of Operations of the Corporation, and a written employment agreement between the Corporation and Tanya Lupien, Vice-President of Sales of the Corporation, the Corporation is not:

(A)

a party to any written or oral agreement, arrangement, plan, obligation, policy or understanding providing for severance or termination payments to, or any employment or consulting agreement with, any director or officer of the Corporation;

(B)

a party to any collective bargaining agreement nor, to the knowledge of the Corporation, subject to any application for certification or threatened or apparent union-organizing campaigns for employees not covered under a collective bargaining agreement nor are there any current, or to the knowledge of the Corporation, pending or threatened strikes or lockouts at the Corporation; and

(C)

subject to any claim for wrongful dismissal, constructive dismissal or any other tort claim, actual or, to the knowledge of the Corporation, threatened, or any litigation, actual or, to the knowledge of the Corporation, threatened, relating to its employees or independent contractors (including any termination of such individuals).

(ii)

The Corporation has been and is now in compliance, in all material respects, with all Applicable Laws with respect to employment and labour and there are no current, or, to the knowledge of the Corporation, pending or threatened proceedings before any Governmental Entity with respect to any of the areas listed herein.

(iii)

Other than performance related employee bonus plans, employee healthcare benefits, 401k matching contributions and an employee group insurance plan, the Corporation has not and is not subject to any present or future obligation or liability under, any pension plan, deferred compensation plan, retirement income plan, stock option or stock purchase plan, profit sharing plan, program policy or practice, formal or informal, with respect to its employees.

(dd) Related Party Transactions. With the exception of any contracts related to loans with officers and/or directors of the Corporation, bonus payments paid or payable to certain employees, senior executive officers or directors of the Corporation, or as otherwise disclosed to the Acquiror, there are no contracts or other transactions currently in place between the Corporation, and: (i) any officer or director of the Corporation; (ii) any holder of record or, to the knowledge of the Corporation, beneficial owner of 10% or more of the Corporation Shares; and (iii) any affiliate or associate of any such, officer, director, holder of record or beneficial owner, on the other hand.

(ee) Expropriation. No part of the property or assets of the Corporation has been taken, condemned or expropriated by any Governmental Entity nor has any written notice or proceeding in respect thereof been given or commenced nor does the Corporation know of any intent or proposal to give such notice or commence any such proceedings.

(ff) Rights of Other Persons. Except in respect of the Acquiror’s interest in the Property, no Person has any right of first refusal or option to acquire or any other right of participation in any of the properties or assets owned by the Corporation or any part thereof.

(gg) Restrictions on Business Activities. There is no arbitral award, judgment, injunction, constitutional ruling, order or decree binding upon the Corporation that has or could reasonably be expected to have the effect of prohibiting, restricting, or impairing any business practice of the Corporation, any acquisition or disposition of property by the Corporation, or the conduct of the business by the Corporation as currently conducted or as proposed, which could reasonably be expected to have a Material Adverse Effect on the Corporation.

(hh) Directors and Officers of a Reporting Issuer. The Corporation is not aware of any of the directors or officers of the Corporation receiving any objection from securities regulatory authorities to their serving in capacities as directors or officers of a reporting issuer in any jurisdiction of Canada.

(ii)

No Violations. No filing or registration with, or authorization, consent or approval of any domestic or foreign public body or authority is necessary by the Corporation in connection with the consummation of the Transaction, except for such filings or registrations which, if not made, or for such authorizations, consents or approvals, which, if not received, would not have any Material Adverse Effect on the ability of Corporation to consummate the transactions contemplated by this Agreement or any other agreement in connection with the Transaction, or operate its business in the ordinary course following the completion of the Transaction.

(jj)

Authorizations and Consents.

(i)

Except for the approval of the CSE contemplated in Section 7.1(a), the approval of the shareholders of the Corporation contemplated in Section 7.1(d), and the approval of the Nevada Department of Taxation contemplated in Section 7.1(e), no Authorization or declaration or filing with any Governmental Entity on the part of the Corporation is required for the valid execution, delivery and performance of its obligations under this Agreement or the completion of the Transaction pursuant to this Agreement.

(ii)

Except as set forth in Schedule “D”, no consent, approval or waiver is required pursuant to the terms of any Material Contract, agreement or instrument to which the Corporation is a party for the valid execution, delivery and performance of its obligations under this Agreement or the completion of the Transaction pursuant to this Agreement.

(kk) Fees. Other than the agents to the Brokered Financing, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Corporation.

(ll)

Benefits. Except as disclosed to the Acqurior in writing, there are no plans for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, incentive or otherwise contributed to or required to be contributed to, by the Corporation for the benefit of any current or former director, officer, employee or consultant of the Corporation;.

(mm) Royalty Interests. no director, officer, consultant, insider or other non-arm’s length party to the Corporation (or any associate or affiliate thereof) has any right, title or interest in (or the right to acquire any right, title or interest in) any royalty interest, carried interest, participation interest or any other interest whatsoever which are based on revenue from or otherwise in respect of any assets of the Corporation.

(nn) Escrow Release Conditions. To the knowledge of the Corporation, no event has occurred which is reasonably likely to prevent the escrow release conditions in connection with the Finco Subscription Receipts from being satisfied on or before the escrow release deadline relating to the Finco Subscription Receipts.

(oo) Insurance. As of the date hereof, the Corporation has all insurance maintained by the Corporation in full force and effect and in good standing and is in amounts and in respect of such risks as are normal and usual for companies of similar size and customary in the businesses in which the Corporation is engaged.

(pp) Listing Statement. The description of the Corporation to be contained in the listing statement of the Acqurior prepared in accordance with the regulations of the CSE in connection with the listing of the Resulting Issuer Shares shall not, at the time of filing thereof on SEDAR, fail to be true and correct in any material respect or contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(qq) Data Provided. To the knowledge of the Corporation, any confidential information provided by or on behalf of the Corporation to the Acquiror and its Representatives is true and accurate in all material respects as of the respective dates of such confidential information.

(rr) Licenced Cannabis Company. The Corporation is a licenced producer in the medical and recreational cannabis industry in the State of Nevada, under Applicable Laws in the State of Nevada, authorizing the Corporation to, among other things, grow, produce, sell, possess, process, ship, transport, deliver and destroy cannabis, dried cannabis and cannabis oil in the State of Nevada, and all operations of the Corporation have been and continue to be conducted in compliance with all Applicable Laws in the State of Nevada.

(ss) Cannabis-related Matters.

(i)

To the knowledge of the Corporation, there is no legislation, or proposed legislation to be published by a legislative body, which it anticipates will materially and adversely affect the business, affairs, operations, assets, liabilities (contingent or otherwise) or prospects of the Corporation, with the exception of any U.S. federal laws, statutes, and/or regulations which deal with the production, trafficking, distribution, processing, extraction, or sale of cannabis and related substances.

(ii)The execution and delivery of this Agreement and the performance of

the transactions contemplated hereby do not and will not result in a breach of, and do not create a state of facts which, after notice or lapse of time or both, will result in a breach of Nevada state law related to cannabis nor the licenses, permits, authorizations, certifications or consents issued to the Corporation by any Nevada state or local governmental authority.

(tt) Compliance with Healthcare Laws. The Corporation: (A) is and at all times has

been in compliance in all material respects with all applicable statutes, rules, regulations, ordinances, orders, by-laws, decrees and guidances applicable to it under any Applicable Laws relating in whole or in part to health and safety and/or the environment, any implementing regulations pursuant to any of the foregoing, and all similar or related federal, state, provincial or local healthcare statutes, regulations and directives applicable to the business of the Corporation, including but not limited to Applicable Laws concerning fee-splitting, kickbacks, corporate practice of medicine, disclosure of ownership, related party requirements, survey, certification, licensing, civil monetary penalties, self-referrals, or laws concerning the privacy and/or security of personal health information and breach notification requirements concerning personal health information (collectively, “Applicable Healthcare Laws”); (B) has not received any correspondence or notice from any Governmental Entity alleging or asserting material noncompliance with any Applicable Healthcare Laws or any Permits required by any such Applicable Healthcare Laws; (C) has not received notice of any pending or threatened claim, suit, proceeding, charge, hearing, enforcement, audit, inspection, investigation, arbitration or other action from any Governmental Entity or third party alleging that any operation or activity of the Corporation, or any of their directors, officers and/or employees is in material violation of any Applicable Healthcare Laws or Permit required by any such Applicable Healthcare Laws, and the Corporation does not have any knowledge or reason to believe that any such Governmental Entity or third party is considering or would have reasonable grounds to consider any such claim, suit, proceeding, charge, hearing, enforcement, audit, inspection, investigation, arbitration or other action; and (D) either directly has, or indirectly on its behalf has, filed, declared, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Healthcare Laws or Governmental Entity required by any such Applicable Healthcare Laws in order to keep all Permits in good standing, valid and in full force (except where the failure to so file, declare, obtain, maintain or submit would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Corporation), and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission).

(uu) Regulatory Proceedings. Except for ordinary course inquiries by any Governmental Entity, no Governmental Entity is presently alleging or asserting, or, to the

Corporation’s knowledge, threatening to allege or assert, noncompliance with any applicable legal requirement or registration in respect of the Corporation’s products.

(vv) Products. The Corporation’s products are currently processed, manufactured, tested, packaged and labeled at facilities which are in compliance with good production practices prescribed by Applicable Laws and such other regulatory requirements applicable to the Corporation’s products.

(ww) Protection of Personal Information. The Corporation has security measures and safeguards in place to protect Personally Identifiable Information it collects from customers and other parties from illegal or unauthorized access or use by its personnel or third parties or access or use by its personnel or third parties in a manner that violates the privacy rights of third parties. The Corporation has complied in all material respects with all Applicable Laws relating to privacy and consumer protection and neither has collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized access to any information protected by Applicable Laws related to privacy, whether collected directly or from third parties, in an unlawful manner. The Corporation has taken all reasonable steps to protect Personally Identifiable Information against loss or theft and against unauthorized access, copying, use, modification, disclosure or other misuse.

(xx) Investor Presentation. The information and statements contained in the investor presentation dated February 2018 (the “Investor Presentation”) as prepared by the Corporation, and this Agreement, with respect to the Corporation are true and correct and do not (i) contain any untrue statement of a material fact in respect of the Corporation or the affairs, prospects, operations or condition of the Corporation, or any of its assets; or (ii) to the knowledge of the Corporation, omit any statement of a material fact necessary in order to make the statements in respect of the Corporation, the affairs, prospects, operations or condition of the Corporation or its assets contained herein or therein not misleading. There is no fact known to the Corporation which materially and adversely affects the affairs, prospects, operations or condition of the Corporation or any of its assets which has not been set forth in this Agreement. All forward-looking information and statements of the Corporation contained in the Investor Presentation and the assumptions underlying such information and statements, subject to any qualifications contained therein, are to the knowledge of the Corporation, reasonable in the circumstances as at the date on which such assumptions were made.

3.2 The representations and warranties of the Corporation contained in this Agreement shall survive the execution and delivery of this Agreement and shall expire and be terminated on the earlier of the Time of Closing and the date on which this Agreement is terminated in accordance with its terms. Any investigation by the Acquiror and its Representatives shall not mitigate, diminish or affect the representations and warranties of the Corporation pursuant to this Agreement.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

4.1 Each of the Shareholders hereby severally represents and warrants to the Acquiror and

acknowledges and confirms that the Acquiror is relying upon such Shareholders’ representations and warranties in connection with the purchase by the Acquiror of the Acquired Corporation Shares to be transferred by the Shareholders to the Acquiror pursuant to Section 2.1 of this Agreement and in connection with the issuance of the Consideration Shares:

(a)

neither the execution and delivery of this Agreement, or any other agreements and instruments executed in connection with the Transaction by the Shareholder nor the performance by the Shareholder of its obligations hereunder and thereunder will conflict with or result in:

(i)

a violation, contravention or breach by the Shareholder of any of the terms, conditions or provisions of any agreement or instrument to which such the Shareholder is a party, or by which the Shareholder is bound or constitute a default by the Shareholder thereunder, or, to the knowledge of the Shareholder, after due inquiry, under any statute, regulation, judgment, decree or law by which the Shareholder is subject or bound, or result in the creation or imposition of any mortgage, lien, charge or Encumbrance of any nature whatsoever upon any of the Shareholder’s Acquired Corporation Shares; or

(ii)

a violation by the Shareholder of any law or regulation or any applicable order of any court, arbitrator or governmental authority having jurisdiction over the Shareholder, or require the Shareholder, prior to the Closing or as a condition precedent thereof, to make any governmental or regulatory filings, obtain any consent, authorization, approval, clearance or other action by any Person, or await the expiration of any applicable waiting period;

(b)

no Person has any agreement or option or any right or privilege (whether pre-emptive or contractual) capable of becoming an agreement or option for the acquisition from the Shareholder of any of the Shareholder’s Acquired Corporation Shares;

(c)

the Shareholder has all necessary power, authority and capacity to enter into theAgreement, and all other agreements and instruments to be executed by it as contemplated by the Agreement and to carry out its obligations under the Agreement, and such other agreements and instruments;

(d)

the execution and delivery of the Agreement, and such other agreements and instruments and the consummation of the Transaction have been duly authorized by all necessary corporate action on the part of the Shareholder as may be required;

(e)

the Agreement constitutes a valid and binding obligation of the Shareholderenforceable against the undersigned in accordance with its terms subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and to the extent that equitable remedies such as specific performance and injunctions are only available in the discretion of the court from which they are sought;

(f)

the Shareholder is the registered and legal beneficial owner of its Acquired Corporation Shares as set forth in Schedule “A” to the Agreement and identified on the signature page hereto and has good and valid title thereto free and clear of any Encumbrances;

(g)

the Shareholder has the exclusive right and full power to transfer its Acquired Corporation Shares to the Acquiror as contemplated in the Agreement free and clear of any Encumbrances;

(h)

there is not pending or, to the knowledge of the Shareholder, after due inquiry, threatened or contemplated, any suit, action, legal proceeding, litigation or governmental investigation of any sort which would:

(i) in any manner restrain or prevent the Shareholder from effectually or legally transferring its Acquired Corporation Shares to the Acquiror in accordance with the Agreement;

(ii)

cause any Encumbrance to be attached to its Acquired Corporation Shares;

(iii)

divest title to its Acquired Corporation Shares; or

(iv)

make the Acquiror or the Corporation liable for damages in connection with the Transaction;

(i)

to the knowledge of the undersigned, after due inquiry, there is not pending, threatened or contemplated, any suit, action, legal proceeding, litigation or governmental investigation of any sort relating to the Shareholder, its Acquired Corporation Shares or the Transaction, nor is there any present state of facts or circumstances which can be reasonably anticipated to be a basis for any such suit, action, legal proceeding, litigation or governmental investigation nor is there presently outstanding against the Shareholder, any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality, or arbitrator;

(j)

the Shareholder has not entered into any agreement that would entitle any person to any valid claim against the Acquiror for a broker’s commission, finder’s fee, or any like payment in respect of the acquisition and sale of the Acquired Corporation Shares or any other matters contemplated by the Agreement, and in the event that

any Person acting or purporting to act for the undersigned establishes a claim for any fee from the Acquiror, the Shareholder severally covenants to indemnify and hold harmless the Acquiror with respect thereto and with respect to all costs reasonably incurred in the defence thereof;

(k)

the Shareholder has had the opportunity to ask questions of and receive answers from the Acquiror regarding the acquisition of the Consideration Shares, and has received all the information regarding Acquiror that it has requested;

(l)

the Shareholder acknowledges that the Consideration Shares are highly speculative in nature and that the Shareholder has such sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the investment. In connection with the delivery of the Consideration Shares, the Shareholder has not relied upon the Acquiror for investment, legal or tax advice, or other professional advice, and has in all cases sought or elected not to seek the advice of his own personal investment advisers, legal counsel and tax advisers. The Shareholder is able, without impairing his financial condition, to bear the economic risk of, and withstand a complete loss of the investment and he can otherwise be reasonably assumed to have the capacity to protect his own interests in connection with its investment in the Consideration Shares;

(m)

the Shareholder acknowledges that the Consideration Shares have not been and will not be registered under the U.S. Securities Act or applicable state securities laws, and the Consideration Shares are being offered and sold to the Shareholder in reliance upon Rule 506(b) of Regulation D and/or Section 4(a)(2) under the U.S. Securities Act;

(n)

the Shareholder is an “accredited investor” as defined in Rule 501(a) of Regulation D under the U.S. Securities Act;

(o)

the Shareholder acknowledges that it is not acquiring the Consideration Shares as a result of “general solicitation” or “general advertising” (as such terms are used in Regulation D under the U.S. Securities Act), including without limitation, advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the internet, or broadcast over radio or television or on the internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

(p)

the Shareholder acknowledges that the Consideration Shares are “restricted securities”, as such term is defined under Rule 144 of the Securities Act, and may not be offered, sold, pledged, or otherwise transferred, directly or indirectly, without prior registration under the U.S. Securities Act and applicable state securities laws, or pursuant to an exemption from the registration requirements of the U.S. Securities Act;

(q)

the Shareholder understands that upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the U.S. Securities Act or applicable U.S. state laws and regulations, the certificates representing the Consideration Shares will bear a legend in substantially the following form:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”,

provided, that if the Consideration Shares are being sold under clause (B) above, the legend set forth above may be removed by providing a declaration to Acquiror’s registrar and transfer agent in such form as the Resulting Issuer or its registrar and transfer agent may prescribe from time to time, to the effect that the sale of the securities is being made in compliance with Rule 904 of Regulation S under the U.S. Securities Act;

provided further that if the Consideration Shares are being sold under clauses (C) and (D) above, the legend may be removed by delivery to the Resulting Issuer and its transfer agent of an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Resulting Issuer to the effect that the legend is no longer required under applicable requirements of the U.S. Securities Act;

(r)

none of the foregoing representations and warranties knowingly contains any untrue statement of material fact or knowingly omits to state any material fact necessary to make any such covenant, warranty or representation not misleading to a prospective acquiror seeking full information as to the Acquired Corporation Shares; and

(s) to the knowledge of the Shareholder, none of the representations and warranties made by the Corporation in Section 3.1 of this Agreement is untrue or inaccurate in any material respect.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR

5.1The Acquiror represents and warrants to the Shareholders and the Corporation as follows as at the date hereof and as at the Closing Date and acknowledges that the Shareholders and the Corporation are relying upon such representations and warranties in connection with the sale by the Shareholders and the Corporation of the Acquired Corporation Shares:

(a)

Authority Relative to this Agreement. The Acquiror has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the Acquiror and the performance by the Acquiror of its obligations hereunder have been duly authorized by its board of directors and no other corporate proceedings on its part are necessary to authorize this Agreement or the Transaction. This Agreement has been duly executed and delivered by the Acquiror and constitutes a legal, valid and binding obligation of the Acquiror, enforceable against the Acquiror in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

(b)

Organization and Qualification. The Acquiror is a corporation duly incorporated and validly existing under the federal laws of the Canada and has all necessary corporate or legal power and capacity to own its property and assets as now owned and to carry on its business as it is now being conducted. The Acquiror (a) has all Permits necessary to conduct its business substantially as now conducted, and (b) is duly registered, licensed or otherwise authorized and qualified to do business and each is in good standing in each jurisdiction in which the character of its properties, owned, leased, licensed or otherwise held, or the nature of its activities makes such qualification necessary, except where the failure to be so registered or in good standing or to have such Permits would not have a Material Adverse Effect on the Acquiror.

(c)

Ordinary Course. Since October 18, 2010, the Acquiror has carried on no business other than activities as a venture capital company seeking assets or businesses with good growth potential to merge with or acquire.

(d)

No Material Change. Since December 31, 2017, except as disclosed in the Acquiror Public Disclosure Record:

(i) other than as described in Section 5.1(c) hereof, the Acquiror has not carried on any business;

(ii)

there has not occurred any event that constituted or with the passage of time would constitute a Material Adverse Effect in respect of the Acquiror;

(iii)

the Acquiror has not effected or passed any resolution to approve a split, consolidation or reclassification of any of the outstanding Acquiror Shares;

(iv)

the Acquiror has not effected any material change in its accounting methods, principles or practices;

(v)

there has been no dividend or distribution of any kind declared, paid or made by the Acquiror on any the Acquiror Shares;

(vi)

there has not occurred any event that constituted or with the passage of time would constitute a Material Adverse Effect in respect of the Acquiror and its subsidiaries taken as a whole;

(vii)

the business and property of the Acquiror conform in all material respects to the description thereof contained in the Acquiror Public Disclosure Record;

(viii)

other than in the ordinary and regular course of business consistent with past practice, there has not been any incurrence, assumption or guarantee by the Acquiror of any debt for borrowed money, any creation or assumption by the Acquiror of any Encumbrance or any making by the Acquiror or any of its subsidiaries of any loan, advance or capital contribution to, or investment in, any other Person.

(e)

No Violations. Neither the authorization, execution and delivery of this Agreement by the Acquiror nor the completion of the transactions contemplated by the Agreement or the Transaction, nor the performance of its obligations thereunder, nor compliance by the Acquiror with any of the provisions hereof will:

(i)

result in a violation or breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), require any consent or approval to be obtained or notice to be given under, or give rise to any third party right of termination, cancellation, suspension, acceleration, penalty or payment obligation or right to acquire or sale under, any provision of: (A) the notice of articles, articles of incorporation, or other constating documents of the Acquiror or any of its subsidiaries, (B) any Permit or material contract to which the Acquiror or any of its subsidiaries is a party or to which any of them, or any of their respective properties or assets, may be subject or by which the Acquiror or any of its subsidiaries is bound, or (C) any law,

regulation, order, judgment or decree applicable to the Acquiror or any of its subsidiaries or any of their respective properties or assets.

(ii)

give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, material contract, license, franchise or Permit to which the Acquiror or any of its subsidiaries is a party;

(iii)

give rise to any termination or acceleration of indebtedness, or cause any third party indebtedness to come due before its stated maturity or cause any available credit to cease to be available; or

(iv)

result in the imposition of any Encumbrance upon any of the property or assets of the Acquiror or any of its subsidiaries or restrict, hinder, impair or limit the ability of the Acquiror or any of its subsidiaries to conduct the business of the Acquiror or such subsidiary as and where it is now being conducted which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Acquiror.

No consents, approvals and notices required from any third party under any material contracts of the Acquiror or any of its subsidiaries in order for the Acquiror to proceed with the execution and delivery of this Agreement and the completion of the Transaction.

(f)

Capitalization. The authorized share capital of the Acquiror consists of an unlimited number of Acquiror Shares. As at the date hereof, 5,000,000 Acquiror Shares were issued and outstanding, and an aggregate of 1,000,000 Acquiror Shares are issuable upon the exercise of the Acquiror Special Warrants, and, except for such Acquiror Special Warrants, as of the date hereof, there are no options, warrants, conversion privileges or other rights, shareholder rights plans, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) of any character whatsoever requiring or which may require the issuance, sale or transfer by the Acquiror of any securities of the Acquiror (including the Acquiror Shares), or any securities or obligations convertible into, or exchangeable or exercisable for, or otherwise evidencing a right or obligation to acquire, any securities of the Acquiror (including the Acquiror Shares) or subsidiaries of the Acquiror. All outstanding Acquiror Shares have been duly authorized and validly issued, are fully paid and non-assessable, and all the Acquiror Shares issuable upon the exercise of the Acquiror Special Warrants in accordance with their respective terms have been duly authorized and, upon issuance, will be validly issued as fully paid and non-assessable, and are not and will not be subject to, or issued in violation of, any pre-emptive rights.

(g)

Reporting Status and Securities Laws Matters. The Acquiror is a “reporting issuer” and not on the list of reporting issuers in default under applicable Canadian provincial Securities Laws applicable in the Provinces of Alberta, Ontario, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The Acquiror Shares are not listed on any stock exchange.

(h)

Public Filings. Since October 18, 2010, the Acquiror has filed all documents required to be filed by it in accordance with applicable Securities Laws with the Securities Authorities to maintain the Acquiror’s status as a reporting issuer not on the list of reporting issuers in default under applicable Canadian provincial Securities Laws in the Provinces of Alberta, Ontario, Quebec, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador. All such documents and information comprising the Acquiror Public Disclosure Record, as of their respective dates (and the dates of any amendments thereto), (1) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and (2) complied in all material respects with the requirements of applicable Securities Laws, and any amendments to the Acquiror Public Disclosure Record required to be made have been filed on a timely basis with the Securities Authorities. The Acquiror has not filed any confidential material change report with any Securities Authorities that at the date of this Agreement remains confidential. There has been no change in a material fact or a material change (as those terms are defined under the Securities Act) in any of the information contained in the Acquiror Public Disclosure Record, except for changes in material facts or material changes that are reflected in a subsequently filed document included in the Acquiror Public Disclosure Record.

(i)

The Acquiror Financial Statements. The Acquiror’s audited financial statements as at and for the years ended June 30, 2016 and 2017 (including the notes thereto and related management’s discussion and analysis (the “Acquiror MD&A”) and the Acquiror’s unaudited condensed interim financial statements as at and for the six month period ended December 31, 2017 (collectively, the “Acquiror Financial Statements”) were prepared in accordance with IFRS, respectively, consistently applied (except as otherwise indicated in such financial statements and the notes thereto or in the related report of the Acquiror’s independent auditors) and present fairly in all material respects the financial condition, results of operations and changes in financial position of the Acquiror as of the dates thereof and for the periods indicated therein and reflect reserves required by IFRS, as applicable, in respect of all material contingent liabilities, if any, of the Acquiror.

(j)

No Undisclosed Liabilities. The Acquiror has no outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, and are not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness

of any Person, other than those specifically disclosed in the Acquiror Public Disclosure Record filed prior to the date of this Agreement, specifically identified in the Acquiror Financial Statements, or incurred in connection with the transactions contemplated herein or maintaining the Acquiror’s status as a reporting issuer not on the list of reporting issuers in default under applicable Canadian provincial Securities Laws applicable in the Provinces of Alberta, Ontario, Quebec, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador.

(k)

Litigation. There is no claim, action, suit, grievance, complaint, proceeding or investigation that has been commenced or, to the knowledge of the Acquiror, is threatened affecting the Acquiror or affecting any of its property or assets at law or in equity before or by any Governmental Entity, including matters arising under Environmental Laws, which, individually or in the aggregate, if determined adversely to the Acquiror, as the case may be, has or could reasonably be expected to result in liability to the Acquiror. Neither the Acquiror nor its respective assets or properties is subject to any outstanding judgment, order, writ, injunction or decree.

(l)

Taxes.

(i)

Since October 18, 2010, the Acquiror has filed or caused or will cause to be filed all returns required to be filed by Applicable Law on or before the Closing Date. All such returns are correct and complete in all material respects. The Acquiror has timely paid all material Taxes that are due and payable by the Acquiror, including all instalments on account of taxes for the current year that are due and payable by the Acquiror whether or not assessed (or reassessed) by the appropriate Governmental Entity, and has, as applicable, timely remitted such Taxes to the appropriate Governmental Entity under Applicable Law. There are no Encumbrances for Taxes upon any of the assets or properties of the Acquiror.

(ii)

There is no material dispute or claim, including any audit, investigation or examination by any Governmental Entity, actual, pending or, to the knowledge of the Acquiror, threatened, concerning any Tax liability of the Acquiror, no written notice of such an audit, investigation, examination, material dispute or claim has been received by the Acquiror.

(iii)

The Acquiror has not requested, or entered into any agreement or other arrangement, or executed any waiver providing for, any extension of time within which:

(A)

to file any return (which has not since been filed) in respect of any Taxes for which the Acquiror is or may be liable;

(B)

to file any elections, designations or similar filings relating to Taxes (which have not since been filed) for which the Acquiror is or may be liable;

(C)

the Acquiror is required to pay or remit any Taxes or amounts on account of Taxes (which have not since been paid or remitted); or

(D)

any Governmental Entity may assess or collect Taxes for which the Acquiror is liable.

(iv)

Since October 18, 2010, the Acquiror has duly and timely deducted, collected or withheld from any amount paid or credited by it to or for the account or benefit of any Person and has duly and timely remitted the same (or is properly holding for such remittance) to the appropriate Governmental Entity all Taxes and amounts it is required by Applicable Law to so deduct or collect and remit.

(v)

Since October 18, 2010, the Acquiror has not acquired property or services from, or disposed of property or provided services to, any Person with whom it does not deal at arm’s length, within the meaning of the Tax Act, for an amount that is other than the fair market value of such property or services.

(vi)

Since October 18, 2010, for all transactions between the Acquiror and any Person who is not resident in Canada for purposes of the Tax Act with whom the Acquiror was not dealing at arm’s length for purposes of the Tax Act, the Acquiror has made or obtained records or documents that meet the requirements of paragraphs 247(4)(a) to (c) of the Tax Act.

(vii)

Since October 18, 2010, no claim has been made by any Governmental Entity in a jurisdiction where the Acquiror does not file returns that the Acquiror is or may be subject to Taxes or is required to file returns in that jurisdiction.

(viii)

There are no rulings or closing agreements relating to the Acquiror which could affect the Acquiror’s liability for Taxes for any taxable period after the Closing Date. The Acquiror has not requested an advance tax ruling from the Canada Revenue Agency or comparable rulings from other taxing authorities.

(m)

Issuance of the Acquiror Shares. The Consideration Shares will, when issued pursuant to the Transaction, be duly and validly issued as fully paid and non-assessable shares in the capital of the Acquiror.

(n)

Expropriation. No part of the property or assets of the Acquiror or any of its material subsidiaries has been taken, condemned or expropriated by any Governmental Entity nor has any written notice or proceeding in respect thereof

been given or commenced nor does the Acquiror or any of its material subsidiaries know of any intent or proposal to give such notice or commence any such proceedings.

(o)

Rights of Other Persons. No Person has any right of first refusal or option to acquire or any other right of participation in any of the material properties or assets owned by the Acquiror, or any part thereof, except as disclosed in the Acquiror Financial Statements.

(p)

Compliance with Laws. The Acquiror has complied with and is not in violation of any Applicable Laws, other than non-compliance or violations which would not, individually or in the aggregate, have a Material Adverse Effect on the Acquiror and has not received any written notices or other correspondence from any Governmental Entity regarding any circumstances that have existed or currently exist which would lead to a loss, suspension, or modification of, or a refusal to issue, any material license, permit, authorization, approval, registration or consent of a Governmental Entity relating to its activities which would reasonably be expected to restrict, curtail, limit or adversely affect the ability of the Acquiror to operate its businesses in a manner which would have a Material Adverse Effect on the Acquiror.

(q)

Related Party Transactions. Other than as set forth in the Acquiror Public Disclosure Record, there are no contracts or other transactions currently in place between the Acquiror or its subsidiaries, on the one hand, and: (i) any officer or director of the Acquiror or its subsidiaries; (ii) any holder of record or, to the knowledge of the Acquiror, beneficial owner of 10% or more of the Acquiror Shares; and (iii) any affiliate or associate of any such, officer, director, holder of record or beneficial owner, on the other hand.

(r)

Restrictions on Business Activities. There is no arbitral award, judgment, injunction, constitutional ruling, order or decree binding upon the Acquiror or its subsidiaries that has or could reasonably be expected to have the effect of prohibiting, restricting, or impairing any business practice of any of them, any acquisition or disposition of property by any of them, or the conduct of the business by any of them as currently conducted, which could reasonably be expected to have a Material Adverse Effect on the Acquiror.

(s)

Authorizations and Consents.

(i) Except for the approval of the CSE contemplated in Section 7.1(a) and the approval of the shareholders of the Acquiror contemplated in Section 7.1(d), no Authorization or declaration or filing with any Governmental Entity on the part of the Acquiror is required for the valid execution, delivery and performance of its obligations under this Agreement or the completion of the Transaction pursuant to this Agreement.

(ii) No consent, approval or waiver is required pursuant to the terms of any Material Contract to which the Acquiror is a party for the valid execution, delivery and performance of its obligations under this Agreement or the completion of the Transaction pursuant to this Agreement.

(t)

No Cease Trade. The Acquiror is not subject to any cease trade or other order of any applicable Securities Authority and, to the knowledge of the Acquiror, no investigation or other proceedings involving the Acquiror which may operate to prevent or restrict trading of any securities of the Acquiror are currently in progress or pending before any applicable Securities Authority.

(u)

Fees. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Acquiror.

(v)

United States Securities Laws. The Acquiror is not registered, and is not required to be registered as, an “investment company” under the United States Investment Company Act of 1940, as amended.

5.2 The representations and warranties of the Acquiror contained in this Agreement shall not

survive the completion of the Transaction and shall expire and be terminated on the earlier of the Time of Closing and the date on which this Agreement is terminated in accordance with its terms. Any investigation by the Shareholders and their Representatives shall not mitigate, diminish or affect the representations and warranties of the Acquiror pursuant to this Agreement.

ARTICLE 6

STOCK EXCHANGE LISTING, SHAREHOLDER APPROVALS, TRANSACTION

MATTERS AND EXCHANGE ESCROW

6.1 Stock Exchange Listing, Filings and Approvals

(a) Subject to Section 6.4 below, the Acquiror covenants and agrees to take, in a timely manner, all commercially reasonable actions and steps necessary in order that: (i) prior to the completion of the Transaction, the Acquiror will seek shareholder approval to: (a) effect the Consolidation; (b) effect a change of its name to such name as may be approved by the Corporation and acceptable to applicable regulatory authorities; (c) amend its articles to create the Restricted Shares; and (d) elect the Corporation Nominees to replace the current slate directors of the Acquiror immediately following the Closing of the Transaction (collectively, the “Transaction Resolutions”), in accordance with Section 6.3 below; (ii) the Consideration Shares issued to the Shareholders by the Resulting Issuer will be listed and posted for trading on the CSE; (iii) when received, the Acquiror shall provide the Corporation with copies of the final approval regarding the listing and posting for trading of the Resulting Issuer Shares on the CSE; and (iv) the

distribution of the Consideration Shares to the Shareholders is exempt from theprospectus and registration requirements of applicable Securities Laws.

(b) Subject to Section 6.4 below, the Corporation will use its commercially reasonable efforts to obtain the Stock Exchange Listing and thereafter fulfill the conditions of the CSE. The Acquiror will provide the Corporation and its legal counsel with reasonable advance notice and an opportunity to comment on the content thereof, and to participate in, any communications or submissions to the CSE and other securities regulatory authorities.

6.2 Preparation of Financial Statements

The Corporation shall be responsible for preparing, as required in connection with the Transaction, the audited and interim financial statements of the Corporation, and the pro forma financial statements reflecting the combination of the Acquiror and the Corporation (including Finco), in each case in the form required by the CSE and the relevant securities regulatory authorities.

6.3 Shareholder Approval

As soon as is practicable after the date hereof, the Acquiror shall take all necessary steps to obtain shareholder approval in connection with the Transaction Resolutions.

6.4 Transaction Costs

The Acquiror will be responsible for the payment of up to $300,000 of expenses incurred by both the Acquiror and the Corporation (but not the Shareholders) incurred in connection with the transactions contemplated herein. These expenses will be funded from the proceeds of Acquiror’s private placement of Acquiror Special Warrants, which proceeds have been deposited into escrow and Acquiror will have no liability for expenses hereunder other than from the escrowed funds. Each party hereto shall thereafter be responsible for its own costs and expenses incurred with respect to the transactions contemplated herein including, without limitation, all costs and expenses incurred prior to the date of this Agreement and all reasonable legal and accounting fees and disbursements relating to preparing the Transaction documents or otherwise relating to the transactions contemplated herein. Notwithstanding the foregoing, the parties agree that the Corporation and its counsel shall be primarily responsible for preparation of all documentation and filings in connection with the Transaction and the payment of all related costs and fees, including, without limitation, this Agreement, all shareholder meetings and the application to the CSE for the Stock Exchange Listing, while the Acquiror and its counsel shall perform a review function and cooperate and assist in the preparation of such documentation and required filings; however, each party shall permit the other party and its counsel to review the preparation of all documentation to be sent to the shareholders of such party or otherwise used in connection with the approval of the Transaction by the shareholders of such party and the CSE.

6.5 Exchange Escrow

Each Shareholder shall comply with and be bound by, if applicable, all escrow requirements imposed by the CSE on which the Resulting Issuer Shares are listed or proposed to be listed and under applicable Securities Laws.

ARTICLE 7

MUTUAL CONDITIONS PRECEDENT

7.1 The respective obligations of the Acquiror and the Corporation to complete the Transaction are subject to the fulfillment prior to or at the Closing of each of the following conditions:

(a)

the CSE shall have conditionally approved the Transaction and the Acquiror shall have obtained the Stock Exchange Listing, subject only to compliance with the usual requirements of the CSE;

(b)

the Brokered Financing shall have closed;

(c)

the Amalgamation shall have occurred;

(d)

all required Authorizations shall have been obtained on terms and conditions satisfactory to the parties, acting reasonably;

(e)

the required approval of the Nevada Department of Taxation shall have been received;

(f)

on or before the Closing Date, there shall have been obtained all regulatory approvals and all third party consents as may be required to complete the Transaction, if any, in form and terms satisfactory to the Acquiror and the Corporation, each acting reasonably, unless otherwise provided for between the parties, or if a failure to obtain such approvals or consents would not have a Material Adverse Effect on the Acquiror or the Corporation or materially impede the completion of the Transaction;

(g)

no action shall have been taken by any court or governmental body prohibiting or making illegal the execution and delivery of this Agreement or any transaction contemplated by this Agreement; and

(h)

this Agreement shall not have been terminated pursuant to Article 13.

The conditions precedent in this Article 7 are for the mutual benefit of the Acquiror and the Corporation and may be waived, in whole or in part, at any time if waived by both the Acquiror and the Corporation, such waiver being without prejudice to any other right that any Party may have. In case any of the foregoing conditions cannot be fulfilled on or before the Closing Date to the satisfaction of the Acquiror and the Corporation, any of the Acquiror and the Corporation may rescind this Agreement by notice to the other Party and in such event each of the

Corporation, the Shareholders and the Acquiror shall be released from all obligations hereunder, other than in respect of liability of a party for breach of any of the terms or conditions set forth herein before such termination.

ARTICLE 8

CONDITIONS PRECEDENT TO ACQUIROR’S OBLIGATIONS

8.1 All obligations of the Acquiror to acquire the Acquired Corporation Shares under this Agreement are subject to the fulfillment prior to or at the Closing of each of the following conditions:

(a)

the representations and warranties made by the Corporation and the Shareholders under this Agreement shall be true in all material respects as of the Time of Closing (any breach of a representation or warranty shall be determined without reference to any materiality qualifier with respect thereto) and the Corporation shall deliver a certificate signed by a senior officer, dated the Closing Date in the form satisfactory to counsel to the Acquiror confirming this and confirming that the Corporation has not received notice of any inaccuracy in any of the Shareholders’ representations and warranties contained herein, and confirming such other matters as may be reasonably requested by counsel to the Acquiror;

(b)

no Material Adverse Change shall have occurred in the business, results of operations, assets, financial condition or affairs of the Corporation, financial or otherwise, between the date of the Letter Agreement and the completion of the Transaction;

(c)

there will be no debts or amounts owing to the Corporation by any of its officers, former officers, directors, former directors, shareholders, employees or former employees or any family member thereof, or any Person with whom either the Corporation does not deal at arm’s length, except for any amounts advanced to such Person for expenses incurred on behalf of the Corporation, in the ordinary course;

(d)

each of the Shareholders and the Corporation shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by it;

(e)

the Acquiror shall have received evidence in form satisfactory to the Acquiror, acting reasonably, that all actions required to be taken by the Corporation prior to Closing have been taken and all consents and approvals, including, but not limited to, any consent, approval or waiver required pursuant to the terms of any Material Contract to which the Corporation is a party for the valid execution, delivery and performance of its obligations under this Agreement or the completion of the Transaction, orders and authorizations required to be obtained by the Corporation for the Closing have been obtained;

(f)

no action, suit or proceeding shall have been instituted and be continuing by any Person to restrain, modify or prevent the consummation of the Transaction as contemplated by this Agreement, or to seek damages against the Shareholders in connection with such Transaction, or that has been or is reasonably likely to have a material adverse effect on the ability of any Party hereto to fully consummate the Transaction as contemplated by this Agreement;

(g)

no change, fact or circumstance shall have occurred in the affairs, operations, business or financial condition of the Corporation that the directors of the Acquiror determine, in their sole discretion, to have a Material Adverse Effect on such Party in proceeding with the Transaction and except as is disclosed in this Agreement;

(h)

the Shareholders shall have delivered to the Acquiror the Acquired Corporation Shares free and clear of any Encumbrances, in accordance with the provisions of Section 2.1 hereto; and

(i)

the Financial Statements of the Corporation shall, in all material respects, be consistent with the draft Financial Statements of the Corporation delivered by the Corporation to the Acquiror on or prior to the date hereof.

In case any of the foregoing conditions cannot be fulfilled on or before the Closing Date to the satisfaction of the Acquiror, the Acquiror may rescind this Agreement by notice to the Corporation and in such event each of the Acquiror, the Shareholders and the Corporation shall be released from all obligations hereunder other than in respect of liability of a party for breach of any of the terms or conditions set forth herein before such termination; provided, however, that any such conditions may be waived in whole or in part by the Acquiror without prejudice to its rights of rescission in the event of the non-fulfillment of any other condition or conditions, and that the Closing of the Transaction as contemplated by the Agreement shall be deemed to be a waiver of any unfulfilled conditions.

ARTICLE 9

CONDITIONS PRECEDENT TO THE SHAREHOLDERS’ AND THE

CORPORATION’S OBLIGATIONS

9.1 The obligations of the Corporation and the Shareholders to complete the transactions contemplated herein including, without limitation, the obligations of the Shareholders to sell the Acquired Corporation Shares under this Agreement, are subject to the fulfilment prior to or at the Closing of each of the following conditions:

(a)

the shareholders of the Acquiror shall have approved the Transaction, if required by the CSE;

(b)

there will be no debts or amounts owing to the Acquiror by any of its officers, former officers, directors, former directors, shareholders, employees or former employees or any family member thereof, or any Person with whom either the

Acquiror does not deal at arm’s length, except for any amounts advanced to such

Person for expenses incurred on behalf of the Acquiror, in the ordinary course;

(c)

the representations and warranties made by the Acquiror under this Agreement shall be true in all material respects as of the Time of Closing (any breach of a representation or warranty shall be determined without reference to any materiality qualifier with respect thereto) and the Acquiror shall deliver to the Corporation a certificate signed by a senior officer, dated the Closing Date in the form satisfactory to counsel to the Corporation confirming this and such other matters as may reasonably requested by counsel to the Corporation;

(d)

no Material Adverse Change shall have occurred in business, results of operations assets, liabilities, financial condition or affairs of the Acquiror, financial or otherwise, between the date of the Letter Agreement and the completion of the Transaction;

(e)

all liabilities of the Acquiror showing on its unaudited December 31, 2017 balance sheet or incurred since that date shall have been eliminated, other than liabilities incurred in connection with any transaction contemplated by this Agreement or incurred following the date thereof to maintain the Acqurior’s status as a reporting issuer not in default under applicable Canadian provincial Securities Laws applicable in the Provinces of Alberta, Ontario, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador;

(f)

the Acquiror shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by it;

(g)

receipt by the Corporation of a written resignation from each of the officers and directors of the Acquiror, such resignations to be effective at the Time of Closing;

(h)

the CSE shall not have objected to the appointment of the Corporation Nominees to the board of directors of the Resulting Issuer, or of the management nominees of the Corporation to serve as officers of the Resulting Issuer, each upon closing of the Transaction;

(i)

no action, suit or proceeding shall have been instituted and be continuing by any Person to restrain, modify or prevent the consummation of the Transaction as contemplated by this Agreement, or to seek damages against the Acquiror in connection with such Transaction, or that has been or is reasonably likely to have a Material Adverse Effect on such Party to fully consummate the Transaction as contemplated by this Agreement;

(j)

the Acquiror shall pay and satisfy the Acquisition Price in accordance with Section 2.3 of this Agreement and shall deliver to the Shareholders and/or an escrow agent, as applicable, certificates, in form reasonably satisfactory to counsel

to the Shareholders, representing the Consideration Shares to be issued in accordance with Article 2 hereto registered in the names of the Shareholders; and

(k) all convertible securities of the Acquiror outstanding prior to the Time of Closing shall have been converted and the Acquiror shall not have outstanding (following such conversion), more than 5,250,000 Acquiror Shares.

In case any of the foregoing conditions cannot be fulfilled on or before the Closing Date to the satisfaction of the Shareholders, the Shareholders may rescind this Agreement by notice to the Acquiror and in such event each of the Corporation, the Shareholders and the Acquiror shall be released from all obligations hereunder other than in respect of liability of a party for breach of any of the terms or conditions set forth herein before such termination, provided, however, that any such conditions may be waived in whole or in part by the Shareholders without prejudice to its rights of rescission in the event of the non- fulfilment of any other condition or conditions, and that the Closing of the Transaction as contemplated by the Agreement shall be deemed to be a waiver of any unfulfilled conditions.

ARTICLE 10

COVENANTS OF THE CORPORATION

10.1 The Corporation agrees that during the period commencing on the date of this Agreement and continuing until Closing or the earlier termination of this Agreement, the Corporation:

(a)

subject to the terms of this Agreement, agrees to prepare and circulate a form of unanimous written consent resolution for the purpose of obtaining the Corporation Shareholder Approval in accordance with the Corporation’s articles, by-laws and Applicable Law, as soon as reasonably practicable, and shall use its best efforts to obtain the Corporation Shareholder Approval no later than April 30, 2018;

(b)

will carry on its business in, and only in, the ordinary course in substantially the same manner as heretofore conducted;

(c)

will not issue, authorize or propose the issuance of, or acquire or propose the acquisition of, any shares of its capital stock of any class or securities convertible into, or rights, warrants or options to acquire, any such shares or other convertible securities other than those currently outstanding or upon exercise of existing convertible securities or as otherwise contemplated hereby;

(d)

will not borrow any money or incur any indebtedness in an aggregate amount in excess of US$200,000 (except for trade payables incurred in the ordinary course), without the prior written consent of the Acquiror;

(e)

will not to declare or pay any dividends or distribute any of the Corporation’s properties or Assets to shareholders of the Corporation;

(f)

will not to alter or amend the Corporation’s articles or by-laws in any manner which may adversely affect the success of the Transaction, except as is agreed to by the

Acquiror in writing or as strictly required to give effect to the matters contemplated herein;

(g)

will use its reasonable commercial efforts to obtain any third parties approvals required in respect of the Transaction, including any lenders or financial institutions, licensors and strategic partners;

(h)

will cooperate fully with the Acquiror and to use all reasonable commercial efforts to assist the Acquiror in its efforts to acquire all of the Acquired Corporation Shares, unless such cooperation and efforts would subject the Corporation to liability or would be in breach of applicable statutory and regulatory requirements;

(i)

will not sell, lease or otherwise dispose of a material portion of its Assets, other than: (i) in the ordinary course; (ii) in connection with a reorganization completed in connection with the transactions contemplated herein; (iii) or with the prior written consent of the Acquiror, such consent not to be unreasonably withheld;

(j)

will use its reasonable efforts to comply promptly with all requirements which Applicable Law may impose on the Corporation with respect to the Transaction;

(k)

will cooperate and provide the Acquiror and its representatives with full copies of and access to, all contracts, financial records and statements, books, records, documents and other such information regarding its previous businesses as they may require, as well as access to the Acquiror’s auditors, technical personnel and to such premises and personnel of the Acquiror, if any, as may be reasonably requested;

(l)

will promptly advise the Acquiror orally and in writing of any Material Adverse Change of the Corporation; and

(m)

will cooperate in obtaining all necessary and desirable consents and regulatory approvals in connection with the Transaction.

ARTICLE 11

COVENANTS OF THE ACQUIROR

11.1 The Acquiror covenants and agrees that until Closing or the earlier termination of this Agreement it will:

(a)

subject to the terms of this Agreement, the Acquiror agrees to circulate a form of unanimous written consent resolution for the purpose of obtaining the Acquiror Shareholder Approval in accordance with the Acquiror’s articles, by-laws and Applicable Law, as soon as reasonably practicable, and shall use its best efforts to obtain the Acquiror Shareholder Approval no later than April 30, 2018;

(b)

not issue any debt or equity or other securities without the prior written consent of the Corporation, except as required to complete the Amalgamation, or for the

issuance of Acquiror Shares upon the exercise of existing convertible securities as contemplated hereunder;

(c)

not carry on any business except as required to complete the Transaction and retain its status as reporting issuer not in default under applicable Canadian provincial Securities Laws applicable in the Provinces of Alberta, Ontario, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, not borrow any money or incur any indebtedness (except for trade payables incurred in the ordinary course);

(d)

not make loans, advances or other similar payments to any party, excluding advances to the Corporation or third parties for expenses reasonably necessary to carry out the terms of this Agreement;

(e)

not make any expenditures except those that are reasonably necessary to carry out the terms of this Agreement, that are necessary to fulfil the Acquiror’s obligations as a “public company” or that are incurred to reimburse directors or officers for reasonable expenses incurred for the foregoing purposes;

(f)

not declare or pay any dividends or distribute any of the Acquiror’s property or assets to shareholders;

(g)

not alter or amend the Acquiror’s articles or by-laws in any manner which may adversely affect the success of the Transaction, except as strictly required to give effect to the matters contemplated herein, including, but not limited to, the creation of the class of Restricted Shares, the Consolidation and the change of name of the Corporation, as contemplated pursuant to Section 6.1(a);

(h)

not enter into any transaction or material contract, except as reasonably necessary to give effect to the matters contemplated herein;

(i)

use its reasonable commercial efforts to obtain any third parties approvals required in respect of the Transaction, including any lenders or financial institutions, licensors and strategic partners;

(j)

cooperate fully with the Corporation and to use all reasonable commercial efforts to otherwise complete the Transaction, unless such cooperation and efforts would subject the Acquiror to liability or would be in breach of applicable statutory and regulatory requirements;

(k)

promptly advise the Corporation orally and in writing of any Material Adverse Change with respect to the Acquiror;

(l)

cooperate in obtaining all necessary consents and regulatory approvals in connection with the Transaction;

(m) maintain its corporate status and comply with all applicable securities requirements (including any applicable filing requirements);

(n) provide the Corporation with full copies of, and access to, all contracts, financial records and statements, books, records, documents and other such information regarding its previous businesses as is available and they may require, as well as access to the Acquiror’s auditors and to such premises and personnel of the Acquiror, if any, as may be reasonably requested; and

(o) use its commercially reasonable best efforts to obtain CSE approval of the Transaction as expeditiously as possible.

ARTICLE 12

ADDITIONAL COVENANTS

12.1 Non-Solicitation.

(a) Each of the Acquiror and the Corporation agree that during the period from the date hereof until the earlier of the Closing Date and the Termination Date, it:

(i)

shall immediately cease and cause to be terminated any existing discussions or negotiations or other proceedings initiated prior to the date hereof by it, or its respective Representatives with respect to all Acquisition Proposals; shall not amend, modify, waive, release or otherwise forebear in the enforcement of, and shall use all commercially reasonable efforts to enforce, any confidentiality, non-solicitation or standstill or similar agreements or provisions to which it and any third parties are parties; and shall discontinue access to any of its confidential information (and not establish or allow access to any of its confidential information, or any data room, virtual or otherwise);

(ii)

shall not directly or indirectly, through any Representative, solicit, initiate or knowingly encourage (including by way of furnishing information), or cause or facilitate anyone else to solicit, initiate or knowingly encourage, any Acquisition Proposal, or any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to an Acquisition Proposal, from any Person, or engage in any discussion, negotiations or inquiries relating thereto, provided however that the Acquiror may request information from any Person who has made an Acquisition Proposal for the sole purpose of clarifying the terms of such Acquisition Proposal;

(iii)

shall not provide information concerning its securities, assets or business to any Person for or in furtherance of anything mentioned in Sections 12.1(i)or (ii) other than as required by Applicable Law;

(iv)

shall (i) immediately notify the Corporation if the Acquiror or any of its Representatives receives any indications of interest, requests for information or offers in respect of any Acquisition Proposal; and (ii) provide full details to the Corporation of the terms of any such indication, request or offers, subject to any contractual obligations of confidentiality; and

(v)

shall not accept, recommend, approve or enter into or propose to publicly accept, recommend, approve or enter into an agreement to implement an Acquisition Proposal.

ARTICLE 13

TERMINATION

13.1 This Agreement may, by notice given before or at the Closing, be terminated by:

(a)

mutual agreement of the Acquiror and the Corporation;

(b)

either the Acquiror or the Corporation upon notice to the other in the event that any condition set forth in this Agreement for their benefit is not satisfied to the satisfaction of such Party prior to the Closing Date or becomes incapable of being satisfied and such Party does not waive such condition;

(c)

either the Acquiror or the Corporation, if there shall be any Applicable Law that makes consummation of the Transaction illegal or otherwise prohibited, any applicable regulatory authority having notified in writing either the Acquiror or the Corporation that it will not permit the Transaction to proceed, or if any judgment, injunction, order or decree of a competent governmental entity enjoining the Acquiror or the Corporation from consummating the Transaction shall be entered and such judgment, injunction, order or decree shall have become final and non-appealable;

(d)

either the Acquiror or the Corporation upon notice to the other in the event that the Brokered Financing is not completed on or prior to April 30, 2018 provided that if the lead agent for the Brokered Financing has confirmed in writing prior to April 30, 2018 that commitments for the full Brokered Financing have been received but closing has not yet occurred, such date will be extended to May 6, 2018;

(e)

either the Acquiror or the Corporation upon notice to the other in the event that the Transaction is not completed before June 30, 2018 (the “Termination Date”), or such other date as the Acquiror and the Corporation may agree in writing;

(f) the Corporation if:

(i)

the Acquiror has breached any of its representations, warranties or covenants in this Agreement in any material respect and such breach is not curable or if curable, is not cured within five Business Days after notice thereof has been received by the Party alleged to be in breach;

(ii)

there shall occur after the date hereof, any change, effect, event, circumstance or fact that constitutes a Material Adverse Effect in respect of the Acquiror;

(g) the Acquiror if:

(i)

the Corporation has breached any of its representations, warranties or covenants in this Agreement in any material respect and such breach is not curable or if curable, is not cured within five Business Days after notice thereof has been received by the Corporation; or

(ii)

there shall occur after the date hereof, any change, effect, event, circumstance or fact that constitutes a Material Adverse Effect in respect of the Corporation.

13.2 Each Party’s right of termination under Section 13.1 hereto is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of such right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 13.1 hereto, all obligations of the Parties under this Agreement will terminate, except as provided under Section 13.3 hereto; provided, however, that for greater certainty if this Agreement is terminated by a Party because of the breach of the Agreement by another Party or because one or more of the conditions to the terminating Party’s obligations under this Agreement is not satisfied as a result of any other Party’s failure to comply with its obligations under this Agreement, the terminating Party’s right to pursue all legal remedies will survive such termination unimpaired.

13.3 Expenses and Reimbursement.

(a)

Subject to Section 6.4, all fees, costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees, costs or expenses.

(b)

Nothing in this Section 13.3 shall preclude a Party from seeking injunctive relief to restrain any breach or threatened breach of the covenants or agreements set forth in this Agreement or otherwise to obtain specific performance of any such covenants or agreements.

ARTICLE 14

NOTICES

14.1 All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient or by email addressed to the recipient. Such notices, demands and other communications shall be delivered, mailed or sent electronically to the parties at the respective addresses or email addresses indicated below:

(a)

If to the Corporation or the Shareholders, addressed as follows:

MM Development Company Inc.

4850 W. Sunset Road, Suite 130

Las Vegas, Nevada 89118

Attention: Larry Scheffler or Robert Groesbeck, Co-Chief Executive Officers

E-mail: lscheffler@lasvegascolor.com or bobgroesbeck@gmail.com

(b)

If to the Acquiror, addressed as follows:

Carpincho Capital Corp.

181 University Avenue, Suite 800

Toronto, Ontario M5H 2X7

Attention: Lonnie Kirsh, Chief Executive Officer

E-mail: lonnie@acuitylaw.ca

or to such other address as the Party to be notified shall have furnished to the other parties in writing. Any notice given in accordance with the foregoing shall be deemed to have been given when delivered in person or on the next Business Day following the date on which it shall have been sent electronically or mailed.

ARTICLE 15

GENERAL

15.1 This Agreement:

(a)

shall be construed and enforced in accordance with the laws of the Province of Ontario; and

(b)

shall enure to the benefit of and be binding upon the Acquiror, the Shareholders and the Corporation and their respective executors, administrators, legal representatives, successors and permitted assigns, nothing in this Agreement, express or implied, being intended to confer upon any other person any rights or remedies hereunder.

15.2 This Agreement may be amended or modified only by a written instrument executed by the parties affected thereby, or by their respective successors and permitted assigns.

15.3 This Agreement, the Schedules hereto and the documents specifically referred to herein or executed and delivered concurrently herewith or at the Closing constitute the entire agreement, understanding, representations and warranties of the parties hereto and supersede any prior agreement, understanding, representation, warranty or documents relating to the subject matter of this Agreement including, for greater certainty, the Letter Agreement.

15.4 Time shall be of the essence hereof.

15.5 Each of the Parties hereto covenants and agrees that at any time and from time to time after the Closing Date such Party will, upon the request of any other Party, do, execute, acknowledge and deliver all such further acts, documents and assurances as may be reasonably required for the better carrying out of the terms of this Agreement.

15.6 This Agreement may be executed by facsimile or PDF email and in one or more counterparts, each of which shall be considered an original but all of which together shall constitute one and the same agreement.

15.7 The parties hereto agree to file in a timely manner all forms required to be filed after the Closing Date by Applicable Law and by the regulations and policies of all applicable securities regulatory authorities in connection with the Transaction. The parties acknowledge that a copy of this Agreement will be filed on SEDAR.

15.8 Neither this Agreement nor any right or obligation hereunder shall be assignable by any Party hereto without the prior written consent of the other parties hereto, which consent may be arbitrarily withheld.

15.9 Until immediately after the Time of Closing, all documents and information exchanged or received hereunder by the Acquirors, the Shareholders or the Corporation and their respective auditors and solicitors shall be treated as confidential information except as may be required by law, or regulation. Any press releases shall be subject to joint approval of the Acquiror and the Corporation. The parties acknowledge that a copy of this Agreement will be required to be filed by Acquiror on SEDAR pursuant to applicable Securities Laws.

[The remainder of this page has been left intentionally blank. Signature page follows.]

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.

MM DEVELOPMENT COMPANY, INC.

By: /s/ Robert Groesbeck

Authorized Signatory

CARPINCHO CAPITAL CORP.

By: /s/Lonnie Kirsh

Authorized Signatory

PRMN INVESTMENTS LTD.

By: /s/ Robert Groesbeck

Authorized Signatory

THIRTEEN, LLC

By: /s/ Larry Scheffler

Authorized Signatory

4 DEGREES HIGHER, LLC

By: /s/ Chris Wren

Authorized Signatory

SCHEDULE “A”

SHAREHOLDERS OF CORPORATION

Name and Address of Registered Shareholder	Number of Corporation Shares	Number of Corporation Non- Voting Shares	Number of Consideration Shares to be Issued on Closing
PRMN Investments Ltd. 205 N. Stephanie St., Suite D-126 Henderson, Nevada 89074	11,891,000	23,359,000	11,891,000 Resulting Issuer Shares and 23,359,000 Restricted Shares
Thirteen, LLC 205 N. Stephanie St., Suite D-126 Henderson, Nevada 89074	11,891,000	23,359,000	11,891,000 Resulting Issuer Shares and 23,359,000 Restricted Shares
4 Degrees Higher, LLC 205 N. Stephanie St., Suite D-126 Henderson, Nevada 89074	1,518,000	2,982,000	1,518,000 Resulting Issuer Shares and 2,982,000 Restricted Shares
TOTAL:	25,300,000	49,700,000	25,300,000 Resulting Issuer Shares and 49,700,000 Restricted Shares

A-1

SCHEDULE “B”

MATERIAL CONTRACTS OF THE CORPORATION

Exclusive Services Agreement (Software) between Blackbird Logistics, Corp. and the Corporation dated November 8, 2017;

IT Services Agreement between Intelligent Design I.T. Consulting and the Corporation dated December 1, 2015;

Marketing Agreement between Artisans on Fire and the Corporation dated January 24, 2018;

Marketing Agreement between Ghost Management Group, LLC and the Corporation dated January 8, 2018;

Professional Services Agreement between On Scene Investigation & Security, Inc. and the Corporation dated December 10, 2015;

Software License Installation Agreement between [REDACTED – CONFIDENTIAL INFORMATION] and the Corporation (signed by the Corporation on January 18, 2016);

Software Agreement between [REDACTED – CONFIDENTIAL INFORMATION] and the Corporation dated November 6, 2017;

Microbulk Products Sales Agreement between Airgas USA, LLC and the Corporation dated August 12, 2015;

Service Agreement between Green Clean Commercial Cleaning Services and the Corporation dated December 1, 2017;

10.

Proposal for Pest Control presented by Pride Pest Control LLC dba Bears Pest Control for Grow House Beatty (undated);

11.

Pest Control and Service Agreement between American Pest Control, Inc. and the Corporation dated April 22, 2016;

12.

Rental Service Agreement between Cintas Corporation and the Corporation dated August 5, 2017;

13.

Decorator/Design Services Agreement between Briana Tiberti, T Square Studio LLC, and the Corporation dated November 16, 2017;

14.

Professional Services Agreement between On Scene Investigation & Security, Inc. and the Corporation dated December 10, 2015; and

15.

Credit Facility between [REDACTED – CONFIDENTIAL INFORMATION] and the Corporation dated February 24, 2018.

B-1

SCHEDULE “C”

RESTRICTED SHARE TERMS

[See Following Page]

C-1

1.1 General Definitions

In this Part, the following terms shall have the following meanings unless the context otherwise requires:

(a) “1933 Act” means the United States Securities Act of 1933, as amended from time to time.

(b) “Common Shares” means the common shares in the capital of the Company.

(d) “Conversion Notice” means a written notice to the transfer agent of the Restricted Voting Shares, in form and substance satisfactory to the Company and the transfer agent, executed by a person registered in the records of the Company or the transfer agent, as the case may be, as a holder of the Restricted Voting Shares, or by his or her attorney duly authorized in writing and specifying the number of Restricted Voting Shares which the holder thereof desires to have converted into Common Shares, and accompanied by:

(1)

if share certificates were issued to such holder, the share certificate or certificates representing the Restricted Voting Shares which such holder desires to convert;

(2)

a letter of transmittal, direction, transfer, power or attorney and/or such other documentation as is specified by the Company or the transfer agent for the Restricted Voting Shares, acting reasonably, as being required to give full effect to the conversion duly completed and executed by the person registered in the records of the Company or the transfer agent, as the case may be, as the holder of the Restricted Voting Shares to be converted or by his or her attorney duly authorized in writing; and

(3)

a duly completed and executed Residency Declaration or an opinion or memorandum of counsel (which may be the Company's counsel), in form and substance satisfactory to the Company and the transfer agent, to the effect that the conversion of such Restricted Voting Shares into Common Shares would not cause the Company to become a Domestic Issuer.

(e) “Domestic Issuer”' has the meaning ascribed thereto in Rule 902(c) of Regulation S under the 1933 Act.

(f) “Exclusionary Offer” means an offer to purchase Restricted Voting Shares which must be made, by reason of applicable securities legislation or by the rules or policies of a stock exchange on which any shares or the Company are listed, to all or substantially all of the holders or Restricted Voting Shares.

(g) “Fundamental Transaction” means a reorganization, recapitalization, reclassification, merger or amalgamation or any similar transaction involving the Company.

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(h)

“Liquidation Event” means a distribution of assets of the Company to its shareholders arising on the winding-up, liquidation or dissolution of the Company, whether voluntary or involuntary, or any other distribution of its assets for the purpose of winding up its affairs or otherwise.

(i)

“Residency Declaration” means (i) a declaration by a person attesting that such person is not a resident of the United States and (ii) any indemnity required by the Company or the transfer agent in respect of such declaration in favour of the Company from the person providing the declaration, in each case in form approved by the Company from time to time.

(j)

“Restricted Voting Shares” means the Class A Restricted Voting Shares in the capital of the Company.

(k)

“United States” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

COMMON SHARES

1.2 Voting

Each Common Share entitles the holder to receive notice of and to attend any meeting of shareholders and to exercise one vote for each Common Share held at all meetings of shareholders of the Company, other than meetings at which only the holders of another class or series of shares are entitled to vote separately as a class or series. Except as provided otherwise herein or as required by law, holders of Common Shares and Restricted Voting Shares shall vote as one class at all meetings of shareholders of the Company.

1.3 Dividends

Subject to the Business Corporations Act, and subject to the rights of the shares or any other class ranking senior to the Common Shares with respect to priority in the payment or dividends, the holders or Common Shares shall be entitled to receive dividends, and the Company shall pay dividends thereon, as and when declared by the Board out of moneys properly applicable to the payment of dividends, pari passu with the holders of the Restricted Voting Shares on a per share basis, in such amount and in such form as the Board may from time to time determine; provided however that no dividend on the Common Shares shall be declared unless contemporaneously therewith the Board shall declare a dividend, payable at the same time as such dividend on the Common Shares, on each Restricted Voting Share. All dividends declared on the Common Shares and on the Restricted Voting Shares shall be declared and paid in equal amounts per share on all Common Shares and Restricted Voting Shares at the time outstanding on the applicable record data for such dividend. For purposes hereof, the payment of dividends by way of a stock dividend in Common Shares on the Common Shares and in Restricted Voting Shares on the Restricted Voting Shares in the same number per share shall be considered to be a pari passu payment of dividends.

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1.4 Liquidation Event

Subject to the rights of the shares of any other class ranking senior to the Common Shares with respect to priority upon a Liquidation Event, in the event of a Liquidation Event, the holders of Common Shares and the holders of Restricted Voting Shares shall participate rateably in equal amounts per share, without preference or distinction, in the remaining assets of the Company.

1.5 Changes to Common Shares

The Common Shares shall not be subdivided, consolidated, reclassified or otherwise changed unless, contemporaneously therewith, the Restricted Voting Shares are subdivided, consolidated, reclassified or otherwise changed in the same proportion and in the same manner as the Common Shares.

RESTRICTED VOTING SHARES

1.6 Voting

Subject to Section 1.7, each Restricted Voting Share entitles the holder to receive notice of and to attend any meeting of shareholders of the Company and to exercise one vote for each Restricted Voting Share held at all meetings of shareholders of the Company, other than meetings at which only the holders or another class or series of shares are entitled to vote separately as a class or series. Except as provided otherwise herein or as required by law, holders or Common Shares and Restricted Voting Shares shall vote as one class at all meetings of shareholders of the Company.

1.7 Limitation on Voting Rights

The Restricted Voting Shares carry no entitlement for the holder thereof to vote for the election or removal of directors of the Company.

1.8 Dividends

Subject to the Business Corporations Act, and subject to the rights of the shares of any other class ranking senior to the Restricted Voting Shares with respect to priority in the payment of dividends, the holders of Restricted Voting Shares shall be entitled to receive dividends, and the Company shall pay dividends thereon, as and when declared by the Board out of moneys properly applicable to the payment of dividends, pari passu with the holders of the Common Shares on a per share basis, in such amount and in such form as the Board may from time to time determine; provided however that no dividend on the Restricted Voting Shares shall be declared unless contemporaneously therewith the Board shall declare a dividend, payable at the same time as such dividend on the Restricted Voting Shares, on each Common Share. All dividends declared on the Common Shares and on the Restricted Voting Shares shall be declared and paid in equal amounts per share on all Common Shares and Restricted Voting Shares at the time outstanding on the applicable record date for such dividend. For purposes hereof, the payment of dividends by way of a stock dividend in Common Shares on the Common Shares and in

C-4

Restricted Voting Shares on the Restricted Voting Shares in the same number per share shall be considered to be a pari passu payment of dividends.

1.9 Liquidation Event

Subject to the rights of the shares of any other class ranking senior to the Restricted Voting Shares with respect to priority upon a Liquidation Event, in the event of a Liquidation Event, the holders of Restricted Voting Shares and the holders of Common Shares shall participate rateably in equal amounts per share, without preference or distinction, in the remaining assets of the Company.

1.10 Restrictions on Transfer

No Restricted Voting Share shall be transferred by any holder thereof pursuant to an Exclusionary Offer unless, concurrently with the Exclusionary Offer, an offer to acquire Common Shares is made that is identical to the Exclusionary Offer in terms of price per share, percentage of outstanding shares to be taken up (exclusive of shares owned immediately before the Exclusionary Offer by the offeror) and in all other material respects (except with respect to any additional conditions that may be attached to the Exclusionary Offer).

1.11 Conversion at the Option of the Holder

Each Restricted Voting Share may be converted into one Common Share, without payment of additional consideration, at any time and from time to time, at the option of the holder thereof, in accordance with the procedures set forth in Section 1.12 hereof.

1.12 Conversion Procedure

A holder of Restricted Voting Shares may convert all or any number of Restricted Voting Shares held by such holder into Common Shares in accordance with Section 1.11 upon delivery by the holder of such Restricted Voting Shares of a duly completed and executed Conversion Notice and upon receipt by the transfer agent of the Company of such notice and upon compliance with any requirements the transfer agent or the Company may reasonably request, the Company shall issue or cause to be issued the relevant number of fully paid Common Shares. The effective time of conversion shall be the close of business on the date of receipt of a valid Conversion Notice by the transfer agent of the Company and the Common Shares issuable upon conversion of such Restricted Voting Shares shall be deemed to be issued and outstanding of record as of such time.

1.13 Conversion at the Option of the Company

Each Restricted Voting Share may be converted into one Common Share, at any time and from time to time, at the option of the Company by delivery to a holder of the Restricted Voting Share of a notice indicating same and the holder of Restricted Voting Shares shall only have the right to receive the relevant number of Common Shares resulting from such conversion and any accrued and unpaid dividends on the Restricted Voting Shares so converted upon compliance with the terms of the notice. The effective time of conversion shall be the close of business on the date specified in the notice of the Company and the Common Shares issuable upon

C-5

conversion of such Restricted Voting Shares shall be deemed to be issued and outstanding of record as of such time and the applicable Restricted Voting Shares shall be cancelled at that time.

1.14 Withdrawal of Conversion Notice

Despite any other provision hereof, a holder of a Restricted Voting Share that has duly presented a Conversion Notice may, at any time before such Restricted Voting Shares are converted and Common Shares are issued, by irrevocable written notice to the Company, advise the Company that the holder no longer desires that such Restricted Voting Shares be converted into Common Shares and, upon receipt of such written notice, the Company shall return to the holder the certificates(s) representing such Restricted Voting Shares, if any, and thereupon the Company shall cease to have any obligation to convert such Restricted Voting Shares hereunder unless such Restricted Voting Shares are again tendered for conversion by the holder in accordance with the provisions hereof.

1.15 Fractional Common Shares

The Company shall not issue fractional Common Shares in satisfaction of the conversion rights herein provided for. Where the exercise of conversion rights pursuant to this Article would otherwise result in fractional Common Shares being issued, the number of Common Shares to be issued by the Company shall be rounded down to the nearest whole number of Common Shares. A determination of whether or not any fractional share would be issuable upon a conversion of Restricted Voting Shares shall be made on the basis of the total number of Restricted Voting Shares the holder has at the time converting into Common Shares and the appropriate number of Common Shares issuable upon conversion.

1.16 Dividend Entitlement

A holder of Restricted Voting Shares on the record date for the determination of holders of Restricted Voting Shares entitled to receive a dividend declared payable on the Restricted Voting Shares will be entitled to such dividend notwithstanding that such share is converted after such record date and before the payment date of such dividend, and the holders of any Common Shares resulting from any conversion shall be entitled to rank equally with the holders of all other Common Shares in respect of all dividends declared payable to holders of Common Shares of record on any date on or after the date of conversion.

1.17 Adjustments

(1) If there shall occur any Fundamental Transaction involving the Company inwhich the Common Shares (but not the Restricted Voting Shares) are converted into or exchanged for securities, cash or other property (other than a transaction otherwise covered by this Section 1.17) then, following such Fundamental Transaction each Restricted Voting Share shall thereafter be convertible, in lieu of the Common Share into which it was convertible before such event, into the kind and amount or securities, cash or other property which a holder of the number of

C-6

Common Shares issuable upon conversion of one Restricted Voting Share immediately before such Fundamental Transaction would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined by the Board) shall be made in the application of the provisions of this subsection 1.17(1) with respect to the rights and interests thereafter of the holders of the Restricted Voting Shares, to the end that the provisions set forth in this subsection 1.17(1) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Restricted Voting Shares.

(2) The Restricted Voting Shares shall not be subdivided, consolidated, reclassified or otherwise changed unless, contemporaneously therewith, the Common Shares are subdivided, consolidated, reclassified or otherwise changed in the sameproportion and in the same manner as the Restricted Voting Shares.

1.18 Public Distribution Requirements

Conversion of Restricted Voting Shares into Common Shares permitted under this Article shall be subject to the Company meeting applicable distribution requirements for public shareholders of the exchange on which the Common Shares are then listed and posted for trading.

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SCHEDULE “D”

CONSENTS AND APPROVALS

Credit Facility between [REDACTED – CONFIDENTIAL INFORMATION] and the Corporation dated February 24, 2018; and

Dispensary lease agreement [REDACTED – COMMERCIALLY SENSITIVE INFORMATION].

D-1

SCHEDULE “E”

OWNED AND LEASED REAL PROPERTY

Leases:

1. [REDACTED – COMMERCIALLY SENSITIVE INFORMATION].

2. [REDACTED – COMMERCIALLY SENSITIVE INFORMATION].

3. [REDACTED – COMMERCIALLY SENSITIVE INFORMATION].

Real Property Ownership:

Nye County cultivation and production real estate and buildings at 101 Airport Road, Beatty, Nevada 89003, approximately 80 acres owned by Corporation, with planning for significant capital outlay to expand cultivation, APN #[REDACTED – CONFIDENTIAL INFORMATION].

E-1

Exhibit 2.4

MASTER AGREEMENT

THIS AGREEMENT made as of the 26th day of April, 2018

AMONG:

CARPINCHO CAPITAL CORP.

a corporation incorporated under the federal laws of Canada ("Carpincho")

- and -

10713791 CANADA INC.

a corporation incorporated under the federal laws of Canada ("Subco")

- and -

10653918 CANADA INC.

a corporation incorporated under the federal laws of Canada ("Finco")

WHEREAS:

Carpincho wishes to acquire all of the Finco Shares (as hereinafter defined) by way of Amalgamation (as hereinafter defined);

Carpincho has also entered into the Share Exchange Agreement (as hereinafter defined) pursuant to which Carpincho will acquire all of the issued and outstanding securities of MM Development Company Inc. (“MMDC”);

As soon as practicable following the date hereof, Finco intends to complete the Finco Financing (as hereinafter defined), with the net proceeds of the Finco Financing to be placed into escrow and released to Finco immediately prior to the completion of the Amalgamation;

Finco and Subco wish to amalgamate and continue as one corporation in accordance with the terms and conditions hereof;

Subco is a wholly-owned subsidiary of Carpincho, and has been incorporated solely for the purposes of amalgamating with Finco, and has not carried on any active business, in each case other than as set forth herein; and

The parties have entered into this Agreement to provide for the matters referred to in the foregoing recitals and for other matters relating to the proposed Amalgamation.

NOW THEREFORE IN CONSIDERATION OF THE COVENANTS AND AGREEMENTS CONTAINED IN THIS AGREEMENT THE PARTIES HERETO AGREE AS FOLLOWS:

Interpretation.

(a)

Definitions. In this Agreement (including the recitals hereto) and each schedule hereto:

“Act” means the Canada Business Corporations Act and the regulations prescribed thereunder, as the same may be varied, supplemented or amended from time to time;

“Agreement” means this master agreement and the schedules hereto, as may be amended, modified, restated, supplemented or replaced from time to time;

“Amalco” means the entity formed by the Amalgamation of the Amalgamating Parties;

“Amalco Shares” means the common shares of Amalco;

“Amalgamating Parties” means Finco and Subco;

“Amalgamation” means the amalgamation of Finco and Subco under the provisions of section 185 of the Act and otherwise on the terms and subject to the conditions set forth in this Agreement;

“Amalgamation Agreement” means the form of amalgamation agreement to be entered into between Finco, Subco and Carpincho in accordance with the terms hereof, in substantially the form set forth in Schedule “A” hereto;

“Applicable Laws” means with respect to any person, all laws, statutes, regulations, by-laws, statutory rules, orders, ordinances, protocols, codes, guidelines, notices, directions (including all applicable Canadian securities laws), and terms and conditions of any grant of approval, permission, authority or license of any court, governmental authority, statutory body or self-regulatory authority (including, where applicable, the CSE), in each case, that is binding upon or applicable to such person, as amended unless expressly specified otherwise;

“Articles of Amalgamation” means the articles of amalgamation of Amalco;

“Brokered Financing” means the brokered private placement of up to 31,250,000 Finco Subscription Receipts by Finco at a price of $0.80 per Finco Subscription Receipt; the net proceeds of which will be placed into escrow and released to Finco, and the Finco Subscription Receipts will automatically be converted into Finco Units, on satisfaction of the Release Conditions, and each Finco Share will then be exchanged for one New Carpincho Share and each whole Finco Warrant will then be exchanged for one New Carpincho Warrant, respectively, in connection with the Amalgamation;

“Business Day” means a day other than a Saturday, Sunday or a civic or statutory holiday in the City of Toronto, Ontario;

“CSE” means the Canadian Securities Exchange;

“Certificate” means the certificate of amalgamation issued by the Director under the Act in respect of the Amalgamation;

“Carpincho Material Adverse Effect” means any change, effect, event or occurrence that, individually or taken together with any other change, effect, event or occurrence, is or would reasonably be expected to be materially adverse to the financial condition, operations, assets, liabilities, capitalization or business of Carpincho, considered as a whole, or would reasonably be expected to prevent, materially delay or materially impair the ability of Carpincho to consummate the transactions contemplated by this Agreement; provided, however, that a Carpincho Material Adverse Effect shall not include an adverse change or adverse effect resulting from a change, effect, event or occurrence: (i) which arises out of or in connection with a matter that has been disclosed in writing to Finco or its representatives by Carpincho or its representatives prior to the date of this Agreement; (ii) expenses incurred by Carpincho to pursue the transactions contemplated by this Agreement and any related transactions and to maintain its status as a reporting issuer; or (iii) resulting from general economic, financial, currency exchange, securities or commodity market conditions in Canada, unless, with respect to clause (iii), such matter has a materially disproportionate effect on Carpincho, considered as a whole, relative to comparable entities operating in the industries in which Carpincho operates. References in certain sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretative for purposes of determining whether a “Carpincho Material Adverse Effect” has occurred;

“Carpincho Shares” means the issued and outstanding common shares in the capital of Carpincho as constituted on the date hereof;

“Carpincho Shareholder” means a registered holder of Carpincho Shares;

“Confidentiality” means to maintain in confidence and not to disclose the applicable information to third parties, except:

(i)

employees, officers, directors, consultants, agents and other representatives that need to know or ought to know in order to discharge their respective duties in an efficient manner; or

(ii)

persons that are or may be interested in advancing, loaning, investing or otherwise providing potential debt or equity financing to a party, including banks, financial institutions, brokerage companies and their respective employees, officers, directors, consultants, agents and other representatives, provided, however, that such persons agree to maintain the information to be disclosed in confidence;

and “Confidential” and “Confidence” shall have similar meanings;

“Confidential Information” shall have the meaning ascribed thereto in Section 25;

“Consolidation” means the consolidation of the Carpincho Shares on the basis of 0.875 of a New Carpincho Share for every one existing Carpincho Share;

“Director” means the Director appointed under section 260 of the Act;

“Effective Date” means the effective date of the Amalgamation as set forth in the Certificate;

“Effective Time” shall have the meaning ascribed thereto in Subsection 2(c)(iii);

“Finco Compensation Options” means the compensation options to be issued on closing of the Brokered Financing, each such compensation option entitling the holder to purchase one (1)

Finco Share at a price of $0.80 per Finco Share upon completion of the Amalgamation on the Effective Date, and anytime for a period of 24 months thereafter;

“Finco Financing” means, collectively, the Brokered Financing and the Non-Brokered Financing;

“Finco Material Adverse Effect” means any change, effect, event or occurrence that, individually or taken together with any other change, effect, event or occurrence, is or would reasonably be expected to be materially adverse to the financial condition, operations, assets, liabilities, capitalization or business of Finco, or would reasonably be expected to prevent, materially delay or materially impair the ability of Finco to consummate the transactions contemplated by this Agreement; provided, however, that a Finco Material Adverse Effect shall not include an adverse change or adverse effect resulting from a change, effect, event or occurrence: (i) which arises out of or in connection with a matter that has been disclosed in writing to Carpincho or its representatives by Finco or its representatives prior to the date of this Agreement; or (ii) resulting from general economic, financial, currency exchange, securities or commodity market conditions in Canada unless, with respect to clause (ii), such matter has a materially disproportionate effect on Finco relative to comparable entities operating in the industries in which Finco operates. References in certain sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretative for purposes of determining whether a “Finco Material Adverse Effect” has occurred;

“Finco Shareholder” means a registered holder of Finco Shares;

“Finco Shares” means the issued and outstanding common shares in the capital of Finco;

“Finco Subscription Receipts” means the subscription receipts of Finco to be issued pursuant to the Finco Financing, each such subscription receipt to be deemed to be exchanged, without payment of any additional consideration and subject to adjustment, for one Finco Unit upon satisfaction of the Release Conditions, all in accordance with the terms of the Subscription Receipt Agreement;

“Finco Warrants” means the whole share purchase warrants issued to holders of Finco Subscription Receipts upon satisfaction of the Release Conditions, each whole such Finco Warrant entitling the holder thereof to purchase one (1) Finco Share;

“IFRS” means the international financial reporting standards as set out in the Handbook of the Canadian Institute of Chartered Accountants, at the relevant time applied on a consistent basis;

“New Carpincho Compensation Options” means compensation options issued in exchange for Finco Compensation Options, each such option entitling the holder to purchase one (1) New Carpincho Share at a price of $0.80 per New Carpincho Share for a period of 24 months from the Effective Date;

“New Carpincho Shares” means the Carpincho Shares, after giving effect to the Consolidation;

“New Carpincho Warrants” means share purchase warrants issued in exchange for Finco Warrants, each such warrant entitling the holder thereof to purchase one (1) New Carpincho

Share at a price of $1.40 per New Carpincho Share for a period of 24 months from the Effective Date;

“Non-Brokered Financing” means the non-brokered financing of up to 6,250,000 Finco Subscription Receipts by Finco at a price of $0.80 per Finco Subscription Receipt; the gross proceeds of which will be placed in escrow and released to Finco, and the Finco Subscription Receipts will automatically be converted into Finco Units, on satisfaction of certain escrow release conditions, and each Finco Share will then be exchanged for one New Carpincho Share and each whole Finco Warrant will then be exchanged for one New Carpincho Warrant, respectively, in connection with the Transaction and the Amalgamation;

“Release Conditions” shall have the meaning given to it in the Subscription Receipt Agreement;

“Share Exchange Agreement” means the share exchange agreement dated April 26, 2018 among Carpincho, MMDC and the shareholders of MMDC;

“Subco Shares” means the issued and outstanding common shares in the capital of Subco;

“Subscription Receipt Agent” means Odyssey Trust Company, in its capacity as subscription receipt agent appointed pursuant to the terms of the Subscription Receipt Agreement;

“Subscription Receipt Agreement” means the subscription receipt agreement to be entered into among Finco, the Subscription Receipt Agent and Beacon Securities Limited governing the terms of the Finco Subscription Receipts;

“subsidiary” shall have the meaning ascribed thereto in the Act;

“Termination Deadline” means June 30, 2018;

“Transaction” means, together with the Amalgamation, the sale by the shareholders of MMDC and the acquisition by Carpincho of all of the shares of MMDC to form a resulting issuer company as contemplated pursuant to the terms of the Share Exchange Agreement, and effect a stock exchange listing on the CSE, and all ancillary matters to be completed in connection with the foregoing; and

“Transfer Agent” means Odyssey Trust Company, in its capacity as registrar and transfer agent for the New Carpincho Shares.

(b)

The division of this Agreement into articles, sections and subsections is for convenience of reference only and does not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereby” and “hereunder” and similar expressions refer to this Agreement (including the appendices hereto) and not to any particular article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.

(c)

Words importing the singular number include the plural and vice versa, words importing the use of any gender include all genders, and words importing persons include firms and corporations and vice versa.

(d)

If any date on which any action is required to be taken hereunder by any of the parties is not a Business Day and a business day in the place where an action is required to be taken, such action is required to be taken on the next succeeding day which is a Business Day and a business day, as applicable, in such place.

(e) Unless otherwise stated, all sums of money which are referred to in this Agreement are expressed in lawful money of Canada.

(f) Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings attributable thereto under IFRS and all determinations of an accounting nature required to be made hereunder shall be made in a manner consistent with IFRS.

(g) In this Agreement, whenever a representation or warranty is made on the basis of the knowledge or awareness of a party, such knowledge or awareness consists only of the actual collective knowledge or awareness, as of the date hereof, of the senior officers of such party, in their capacity as senior officers of such party and not in their personal capacity and without personal liability, but does not include the knowledge or awareness of any other individual or any constructive, implied or imputed knowledge; provided that the party making the representation and warranty shall have conducted a reasonable investigation as to the subject matter relating thereto and the level of such investigation shall be that of a reasonably prudent person investigating a material consideration in the context of a material transaction and the use of such phrase shall constitute a representation and warranty by the party making the representation and warranty in each case that such investigation has actually been made.

(h) References in this Agreement to any statute or sections thereof shall include such statute as amended or substituted and any regulations promulgated thereunder from time to time in effect.

(i) The following Appendices are annexed to this Agreement and are hereby incorporated by reference into the Agreement and form part hereof:

Schedule “A” Amalgamation Agreement

Amalgamation. The Amalgamating Parties hereby agree to amalgamate and continue as one corporation under the provisions of the Act upon the terms and conditions hereinafter set out. Each of Carpincho and Finco acknowledge and agree that the Amalgamation and the matters related thereto as contemplated hereby are subject to (a) the receipt of all regulatory approvals; and (b) the approval of the Amalgamation by the shareholders of each of Finco and Subco, all in accordance with Applicable Laws. In furtherance of the foregoing, subject to the terms and conditions herein set forth and on the basis of the covenants, representations, warranties and agreements of the parties herein contained, each of Finco, Subco and Carpincho covenant and agree to:

(a)

enter into the Amalgamation Agreement forthwith after receipt of the requisite approvals of the securityholders of each of Finco and Subco to the Amalgamation, all as further set forth herein;

(b)

co-operate with each other, as promptly as reasonably practicable, in the preparation of all documents required by applicable legislation and/or regulation in connection with all securityholder and regulatory approvals required in respect of the Amalgamation and the other matters contemplated hereby, and in connection therewith, each party shall provide such other parties with such information and material concerning its affairs as the other parties shall reasonably request;

(c)

use all commercially reasonable efforts and do all things necessary or reasonably desirable on its part to facilitate the implementation of the Amalgamation and all related matters in connection therewith as set forth herein prior to the Termination Deadline, including, without limiting the generality of the foregoing, as applicable:

(i)

the approval of the CSE for the listing of the New Carpincho Shares to be issued in connection with the Amalgamation;

(ii)

obtaining such other consents, orders or approvals as counsel to Finco, Subco and Carpincho may advise are necessary or desirable to be obtained for the implementation of the Amalgamation, and preparing and delivering all necessary documents in connection therewith; and

(iii)

subject to obtaining the approval of the holders Finco Shares and the approval of Carpincho as the sole shareholder of Subco: (A) the filing with the Director of the Articles of Amalgamation to be made effective at 12:01 a.m. (Toronto time) on the Effective Date (the “Effective Time”); and (B) the obtaining of the Certificate in that regard; and

(d)

take and cause to be taken such other steps and actions and execute such other documents, agreements and instruments as may be reasonably necessary or desirable in connection with the consummation of the transactions contemplated hereby.

Effect of Amalgamation. Subject to the terms and conditions of this Agreement, on the Effective Date, in accordance with section 185 of the Act:

(a)

the Amalgamation shall be effective;

(b)

Amalco shall be authorized to issue an unlimited number of shares designated as common shares which shall have the rights, privileges, restrictions and conditions set forth in the Articles of Amalgamation;

(c)

there shall be no restrictions on the business that Amalco may carry on;

(d)

the property of each of the Amalgamating Parties shall continue to be the property of Amalco;

(e)

Amalco shall continue to be liable for the obligations of each of the Amalgamating Parties;

(f)

any existing cause of action, claim or liability to prosecution with respect to either or both of the Amalgamating Parties shall be unaffected;

(g)

any civil, criminal or administrative action or proceeding pending by or against any of the Amalgamating Parties may be continued to be prosecuted by or against Amalco;

(h)

any conviction against, or ruling, order or judgment in favour of or against, any of the Amalgamating Parties may be enforced by or against Amalco;

(i)

the by-laws of Subco shall be the by-laws of Amalco; and

(j)

the Articles of Amalgamation will be deemed to be the articles of incorporation of Amalco.

Finco Financing. Finco shall use its commercially reasonable efforts to complete the Finco

Financing prior to the Effective Date.

(a)

Additional terms of the Finco Financing.

(i)

Upon the closing of Finco Financing, the gross proceeds raised from the sale of the Subscription Receipts, less the reasonable fees, disbursements and applicable taxes thereon of the agents to the Brokered Financing (up to a maximum of $150,000, exclusive of disbursements and taxes) incurred prior to the closing date of the Finco Financing shall be deposited with the Subscription Receipt Agent pursuant to the terms of the Subscription Receipt Agreement, and such funds and all interest earned thereon will only be released in accordance with the terms thereof in the event that the Release Conditions are satisfied on or prior to the Termination Deadline, all in accordance with the terms of the Subscription Receipt Agreement.

(ii)

Each Subscription Receipt will be exchangeable into one Finco Unit in accordance with the terms of the Subscription Receipt Agreement and on satisfaction of the Release Conditions.

(iii)

if the Release Conditions are not satisfied or waived on or prior to the Termination Deadline (as the same may be extended in accordance with the terms of the Subscription Receipt Agreement), then all of the issued and outstanding Finco Subscription Receipts shall be cancelled and the Escrowed Funds (as such term is defined in the Subscription Receipt Agreement) shall be used to pay holders of Finco Subscription Receipts an amount equal to $0.80 per Finco Subscription Receipt held (plus an amount equal to a pro rata share of any interest or other income earned thereon) without any further action or formality, all in accordance with the terms and conditions of the Subscription Receipt Agreement.

Treatment of Securities. Subject to the terms and conditions of this Agreement, on the Effective

Date:

(a)

each issued and outstanding Subco Share shall be converted into one fully paid and non-assessable Amalco Share;

(b)

each one (1) issued and outstanding Finco Share shall immediately be converted into the right to receive one (1) New Carpincho Share, resulting in the issuance of up to 37,500,100 New Carpincho Shares in the aggregate to be distributed proportionately amongst the holders of such Finco Shares, and all such Finco Shares shall be cancelled;

(c)

each Finco Warrant outstanding on the Effective Date shall be cancelled and its place Carpincho shall issue one (1) New Carpincho Warrant on the same terms and conditions as the cancelled Finco Warrants, except to the extent their terms may be adjusted (in accordance with the terms of such Finco Warrant) to reflect the Amalgamation; and

(d)

each Finco Compensation Option outstanding on the Effective Date shall be cancelled and in its place Carpincho shall issue one (1) New Carpincho Compensation Option on the same terms and conditions as the cancelled Finco Compensation Options, except to the extent their terms may be adjusted (in accordance with the terms of such Finco Compensation Option) to reflect the Amalgamation.

Issuance of Amalco Shares to Carpincho. On the Effective Date, in consideration of Carpincho issuing the New Carpincho Shares to the holders of Finco Shares as provided for in Subsection 5(b), Amalco shall allot and issue to Carpincho one fully paid and non-assessable Amalco Share for each Finco Share outstanding immediately before the Effective Date.

Fractional Shares. Notwithstanding Section 5 of this Agreement, no fractional New Carpincho Shares will be issuable to Finco Shareholders pursuant to the Amalgamation, and no cash payment or other form of consideration will be payable in lieu thereof. Any such fractional New Carpincho Share interest to which a Finco Shareholder would otherwise be entitled pursuant to the Amalgamation will be rounded down to the nearest whole New Carpincho Share. Notwithstanding the foregoing, each Finco Shareholder shall receive a minimum of one (1) New Carpincho Share.

Certificates.

(a)

At the Effective Time:

(i)

the Finco Shareholders (other than holders of Finco Shares on conversion of the Finco Subscription Receipts) shall be deemed to be the registered holders of the New Carpincho Shares to which they are entitled hereunder. All Finco Shareholders (other than holders of Finco Shares on conversion of the Finco Subscription Receipts) shall be required to deliver and surrender to the Transfer Agent the certificates representing all of their respective Finco Shares which have been exchanged for New Carpincho Shares in accordance with Subsection 5(b) hereof, and such other documentation as may be required by the Transfer Agent, following which the Transfer Agent shall, as soon as practicable, issue to such Finco Shareholders certificates representing the number of New Carpincho Shares to which such Finco Shareholders are entitled;

(ii)

Carpincho, as the registered holder of the Subco Shares, shall be deemed to be the registered holder of the Amalco Shares to which it is entitled hereunder and, upon surrender of the certificates representing such Subco Shares to Amalco, Carpincho shall be entitled to receive a share certificate representing the number of Amalco Shares to which it is entitled as set forth in Section 6 hereof; and

(iii)

share certificates evidencing Finco Shares shall cease to represent any claim upon or interest in Finco or Amalco other than the right of the registered holders of Finco Shares to receive pursuant to the terms hereof and the Amalgamation, New Carpincho Shares in accordance with Section 5 hereof, all as further set forth herein.

(b)

Immediately following the satisfaction of the Release Conditions:

(i)

the holders of Finco Subscription Receipts shall be deemed to be the registered holders of the Finco Shares and Finco Warrants to which they are entitled

pursuant to the terms of the Finco Subscription Receipts. No certificates shall be delivered to any securityholder of Finco evidencing any Finco Shares or Finco Warrants and accordingly, any securityholder of Finco which is entitled to any Finco Shares or Finco Warrants issuable upon conversion of the Subscription Receipts pursuant to the Subscription Receipt Agreement, shall receive delivery of certificates representing the number of New Carpincho Shares and New Carpincho Warrants to which such holder is entitled pursuant to the Amalgamation directly from the Transfer Agent as soon as practicable following the Amalgamation, without any further action on the part of such securiyholder of Finco;

(ii)

certificates evidencing Subscription Receipts shall cease to represent any claim upon or interest in Finco other than the right of the registered holder to receive pursuant to the terms of the Amalgamation, New Carpincho Shares and New Carpincho Warrants, respectively, in accordance with Section 5 hereof; and

(iii)

holders of Finco Compensation Options shall be deemed to be the registered holders of the New Carpincho Compensation Options to which they are entitled hereunder and, upon surrender of the certificates representing such Finco Compensation Options to Carpincho, holders of the Finco Compensation Options shall be entitled to receive certificates representing the number of New Carpincho Compensation Options to which they are entitled as set forth in Section 5 hereof.

Stated Capital. The stated capital of Amalco immediately following the Amalgamation but prior to giving effect to the issuance of Amalco Shares as provided for in Section 6 of this Agreement, shall be as set forth in the Amalgamation Agreement or as may otherwise be agreed upon between the parties hereto.

10.

Articles of Amalgamation. Upon the Finco Shareholders and Carpincho, as the sole shareholder of Subco, approving the Amalgamation on the terms and subject to the conditions set forth in this Agreement, in each case in accordance with Applicable Laws, and provided that the conditions to the completion of the Amalgamation specified in Sections 17, 18 and 19 hereof have then been satisfied or waived (to the extent such waiver is permitted hereunder), Finco and Subco shall jointly file, in duplicate, with the Director appointed under the Act, the Articles of Amalgamation and such other documents as may be required pursuant to the Act.

11.

Covenants of Finco. Finco hereby covenants and agrees with Subco and Carpincho that it will:

(a)

use its commercially reasonable efforts to obtain, on or prior to the Effective Date, the approval of the Amalgamation by Finco Shareholders by way of unanimous written consent resolution executed by such all of the Finco Shareholders, all in accordance with Applicable Laws;

(b)

use all commercially reasonable efforts to complete the Finco Financing, as soon as practicable and as market conditions permit, on terms acceptable to both Finco and Carpincho, each acting reasonably;

(c)

act in good faith and use all commercially reasonable efforts to cause each of the conditions precedent to the Amalgamation set forth in Sections 17 and 18 hereof to be complied with, in each case on or prior to the Effective Date;

(d)

unless Carpincho otherwise agrees in writing, such consent not to be unreasonably withheld, until the earlier of the Effective Date and the date that this Agreement is terminated by its terms,

(i)

not carry on any business other than the completion of the Finco Financing and the Amalgamation;

(ii)

not: (i) amend its constating documents; (ii) declare, set aside or pay any dividend or make any other distribution or payment (whether in cash, shares or property) in respect of its outstanding securities; (iii) redeem, purchase or otherwise acquire any of its outstanding shares or other securities; (iv) split, combine or reclassify any of its securities; (v) adopt a plan of liquidation or resolutions providing for its liquidation, dissolution, merger, consolidation or reorganization; (vi) enter into or modify any contract, agreement, commitment or arrangement with respect to any of the foregoing; (vii) other than in connection with the Finco Financing, issue any Finco Shares or securities convertible into Finco Shares, or effect any financing transaction whether by means of debt, equity or otherwise, or issue, grant, sell, pledge, lease, dispose of or encumber or agree to issue, grant, sell, pledge, lease, dispose of or encumber, any Finco Shares, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, Finco Shares; or (viii) solicit, initiate or take any other action, directly or indirectly, which may result in Finco becoming a “reporting issuer” (or the equivalent) under the securities laws of any province or territory of Canada;

(iii)

not directly or indirectly, through any officer, director, affiliate, agent or advisor of Finco, solicit, initiate, knowingly encourage, or enter into any agreements in respect of any new acquisitions by Finco, without the prior written consent of Carpincho;

(iv)

not grant any officer, director or employee an increase in compensation in any form, grant any general salary increase, take any action with respect to the amendment or grant of any severance or termination pay policies or arrangements for any directors, officers or employees, nor adopt or amend any stock option or other employee compensation plans, nor make any loan to any officer, director or any other party not at arm’s length;

(v)

not take any action or refrain from taking any action inconsistent with this Agreement which might reasonably be expected to directly or indirectly interfere with or affect the consummation of the Amalgamation; and

(e)

subject to the conditions set forth in Sections 17, 18 and 19 hereof being obtained, jointly with Subco, file with the Director the Articles of Amalgamation and such other documents as may be required to give effect to the Amalgamation upon and subject to the terms and conditions of this Agreement.

12.

Covenants of Carpincho. Carpincho hereby covenants and agrees with Finco that it will:

(a)

sign a special resolution, on or prior to the Effective Date, as the sole shareholder of Subco in favour of the approval of the Amalgamation, this Agreement and the transactions contemplated hereby in accordance with the Act;

(b)

act in good faith and use all commercially reasonable efforts to cause each of the conditions precedent set forth in Section 17 and 19 hereof to be complied with, in each case on or prior to the Effective Date;

(c)

unless Finco otherwise agrees in writing, such consent not to be unreasonably withheld, until the earlier of the Effective Date and the date that this Agreement is terminated by its terms,

(i)

not carry on any business except as required to complete the Amalgamation, or any of the matters related thereto as contemplated hereby, and retain its status as reporting issuer not in default under applicable Canadian provincial Securities Laws applicable in the Provinces of Alberta, Ontario, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, not borrow any money or incur any indebtedness (except for trade payables incurred in the ordinary course or to pursue the Amalgamation and related transactions);

(ii)

(iii)

not, except as required to complete the Amalgamation or any of the matters related thereto as contemplated hereby: (i) amend its constating documents; (ii) declare, set aside or pay any dividend or make any other distribution or payment (whether in cash, shares or property) in respect of its outstanding securities; (iii) redeem, purchase or otherwise acquire any of its outstanding shares or other securities; (iv) split, combine or reclassify any of its securities; (v) adopt a plan of liquidation or resolutions providing for its liquidation, dissolution, merger, consolidation or reorganization; (vi) enter into or modify any contract, agreement, commitment or arrangement with respect to any of the foregoing; or (vii) issue any Carpincho Shares or securities convertible into Carpincho Shares, or effect any financing transaction whether by means of debt, equity or otherwise, or issue, grant, sell, pledge, lease, dispose of or encumber or agree to issue, grant, sell, pledge, lease, dispose of or encumber, any Carpincho Shares, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, Carpincho Shares except in connection with the exercise of outstanding special warrants of Carpincho to acquire an aggregate of 1,000,000 Carpincho Shares;

(iv)

not directly or indirectly, through any officer, director, affiliate, agent or advisor of Carpincho, solicit, initiate, knowingly encourage, or enter into any agreements in respect of any new acquisitions by Carpincho, without the prior written consent of Finco; and

(v)

(d)

subject to the conditions set forth in Sections 17, 18 and 19 hereof being obtained, issue that number of New Carpincho Shares as required by Subsection 5(b) hereof on completion of the Amalgamation.

13.

Covenants of Subco. Subco hereby covenants and agrees with Finco that it will:

(a)

until the Effective Date, not carry on active business (other as is necessary to effect the Amalgamation);

(b)

use its commercially reasonable efforts to cause each of the conditions precedent set forth in Sections 17 and 19 hereof to be complied with on or prior to the Effective Date;

(c)

unless Finco otherwise agrees in writing, until the earlier of the Effective Date and the date that this Agreement is terminated by its terms,

(i)

not conduct any business (other than as required in connection with the Amalgamation), and shall use all commercially reasonable efforts to maintain and preserve its corporate existence; and

(ii)

not directly or indirectly, amend its constating documents, declare, set aside or pay any dividend or other distribution or payment or otherwise to or for the benefit of its shareholders or reduce its stated capital; and

(d)

subject to the conditions set forth in Sections 17, 18 and 19 hereof being obtained, jointly with Finco, file with the Director the Articles of Amalgamation and such other documents as may be required to give effect to the Amalgamation upon and subject to the terms and conditions of this Agreement.

14.

Representations and Warranties of Carpincho. Carpincho represents and warrants to and in favour of Finco as follows, and acknowledges that Finco is relying upon such representations and warranties:

(a)

Carpincho is a corporation existing under the federal laws of the Canada and has the corporate power, capacity and authority to carry on its business as currently conducted; own, lease and operate its property and assets; enter into and perform its obligations under this Agreement in accordance with the provisions hereof; and to issue and deliver the New Carpincho Shares in connection with the Amalgamation;

(b)

this Agreement has been duly authorized, executed and delivered by Carpincho and constitutes a valid and binding obligation of Carpincho enforceable in accordance with its terms (subject to such limitations and prohibitions as may exist or may be enacted in Applicable Laws relating to bankruptcy, insolvency, liquidation, moratorium, reorganization, arrangement or winding-up and other laws, rules and regulations of general application affecting the rights, powers, privileges, remedies and/or interests of creditors generally);

(c)

Since October 18, 2010, Carpincho has carried on no business other than activities as a venture capital company seeking assets or businesses with good growth potential to merge with or acquire;

(d)

the Amalgamation has been authorized by all necessary corporate action on the part of Carpincho and the issue and delivery of the New Carpincho Shares, New Carpincho Warrants and New Carpincho Compensation Options on the Effective Date pursuant to the Amalgamation will be authorized by all necessary corporate action on the part of Carpincho prior to the Effective Date;

(e)

there is no requirement to make any filing with, give any notice to, or obtain any authorization of, any governmental authority, or to obtain any consent, approval or authorization of any other party or person (other than the approval of the shareholders of each of Finco and Subco), as a condition to the lawful completion of the transactions contemplated by this Agreement, including specifically the Amalgamation, except for the filing of the Articles of Amalgamation giving effect to the Amalgamation and other filings, notifications and authorizations required under applicable securities laws;

(f)

to its knowledge, Carpincho is not in default of any requirement of Applicable Laws which would reasonably be expected to have a Carpincho Material Adverse Effect;

(g)

on the Effective Date, the New Carpincho Shares will be duly and validly issued and outstanding as fully paid and non-assessable, and the New Carpincho Warrants and New Carpincho Compensation Options will be duly and validly issued;

(h)

other than Subco, Carpincho has no direct or indirect subsidiaries or branches;

(i)

the authorized capital of Carpincho consists of an unlimited number of Carpincho Shares, of which 5,000,000 Carpincho Shares are issued and outstanding as of the date of this Agreement, all of which shares have been duly authorized and validly issued, and are fully paid and non-assessable and are not subject to, nor issued in violation of, any preemptive rights, and immediately prior to the Effective Time, there will be no more than 5,250,000 New Carpincho Shares issued and outstanding;

(j)

no person, firm, corporation or other entity holds any securities convertible or exchangeable into securities of Carpincho, or now has any agreement, warrant, option, right or privilege (whether pre-emptive or contractual) being or capable of becoming an agreement, option or right for the purchase, subscription or issuance of any unissued shares, securities (including convertible securities) or warrants of Carpincho, other than (A) special warrants to acquire an aggregate of 1,000,000 Carpincho Shares; and (B) as contemplated hereby in connection with the Amalgamation;

(k)

the authorized capital of Subco consists of an unlimited number of Subco Shares. An aggregate of 100 Subco Shares are issued and outstanding, all of which are owned by Carpincho. All outstanding Subco Shares have been duly authorized and validly issued, and are fully paid and non-assessable and are not subject to, nor issued in violation of, any pre-emptive rights. No person, firm, corporation or other entity holds any securities convertible or exchangeable into securities of Subco, or now has any agreement, warrant, option, right or privilege (whether pre-emptive or contractual) being or capable of becoming an agreement, option or right for the purchase, subscription or issuance of any unissued shares, securities (including convertible securities) or warrants of Subco;

(l)

Carpincho is a reporting issuer in the provinces of Alberta, Ontario, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The issued and outstanding Carpincho Shares are not listed or posted for trading on any stock exchange;

(m)

since October 18, 2010, Carpincho has filed all documents required to be filed by it in accordance with Applicable Laws to maintain the Acquiror’s status as a reporting issuer not on the list of reporting issuers in default under applicable Canadian provincial securities laws in the Provinces of Alberta, Ontario, Quebec, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador. All such documents and information, as of their respective dates (and the dates of any amendments thereto), (1) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and (2) complied in all material respects with the requirements of Applicable Laws, and any amendments to Carpincho’s public disclosure record required to be made have been filed on a timely basis with the applicable regulatory authorities. Carpincho has not filed any confidential material change report with any applicable regulatory authorities that at the date of this Agreement remains confidential. There has been no change in a material fact or a material change (as those terms are defined under the Securities Act (Ontario)) in any of the information contained in Carpincho’s public disclosure record, except for changes in material facts or material changes that are reflected in a subsequently filed document included in Carpincho’s public disclosure record;

(n)

Carpincho’s audited financial statements as at and for the years ended June 30, 2016 and 2017 (including the notes thereto and related management’s discussion and analysis (the “Carpincho MD&A”) and Carpincho’s unaudited condensed interim financial statements as at and for the six month period ended December 31, 2017 (collectively, the “Carpincho Financial Statements”) were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), respectively, consistently applied (except as otherwise indicated in such financial statements and the notes thereto or in the related report of Carpincho’s independent auditors) and present fairly in all material respects the financial condition, results of operations and changes in financial position of Carpincho as of the dates thereof and for the periods indicated therein and reflect reserves required by IFRS, as applicable, in respect of all material contingent liabilities, if any, of Carpincho;

(o)

since October 18, 2010, all taxes (including domestic and foreign federal and provincial income tax, capital tax, payroll and withholding taxes, employment insurance premiums, unemployment insurance, social insurance taxes, Canada Pension Plan contributions, sales, use and goods and services taxes, value added taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, environmental taxes, capital taxes, production taxes, recapture, surtaxes, customs, import and export taxes, business license taxes, occupation taxes, stamp taxes, employer health tax, workers’ compensation payments, real and personal property taxes, custom and land transfer taxes and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing), duties, fees, excises, premiums, royalties, levies, imposts, assessments, deductions, charges or withholdings of any kind whatsoever however denominated, and all liabilities with respect thereto including any arrears, penalty and interest payable with respect thereto imposed by any Governmental Authority responsible for the imposition of any Tax, whether computed on a separate, consolidated, unitary, combined or other basis (collectively, “Taxes”) due and payable or required to be collected or withheld and remitted, by Carpincho have been paid, collected or withheld and remitted, as applicable; (ii) all tax returns required to be filed by Carpincho have been filed with all appropriate governmental authorities and all such tax returns are complete and accurate and no material fact or facts have been omitted therefrom that would make any of them

misleading; (iii) no examination of any tax return of Carpincho is currently in progress and there are no issues or disputes outstanding with any governmental authority respecting any taxes that have been paid, or may be payable, by Carpincho; and (iv) there are no agreements, waivers or other arrangements with any taxation authority providing for an extension of time for any assessment or reassessment of Taxes with respect to Carpincho;

(p)

Carpincho has no outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, and are not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any person, other than those specifically disclosed in Carpincho’s public disclosure record filed prior to the date of this Agreement, specifically identified in the Carpincho Financial Statements, or incurred in connection with the transactions contemplated herein or maintaining Carpincho’s status as a reporting issuer not on the list of reporting issuers in default under Applicable Laws in the Provinces of British Columbia, Alberta, Ontario, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador;

(q)

there is no claim, action, suit, grievance, complaint, proceeding or investigation that has been commenced or, to the knowledge of Carpincho, is threatened affecting Carpincho or affecting any of its property or assets at law or in equity before or by any governmental entity, which, individually or in the aggregate, if determined adversely to Carpincho, as the case may be, has or could reasonably be expected to result in liability to Carpincho. Neither Carpincho nor its respective assets or properties is subject to any outstanding judgment, order, writ, injunction or decree;

(r)

neither the authorization, execution and delivery of this Agreement by Carpincho nor the completion of the transactions contemplated by this Agreement or the Amalgamation, nor the performance of its obligations thereunder, nor compliance by Carpincho with any of the provisions hereof will: (A) result in a violation or breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), require any consent or approval to be obtained or notice to be given under, or give rise to any third party right of termination, cancellation, suspension, acceleration, penalty or payment obligation or right to acquire or sale under, any provision of: (i) the notice of articles, articles of incorporation, or other constating documents of Carpincho or any of its subsidiaries, (ii) any permit or material contract to which Carpincho is a party or to which it, or its properties or assets, may be subject or by which Carpincho is bound, or (iii) any law, regulation, order, judgment or decree applicable to Carpincho or any of its subsidiaries or any of their respective properties or assets; and (B) give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, material contract, license, franchise or permit to which Carpincho is a party (except, in the case of each of clauses (i), (ii) and (iii) above, for such breaches, violations, conflicts, defaults, terminations or accelerations which would not have a Carpincho Material Adverse Effect);

(s)

Carpincho has complied with and is not in violation of any Applicable Laws, other than non-compliance or violations which would not, individually or in the aggregate, have a Carpincho Material Adverse Effect and has not received any written notices or other

correspondence from any governmental entity regarding any circumstances that have existed or currently exist which would lead to a loss, suspension, or modification of, or a refusal to issue, any material license, permit, authorization, approval, registration or consent of a governmental entity relating to its activities which would reasonably be expected to restrict, curtail, limit or adversely affect the ability of Carpincho to operate its businesses in a manner which would have a Carpincho Material Adverse Effect;

(t)

there is no arbitral award, judgment, injunction, constitutional ruling, order or decree binding upon Carpincho that has or could reasonably be expected to have the effect of prohibiting, restricting, or impairing any business practice of any of them, any acquisition or disposition of property by any of them, or the conduct of the business by any of them as currently conducted, which could reasonably be expected to have a Carpincho Material Adverse Effect;

(u)

other than as set forth in Carpincho’s public disclosure record, there are no contracts or other transactions currently in place between Carpincho or Subco, on the one hand, and: (i) any officer or director of Carpincho or Subco; (ii) any holder of record or, to the knowledge of Carpincho, beneficial owner of 10% or more of the Carpincho Shares; and (iii) any affiliate or associate of any such, officer, director, holder of record or beneficial owner, on the other hand;

(v)

Carpincho is not subject to any cease trade or other order of any Applicable Laws and, to the knowledge of Carpincho, no investigation or other proceedings involving Carpincho which may operate to prevent or restrict trading of any securities of Carpincho are currently in progress or pending before any applicable regulatory authority; and

(w)

no agent, broker, investment banker or other firm or person is or will be entitled to claim against Carpincho for any broker’s or finder’s fee or other commission or similar fee incurred by Carpincho in connection with any of, or the consummation of any of, the transactions contemplated hereby or the Amalgamation.

15.

Representation and Warranties of Finco. Finco represents and warrants to and in favour of Carpincho and Subco as follows, and acknowledges that Carpincho and Subco are relying upon such representations and warranties:

(a)

Finco is a corporation existing under the federal laws of Canada;

(b)

Finco has the power and capacity and is duly authorized to execute and deliver, and perform its obligations under, this Agreement and this Agreement is a valid and binding agreement, enforceable against Finco in accordance with its terms (subject to such limitations and prohibitions as may exist or may be enacted in Applicable Laws relating to bankruptcy, insolvency, liquidation, moratorium, reorganization, arrangement or winding-up and other laws, rules and regulations of general application affecting the rights, powers, privileges, remedies and/or interests of creditors generally) and no other proceeding on the part of Finco is necessary to authorize the transactions contemplated under this Agreement;

(c)

Finco has been incorporated solely for the purposes of the Amalgamation and the Finco Financing, and has never carried on any active business (other than such business required in connection with the Amalgamation and the Finco Financing), and has no material assets and no liabilities;

(d)

immediately following the satisfaction of the Release Conditions in accordance with the terms of the Subscription Receipt Agreement, the Finco Shares issuable upon the deemed exercise of the Finco Subscription Receipts shall be duly and validly issued and outstanding as fully paid and non-assessable, and the Finco Warrants issuable upon the deemed exercise of the Finco Subscription Receipts shall be issued;

(e)

there is no requirement to make any filing with, give any notice to, or obtain any authorization of, any governmental authority, or to obtain any consent, approval or authorization of any other party or person (other than the approval of the shareholders of Finco and Subco as required by the Act), as a condition to the lawful completion of the transactions contemplated by this Agreement, including specifically the Amalgamation, except for the filing of Articles of Amalgamation giving effect to the Amalgamation and other filings, notifications and authorizations required under applicable securities laws;

(f)

there are no actions, suits, proceedings or inquiries, including, to the knowledge of Finco, pending or threatened, against or affecting Finco at law or in equity or before or by any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality;

(g)

neither the authorization, execution and delivery of this Agreement by Finco nor the completion of the transactions contemplated by this Agreement or the Amalgamation, nor the performance of its obligations thereunder, nor compliance by Finco with any of the provisions hereof will: (A) result in a violation or breach of, constitute a default (or an event which, with notice or lapse of time or both, would become a default), require any consent or approval to be obtained or notice to be given under, or give rise to any third party right of termination, cancellation, suspension, acceleration, penalty or payment obligation or right to acquire or sale under, any provision of: (i) the notice of articles, articles of incorporation, or other constating documents of Finco or any of its subsidiaries, (ii) any permit or material contract to which Finco is a party or to which it, or its properties or assets, may be subject or by which Finco is bound, or (iii) any law, regulation, order, judgment or decree applicable to Finco or any of its subsidiaries or any of their respective properties or assets; and (B) give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, material contract, license, franchise or permit to which Finco is a party (except, in the case of each of clauses (i), (ii) and (iii) above, for such breaches, violations, conflicts, defaults, terminations or accelerations which would not have a Finco Material Adverse Effect); and

(h)

the authorized capital of Finco consists of an unlimited number of Finco Shares, of which 100 Finco Shares are issued and outstanding as of the date hereof, all of which shares have been duly authorized and validly issued, and are fully paid and non-assessable and are not subject to, nor issued in violation of, any pre-emptive rights. Other than Finco Subscription Receipts to be issued pursuant to the Finco Financing, there are no other Finco Shares or securities convertible or exercisable for Finco Shares that will be outstanding prior to the completion of the Amalgamation and no person has or prior to completion of the Amalgamation will have, any agreement, right or option (whether direct, indirect or contingent or whether pre-emptive, contractual or by law) to purchase, or otherwise acquire any securities of any nature or kind of Finco. All such Finco Shares to be issued on conversion of the Finco Subscription Receipts will, when issued, be duly and validly issued as fully paid and non-assessable shares of Finco.

16.

Representations and Warranties of Subco. Subco represents and warrants to and in favour of Finco as follows, and acknowledges that Finco is relying upon such representations and warranties:

(a)

Subco is a corporation existing under the federal laws Canada;

(b)

Subco has the power and capacity and is duly authorized to execute and deliver, and perform its obligations under, this Agreement and this Agreement is a valid and binding agreement, enforceable against Subco in accordance with its terms (subject to such limitations and prohibitions as may exist or may be enacted in Applicable Laws relating to bankruptcy, insolvency, liquidation, moratorium, reorganization, arrangement or winding-up and other laws, rules and regulations of general application affecting the rights, powers, privileges, remedies and/or interests of creditors generally) and no other proceeding on the part of Subco, other than the approval of the Amalgamation by Carpincho, as sole shareholder of Subco, is necessary to authorize the transactions contemplated under this Agreement;

(c)

Subco has been incorporated solely for the purpose of the Amalgamation and has never carried on any active business (other than such business required in connection with the Amalgamation), and has no material assets and no liabilities;

(d)

there is no requirement to make any filing with, give any notice to, or obtain any authorization of, any governmental authority, or to obtain any consent, approval or authorization of any other party or person (other than the approval of the shareholders of Finco and Subco as required by the Act), as a condition to the lawful completion of the transactions contemplated by this Agreement, including specifically the Amalgamation, except for the filing of Articles of Amalgamation giving effect to the Amalgamation and other filings, notifications and authorizations required under applicable securities laws;

(e)

there are no actions, suits, proceedings or inquiries, including, to the knowledge of Subco, pending or threatened, against or affecting Subco at law or in equity or before or by any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality; and

(f)

17.

General Conditions Precedent. The respective obligations of the parties hereto to consummate the transactions contemplated hereby are subject to the satisfaction, on or before the Effective Date, of the following conditions, any of which may be waived by the mutual consent of such parties without prejudice to their right to rely on any other of such conditions, subject to the last paragraph of this Section 17:

(a)

the Finco Financing shall have been completed and the proceeds from the Finco Financing, less the reasonable fees, disbursements and applicable taxes thereon of the agents to the Brokered Financing (up to a maximum of $150,000, exclusive of disbursements and taxes) incurred prior to the closing date of the Finco Financing shall be deposited with the Subscription Receipt Agent pursuant to the terms of the Subscription Receipt Agreement, and shall be held in escrow pending release pursuant to the Transaction;

(b)

the Finco Subscription Receipts will have converted into Finco Units immediately prior to the Effective Time;

(c)

the Amalgamation shall have been approved by Carpincho as the sole shareholder of Subco by way of written resolution executed by such sole shareholder, all in accordance with the applicable provisions of the Act;

(d)

the Amalgamation shall have been approved by the shareholders of Finco, all in accordance with the applicable provisions of the Act;

(e)

Carpincho shall have obtained the conditional approval for the listing of the New Carpincho Shares from the CSE, subject only to customary listing conditions of the CSE;

(f)

all conditions precedent to the closing of the Transaction shall have been met or waived, provided that any waivers shall require the prior written consent of each of Carpincho and Finco, such consent not to be unreasonably withheld or delayed;

(g)

the Articles of Amalgamation to be filed with the Director in accordance with the Amalgamation shall be in form and substance satisfactory to each of Carpincho and Finco, acting reasonably;

(h)

there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement, including, without limitation, the Amalgamation;

(i)

all other necessary third party, regulatory and governmental approvals, waivers and consents in respect of the transactions contemplated herein shall have been obtained on terms and conditions satisfactory to Carpincho and Finco, each acting reasonably;

(j)

no material action or proceeding shall be pending or threatened by any person, company, firm, governmental authority, regulatory body or agency and there shall be no action taken under any existing Applicable Law or regulation, nor any statute, rule, regulation or order which is enacted, enforced, promulgated or issued by any court, department, commission, board, regulatory body, government or governmental authority or similar agency, domestic or foreign, that:

(i)

makes illegal or otherwise directly or indirectly restrains, enjoins or prohibits the Amalgamation or any other transactions contemplated herein; or

(ii)

results in a judgment or assessment of material damages directly or indirectly relating to the transactions contemplated herein;

(k)

this Agreement shall not have been terminated pursuant to Section 22 hereof;

(l)

the Share Exchange Agreement shall not have been terminated in accordance with its terms; and

(m)

the Effective Time shall have occurred on or prior to the Termination Deadline.

The conditions described above are for the mutual benefit of Carpincho, Finco and Subco and may be asserted by Carpincho, Finco and Subco regardless of the circumstances, and such conditions (other than the conditions set forth in Subsections 17(a), 17(b), 17(c), 17(d), 17(e) and 17(f) above) may be waived by Carpincho, Finco and Subco in their sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which Carpincho, Finco and Subco may have.

18.

Conditions to Obligations of Carpincho and Subco. The obligations of Carpincho and Subco to consummate the transactions contemplated hereby are subject to the satisfaction, on or before the Effective Date (or such other time specified in respect thereof), of the following conditions:

(a)

each of the covenants, acts and undertakings of Finco to be performed on or before the Effective Date pursuant to the terms of this Agreement shall have been duly performed by it and there shall have been no Finco Material Adverse Effect from and after the date hereof to the Effective Date;

(b)

Carpincho and Subco shall have received a certificate from a senior officer of Finco confirming that the conditions set forth in Sections 17 and 18 hereof have been satisfied;

(c)

the representations, warranties, covenants and agreements of Finco set forth in this Agreement (without giving effect to any materiality qualifiers) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Date as if made by Finco immediately preceding the Amalgamation on the Effective Date, except where the failure of such representations and warranties to be true and complete, individually or in the aggregate, would not result or would not reasonably be expected to result in a Finco Material Adverse Effect; and

(d)

Finco shall have furnished Carpincho with certified copies of:

(i)

the resolutions, duly passed by the sole director of Finco approving the Amalgamation, this Agreement and the consummation of the transactions contemplated hereby;

(ii)

the resolutions, duly passed by the sole director of Finco, approving the Finco Financing; and

(iii)

the resolutions of the Finco Shareholders approving the Amalgamation in accordance with the terms hereof.

The conditions described above are for the exclusive benefit of Carpincho and Subco and may be asserted by Carpincho and Subco regardless of the circumstances, and such conditions may be waived by Carpincho and Subco in their sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which Carpincho and Subco may have.

19.

Conditions to Obligations of Finco. The obligations of Finco to consummate the transactions contemplated hereby are subject to the satisfaction, on or before the Effective Date (or such other time specified in respect thereof), of the following conditions:

(a)

each of the covenants, acts and undertakings of Carpincho and Subco to be performed on or before the Effective Date pursuant to the terms of this Agreement shall have been duly performed by them and there shall have been no Carpincho Material Adverse Effect from and after the date hereof to the Effective Date;

(b)

Finco shall have received a certificate from a senior officer of each of Carpincho and Subco confirming that the conditions set forth in Sections 17 and 19 hereof have been satisfied;

(c)

the representations, warranties, covenants and agreements of Carpincho and Subco set forth in this Agreement (without giving effect to any materiality qualifiers) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Date as if made by Carpincho or Subco, as the case may be, immediately preceding the Amalgamation on the Effective Date, except where the failure of such representations and warranties to be true and complete, individually or in the aggregate, would not result or would not reasonably be expected to result in a Carpincho Material Adverse Effect;

(d)

completion of the Consolidation; and

(e)

Carpincho shall have furnished Finco with certified copies of:

(i)

the resolutions, duly passed by the board of directors of Carpincho: (A) approving the Amalgamation, this Agreement and the consummation of the transactions contemplated hereby; and (B) conditionally allotting for issuance the aggregate number of New Carpincho Shares that may be required to be issued in accordance with the terms of this Agreement upon the Amalgamation taking effect; and

(ii)

the written resolution of the sole shareholder of Subco approving the Amalgamation in accordance with the terms hereof.

The conditions described above are for the exclusive benefit of Finco and may be asserted by Finco regardless of the circumstances, and such conditions may be waived by Finco in its sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which Finco may have.

20.

Notice and Effect of Failure to Comply with Conditions. Each of Finco and Carpincho (on its behalf and on behalf of Subco) shall give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof to the Effective Date of any event or state of facts which occurrence or failure would, or would be likely to, (i) cause any of the representations or warranties of any party contained herein to be untrue or inaccurate in any material respect, or (ii) result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by any party hereunder provided, however, that no such notification will affect the representations or warranties of the parties or the conditions to the obligations of the parties hereunder.

21.

Amendment. This Agreement may at any time and from time to time be amended by written agreement of the parties hereto without, subject to Applicable Law, further notice to or authorization on the part of their respective securityholders and any such amendment may, without limitation:

(a)

change the time for performance of any of the obligations or acts of the parties hereto;

(b)

waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

(c)

waive compliance with or modify any of the covenants contained herein and waive or modify performance of any of the obligations of the parties hereto; or

(d)

waive compliance with or modify any other conditions precedent contained herein; provided that no such amendment shall change the provisions hereof regarding the consideration to be received by Finco Shareholders in exchange for their Finco Shares without approval by the shareholders of Finco given in the same manner as required for the approval of the Amalgamation.

22.

Termination. This Agreement may be terminated:

(a)

at any time prior to the issuance of the Certificate, by mutual written agreement of the respective boards of directors of the parties hereto, without further action on the part of the shareholders of Finco, Carpincho or Subco;

(b)

at any time prior to the Termination Deadline, by either Finco or Carpincho, if the Share Exchange Agreement is terminated;

(c)

at any time after the Termination Deadline, by either Finco or Carpincho (on its behalf and on behalf of Subco) by notice in writing to the other Party, provided that such terminating party is not in material breach of this Agreement, if the Certificate has not been issued by the Director on or before such date, without further action on the part of the shareholders of Finco, Carpincho or Subco;

(d)

by either the Carpincho or Finco upon notice to the other in the event that the Finco Financing is not completed on or prior to April 30, 2018 provided that if the lead agent for the Finco Financing has confirmed in writing prior to April 30, 2018 that commitments for the full Finco Financing have been received but closing has not yet occurred, such date will be extended to May 6, 2018;

(e)

either Carpincho or Finco, if there shall be any Applicable Law that makes consummation of the Amalgamation illegal or otherwise prohibited, any applicable regulatory authority having notified in writing either Carpincho or Finco that it will not permit the Amalgamation to proceed, or if any judgment, injunction, order or decree of a competent governmental entity enjoining Carpincho or Finco from consummating the Amalgamation shall be entered and such judgment, injunction, order or decree shall have become final and non-appealable;

(f)

provided Carpincho and Subco are not in material breach of this Agreement, upon five Business Days’ written notice by Carpincho (on its behalf and on behalf of Subco) to Finco, at any time prior to the Effective Date if Finco is in breach of any of its representations or warranties made in this Agreement (without giving effect to any materiality qualifiers contained therein) or covenants made in this Agreement which breach individually or in the aggregate causes or would be reasonably expected to cause a Finco Material Adverse Effect; or

(g)

provided Finco is not in material breach of this Agreement, upon five Business Days’ written notice by Finco to Carpincho (on its own behalf and on behalf of Subco), at any time prior to the Effective Date if Carpincho or Subco is in breach of any of its representations or warranties made in this Agreement (without giving effect to any materiality qualifiers contained therein) or covenants made in this Agreement which breach individually or in the aggregate causes or would be reasonably expected to cause a Carpincho Material Adverse Effect.

Following the termination of this Agreement in accordance with any of the above provisions, this agreement will terminate but the provisions in Sections 23 (Costs and Expenses) and 25 (Confidentiality) shall remain binding and enforceable and in full force and effect. If this Agreement is terminated pursuant to any provision of this Agreement, the parties shall return all materials and copies of all materials delivered to Finco or Carpincho, as the case may be, or their respective representatives.

23.

Costs and Expenses. The parties acknowledge and agree that, whether or not the transactions contemplated hereby are completed, all costs and expenses relating to the transactions contemplated by this Agreement will be paid by the party incurring same.

24.

Binding Effect. This Agreement shall be binding upon and enure to the benefit of the parties hereto.

25.

Confidentiality.

(a)

“Confidential Information” means any information relating to the disclosing party’s businesses, operations, assets, liabilities, plans, prospects or affairs, or to the transactions contemplated hereby, which has been or is disclosed to or acquired by the receiving parties regardless of whether such information is in oral, visual, electronic, written or other form and whether or not it is identified as “confidential”.

Confidential Information does not include any information that:

(i)

is or becomes generally available to the public other than as a result of disclosure directly or indirectly by the receiving parties or their directors, officers, employees, agents, representatives or advisors (the “Representatives”);

(ii)

is or becomes available to the receiving parties on a non-confidential basis from a source other than the disclosing party unless the receiving parties know after reasonable inquiry that such source is prohibited from disclosing the information to the receiving parties by a contractual, fiduciary or other legal obligation to the disclosing party; or

(iii)

the receiving parties can show was independently acquired or developed by the receiving parties prior to the disclosure by the other party and without the use of any Confidential Information;

(b)

The receiving parties shall keep confidential the Confidential Information, shall not disclose the Confidential Information in any manner whatsoever, in whole or in part, except as permitted by this Section 25, and shall use the Confidential Information solely to evaluate the transactions contemplated hereby and not directly or indirectly for any other purpose.

(c)

The receiving parties shall not disclose to any person the fact that the Confidential Information has been made available, this Agreement has been entered into, discussions or negotiations are taking place or have taken place concerning a possible transaction, or any of the terms, conditions or other facts with respect to the foregoing, including the status thereof, except as permitted by this Agreement. Notwithstanding the foregoing, the parties acknowledge and agree that Carpincho shall be required to disclose the terms hereof in accordance with the applicable timely disclosure obligations.

(d)

The receiving parties may disclose Confidential Information to their Representatives but only to the extent that such Representatives need to know the Confidential Information for the purposes of evaluating the transactions contemplated hereby, have been informed of the confidential nature of the Confidential Information, are directed to hold the Confidential Information in the strictest confidence, and agree to act in accordance with the terms and conditions of this Agreement. Each party shall cause its Representatives to observe the terms of this Agreement and is responsible for any breach by its Representatives of any of the provisions of this Agreement.

(e)

The disclosure restrictions contained in this Agreement do not apply to disclosure that is required by Applicable Laws, unless the receiving parties are permitted or required by Applicable Law to refrain from making such disclosure for confidentiality or other reasons, or that the disclosing party gives the receiving parties prior written consent to disclose. Prior to making any disclosure pursuant to Applicable Laws, the receiving parties shall, to the extent not prohibited by Applicable Laws:

(i)

give the disclosing party prompt notice of the requirement and the proposed content of any disclosure;

(ii)

at the disclosing party’s request and expense, co-operate with the disclosing party in limiting the extent of the disclosure and in obtaining an appropriate protective order or pursuing such legal action, remedy or assurance as the disclosing party deems necessary to preserve the confidentiality of the Confidential Information, at the disclosing party’s cost; and

(iii)

if a protective order or other remedy is not obtained or the disclosing party fails to waive compliance with the provisions of this Agreement, disclose only that portion of the Confidential Information that it is required to disclose and exercise commercially reasonable efforts to obtain reliable assurance that confidential treatment is given to the Confidential Information disclosed.

(f)

The receiving parties shall make the same efforts to safeguard the Confidential Information as they make to safeguard their own confidential and proprietary business information, or all commercially reasonable efforts to safeguard the Confidential Information if such efforts would impose on it a higher standard of care.

(g)

If this Agreement is terminated pursuant to Section 22, each party shall, subject to Section 25(h), within seven Business Days of such termination:

(i)

return all Confidential Information to the other party without retaining any copies; or

(ii)

destroy or permanently erase all copies of the Confidential Information; and

(iii)

certify to the other party in writing that this Section 25(g) has been complied with Return or destruction of Confidential Information shall not minimize the receiving party’s obligation to protect and maintain the Confidential Information in the strictest confidence as provided for herein.

(h)

Despite 24(g), Carpincho and Finco may each retain data or electronic records containing the Confidential Information solely for the purposes of backup, recovery, contingency planning or business continuity planning so long as such data or records are not accessible in the ordinary course of business and are not accessed except as required for backup, recovery, contingency planning or business continuity purposes. Each party shall keep such retained Confidential Information confidential, subject to the terms of this Agreement. Carpincho and Finco shall permanently delete any data or records that are restored or otherwise become accessible in the ordinary course of business.

26.

Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supercedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties with respect to the subject matter hereof.

27.

Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of each of the other parties.

28.

Press Releases. Notwithstanding any other provision hereof, all press releases issued by any of Subco, Carpincho and/or Finco in connection with the Amalgamation or other matters contemplated hereby must be provided to each of Carpincho and Finco for approval and comment prior to their release, provided however that this Section 28 shall not be interpreted so as to prohibit any party from complying with its timely disclosure obligations under Applicable Laws.

29.

Further Assurances. Each of the parties hereto agrees to execute and deliver such further instruments and to do such further reasonable acts and things as may be necessary or appropriate to carry out the intent of this Agreement.

30.

Notice. Any notice which a party may desire to give or serve upon another party shall be in writing and may be delivered or sent by e-mail to the following addresses:

(a) 10653918 Canada Inc.

Suite 2100, Scotia Plaza

40 King Street W.

Toronto, Ontario M5H 3C2

Attention: David Gardos

E-mail: dennisplogan@gmail.com or dgardos@casselsbrock.com

(b) Carpincho Capital Corp. or Subco

181 University Avenue, Suite 800

Toronto, Ontario M5H 2X7

Attention: Chief Executive Officer

E-mail: lonnie@acuitylaw.ca

or to such other address as the party to or upon whom notice is to be given or served has communicated to the other parties by notice given or served in the manner provided for in this Section. Notice shall be deemed to be given on the date of delivery and in the case of e-mail, notice shall be deemed to be given on the date of the e-mail.

31.

Time of Essence. Time shall be of the essence of this Agreement.

32.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF this Master Agreement has been duly executed by the parties hereto as of the date first written above.

	10653918 CANADA INC.

	Per:	/s/ Dennis Logan
		Name: Dennis Logan
		Title: President & CEO

	CARPINCHO CAPITAL CORP.

	Per:	/s/ Lonnie Kirsh
		Name: Lonnie Kirsh
		Title: President

	10713791 CANADA INC.

	Per:	/s/ Lonnie Kirsh
		Name: Lonnie Kirsh
		Title: President

SCHEDULE “A”

AMALGAMATION AGREEMENT

THIS AGREEMENT made as of the ● day of ●, 2018

AMONG:

10653918 CANADA INC.

a corporation incorporated under the federal laws of Canada ("Finco")

- and -

10713791 CANADA INC.

a corporation incorporated under the federal laws of Canada ("Subco")

- and -

CARPINCHO CAPITAL CORP.

a corporation incorporated under the federal laws of Canada ("Carpincho")

RECITALS:

WHEREAS Carpincho, Subco and Finco have entered into a master agreement dated as of April 26, 2018 pursuant to which the parties thereto have agreed that the business and assets of Finco will be combined with those of Carpincho (the "Master Agreement");

AND WHEREAS it is desirable for Subco and Finco to amalgamate (the "Amalgamation") under the CBCA (as hereinafter defined) upon the terms and conditions hereinafter set out;

NOW THEREFORE in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged) the parties hereto do hereby agree as follows:

Interpretation

In this Agreement including the recitals:

"Acquisition" means the acquisition by Carpincho of Finco pursuant to the terms of the Master Agreement;

"Agreement" means this agreement and any amendment made to this Agreement;

"Amalco" means the corporation resulting from the Amalgamation and continuing the corporate existence of the Amalgamating Corporations;

"Amalco Shares" means the common shares in the capital of Amalco;

"Amalgamating Corporation" means each of Subco and Finco and "Amalgamating Corporations" means both of them;

"Amalgamation" means the amalgamation of the Amalgamating Corporations pursuant to the provisions of section 185 of the CBCA in the manner contemplated in and pursuant to this Agreement;

"Finco Shares" means common shares in the capital of Finco;

"Finco Shareholder" means a registered holder of Finco Shares, from time to time, and "Finco Shareholders" means all of such holders;

"CBCA" means the Canada Business Corporations Act, as the same has been and may hereafter from time to time be amended;

"Certificate of Amalgamation" means the certificate of amalgamation to be issued by the Director in respect of the Amalgamation;

"Carpincho Shares" means common shares in the capital of Carpincho as constituted immediately prior to the Amalgamation;

"Director" means the director appointed under section 260 of the CBCA;

"Effective Date" means the date shown on the Certificate of Amalgamation;

"Effective Time" has the meaning ascribed to it in Section 10;

"Government Authority" means any foreign, national, provincial, local or state government, any political subdivision or any governmental, judicial, public or statutory instrumentality, court, tribunal, commission, board, agency (including those pertaining to health, safety or the environment), authority, body or entity, or other regulatory bureau, authority, body or entity having legal jurisdiction over the activity or Person in question and, for greater certainty;

"Master Agreement" has the meaning ascribed thereto in the recitals to this Agreement;

"Paid-up Capital" means paid-up capital within the meaning of subsection 89(1) of the Income Tax Act (Canada);

"Parties" means Carpincho, Subco and Finco;

"Person" includes any individual, sole proprietorship, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, union, Government Authority, syndicate or other entity, whether or not having legal status;

“Subco Shares” means the issued and outstanding common shares in the capital of Subco; and

“Transfer Agent” means Odyssey Trust Company, in its capacity as registrar and transfer agent for the Carpincho Shares.

1. Paramountcy

In the event of any conflict between the provisions of this Agreement and the provisions of the Master Agreement, the provisions of the Master Agreement shall prevail.

2. Agreement to Amalgamate

Each of the Parties hereby agrees to the Amalgamation. The Amalgamating Corporations shall amalgamate to create Amalco on the terms and conditions set out in this Agreement.

3. Amalgamation Events

The Parties shall cause the Articles of Amalgamation to be filed pursuant to section 185 of the CBCA to effect the Amalgamation. Under the Amalgamation:

(a)

Finco and Subco will amalgamate and continue as Amalco;

(b)

the Finco Shareholders shall receive one (1) Carpincho Share for each one (1) Finco Share held, resulting in the issuance of up to 37,500,100 Carpincho Shares in the aggregate to be distributed proportionately amongst the Finco Shareholders, and all Finco Shares shall be cancelled;

(c)

all other convertible securities issued by Finco shall be exchanged for convertible securities in the capital of Carpincho on a one (1) for one (1) basis, with all terms thereof adjustd accordingly;

(d)

each issued and outstanding Subco Share shall be converted into one fully paid and non-assessable Amalco Share;

(e)

as consideration for the issuance of the Carpincho Shares to effect the Amalgamation, Carpincho will receive one Amalco Share for each one Finco Share outstanding immediately prior to the Effective Time;

(f)

all of the property and assets of each of the Amalgamating Corporations will be the property and assets of Amalco and Amalco will be liable for all of the liabilities and obligations of each of the Amalgamating Corporations; and

(g)

Amalco will be a wholly-owned subsidiary of Carpincho.

4. Delivery of Securities Following Amalgamation

In accordance with normal commercial practice, as soon as practicable following the Effective Date, Carpincho, directly or through the Transfer Agent, shall issue certificates (or direct registration statement advices) representing the appropriate number of Carpincho Shares to the former holders of Finco Shares.

5. Negative Covenants

From the date hereof to and including the Effective Date, each of Finco and Subco covenants that it will not:

(a)

reserve, allot, create, issue or distribute any of its securities;

(b)

declare or pay dividends on any of its shares or make any other issue, payment or distribution to the holders of its securities including, without limitation, the issue, payment or distribution of any of its assets or property to such holders;

(c)

other than as contemplated in this Agreement, authorize or take any action to amalgamate, merge, reorganize, effect an arrangement, liquidate, dissolve, wind-up or transfer all or substantially all of its undertaking or assets to another corporation or entity;

(d)

reclassify any outstanding securities or change such securities into other shares or securities or subdivide, redivide, reduce, combine or consolidate such securities into a greater or lesser number of securities, effect any other capital reorganization or amend the designation of or the rights, privileges, restrictions or conditions attaching to such securities;

(e)

other than as contemplated in this Agreement, amend its Articles; or

(f)

other than as contemplated in this Agreement, enter into any transaction, or take any other action, out of the ordinary course of its business.

6. Conditions Precedent to the Amalgamation

The Amalgamation is subject to all conditions precedent to the completion of the Amalgamation having obtained or waived in accordance with the Master Agreement on or before the Effective Date.

A certificate signed by a senior officer of each of Carpincho, Finco and Subco confirming the satisfaction or waiver of such conditions shall be conclusive evidence that such conditions have been satisfied and that Carpincho, Finco and Subco may amalgamate in accordance with Section 3 hereof.

7. Fractional Shares

No fractional New Carpincho Shares will be issued or delivered to any Finco Shareholders otherwise entitled thereto as a result of the Amalgamation, if any. Instead, the number of Carpincho Shares issued to each exchanging holder of Finco Shares will be rounded down to the nearest whole number. Notwithstanding the foregoing, each Finco Shareholder shall receive a minimum of one (1) Carpincho Share.

8. Filing of Articles of Amalgamation

If this Agreement is adopted by each of the Amalgamating Corporations as required by the CBCA, the Amalgamating Corporations agree that they will, jointly and together, file with the Director, agreed upon Articles of Amalgamation in the form prescribed under the CBCA.

9. Effective Time

The Amalgamation shall take effect and go into operation at 12:01 a.m. on the effective date of the Articles of Amalgamation (the “Effective Time”), if this Agreement has been adopted as required by law and all necessary filings have been made with the Director before that time, or at such later time, or time and date, as may be determined by the directors or by special resolutions of the Amalgamating Corporations when this Agreement shall have been adopted as required by law; provided, however, that if the directors of both of the Amalgamating Corporations determine not to proceed with the Amalgamation, then the Amalgamating Corporations may by agreement in writing terminate this Agreement at any time prior to the Amalgamating Corporations being amalgamated, and in such event, the Amalgamation shall not take place notwithstanding the fact that this Agreement may have been adopted by the shareholders of the Amalgamating Corporations.

10. Registered Office

The registered office of Amalco shall be in the Province of Ontario.

11. Activities

There will be no limitations on the activities of Amalco. The directors of Amalco shall be authorized to borrow money on the credit of Amalco. The articles of Subco shall be the articles of Amalco.

12. Authorized Capital

The authorized capital of Amalco shall consist of an unlimited number of common shares without nominal or par value.

13. Capital

The amount to be added to the stated capital in respect of the Amalco Shares issuable by Amalco pursuant to Sections 4(c) and 4(d) of this Agreement shall be the aggregate of: (i) the Paid-up Capital, determined before the Effective Time, of the Subco Shares converted into Amalco Shares pursuant to section 4(c); and (ii) the Paid-up Capital, determined before the Effective Time, of all of the issued and outstanding Finco Shares immediately before the Effective Time (other than any Finco Shares held by Subco, if any).

14. Number of Directors

The board of directors of Amalco shall consist of not less than one and not more than 10 directors, the exact number of which shall be determined by the directors from time to time.

15. Initial Director

The first director of Amalco shall be the person whose names and residential addresses appear below:

Name	Prescribed Address
Dennis Logan	●

The above director will hold office from the Effective Date until the first annual meeting of shareholders of Amalco or until his successor is elected or appointed.

16. Termination

This Agreement may be terminated by agreement in writing of the Parties and shall automatically concurrently terminate upon the termination of the Master Agreement, notwithstanding the approval of this Agreement by the shareholders of the Amalgamating Corporations, at any time prior to the issuance of the Certificate of Amalgamation without, except as provided in the Master Agreement, any recourse by any Party hereto or any of their shareholders or other Persons.

17. Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each Party hereby irrevocably attorns to the jurisdiction of the courts of the Province of Ontario in respect of all matters arising under or in relation to this Agreement.

18. Further Assurances

Each of the Parties agrees to execute and deliver such further instruments and to do such further reasonable acts and things as may be necessary or appropriate to carry out the intent of this Agreement.

19. Time of the Essence

Time shall be of the essence of this Agreement.

20. Amendments

This Agreement may only be amended or otherwise modified by written agreement executed by the Parties.

21.

Counterparts

This Agreement may be signed in counterparts (including counterparts by facsimile or other electronic transmission), and all such signed counterparts, when taken together, shall constitute one and the same agreement, effective on this date.

[The remainder of this page has been left intentionally blank. Signature page follows.]

IN WITNESS WHEREOF the Parties have executed this Agreement.

10653918 CANADA INC. By:

Name:

Title:

10713791 CANADA INC. By:

Name:

Title:

CARPINCHO CAPITAL CORP. By:

Name:

Title:

Exhibit 2.5

Certain identified information has been excluded from the exhibit because it is both not material and is the type that the registrant treats as private or confidential.

LICENSE PURCHASE AGREEMENT

by and among

[Buyer],

PLANET 13 HOLDINGS INC.,

[Seller],

and

HARVEST HEALTH & RECREATION INC.

dated as of

August 31, 2021

LICENSE PURCHASE AGREEMENT

This License Purchase Agreement (this “Agreement”), dated as of August 31, 2021 (the “Effective Date”), is entered into by and among [Buyer], a Florida corporation (which shall be renamed “Planet 13 Florida Inc.” promptly following the Effective Date) (“Buyer”), Planet 13 Holdings Inc., a British Columbia corporation (“Buyer Parent”), [Seller], a Florida corporation (“Seller”) and Harvest Health & Recreation Inc., a British Columbia corporation (“Seller Parent”).

WHEREAS, Seller owns a Medical Marijuana Treatment Center license number MMTC-2016-0006 (the “License”) issued by the Florida Department of Health to Seller; and

WHEREAS, Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase from Seller, the License, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The following terms have the meanings specified or referred to in this Article I:

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Ancillary Documents” means the Bill of Sale, the Escrow Agreement and the other agreements, instruments and documents required to be delivered in connection with this Agreement or at the Closing.

“Business Day” means a day (other than a Saturday or a Sunday) on which banks are open for general business in New York City.

“Cannabis Laws” means any U.S. federal laws, civil, criminal or otherwise, to the extent that such law is directly or indirectly related to the cultivation, harvesting, production, manufacturing, processing, marketing, distribution, sale or possession of cannabis, marijuana or related substances or products containing cannabis, marijuana or related substances, including the prohibition on drug trafficking under the Controlled Substances Act (21 U.S.C. § 801, et seq.), the conspiracy statute under 18 U.S.C. § 846, the bar against aiding and abetting the conduct of an offense under 18 U.S.C. § 2, the bar against misprision of a felony (concealing another’s felonious conduct) under 18 U.S.C. § 4, the bar against being an accessory after the fact to criminal conduct under 18 U.S.C. § 3, and federal money laundering statutes under 18 U.S.C. §§ 1956, 1957 and 1960, and any state controlled substances acts.

“CSE” means the Canadian Securities Exchange.

“Disclosure Schedules” means the Disclosure Schedules, if any, delivered by Seller and Buyer concurrently with the execution and delivery of this Agreement.

“Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“Escrow Agent” means GLAS Americas LLC, New York limited liability company.

“Fraud” means actual common law fraud in the making of a representation, warranty, or other statement committed by a Person making such representation, warranty, or statement with the intent to deceive another Person, and to induce any Person to enter into this Agreement or any Ancillary Document and requires (a) a false representation, warranty, or statement of material fact; (b) actual knowledge or belief that such representation, warranty, or statement is false; (c) an intention to induce such other Person to whom such representation, warranty, or statement was made to act or refrain from acting in reliance upon it; (d) causing that Person, in justifiable reliance upon such false representation, warranty, or statement to take or refrain from taking action; and (e) causing such Person or any party hereto to suffer damage by reason of such reliance.

“GAAP” means United States generally accepted accounting principles and practices, consistently applied.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction, including, without limitation, the OMMU and any local licensing authority.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Law” means any foreign or United States statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law or other requirement or rule of law of any Governmental Authority; provided, however, that the parties acknowledge and agree that Cannabis Laws shall not be deemed to be Law.

“Liabilities” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not include punitive damages, except to the extent actually awarded to a Governmental Authority or other third party.

“Material Adverse Effect” means any event, occurrence, fact, condition or change that is materially adverse to: (a) the License; or (b) the ability of Seller to consummate the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which Seller operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Buyer; (vi) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; or (vii) any natural or manmade disaster or acts of God, including the COVID-19 virus or any other epidemic or pandemic; provided, further, that any event, occurrence, fact, condition or change referred to in clauses (i), (ii), or (iii) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on Seller, taken as a whole, compared to other participants in the industries in which Seller conducts its business.

“OMMU” means the Florida Department of Health’s Office of Medical Marijuana Use.

“OMMU Approval” means the approval by the OMMU necessary to consummate the transactions contemplated by this Agreement.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Remaining Deposit Notice” means a written notice from Seller to Buyer setting forth the closing date of the transactions contemplated by that certain Arrangement Agreement, dated May 10, 2021 (the “Arrangement Agreement”), between Seller Parent and Trulieve Cannabis Corp., a British Columbia corporation (the “Harvest/Trulieve Transaction”).

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Security Interest” means that security interest in the License granted by Seller pursuant to the Security Agreement, dated as of December 20, 2019, by and among Seller, the other “Grantors” party thereto, and Odyssey Trust Company, as collateral trustee (the “Collateral Trustee”), to secure obligations of Seller Parent under the Trust Indenture, dated as of December 20, 2019, by and between Harvest and the Collateral Trustee

“Seller’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of Steve White or Nicole Stanton following due inquiry.

“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, property (real or personal), customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto.

“Tax Return” means any and all returns, declarations, reports, information returns and statements and other documents relating to Taxes (including amended returns and claims for refund).

ARTICLE II

PURCHASE AND SALE OF LICENSE

Section 2.01 Purchase and Sale of License. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, free and clear of any Encumbrances, all of Seller’s right, title and interest in, to and under the License. Other than the License, Buyer expressly understands and agrees that it is not purchasing or acquiring, and Seller is not selling or assigning, any other assets or properties of Seller, and all such other assets and properties shall be excluded from the transaction contemplated by this Agreement (collectively, the “Excluded Assets”).

Section 2.02 Buyer Liabilities; Excluded Liabilities.

(a) Buyer agrees to pay, perform and discharge when due any and all Liabilities arising out of or relating to Buyer’s ownership of the License or the operation of the business to be conducted by Buyer and its Affiliates under the License on or after the Closing Date.

(b) Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Seller and its Affiliates of any kind or nature, including any and all Liabilities arising out of or relating to Seller’s ownership of the License or the operation of the business conducted by Seller and its Affiliates under the License prior to the Closing Date (collectively, the “Excluded Liabilities”). Seller shall, and shall cause each of its Affiliates to, pay and satisfy in due course all Excluded Liabilities which they are obligated to pay and satisfy.

Section 2.03 Purchase Price. The aggregate purchase price for the License shall be US$55,000,000 (the “Purchase Price”), payable as follows:

(a) Upon the execution of the Escrow Agreement, Buyer shall deposit US$2,000,000 (the “Initial Deposit”) with the Escrow Agent which shall be held by the Escrow Agent in an escrow account (the “Escrow Account”) pursuant to the terms and conditions of this Agreement and the escrow agreement entered into as of even date herewith by and among Buyer, Seller and the Escrow Agent (the “Escrow Agreement”). Each party shall deliver to the Escrow Agent its respective documents required for the Escrow Agent to complete its “Know Your Customer” compliance identity verification no later than three Business Days following the Effective Date. Buyer and Seller acknowledge and agree that the Escrow Agreement is in final form (as between Buyer and Seller) as of the Effective Date, and Buyer and Seller shall execute the Escrow Agreement as promptly as possible following the Effective Date.

(b) Within two Business Days of Buyer’s and the Escrow Agent’s receipt of the Remaining Deposit Notice from Seller, Buyer shall deposit US$53,000,000 (the “Remaining Deposit”) with the Escrow Agent which shall be held by the Escrow Agent pursuant to the terms and conditions of this Agreement and the Escrow Agreement; provided, that [Remaining Deposit Notice timing requirement]; provided, further that, if the Closing under this Agreement does not occur within [Remaining Deposit timing requirement] following the funding of the Remaining Deposit, if Buyer, in its sole discretion, so chooses, Buyer and Seller shall deliver joint written instructions to the Escrow Agent to request the return to Buyer of the Remaining Deposit. Upon the return of the Remaining Deposit to Buyer, Seller shall be obligated to send another Remaining Deposit Notice to Buyer and the Escrow Agent in order for Buyer to re-deposit the Remaining Deposit with the Escrow Agent.

(c) At the Closing, the Escrow Agent shall release the entire Purchase Price (i.e., the Initial Deposit plus the Remaining Deposit) to Seller in accordance with the terms and conditions of this Agreement and the Escrow Agreement.

ARTICLE III

CLOSING

Section 3.01 Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place remotely by exchange of documents and signatures (or their electronic counterparts), within five Business Days after all of the conditions to Closing set forth in Article VII are either satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), or at such other time, date or place as Seller and Buyer may mutually agree upon in writing; provided, that notwithstanding anything to the contrary herein, Buyer and Seller hereby agree that the Closing shall take place simultaneously upon the consummation of the Harvest/Trulieve Transaction. The date on which the Closing is to occur is herein referred to as the “Closing Date.”

Section 3.02 Closing Deliverables.

(a) At the Closing, Seller and Buyer shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Escrow Funds to Seller in accordance with this Agreement and the Escrow Agreement. In addition, Seller shall deliver to Buyer the following:

(i) a bill of sale substantially in the form attached hereto as Exhibit A (the “Bill of Sale”), duly executed by Seller;

(ii) a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that Seller is not a foreign person within the meaning of Section 1445 of the Code, duly executed by Seller;

(iii) a certificate, dated as of the Closing Date and signed by a duly authorized officer of Seller, certifying that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied;

(iv) a certificate from a duly authorized officer of Seller certifying that attached thereto are true and complete copies of the resolutions adopted by the board of directors of Seller authorizing the execution, delivery and performance of this Agreement, the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby; and

(v) such other documents or instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

(b) At the Closing, Buyer shall deliver to Seller the following:

(i) evidence that Buyer has obtained a performance bond (or its equivalent) that satisfies the requirements of section 381.986(8)(b)7, Florida Statutes;

(ii) a certificate, dated as of the Closing Date and signed by a duly authorized officer of Buyer, certifying that each of the conditions set forth in Section 7.03(a) and Section 7.03(b) have been satisfied;

(iii) a certificate from a duly authorized officer of Buyer certifying that attached thereto are true and complete copies of the resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement, the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby; and

(iv) such other documents or instruments as Seller reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that:

Section 4.01 Organization and Authority of Seller. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Florida. Seller Parent is a corporation duly incorporated, validly existing and in good standing under the Laws of the Province of British Columbia. Each of Seller and Seller Parent has all necessary corporate power and authority to enter into this Agreement and the Ancillary Documents to which Seller or Seller Parent, as applicable, is a party, to carry out its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of Seller and Seller Parent of this Agreement and any Ancillary Document to which Seller or Seller Parent, as applicable, is a party, the performance by each of Seller and Seller Parent of its obligations hereunder and thereunder, and the consummation by each of Seller and Seller Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller and Seller Parent, as applicable. This Agreement and the Ancillary Documents constitute legal, valid and binding obligations of Seller and Seller Parent enforceable against Seller and Seller Parent in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 4.02 No Conflicts or Consents. The execution, delivery and performance by each of Seller and Seller Parent of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any provision of the articles of incorporation, bylaws or other constating documents of Seller or Seller Parent; (b) violate or breach any provision of any Law or Governmental Order applicable to Seller, Seller Parent or the License; or (c) except for the OMMU Approval, require any consent, permit, Governmental Order, filing or notice from, with or to any Governmental Authority or any other Person by or with respect to Seller or Seller Parent in connection with the execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.

Section 4.03 Title to License. Except for the Security Interest, Seller has good and valid title to the License, free and clear of all Encumbrances.

Section 4.04 Legal Proceedings; Governmental Orders.

(a) There are no Actions pending or, to Seller’s Knowledge, threatened against or by Seller or Seller Parent: (a) relating to or affecting the License, which if determined adversely to Seller or Seller Parent, as applicable, would result in a Material Adverse Effect; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement or any Ancillary Document.

(b) There are no outstanding Governmental Orders against, relating to or affecting the License which would have a Material Adverse Effect.

Section 4.05 Compliance with Laws; License. Seller is in compliance in all material respects with all Laws applicable to the ownership and use of the License. Neither Seller nor Parent has received any written communication from any Governmental Authority or other Person that remains unresolved as of the Effective Date that alleges that Seller is not in material compliance with any such Laws. The License is in good standing, is valid and is in full force and effect. All fees and charges with respect to the License as of Effective Date have been paid in full. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of the License. The License was obtained in compliance with Law. The License has a current expiration date of October 26, 2022 (the “License Expiration Date”), and Seller is not aware of any reason the License will not be renewed or capable of being renewed on or before the License Expiration Date.

Section 4.06 Brokers. Except for Canaccord Genuity Corp., no broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of Seller.

Section 4.07 No Other Representations and Warranties. Except for the representations and warranties contained in this Article IV (including the related portions of the Disclosure Schedules, if any), neither Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller, including any representation or warranty arising from statute or otherwise in Law.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that:

Section 5.01 Organization and Authority of Buyer. Buyer is a Florida corporation duly organized, validly existing and in good standing under the Laws of the State of Florida. Buyer Parent is a corporation duly incorporate, validly existing and in good standing under the Laws of the Province of British Columbia. Buyer has been registered to do business in the State of Florida for at least five consecutive years prior to the Effective Date, as required by section 381.986(8)(b)1., Florida Statutes. Each of Buyer and Buyer Parent has all necessary corporate power and authority to enter into this Agreement and the Ancillary Documents to which Buyer or Buyer Parent, as applicable, is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of Buyer and Buyer Parent of this Agreement and any Ancillary Document to which Buyer or Buyer Parent, as applicable, is a party, the performance by each of Buyer and Buyer Parent of its obligations hereunder and thereunder and the consummation by each of Buyer and Buyer Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer and Buyer Parent, as applicable. This Agreement and the Ancillary Documents constitute legal, valid and binding obligations of Buyer and Buyer Parent enforceable against Buyer and Buyer Parent in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 5.02 No Conflicts; Consents. The execution, delivery and performance by each of Buyer and Buyer Parent of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) violate or breach any provision of the articles of incorporation, bylaws or other constating documents of Buyer or Buyer Parent; (b) violate or breach any provision of any Law or Governmental Order applicable to Buyer or Buyer Parent; (c) require the consent, notice or other action by any Person under, conflict with, violate or breach, constitute a default under or result in the acceleration of any agreement to which Buyer or Buyer Parent is a party; or (d) except for the OMMU Approval, require any consent, permit, Governmental Order, filing or notice from, with or to any Governmental Authority or any other Person by or with respect to Buyer or Buyer Parent in connection with the execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.

Section 5.03 Capitalization. One hundred percent (100%) of the issued and outstanding stock of Buyer is owned by Buyer Parent. No individual or entity who directly or indirectly owns, controls, or holds with power to vote five percent or more of the voting interests of Buyer has any direct or indirect ownership or control of any voting interests or other form of ownership of any Florida licensed medical marijuana treatment center. No individual or entity who has any direct or indirect ownership or control of any voting interests or other form of ownership of Buyer directly or indirectly owns, controls, or holds with power to vote five percent or more of the voting interests of any Florida licensed medical marijuana treatment center.

Section 5.04 Solvency; Sufficiency of Funds. Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all Liabilities); and (c) have adequate capital to build out and construct cultivation and dispensary facilities for the operation of its cannabis business under the License and the financial ability to maintain such operations for at least two years. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of Buyer or Seller. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured. Buyer has sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price and consummate the transactions contemplated by this Agreement.

Section 5.05 Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer or Buyer Parent that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

Section 5.06 Brokers. Except for Beacon Securities Limited, no broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of Buyer.

Section 5.07 Independent Investigation. Buyer has conducted its own independent investigation, review and analysis of the License. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth in Article IV of this Agreement (including related portions of the Disclosure Schedules, if any); and (b) neither Seller nor any other Person has made any representation or warranty as to Seller, the License or this Agreement, except as expressly set forth in Article IV of this Agreement (including the related portions of the Disclosure Schedules, if any).

ARTICLE VI

COVENANTS

Section 6.01 Confidentiality. The parties hereto acknowledge and agree that the Confidentiality Agreement, dated as of August 26, 2021 between Buyer Parent and Harvest Enterprises, Inc. (the “Confidentiality Agreement”) remains in full force and effect and, in addition, each party covenants and agrees to keep confidential, in accordance with the provisions of the Confidentiality Agreement, information provided by any party to the other pursuant to this Agreement.

Section 6.02 Public Announcements. Unless otherwise required by applicable Law or stock exchange applicable to a party or its Affiliates, no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), and the parties shall cooperate as to the timing and contents of any such announcement; provided, however, that any party and its Affiliates may, without the prior written consent of other party(ies), make any public statement or disclosure to the extent the substance of such public statement or disclosure is consistent with any previous press release, statement or disclosure made in accordance with, or permitted by, this Section 6.02.

Section 6.03 Transfer Taxes. All transfer, sales, use, registration, documentary, stamp, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the Ancillary Documents, if any, shall be borne and paid by Buyer when due. Buyer shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Seller shall cooperate with respect thereto as necessary).

Section 6.04 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the Ancillary Documents.

Section 6.05 Exclusivity. Seller shall not, and shall not authorize or permit any of its Affiliates or any of its or their Representatives to, directly or indirectly (i) solicit, initiate or continue any discussions or negotiations with any Person concerning the actual or potential sale of the License, (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning the actual or potential sale of the License or (iii) enter into any agreements or other instruments (whether or not binding) regarding any actual or potential sale of the License. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates and all of their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could reasonably lead to, any actual or potential sale of the License. In addition to the other obligations under this Section 6.05, Seller shall promptly (and in any event within one Business Day after receipt thereof by Seller, its Affiliates or its or their respective Representatives) advise Buyer orally and in writing of any bona fide proposal relating to the actual or potential sale of the License.

Section 6.06 Governmental Approvals and Consents.

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be made, all filings and submissions required under any Law or stock exchange requirement applicable to such party or any of its Affiliates; and (ii) use commercially reasonable efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement and the Ancillary Documents, including without limitation, the OMMU Approval. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

(b) In furtherance of the foregoing:

(i) promptly following the Effective Date, but in no event more than one Business Day following the Effective Date, Seller will submit to the OMMU a request for approval of the transfer of the License from Seller to Buyer, which approval shall contain evidence of satisfaction of all regulatory requirements and Buyer’s plan of operation for the business to be conducted under the License, as described in greater detail on Schedule 1 attached hereto, and Buyer will use commercially reasonable efforts to cooperate and provide all information requested by Seller and/or required by the OMMU in connection with such request for approval; provided, however, the parties agree the request for approval contemplated by this Section 6.06(b)(i) shall not include the items set forth in Section 6.06(b)(ii); and

(ii) [Florida regulatory requirements Buyer covenants].

(c) Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, each of the parties hereto shall use commercially reasonable efforts to:

(i) respond within three Business Days following receipt to any inquiries by any Governmental Authority regarding any matter with respect to the transactions contemplated by this Agreement or any Ancillary Document;

(ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any Ancillary Document; and

(iii) in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement or any Ancillary Document has been issued, to have such Governmental Order vacated or lifted.

(d) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller or Buyer with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

Section 6.07 Seller Parent Guaranty. Seller Parent hereby guarantees to Buyer the full, prompt and unconditional payment when due of all obligations of Seller to Buyer under this Agreement, including, without limitation, all indemnification obligations set forth in Article VIII. This guaranty is an absolute, unconditional, irrevocable and continuing guaranty of the full and punctual payment and performance of Seller’s obligations under this Agreement and not of their collectability only and is in no way conditioned upon any requirement that Buyer first attempt to collect any of the obligations under this Agreement from Seller or resort to any security or other means of obtaining their payment. Should Seller default in the payment or performance of any of the obligations under this Agreement, the obligations of Seller Parent as guarantor hereunder shall become immediately due and payable to Buyer, without demand or notice of any nature, all of which are expressly waived by Seller Parent.

Section 6.08 Buyer Parent Guaranty. Buyer Parent hereby guarantees to Seller the full, prompt and unconditional payment when due of all obligations of Buyer to Seller under this Agreement, including, without limitation, all indemnification obligations set forth in Article VIII. This guaranty is an absolute, unconditional, irrevocable and continuing guaranty of the full and punctual payment and performance of Buyer’s obligations under this Agreement and not of their collectability only and is in no way conditioned upon any requirement that Seller first attempt to collect any of the obligations under this Agreement from Buyer or resort to any security or other means of obtaining their payment. Should Buyer default in the payment or performance of any of the obligations under this Agreement, the obligations of Buyer Parent as guarantor hereunder shall become immediately due and payable to Seller, without demand or notice of any nature, all of which are expressly waived by Buyer Parent.

Section 6.09 Negative Covenants. From the Effective Date until the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, and except as otherwise expressly permitted elsewhere in this Agreement, Seller shall not, and shall cause Seller Parent and its Affiliates not to: (i) pledge, encumber, sell, or otherwise allow any Encumbrance to be placed on, the License or any right, title, or interest in or to the License, or (ii) take or permit any action that would cause the License to not be in good standing or not be transferable or would, to Seller’s Knowledge, cause any of the representations and warranties set forth in Article IV to become untrue.

Section 6.10 Operation of the Business Between Signing and Closing. From the Effective Date until the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, Seller shall (i) conduct its business in the ordinary course of business consistent with past practice, (ii) comply in all material respects with applicable Law, including all Laws with respect to the License.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.01 Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a) No Governmental Authority or stock exchange applicable to a party or its Affiliates shall have enacted, issued, promulgated, enforced or entered any Governmental Order or decision which is in effect and has the effect of making the transactions contemplated by this Agreement illegal (excluding federal illegality with regards to marijuana being classified as a federally controlled substance), otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

(b) The parties shall have received the OMMU Approval.

(c) No Action shall have been commenced or threatened against any party that seeks to enjoin or would prevent the Closing or would have a material impact on the License. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.

Section 7.02 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

(a) The representations and warranties of Seller contained in this Agreement shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect.

(b) Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Ancillary Documents to be performed or complied with by it prior to or on the Closing Date.

(d) Seller shall have delivered to Buyer duly executed counterparts to the Ancillary Documents and such other documents and deliveries set forth in Section 3.02(a).

(e) All Encumbrances relating to the License shall have been released in full, and Seller shall have delivered to Buyer written evidence, in form satisfactory to Buyer in its sole discretion, of the release of such Encumbrances.

(f) From the Effective Date, there shall not have occurred a Material Adverse Effect.

(g) Seller shall have delivered to Buyer such other documents or instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

Section 7.03 Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:

(a) The representations and warranties of Buyer contained in this Agreement shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except where the failure of such representations and warranties to be true and correct would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby.

(b) Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Ancillary Documents to be performed or complied with by it prior to or on the Closing Date.

(c) Buyer shall have delivered to Seller duly executed counterparts to the Ancillary Documents and such other documents and deliveries set forth in Section 3.02(b).

(d) Buyer shall have delivered the Purchase Price to the Escrow Agent pursuant to Section 2.03.

(e) Seller shall have simultaneously herewith closed the Harvest/Trulieve Transaction.

ARTICLE VIII

INDEMNIFICATION

Section 8.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is one year from the Closing Date; provided, however, that the representations and warranties in: (i) Section 4.01, Section 4.02, Section 4.03, Section 4.06 (collectively, the “Seller Fundamental Representations”), Section 5.01 and Section 5.06 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 60 days. None of the covenants or other agreements contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

Section 8.02 Indemnification by Seller. Subject to the other terms and conditions of this Article VIII, Seller shall indemnify and defend each of Buyer and its Affiliates and their respective Representatives (collectively, the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement, the Ancillary Documents or in any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement;

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement, the Ancillary Documents or any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement;

(d) any Third-Party Claim related to the foregoing that alleges facts that, if true, would entitle the Buyer Indemnitees to recovery under this Article VIII.

Section 8.03 Indemnification by Buyer. Subject to the other terms and conditions of this Article VIII, Buyer shall indemnify and defend each of Seller and its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of Buyer or any of its Affiliates contained in this Agreement, the Ancillary Documents or in any certificate or instrument delivered by or on behalf of Buyer pursuant to this Agreement;

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer or any of its Affiliates pursuant to this Agreement, the Ancillary Documents or any certificate or instrument delivered by or on behalf of Buyer pursuant to this Agreement; or

(c) any Liability arising out of or relating to Buyer’s ownership of the License or the operation of the business to be conducted by Buyer and its Affiliates under the License on or after the Closing.

Section 8.04 Limits on Indemnification. Notwithstanding anything in this Article VIII to the contrary, in respect of the indemnification obligations provided for in Section 8.02:

(a) [Basket and cap limits on Seller indemnification obligations].

(b) Notwithstanding the foregoing, the limitations set forth in Section 8.04(a) shall not apply to Losses based upon, arising out of, with respect to or by reason of (i) any inaccuracy in or breach of any Seller Fundamental Representation or (ii) any Fraud or willful misconduct.

(c) Any payments by Seller pursuant to Section 8.02 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received (taking into account any increase in insurance premiums relating to recovery under any such applicable insurance policy) by Buyer in respect of any such claim. Buyer shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement.

(d) Buyer shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.

Section 8.05 Indemnification Procedures. The party making a claim under this Article VIII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted under this Article VIII is referred to as the “Indemnifying Party.”

(a) Third-Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third-Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof, but in any event no later than five Business Days after the Indemnified Party becomes aware of such Third-Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits material rights or material defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party within three Business Days following receipt of notice of such Third-Party Claim, to assume the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 8.05(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying Party elects not to compromise or defend such Third-Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 8.05(b), pay, compromise, defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party Claim. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available (subject to the provisions of Section 6.01) records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.

(b) Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), except as provided in this Section 8.05(b). If a firm offer is made to settle a Third-Party Claim and such offer (i) does not lead to liability or the creation of a financial or other obligation on the part of the Indemnified Party, (ii) in the reasonable opinion of the Indemnified Party, would not be material adverse to its business or the License and (iii) provides, in customary form, for the unconditional release of each Indemnified Party from all Liabilities in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten (10) Business Days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).

(c) Direct Claims. Any indemnification claim by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof, but in any event not later than five Business Days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have 30 days after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

Section 8.06 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

Section 8.07 Exclusive Remedies. Subject to Section 10.12, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from Fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII. In furtherance of the foregoing, except with respect to Section 10.12, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other party hereto and its Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article VIII. Nothing in this Section 8.07 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 10.12 or to seek any remedy on account of Fraud by any party hereto.

ARTICLE IX

TERMINATION

Section 9.01 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by the mutual written consent of Seller and Buyer;

(b) by Buyer by written notice to Seller if Buyer is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Seller within 10 days of Seller’s receipt of written notice of such breach from Buyer, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(c) by Seller by written notice to Buyer if Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Buyer within 10 days of Buyer’s receipt of written notice of such breach from Seller, unless such failure shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(d) by Buyer or Seller in the event that: (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable;

(e) by Seller by written notice to Buyer if the OMMU Approval has not been obtained by the date that is 90 days from the Effective Date (the “Outside Date”); provided, however, that Seller may elect to extend the Outside Date for additional 30-day periods until May 1, 2022 by written notice to Buyer no later than three Business Days prior to the Outside Date and the expiration of any applicable 30-day period; provided, further, that the right to terminate this Agreement under this Section 9.01(e) shall not be available to Seller if Seller’s failure to fulfill in any material respect any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement is the primary cause of the failure to obtain the OMMU Approval on or before the Outside Date;

(f) by Seller by written notice to Buyer upon any termination of the Arrangement Agreement; or

(g) by Buyer by written notice to Seller if Closing shall not have occurred by May 1, 2022; provided, that the right to terminate this Agreement under this Section 9.01(g) shall not be available to Buyer if Buyer’s failure to fulfill in any material respect any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement is the primary cause of the failure to close on or before May 1, 2022.

Section 9.02 Effect of Termination. In the event of the termination of this Agreement in accordance with this Article IX, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:

(a) as set forth in Section 6.01, this Article IX and Article X hereof;

(b) (i) if this Agreement is terminated pursuant to Section 9.01(c) or Section 9.01(e), then Buyer and Seller shall promptly provide joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Initial Deposit to Seller, and Seller shall retain the Initial Deposit in consideration of the opportunity cost of the Company’s exclusivity with Buyer pursuant to this Agreement; and (ii) if this Agreement is terminated pursuant to any other subsection of Section 9.01, then Buyer and Seller shall promptly provide joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Initial Deposit to Buyer;

(c) if this Agreement is terminated pursuant to Section 9.01(a), Section 9.01(b), Section 9.01(d), Section 9.01(e), Section 9.01(f) or Section 9.01(g), and Buyer has deposited the Remaining Deposit with the Escrow Agent pursuant to Section 2.03, then Buyer and Seller shall promptly provide joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Remaining Deposit to Buyer;

(d) if this Agreement is terminated pursuant to Section 9.01(c), Buyer will pay to Seller as liquidated damages $2,000,000 (the “Termination Fee”) as follows: (i) if Buyer has not yet deposited the Remaining Deposit with the Escrow Agent pursuant to Section 2.03 at the time of such termination, then by wire transfer of immediately available funds within five Business Days after such termination; or (ii) if Buyer has already deposited the Remaining Deposit with the Escrow Agent pursuant to Section 2.03 at the time of such termination, then Buyer and Seller shall promptly provide joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Termination Fee to Seller and the remaining amount of the Remaining Deposit to Buyer; and

(e) that nothing herein shall relieve any party hereto from liability for any intentional breach of any provision hereof.

The parties acknowledge that the agreements contained in Section 9.02(b)(i) and Section 9.02(d) are an integral part of the transactions contemplated by this Agreement, and that without these agreements the parties would not enter into this Agreement, and that the releasing of the Initial Deposit to Seller in accordance with Section 9.02(b)(i) and the Termination Fee represent liquidated damages, which are a genuine pre-estimate of the damages, including opportunity costs, which the Seller will suffer or incur as a result of the event giving rise to such damages and resultant termination of this Agreement, and are not penalties. Buyer irrevocably waives any rights it may have to raise as a defense that any such liquidated damages are excessive or punitive. Seller agrees that the payment of the Initial Deposit to Seller under Section 9.02(b)(i) and the Termination Fee are the sole remedies of Seller against Buyer in respect of the termination of this Agreement pursuant to Section 9.01(c) or Section 9.01(e), as applicable; provided however, that nothing shall preclude Seller from pursuing additional damages, including for lost opportunities or other consequential losses, in the event of any intentional breach by Buyer of any provision hereof.

ARTICLE X

MISCELLANEOUS

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):

If to Buyer or Buyer Parent: [Buyer contact information]

If to Seller or Seller Parent: [Seller contact information]

Section 10.03 Interpretation. For purposes of this Agreement: (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement, if any; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules, if any, and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

Section 10.04 Disclosure Schedules. To the extent there are Disclosure Schedules attached to this Agreement, this Section 10.04 shall apply. All section headings in the Disclosure Schedules correspond to the sections of this Agreement, but information provided in any section of the Disclosure Schedules shall constitute disclosure for purposes of each section of this Agreement where such information is relevant. Unless the context otherwise requires, all capitalized terms used in the Disclosure Schedules shall have the respective meanings assigned to such terms in this Agreement. Certain information set forth in the Disclosure Schedules is included solely for informational purposes, and may not be required to be disclosed pursuant to this Agreement. No reference to or disclosure of any item or other matter in the Disclosure Schedules shall be construed as an admission or indication that such item or other matter is required to be referred to or disclosed in the Disclosure Schedules. No disclosure in the Disclosure Schedules relating to any possible breach or violation of any agreement or Law shall be construed as an admission or indication that any such breach or violation exists or has actually occurred. The inclusion of any information in the Disclosure Schedules shall not be deemed to be an admission or acknowledgment by Seller that in and of itself, such information is material to or outside the ordinary course of the business or is required to be disclosed on the Disclosure Schedules. No disclosure in the Disclosure Schedules shall be deemed to create any rights in any third party.

Section 10.05 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Section 10.06 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 10.07 Entire Agreement. This Agreement and the Ancillary Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the Ancillary Documents, the Exhibits and Disclosure Schedules, if any (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

Section 10.08 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

Section 10.09 No Third-Party Beneficiaries. Except as provided in Article VIII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 10.10 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 10.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction).

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MUST BE INSTITUTED IN THE LEON COUNTY CIRCUIT COURT LOCATED IN TALLAHASSEE, FLORIDA, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURT AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11(c).

Section 10.12 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

Section 10.13 Reformation. This Agreement and the transactions contemplated herein may be subject to review and approval by one or more Governmental Authority, including but not limited to the OMMU and applicable local licensing authorities. If a Governmental Authority determines this Agreement or any Ancillary Document must be reformed, the parties shall negotiate in good faith to so reform such agreement according to the Governmental Authority’s requirements while effectuating the original intent of such agreement as near as possible.

Section 10.14 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective authorized agents.

BUYER:

[Buyer]

/s/ Robert Groesbeck

Name: Robert Groesbeck

Title: Co-CEO

/s/ Larry Scheffler

Name: Larry Scheffler

Title: Co-CEO

BUYER PARENT:

Planet 13 Holdings Inc.

/s/ Robert Groesbeck

Name: Robert Groesbeck

Title: Co-CEO

/s/ Larry Scheffler

Name: Larry Scheffler

Title: Co-CEO

SELLER:

[Seller]

/s/ Steve White

Name: Steve White

Title: Chief Executive Officer

SELLER PARENT:

Harvest Health & Recreation, Inc.

/s/ Steve White

Name: Steve White

Title: Chief Executive Officer

Exhibit A

FORM OF BILL OF SALE

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, [Seller], a Florida corporation (“Seller”), does hereby grant, bargain, transfer, sell, assign, convey and deliver to [Buyer], a Florida corporation (“Buyer”), all of its right, title, and interest in and to the License, as such term is defined in the License Purchase Agreement, dated as of August 31, 2021 (the “Purchase Agreement”), by and between Seller and Buyer, to have and to hold the same unto Buyer, its successors and assigns, forever.

Buyer acknowledges that Seller makes no representation or warranty with respect to the License except as specifically set forth in the Purchase Agreement.

IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale as of [DATE]

SELLER:

[Seller]

Name: Steve White

Title: Chief Executive Officer

Schedule 1

BUYER’S PLAN OF OPERATION

1. A description of Buyer’s technical and technological ability to cultivate and produce marijuana, including, but not limited to, low-THC cannabis, and a summary of the methods that will be utilized to cultivate and produce such products in Florida.

2. A description of Buyer’s ability to secure the premises, resources, and personnel necessary to operate as a medical marijuana treatment center.

3. A description of Buyer’s ability to maintain accountability of all raw materials, finished products, and any byproducts to prevent diversion or unlawful access to or possession of these substances.

4. A description of Buyer’s current and intended infrastructure that will be utilized to cultivate, process, and dispense marijuana, including a timeline for buildout of all such infrastructure.

5. A description of Buyer’s financial ability to maintain operations for the duration of the 2-year approval cycle.

6. An organization chart listing all Buyer’s owners, officers, directors, and managers.

7. A description of the medical director who will be employed to supervise Buyer’s medical marijuana treatment center activities, including a curriculum vitae, copy of the medical director’s license, and a copy of the continuing education certificate required for medical directors.

Exhibit 3.1

Number: BC1224419

CERTIFICATE

AMALGAMATION

BUSINESS CORPORATIONS ACT

I Hereby Certify that 10653918 CANADA INC., incorporation number C1219356, and PLANET 13 HOLDINGS INC., incorporation number C1214182 were amalgamated as one company under the name PLANET 13 HOLDINGS INC. on September 24, 2019 at 03:01 PM Pacific Time.

	Issued under my hand at Victoria, British Columbia On September 24, 2019

	CAROL PREST Registrar of Companies Province of British Columbia Canada
ELECTRONIC CERTIFICATE

Mailing Address:

PO Box 9431 Stn Prov Govt

Victoria BC V8W 9V3

www.corporateonline.gov.bc.ca

Location:

2nd Floor - 940 Blanshard Street

Victoria BC

1 877 526-1526

CERTIFIED COPY

Of a Document filed with the Province of British Columbia Registrar of Companies

Notice of Articles
BUSINESS CORPORATIONS ACT	CAROL PREST



	This Notice of Articles was issued by the Registrar on: September 24, 2019 03:01 PM Pacific Time Incorporation Number: BC1224419 Recognition Date and Time: September 24, 2019 03:01 PM Pacific Time as a result of an Amalgamation

NOTICE OF ARTICLES

Name of Company:

PLANET 13 HOLDINGS INC.

REGISTERED OFFICE INFORMATION

Mailing Address:

Delivery Address:

10TH FLOOR, 595 HOWE ST

VANCOUVER BC V6C 2T5

CANADA

RECORDS OFFICE INFORMATION

Mailing Address:

Delivery Address:

10TH FLOOR, 595 HOWE ST

VANCOUVER BC V6C 2T5

CANADA

Page: 1 of 2

DIRECTOR INFORMATION

Last Name, First Name, Middle Name:

SCHEFFLER, LARRY

Mailing Address:

2548 WEST DESERT INN ROAD

LAS VEGAS NV 89109

UNITED STATES

Delivery Address:

2548 WEST DESERT INN ROAD LAS VEGAS NV 89109

UNITED STATES

Last Name, First Name, Middle Name:

HARMAN, MICHAEL

Mailing Address:

2548 WEST DESERT INN ROAD

LAS VEGAS NV 89109

UNITED STATES

Delivery Address:

2548 WEST DESERT INN ROAD LAS VEGAS NV 89109

UNITED STATES

Last Name, First Name, Middle Name:

O'Neal, Adrienne

Mailing Address:

2548 WEST DESERT INN ROAD

LAS VEGAS NV 89109

UNITED STATES

Delivery Address:

2548 WEST DESERT INN ROAD LAS VEGAS NV 89109

UNITED STATES

Last Name, First Name, Middle Name:

GROESBECK, ROBERT

Mailing Address:

2548 WEST DESERT INN ROAD

LAS VEGAS NV 89109

UNITED STATES

Delivery Address:

2548 WEST DESERT INN ROAD LAS VEGAS NV 89109

UNITED STATES

AUTHORIZED SHARE STRUCTURE

1. No Maximum Common Shares Without Par Value

With Special Rights or Restrictions attached

2. No Maximum Class A Restricted Voting Shares Without Par Value

With Special Rights or Restrictions attached

Page: 2 of 2

Planet 13 Holdings Inc.

(the "Company")

The Company has as its articles the following articles.

ARTICLES

1.	Interpretation	2
2.	Shares and Share Certificates	2
3.	Issue of Shares	4
4.	Share Registers	5
5.	Share Transfers	5
6.	Transmission of Shares	7
7.	Purchase of Shares	7
8.	Borrowing Powers	8
9.	Alterations	9
10.	Meetings of Shareholders	10
11.	Proceedings at Meetings of Shareholders	12
12.	Votes of Shareholders	16
13.	Directors	20
14.	Election and Removal of Directors	22
15.	Alternate Directors	25
16.	Powers and Duties of Directors	26
17.	Interests of Directors and Officers	27
18.	Proceedings of Directors	28
19.	Executive and Other Committees	31
20.	Officers	32
21.	Indemnification	33
22.	Dividends	34
23.	Accounting Records and Auditors	36
24.	Notices	36
25.	Seal	39
26.	Prohibitions	40
27.	Special Rights and Restrictions	40

- 2 -

1. INTERPRETATION

1.1 Definitions

In these Articles, unless the context otherwise requires:

(1) "board of directors", "directors" and "board" mean the directors or sole director of the Company for the time being;

(2) "Business Corporations Act" means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

(3) "Interpretation Act" means the Interpretation Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

(4) "legal personal representative" means the personal or other legal representative of a shareholder;

(5) "registered address" of a shareholder means the shareholder's address as recorded in the central securities register;

(6) "seal" means the seal of the Company, if any.

1.2 Business Corporations Act and Interpretation Act Definitions Applicable

The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were set out herein. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict or inconsistency between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

2. SHARES AND SHARE CERTIFICATES

2.1 Authorized Share Structure

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

2.2 Form of Share Certificate

Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

- 3 -

2.3 Shareholder Entitled to Certificate or Acknowledgment or Written Notice

Unless the shares of which a shareholder is the registered owner are uncertificated shares, each shareholder is entitled, on request and at the shareholder’s option, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder's name or (b) a non-transferable written acknowledgment of the shareholder's right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate or acknowledgment and delivery of a share certificate or acknowledgment to one of several joint shareholders or to a duly authorized agent of one of the joint shareholders will be sufficient delivery to all. Within a reasonable time after the issue or transfer of a share that is an uncertificated share, the Company must send to the shareholder a written notice containing the information required by the Business Corporations Act.

2.4 Delivery by Mail

Any share certificate, non-transferable written acknowledgment of a shareholder's right to obtain a share certificate or written notice of the issue or transfer of an uncertificated share may be sent to the shareholder by mail at the shareholder's registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate, acknowledgement or written notice is lost in the mail or stolen.

2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgement

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder's right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:

(1) order the share certificate or acknowledgment, as the case may be, to be cancelled; and

(2) issue a replacement share certificate or acknowledgment, as the case may be.

2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

If a share certificate or a non-transferable written acknowledgment of a shareholder's right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, provided such person has complied with the requirements of the Business Corporations Act.

2.7 Splitting Share Certificates

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder's name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

- 4 -

2.8 Certificate Fee

There must be paid as a fee to the Company for the issuance of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any, determined by the directors, which must not exceed the amount prescribed under the Business Corporations Act.

2.9 Recognition of Trusts

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as required by law or statute or these Articles or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

3. ISSUE OF SHARES

3.1 Directors Authorized

Subject to the Business Corporations Act and the rights, if any, of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

3.2 Commissions and Discounts

The Company may at any time, pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

3.3 Brokerage

The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

3.4 Conditions of Issue

Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

(1) consideration is provided to the Company for the issue of the share by one or more of the following:

(a) past services performed for the Company;

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(b) property;

(2) the directors in their discretion have determined that the value of the consideration received by the Company is equal to or greater than the issue price set for the share under Article 3.1.

3.5 Share Purchase Warrants and Rights

Subject to the Business Corporations Act, the Company may issue share purchase warrants, options, convertible debentures and rights upon such terms and conditions as the directors determine, which share purchase warrants, options, convertible debentures and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

4. SHARE REGISTERS

4.1 Central Securities Register and Any Branch Securities Register

As required by and subject to the Business Corporations Act, the Company must maintain a central securities register and may maintain a branch securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register or any branch securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

4.2 Closing Register

The Company must not at any time close its central securities register.

5. SHARE TRANSFERS

5.1 Registering Transfers

A transfer of a share of the Company must not be registered unless the Company or the transfer agent or registrar for the class or series of share to be transferred has received:

(1) a duly signed instrument of transfer in respect of the share;

(2) if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate;

(3) if a non-transferable written acknowledgment of the shareholder's right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment; and

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(4) such other evidence, if any, as the Company or the transfer agent or registrar for the class or series of share to be transferred may require to prove the title of the transferor or the transferor's right to transfer the share, the due signing of the instrument of transfer and the right of the transferee to have the transfer registered.

For the purpose of this Article, delivery or surrender to the transfer agent or registrar which maintains the Company's central securities register or a branch securities register, if applicable, will constitute receipt by or surrender to the Company.

5.2 Form of Instrument of Transfer

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company's share certificates or in any other form that may be approved from time to time by the directors or the transfer agent or registrar for the class or series of share to be transferred.

5.3 Transferor Remains Shareholder

Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4 Signing of Instrument of Transfer

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificate(s) or set out in the written acknowledgments deposited with the instrument of transfer or, if the shares are uncertificated shares, then all of the uncertificated shares registered in the name of the shareholder:

(1) in the name of the person named as transferee in that instrument of transfer; or

(2) if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

5.5 Enquiry as to Title Not Required

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in

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the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.

5.6 Transfer Fee

There must be paid as a fee to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

6. TRANSMISSION OF SHARES

6.1 Legal Personal Representative Recognized on Death

In case of the death of a shareholder, the legal personal representative of the shareholder, or, in the case of shares registered in the shareholder's name and the name of another person in joint tenancy, the surviving joint holder will be the only person recognized by the Company as having any title to the shareholder's interest in the shares. Before recognizing a person as a legal personal representative of the shareholder, the directors may require a declaration of transmission made by the legal personal representative stating the particulars of the transmission, proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2 Rights of Legal Personal Representative

The legal personal representative of a shareholder has the same rights, privileges and obligations with respect to the shares as were held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company. This Article 6.2 does not apply in the case of the death of a shareholder with respect to shares registered in the shareholder's name and the name of another person in joint tenancy.

7. PURCHASE OF SHARES

7.1 Company Authorized to Purchase Shares

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by resolution of the directors, purchase, redeem or otherwise acquire any of its shares at the price and upon the terms determined by the directors.

7.2 Purchase When Insolvent

The Company must not make a payment or provide any other consideration to purchase, redeem or otherwise acquire any of its shares if there are reasonable grounds for believing that:

(1) the Company is insolvent; or

(2) making the payment or providing the consideration would render the Company insolvent.

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7.3 Redemption of Shares

If the Company proposes to redeem some but not all of the shares of any class, the directors may, subject to any special rights and restrictions attached to such class of shares, determine the manner in which the shares to be redeemed shall be selected.

7.4 Sale and Voting of Purchased Shares

If the Company retains a share which it has redeemed, purchased or otherwise acquired, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

(1) is not entitled to vote the share at a meeting of its shareholders;

(2) must not pay a dividend in respect of the share; and

(3) must not make any other distribution in respect of the share.

8. BORROWING POWERS

8.1 Powers of the Company

The Company, if authorized by the directors, may:

(1) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the directors consider appropriate;

(2) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

(3) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

(4) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

8.2 Bonds, Debentures, Debt

Any bonds, debentures or other debt obligations of the Company may be issued at a discount, premium or otherwise, or with special privileges as to redemption, surrender, drawing, allotment of or conversion into or exchange for shares or other securities, attending and voting at general meetings of the Company, appointment of directors or otherwise and may, by their terms, be assignable free from any equities between the Company and the person to whom they were issued or any subsequent holder thereof, all as the directors may determine.

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9. ALTERATIONS

9.1 Alteration of Authorized Share Structure

Subject to Article 9.2 and the Business Corporations Act, the Company may:

(1) by directors' resolution or by ordinary resolution, in each case as determined by the directors:

(a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

(b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

(d) if the Company is authorized to issue shares of a class of shares with par value:

(i) decrease the par value of those shares; or

(ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

(e) change all or any of its unissued shares with par value into shares without par value or any of its unissued shares without par value into shares with par value or change all or any of its fully paid issued shares with par value into shares without par value; or

(f) alter the identifying name of any of its shares; and

(2) by ordinary resolution otherwise alter its shares or authorized share structure; and, if applicable, alter its Notice of Articles and, if applicable, alter its Articles accordingly.

9.2 Special Rights and Restrictions

Subject to the Business Corporations Act, the Company may:

(1) by directors' resolution or by ordinary resolution, in each case as determined by the directors, create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares if none of those shares have been issued; or vary or delete any special rights or restrictions attached to the shares of any class or series of shares if none of those shares have been issued; and

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(2) by special resolution of the shareholders of the class or series affected, do any of the acts in (1) above if any of the shares of the class or series of shares have been issued,

and alter its Notice of Articles and Articles accordingly.

9.3 Change of Name

The Company may by directors' resolution or by ordinary resolution, in each case as determined by the directors, authorize an alteration of its Notice of Articles in order to change its name and may, by directors' resolution or ordinary resolution, in each case as determined by the directors, adopt or change any translation of that name.

9.4 Other Alterations

If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by directors' resolution or by ordinary resolution, in each case as determined by the directors, alter these Articles.

10. MEETINGS OF SHAREHOLDERS

10.1 Annual General Meetings

Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by a resolution of the directors.

10.2 Resolution Instead of Annual General Meeting

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company's annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3 Calling of Meetings of Shareholders

The directors may, at any time, call a meeting of shareholders.

10.4 Location of Meetings of Shareholders

A meeting of the Company may be held:

(1) in the Province of British Columbia;

(2) at another location outside British Columbia if that location is:

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(a) approved by resolution of the directors before the meeting is held; or

(b) approved in writing by the Registrar of Companies before the meeting is held.

10.5 Notice for Meetings of Shareholders

Subject to Article 10.2, the Company must send notice of the date, time and location of any meeting of shareholders (including, without limitation, any notice specifying the intention to propose a resolution as an exceptional resolution, a special resolution or a special separate resolution, and any notice to consider approving an amalgamation into a foreign jurisdiction, an arrangement or the adoption of an amalgamation agreement, and any notice of a general meeting, class meeting or series meeting), in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by directors' resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(1) if and for so long as the Company is a public company, 21 days;

(2) otherwise, 10 days.

10.6 Notice of Resolution to which Shareholders May Dissent

The Company must send to each of its shareholders, whether or not their shares carry the right to vote, a notice of any meeting of shareholders at which a resolution entitling shareholders to dissent is to be considered specifying the date of the meeting and containing a statement advising of the right to send a notice of dissent together with a copy of the proposed resolution at least the following number of days before the meeting:

(1) if and for so long as the Company is a public company, 21 days; or

(2) otherwise, 10 days.

10.7 Record Date for Notice

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(1) if and for so long as the Company is a public company, 21 days; or

(2) otherwise, 10 days.

If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

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10.8 Record Date for Voting

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.9 Failure to Give Notice and Waiver of Notice

The accidental omission to send notice of any meeting of shareholders to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive that entitlement or may agree to reduce the period of that notice. Attendance of a person at a meeting of shareholders is a waiver of entitlement to notice of the meeting unless that person attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

10.10 Notice of Special Business at Meetings of Shareholders

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting or a circular prepared in connection with the meeting must:

(1) state the general nature of the special business; and

(2) if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

(a) at the Company's records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

(b) during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

11. PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

11.1 Special Business

At a meeting of shareholders, the following business is special business:

(1) at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;

(2) at an annual general meeting, all business is special business except for the following:

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(a) business relating to the conduct of or voting at the meeting;

(b) consideration of any financial statements of the Company presented to the meeting;

(d) the setting or changing of the number of directors;

(e) the election or appointment of directors;

(f) the appointment of an auditor;

(g) the setting of the remuneration of an auditor;

(h) business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; and

(i) any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

11.2 Special Majority

The majority of votes required for the Company to pass a special resolution at a general meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3 Quorum

Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is one person present or represented by proxy.

11.4 Persons Entitled to Attend Meeting

In addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company, any persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the Business Corporations Act or these Articles to be present at the meeting; but if any of those persons does attend the meeting, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxyholder entitled to vote at the meeting.

11.5 Requirement of Quorum

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote

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is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.6 Lack of Quorum

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(1) in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

(2) in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.7 Lack of Quorum at Succeeding Meeting

If, at the meeting to which the meeting referred to in Article 11.6(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the meeting shall be terminated.

11.8 Chair

The following individual is entitled to preside as chair at a meeting of shareholders:

(1) the chair of the board, if any; or

(2) if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

11.9 Selection of Alternate Chair

If, at any meeting of shareholders, there is no chair of the board or president willing to act as chair of the meeting or present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose a director, officer or corporate counsel to be chair of the meeting or if none of the above persons are present or if they decline to take the chair, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

11.10 Adjournments

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

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11.11 Notice of Adjourned Meeting

It is not necessary to give any notice of an adjourned meeting of shareholders or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

11.12 Decisions by Show of Hands or Poll

Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by any shareholder entitled to vote who is present in person or by proxy.

11.13 Declaration of Result

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.12, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

11.14 Motion Need Not be Seconded

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.15 Casting Vote

In case of an equality of votes, the chair of a meeting of shareholders, either on a show of hands or on a poll, does not have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

11.16 Manner of Taking Poll

Subject to Article 11.17, if a poll is duly demanded at a meeting of shareholders:

(1) the poll must be taken:

(a) at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

(b) in the manner, at the time and at the place that the chair of the meeting directs;

(2) the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

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(3) the demand for the poll may be withdrawn by the person who demanded it.

11.17 Demand for Poll on Adjournment

A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

11.18 Chair Must Resolve Dispute

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

11.19 Casting of Votes

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.20 No Demand for Poll on Election of Chair

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.21 Demand for Poll Not to Prevent Continuance of Meeting

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

11.22 Retention of Ballots and Proxies

The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

12. VOTES OF SHAREHOLDERS

12.1 Number of Votes by Shareholder or by Shares

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

(1) on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

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(2) on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

12.2 Votes of Persons in Representative Capacity

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

12.3 Votes by Joint Holders

If there are joint shareholders registered in respect of any share:

(1) any one of the joint shareholders may vote at any meeting of shareholders, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

(2) if more than one of the joint shareholders is present at any meeting of shareholders, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

12.4 Legal Personal Representatives as Joint Shareholders

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders registered in respect of that share.

12.5 Representative of a Corporate Shareholder

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

(1) for that purpose, the instrument appointing a representative must be received:

(a) at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting or any adjourned meeting; or

(b) by the chair of the meeting at the meeting or adjourned meeting or by a person designated by the chair of the meeting or adjourned meeting;

(2) if a representative is appointed under this Article 12.5:

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(a) the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

(b) the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages. Notwithstanding the foregoing, a corporation that is a shareholder may appoint a proxy holder.

12.6 Proxy Provisions Do Not Apply to All Companies

Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

12.7 Appointment of Proxy Holders

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders may, by proxy, appoint up to two proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

12.8 Alternate Proxy Holders

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9 When Proxy Holder Need Not Be Shareholder

A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:

(1) the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5;

(2) the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or

(3) the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting.

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12.10 Deposit of Proxy

A proxy for a meeting of shareholders must:

(1) be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting or any adjourned meeting; or

(2) unless the notice provides otherwise, be received, at the meeting or any adjourned meeting, by the chair of the meeting or any adjourned meeting or by a person designated by the chair of the meeting or adjourned meeting.

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.11 Validity of Proxy Vote

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

(1) at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting or any adjourned meeting at which the proxy is to be used; or

(2) at the meeting or any adjourned meeting by the chair of the meeting or adjourned meeting, before any vote in respect of which the proxy has been given or has been taken.

12.12 Form of Proxy

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

[name of company]

(the "Company")

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

Number of shares in respect of which this proxy is given (if no number is specified, then this proxy is given in respect of all shares registered in the name of the undersigned):

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Signed [month, day, year]

[Signature of shareholder]

[Name of shareholder—printed]

12.13 Revocation of Proxy

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is received:

(1)

at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting or any adjourned meeting at which the proxy is to be used; or

(2)

at the meeting or any adjourned meeting, by the chair of the meeting or adjourned meeting, before any vote in respect of which the proxy has been given has been taken.

12.14 Revocation of Proxy Must Be Signed

An instrument referred to in Article 12.13 must be signed as follows:

(1)

if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;

(2)

if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

12.15 Production of Evidence of Authority to Vote

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

13. DIRECTORS

13.1 First Directors; Number of Directors

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

(1)

subject to paragraphs (2) and (3), the number of directors that is equal to the number of the Company's first directors;

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(2)

if the Company is a public company, the greater of three and the most recently set of:

(a) the number of directors elected by ordinary resolution (whether or not previous notice of the resolution was given); and

(b) the number of directors set under Article 14.4;

(3)

if the Company is not a public company, the most recently set of:

(a) the number of directors elected by ordinary resolution (whether or not previous notice of the resolution was given); and

(b) the number of directors set under Article 14.4.

13.2 Change in Number of Directors

If the number of directors is set under Articles 13.1(2)(a) or 13.1(3)(a):

(1)

the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;

(2)

if theshareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors, subject to Article 14.8, may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3 Directors' Acts Valid Despite Vacancy

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

13.4 Qualifications of Directors

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

13.5 Remuneration of Directors

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6 Reimbursement of Expenses of Directors

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

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13.7 Special Remuneration for Directors

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company's business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8 Gratuity, Pension or Allowance on Retirement of Director

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

14. ELECTION AND REMOVAL OF DIRECTORS

14.1 Election at Annual General Meeting

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

(1) the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

(2) those directors whose term of office expires at the annual general meeting cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment.

14.2 Consent to be a Director

No election, appointment or designation of an individual as a director is valid unless:

(1) that individual consents to be a director in the manner provided for in the Business Corporations Act;

(2) that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

(3) with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

14.3 Failure to Elect or Appoint Directors

If:

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(1) the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or

(2) the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

then each director then in office continues to hold office until the earlier of:

(3) when his or her successor is elected or appointed; and

(4) when he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4 Places of Retiring Directors Not Filled

If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not reelected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

14.5 Directors May Fill Casual Vacancies

Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6 Remaining Directors' Power to Act

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of calling a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

14.7 Shareholders May Fill Vacancies

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

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14.8 Additional Directors

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

(1) one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

(2) in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.

14.9 Ceasing to be a Director

A director ceases to be a director when:

(1) the term of office of the director expires;

(2) the director dies;

(3) the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or

(4) the director is removed from office pursuant to Articles 14.10 or 14.11.

14.10 Removal of Director by Shareholders

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

14.11 Removal of Director by Directors

The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

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15. ALTERNATE DIRECTORS

15.1 Appointment of Alternate Director

Any director (an "appointor") may by notice in writing received by the Company appoint any person (an "appointee") who is qualified to act as a director to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors at which the appointor is not present unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.

15.2 Notice of Meetings

Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.

15.3 Alternate for More Than One Director Attending Meetings

A person may be appointed as an alternate director by more than one director, and an alternate director:

(1) will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity;

(2) has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity;

(3) will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity; and

(4) has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity.

15.4 Consent Resolutions

Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.

15.5 Alternate Director Not an Agent

Every alternate director is deemed not to be the agent of his or her appointor.

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15.6 Revocation of Appointment of Alternate Director

An appointor may at any time, by notice in writing received by the Company, revoke the appointment of an alternate director appointed by him or her.

15.7 Ceasing to be an Alternate Director

The appointment of an alternate director ceases when:

(1) his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;

(2) the alternate director dies;

(3) the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company;

(4) the alternate director ceases to be qualified to act as a director; or

(5) his or her appointor revokes the appointment of the alternate director.

15.8 Remuneration and Expenses of Alternate Director

The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.

16. POWERS AND DUTIES OF DIRECTORS 16.1 Powers of Management

The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

16.2 Appointment of Attorney of Company

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be

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authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

17. INTERESTS OF DIRECTORS AND OFFICERS 17.1 Obligation to Account for Profits

A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

17.2 Restrictions on Voting by Reason of Interest

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors' resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

17.3 Interested Director Counted in Quorum

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

17.4 Disclosure of Conflict of Interest or Property

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual's duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

17.5 Director Holding Other Office in the Company

A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

17.6 No Disqualification

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

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17.7 Professional Services by Director or Officer

Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

17.8 Director or Officer in Other Corporations

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

18. PROCEEDINGS OF DIRECTORS

18.1 Meetings of Directors

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

18.2 Voting at Meetings

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

18.3 Chair of Meetings

The following individual is entitled to preside as chair at a meeting of directors:

(1) the chair of the board, if any;

(2) in the absence of the chair of the board or if designated by the chair, the president, a director or other officer; or

(3) any other director or officer chosen by the directors if:

(a) neither the chair of the board nor the president is present at the meeting within 15 minutes after the time set for holding the meeting;

(b) neither the chair of the board nor the president is willing to chair the meeting; or

(c) the chair of the board and the president have advised the secretary, if any, or any other director, that they will not be present at the meeting.

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18.4 Meetings by Telephone or Other Communications Medium

A director may participate in a meeting of the directors or of any committee of the directors:

(1) in person;

(2) by telephone; or

(3) with the consent of all directors who wish to participate in the meeting, by other communications medium;

if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

18.5 Calling of Meetings

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

18.6 Notice of Meetings

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors by any method set out in Article 24.1 or orally or by telephone.

18.7 When Notice Not Required

It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:

(1) the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

(2) the director or alternate director, as the case may be, has waived notice of the meeting.

18.8 Meeting Valid Despite Failure to Give Notice

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

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18.9 Waiver of Notice of Meetings

Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director. Attendance of a director or alternate director at a meeting of directors is a waiver of notice of the meeting unless that director or alternate director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

18.10 Quorum

The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at a majority of directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

18.11 Validity of Acts Where Appointment Defective

Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

18.12 Consent Resolutions in Writing

A resolution of the directors or of any committee of the directors may be passed without a meeting:

(1) in all cases, if each of the directors entitled to vote on the resolution consents to it in writing; or

(2) in the case of a resolution to approve a contract or transaction in respect of which a director has disclosed that he or she has or may have a disclosable interest, if each of the other directors who have not made such a disclosure consents in writing to the resolution.

A consent in writing under this Article may be by signed document, fax, e-mail or any other method of transmitting legibly recorded messages. A consent in writing may be in two or more counterparts which together are deemed to constitute one consent in writing. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is effective on the date stated in the consent in writing or on the latest date stated on any counterpart and is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

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19. EXECUTIVE AND OTHER COMMITTEES

19.1 Appointment and Powers of Executive Committee

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors' powers, except:

(1) the power to fill vacancies in the board of directors;

(2) the power to remove a director;

(3) the power to change the membership of, or fill vacancies in, any committee of the directors; and

(4) such other powers, if any, as may be set out in the resolution or any subsequent directors' resolution.

19.2 Appointment and Powers of Other Committees

The directors may, by resolution:

(1) appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

(2) delegate to a committee appointed under paragraph (1) any of the directors' powers, except:

(a) the power to fill vacancies in the board of directors;

(b) the power to remove a director;

(d) the power to appoint or remove officers appointed by the directors; and

(3) make any delegation referred to in paragraph (2) subject to the conditions set out in the resolution or any subsequent directors' resolution.

19.3 Obligations of Committees

Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must:

(1) conform to any rules that may from time to time be imposed on it by the directors; and

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(2) report every act or thing done in exercise of those powers at such times and in such manner and form as the directors may require.

19.4 Powers of Board

The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:

(1)

revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

(2)

terminate the appointment of, or change the membership of, the committee; and

(3)

fill vacancies in the committee.

19.5 Committee Meetings

Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:

(1) the committee may meet and adjourn as it thinks proper;

(2) the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

(3) a majority of the members of the committee constitutes a quorum of the committee; and

(4) questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

20. OFFICERS

20.1 Directors May Appoint Officers

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

20.2 Functions, Duties and Powers of Officers The directors may, for each officer:

(1) determine the functions and duties of the officer;

(2) entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

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(3) revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

20.3 Qualifications

No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.

20.4 Remuneration and Terms of Appointment

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors thinks fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

21. INDEMNIFICATION

21.1 Definitions In this Article 21:

(1) "eligible penalty" means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

(2) "eligible proceeding" means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director, former director or alternate director of the Company (an "eligible party") or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company:

(a) is or may be joined as a party; or

(b) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;

(3) "expenses" has the meaning set out in the Business Corporations Act.

21.2 Mandatory Indemnification of Eligible Parties

Subject to the Business Corporations Act, the Company must indemnify a director, former director or alternate director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director and alternate director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

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21.3 Indemnification

Subject to any restrictions in the Business Corporations Act and these Articles, the Company may indemnify any person.

21.4 Non-Compliance with Business Corporations Act

The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles or, if applicable, any former Companies Act or former Articles, does not invalidate any indemnity to which he or she is entitled under this Part.

21.5 Company May Purchase Insurance

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(1) is or was a director, alternate director, officer, employee or agent of the Company;

(2) is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

(3) at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity; or

(4) at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;

against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position.

22. DIVIDENDS

22.1 Payment of Dividends Subject to Special Rights

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

22.2 Declaration of Dividends

Subject to the Business Corporations Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

22.3 No Notice Required

The directors need not give notice to any shareholder of any declaration under Article 22.2.

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22.4 Record Date

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

22.5 Manner of Paying Dividend

A resolution declaring a dividend may direct payment of the dividend wholly or partly in money or by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company or any other corporation, or in any one or more of those ways.

22.6 Settlement of Difficulties

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

(1) set the value for distribution of specific assets;

(2) determine that money in substitution for all or any part of the specific assets to which any shareholders are entitled may be paid to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

(3) vest any such specific assets in trustees for the persons entitled to the dividend.

22.7 When Dividend Payable

Any dividend may be made payable on such date as is fixed by the directors.

22.8 Dividends to be Paid in Accordance with Number of Shares

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

22.9 Receipt by Joint Shareholders

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

22.10 Dividend Bears No Interest

No dividend bears interest against the Company.

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22.11 Fractional Dividends

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

22.12 Payment of Dividends

Any dividend or other distribution payable in money in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the registered address of the shareholder, or in the case of joint shareholders, to the registered address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

22.13 Capitalization of Retained Earnings or Surplus

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any retained earnings or surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the retained earnings or surplus so capitalized or any part thereof.

23. ACCOUNTING RECORDS AND AUDITORS 23.1 Recording of Financial Affairs

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

23.2 Inspection of Accounting Records

Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

23.3 Remuneration of Auditors

The directors may set the remuneration of the auditors. If the directors so decide, the remuneration of the auditors will be determined by the shareholders.

24. NOTICES

24.1 Method of Giving Notice

Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record (for the purposes of this Article 24, a "record") required or permitted by the

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Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

(1) mail addressed to the person at the applicable address for that person as follows:

(a) for a record mailed to a shareholder, the shareholder's registered address;

(b) for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class; or

(2) delivery at the applicable address for that person as follows, addressed to the person:

(a) for a record delivered to a shareholder, the shareholder's registered address;

(b) for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class; or

(3) sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

(4) sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;

(5) making the record available for public electronic access in accordance with the procedures referred to as "notice-and-access" under National Instrument 54-101 and National Instrument 51-102, as applicable, of the Canadian Securities Administrators, or in accordance with any similar electronic delivery or access method permitted by applicable securities legislation from time to time; or

(6) physical delivery to the intended recipient.

24.2 Deemed Receipt

A notice, statement, report or other record that is:

(1) mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day (Saturdays, Sundays and holidays excepted) following the date of mailing;

(2) faxed to a person to the fax number provided by that person referred to in Article 24.1 is deemed to be received by the person to whom it was faxed on the day it was faxed;

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(3) e-mailed to a person to the e-mail address provided by that person referred to in Article 24.1 is deemed to be received by the person to whom it was e-mailed on the date it was e-mailed; and

(4) made available for public electronic access in accordance with the "notice-and-access" or similar delivery procedures referred to in Article 24.1(5) is deemed to be received by a person on the date it was made available for public electronic access.

24.3 Certificate of Sending

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that capacity on behalf of the Company stating that a notice, statement, report or other record was sent in accordance with Article 24.1 is conclusive evidence of that fact.

24.4 Notice to Joint Shareholders

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing such record to the joint shareholder first named in the central securities register in respect of the share.

24.5 Notice to Legal Personal Representatives and Trustees

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

(1) mailing the record, addressed to them:

(a) by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

(b) at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

(2) if an address referred to in paragraph (1)(b) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

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24.6 Undelivered Notices

If on two consecutive occasions, a notice, statement, report or other record is sent to a shareholder pursuant to Article 24.1 and on each of those occasions any such record is returned because the shareholder cannot be located, the Company shall not be required to send any further records to the shareholder until the shareholder informs the Company in writing of his or her new address.

25. SEAL

25.1 Who May Attest Seal

Except as provided in Articles 25.2 and 25.3, the Company's seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

(1) any two directors;

(2) any officer, together with any director;

(3) if the Company only has one director, that director; or

(4) any one or more directors or officers or persons as may be determined by the directors.

25.2 Sealing Copies

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer or the signature of any other person as may be determined by the directors.

25.3 Mechanical Reproduction of Seal

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and such persons as are authorized under Article 25.1 to attest the Company's seal may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

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26. PROHIBITIONS

26.1 Definitions In this Article 26:

(1) "designated security" means:

(a) a voting security of the Company;

(b) a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

(2) "security" has the meaning assigned in the Securities Act (British Columbia);

(3) "voting security" means a security of the Company that:

(a) is not a debt security, and

(b) carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

26.2 Application

Article 26.3 does not apply to the Company if and for so long as it is a public company or a preexisting reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

26.3 Consent Required for Transfer of Shares or Designated Securities

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

27. SPECIAL RIGHTS AND RESTRICTIONS 27.1 General Definitions

In this Article, the following terms shall have the following meanings unless the context otherwise requires:

(1) “1933 Act” means the United States Securities Act of 1933, as amended from time to time.

(2) “Common Shares” means the common shares in the capital of the Company.

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(3) “Company” means “Planet 13 Holdings Inc.”

(4) “Conversion Notice” means a written notice to the transfer agent of the Restricted Voting Shares, in form and substance satisfactory to the Company and the transfer agent, executed by a person registered in the records of the Company or the transfer agent, as the case may be, as a holder of the Restricted Voting Shares, or by his or her attorney duly authorized in writing and specifying the number of Restricted Voting Shares which the holder thereof desires to have converted into Common Shares, and accompanied by:

(a) if share certificates were issued to such holder, the share certificate or certificates representing the Restricted Voting Shares which such holder desires to convert;

(b) a letter of transmittal, direction, transfer, power or attorney and/or such other documentation as is specified by the Company or the transfer agent for the Restricted Voting Shares, acting reasonably, as being required to give full effect to the conversion duly completed and executed by the person registered in the records of the Company or the transfer agent, as the case may be, as the holder of the Restricted Voting Shares to be converted or by his or her attorney duly authorized in writing; and

(c) a duly completed and executed Residency Declaration or an opinion or memorandum of counsel (which may be the Company's counsel), in form and substance satisfactory to the Company and the transfer agent, to the effect that the conversion of such Restricted Voting Shares into Common Shares would not cause the Company to become a Domestic Issuer.

(5) “Domestic Issuer”' has the meaning ascribed thereto in Rule 902(c) of Regulation S under the 1933 Act.

(6) “Exclusionary Offer” means an offer to purchase Restricted Voting Shares which must be made, by reason of applicable securities legislation or by the rules or policies of a stock exchange on which any shares or the Company are listed, to all or substantially all of the holders or Restricted Voting Shares.

(7) “Fundamental Transaction” means a reorganization, recapitalization, reclassification, merger or amalgamation or any similar transaction involving the Company.

(8) “Liquidation Event” means a distribution of assets of the Company to its shareholders arising on the winding-up, liquidation or dissolution of the Company, whether voluntary or involuntary, or any other distribution of its assets for the purpose of winding up its affairs or otherwise.

(9) “Residency Declaration” means (i) a declaration by a person attesting that such person is not a resident of the United States and (ii) any indemnity required by the Company or the transfer agent in respect of such declaration in favour of the Company from the person providing the declaration, in each case in form approved by the Company from time to time.

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(10) “Restricted Voting Shares” means the Class A Restricted Voting Shares in the capital of the Company.

(11) “United States” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

27.2 Common Shares

(1) Voting

(2) Dividends

Subject to the Canada Business Corporations Act, and subject to the rights of the shares or any other class ranking senior to the Common Shares with respect to priority in the payment or dividends, the holders or Common Shares shall be entitled to receive dividends, and the Company shall pay dividends thereon, as and when declared by the Board out of moneys properly applicable to the payment of dividends, pari passu with the holders of the Restricted Voting Shares on a per share basis, in such amount and in such form as the Board may from time to time determine; provided however that no dividend on the Common Shares shall be declared unless contemporaneously therewith the Board shall declare a dividend, payable at the same time as such dividend on the Common Shares, on each Restricted Voting Share. All dividends declared on the Common Shares and on the Restricted Voting Shares shall be declared and paid in equal amounts per share on all Common Shares and Restricted Voting Shares at the time outstanding on the applicable record data for such dividend. For purposes hereof, the payment of dividends by way of a stock dividend in Common Shares on the Common Shares and in Restricted Voting Shares on the Restricted Voting Shares in the same number per share shall be considered to be a pari passu payment of dividends.

(3) Liquidation Event

(4) Changes to Common Shares

The Common Shares shall not be subdivided, consolidated, reclassified or otherwise changed unless, contemporaneously therewith, the Restricted Voting Shares are subdivided, consolidated,

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reclassified or otherwise changed in the same proportion and in the same manner as the Common Shares.

27.3 Restricted Voting Shares

(1) Voting

Subject to Article 27.3(2), each Restricted Voting Share entitles the holder to receive notice of and to attend any meeting of shareholders of the Company and to exercise one vote for each Restricted Voting Share held at all meetings of shareholders of the Company, other than meetings at which only the holders or another class or series of shares are entitled to vote separately as a class or series. Except as provided otherwise herein or as required by law, holders or Common Shares and Restricted Voting Shares shall vote as one class at all meetings of shareholders of the Company.

(2) Limitation on Voting Rights

The Restricted Voting Shares carry no entitlement for the holder thereof to vote for the election or removal of directors of the Company.

(3) Dividends

Subject to the Canada Business Corporations Act, and subject to the rights of the shares of any other class ranking senior to the Restricted Voting Shares with respect to priority in the payment of dividends, the holders of Restricted Voting Shares shall be entitled to receive dividends, and the Company shall pay dividends thereon, as and when declared by the Board out of moneys properly applicable to the payment of dividends, pari passu with the holders of the Common Shares on a per share basis, in such amount and in such form as the Board may from time to time determine; provided however that no dividend on the Restricted Voting Shares shall be declared unless contemporaneously therewith the Board shall declare a dividend, payable at the same time as such dividend on the Restricted Voting Shares, on each Common Share. All dividends declared on the Common Shares and on the Restricted Voting Shares shall be declared and paid in equal amounts per share on all Common Shares and Restricted Voting Shares at the time outstanding on the applicable record date for such dividend. For purposes hereof, the payment of dividends by way of a stock dividend in Common Shares on the Common Shares and in Restricted Voting Shares on the Restricted Voting Shares in the same number per share shall be considered to be a pari passu payment of dividends.

(4) Liquidation Event

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(5) Restrictions on Transfer

(6) Conversion at the Option of the Holder

(7) Conversion Procedure

A holder of Restricted Voting Shares may convert all or any number of Restricted Voting Shares held by such holder into Common Shares in accordance with Article 27.3(6) upon delivery by the holder of such Restricted Voting Shares of a duly completed and executed Conversion Notice and upon receipt by the transfer agent of the Company of such notice and upon compliance with any requirements the transfer agent or the Company may reasonably request, the Company shall issue or cause to be issued the relevant number of fully paid Common Shares. The effective time of conversion shall be the close of business on the date of receipt of a valid Conversion Notice by the transfer agent of the Company and the Common Shares issuable upon conversion of such Restricted Voting Shares shall be deemed to be issued and outstanding of record as of such time.

(8) Conversion at the Option of the Company

(9) Withdrawal of Conversion Notice

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any obligation to convert such Restricted Voting Shares hereunder unless such Restricted Voting Shares are again tendered for conversion by the holder in accordance with the provisions hereof.

(10) Fractional Common Shares

(11) Dividend Entitlement

(12) Adjustments

(a) If there shall occur any Fundamental Transaction involving the Company in which the Common Shares (but not the Restricted Voting Shares) are converted into or exchanged for securities, cash or other property (other than a transaction otherwise covered by this Article 27.3(12)) then, following such Fundamental Transaction each Restricted Voting Share shall thereafter be convertible, in lieu of the Common Share into which it was convertible before such event, into the kind and amount or securities, cash or other property which a holder of the number of Common Shares issuable upon conversion of one Restricted Voting Share immediately before such Fundamental Transaction would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined by the Board) shall be made in the application of the provisions of this Article 27.3(12)(a) with respect to the rights and interests thereafter of the holders of the Restricted Voting Shares, to the end that the provisions set forth in this Article 27.3(12)(a) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Restricted Voting Shares.

(b) The Restricted Voting Shares shall not be subdivided, consolidated, reclassified or otherwise changed unless, contemporaneously therewith, the Common Shares are

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subdivided, consolidated, reclassified or otherwise changed in the same proportion and in the same manner as the Restricted Voting Shares.

(13) Public Distribution Requirements

Exhibit 4.1

PLANET 13 HOLDINGS INC.

- and -

ODYSSEY TRUST COMPANY

WARRANT INDENTURE

Providing for the Issue of

up to 2,679,500 Common Share Purchase Warrants

July 3, 2020

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION		6
1.1	Definitions	6
1.2	Words Importing the Singular	10
1.3	Interpretation not Affected by Headings	10
1.4	Day not a Business Day	10
1.5	Time of the Essence	11
1.6	Governing Law	11
1.7	Meaning of "outstanding" for Certain Purposes	11
1.8	Currency	11
1.9	Termination	11
ARTICLE 2 ISSUE OF WARRANTS		11
2.1	Issue of Warrants	11
2.2	Form and Terms of Warrants	12
2.3	Signing of Warrant Certificates	12
2.4	Authentication by the Warrant Agent	13
2.5	Warrantholder not a Shareholder, etc.	13
2.6	Issue in Substitution for Lost Warrant Certificates	13
2.7	Warrants to Rank Pari Passu	14
2.8	Registration and Transfer of Warrants	14
2.9	Registers Open for Inspection	16
2.10	Exchange of Warrants	16
2.11	Ownership of Warrants	16
2.12	Uncertificated Warrants	16
2.13	Adjustment of Exchange Basis	18
2.14	Rules Regarding Calculation of Adjustment of Exchange Basis	22
2.15	Postponement of Subscription	24
2.16	Notice of Adjustment	24
2.17	No Action after Notice	24
2.18	Purchase of Warrants for Cancellation	25
2.19	Protection of Warrant Agent	25
2.20	U.S. Legend on Warrant Certificates and Warrant Share certificates	25
ARTICLE 3 EXERCISE OF WARRANTS		27
3.1	Method of Exercise of Warrants	27
3.2	No Fractional Shares	29
3.3	Effect of Exercise of Warrants	29
3.4	Cancellation of Warrants	30
3.5	Subscription for less than Entitlement	30

3.6	Expiration of Warrant	30
3.7	Prohibition on Exercise by U.S. Persons; Exception	30
ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT		31
4.1	General Covenants of the Company	31
4.2	Warrant Agent's Remuneration and Expenses	33
4.3	Performance of Covenants by Warrant Agent	33
4.4	Enforceability of Warrants	33
ARTICLE 5 ENFORCEMENT		33
5.1	Suits by Warrantholders	33
5.2	Limitation of Liability	34
5.3	Waiver of Default	34
ARTICLE 6 MEETINGS OF WARRANTHOLDERS		34
6.1	Right to Convene Meetings	34
6.2	Notice	35
6.3	Chairman	35
6.4	Quorum	35
6.5	Power to Adjourn	36
6.6	Show of Hands	36
6.7	Poll and Voting	36
6.8	Regulations	36
6.9	Company, Warrant Agent and Counsel may be Represented	36
6.10	Powers Exercisable by Extraordinary Resolution	36
6.11	Meaning of "Extraordinary Resolution"	37
6.12	Powers Cumulative	38
6.13	Minutes	38
6.14	Instruments in Writing	38
6.15	Binding Effect of Resolutions	39
6.16	Holdings by the Company or Subsidiaries of the Company Disregarded	39
6.17	Common Shares or Warrants Owned by the Company or its Subsidiaries –
Certificate to be Provided		39
ARTICLE 7		40
7.1	Provision for Supplemental Indentures for Certain Purposes	40
7.2	Successor Companies	41
ARTICLE 8 CONCERNING THE WARRANT AGENT		41
8.1	Indenture Legislation	41
8.2	Rights and Duties of Warrant Agent	41
8.3	Evidence, Experts and Advisers	42
8.4	Securities, Documents and Monies Held by Warrant Agent	44
8.5	Actions by Warrant Agent to Protect Interests	44
8.6	Warrant Agent not Required to Give Security	44

8.7	Protection of Warrant Agent	44
8.8	Replacement of Warrant Agent	46
8.9	Conflict of Interest	47
8.10	Acceptance of Duties and Obligations	47
8.11	Warrant Agent not to be Appointed Receiver	47
8.12	Authorization to Carry on Business	48
ARTICLE 9 GENERAL		48
9.1	Notice to the Company and the Warrant Agent	48
9.2	Notice to the Warrantholders	49
9.3	Privacy	49
9.4	Third Party Interests	50
9.5	Securities Exchange Commission Certification	50
9.6	Discretion of Directors	50
9.7	Satisfaction and Discharge of Indenture	51
9.8	Provisions of Indenture and Warrants for the Sole Benefit of Parties and
Warrantholders		51
9.9	Indenture to Prevail	51
9.10	Assignment	51
9.11	Severability	51
9.12	Force Majeure	51
9.13	Counterparts and Formal Date	52

Schedule “A” Form of Warrant Certificate

Schedule “B” Form of Declaration for Removal of Legend

THIS WARRANT INDENTURE dated as of July 3, 2020

BETWEEN:

PLANET 13 HOLDINGS INC.,

a company existing under the laws of British Columbia

(the "Company")

AND

ODYSSEY TRUST COMPANY,

a trust company incorporated under the laws of Alberta and authorized to carry on business in the provinces of Alberta and British Columbia

(the "Warrant Agent")

RECITALS

WHEREAS:

In connection with the public offering by the Company of up to 5,359,000 Units (as defined below) pursuant to a short form prospectus dated June 26, 2020 (the "Offering"), the Company proposes to issue and sell to the public up to 2,679,500 Warrants (as defined below), of which 2,330,000 Warrants will be issuable as a part of the base Offering and up to 349,500 Warrants will be issuable upon the due exercise of the Over-Allotment Option (as defined below);

Each Warrant entitles the holder thereof to purchase, subject to adjustment in certain events, one Warrant Share (as defined below) at a price of $2.85 at any time prior to 5:00 p.m. (Toronto time) on July 3, 2022;

For such purpose the Company deems it necessary to create and issue Warrants and Warrant Certificates (as defined below) to be constituted and issued in the manner hereinafter set forth;

The Company is duly authorized to create and issue the Warrants to be issued as herein provided;

All things necessary have been done and performed to make the Warrants, when Authenticated (as defined below) or certified by the Warrant Agent and issued as provided in this Indenture, legal, valid and binding upon the Company with the benefits of and subject to the terms of this Indenture;

The foregoing recitals are made as statements of fact by the Company and not by the Warrant Agent; and

The Warrant Agent has agreed to enter into this Indenture and to hold all rights, interests and benefits contained herein for and on behalf of those persons who become holders of Warrants issued pursuant to this Indenture from time to time;

NOW THEREFORE THIS INDENTURE WITNESSES that for good and valuable consideration mutually given and received, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed and declared as follows:

ARTICLE 1 INTERPRETATION

1.1

Definitions

In this Indenture, unless there is something in the subject matter or context inconsistent therewith:

"Applicable Legislation" means the provisions of the statutes of Canada and its provinces and the regulations under those statutes relating to warrant indentures and/or the rights, duties or obligations of issuers and warrant agents under warrant indentures as are from time to time in force and applicable to this Indenture;

"Authenticated" means (a) with respect to the issuance of a Warrant Certificate, one which has been duly signed by the Company and authenticated by manual signature of an authorized officer of the Warrant Agent, and (b) with respect to the issuance of an Uncertificated Warrant, one in respect of which the Warrant Agent has completed all Internal Procedures such that the particulars of such Uncertificated Warrant as required by Section 2.4 are entered in the register of Warrantholders, "Authenticate", "Authenticating" and "Authentication" have the appropriate correlative meanings;

"Beneficial Owner" means a person that has a beneficial interest in a Warrant;

"Book-Entry Only System" means the book-based securities system administered by CDS in accordance with its operating rules and procedures in force from time to time;

"Business Day" means a day that is not a Saturday, Sunday, or a day on which banks are closed or which is a civic or statutory holiday in the City of Toronto, Ontario or Calgary, Alberta;

"Capital Reorganization" has the meaning ascribed to that term in Section 2.13(4); "CDS" means CDS Clearing and Depository Services Inc. and its successors in interest;

"CDSX" means the CDS settlement and clearing system for equity and debt securities in Canada;

"Closing Date" means July 3, 2020 or such other date as agreed to by the Company and the Underwriters;

"Common Share Reorganization" has the meaning ascribed to that term in Section 2.13(1); "Common Shares" means the common shares in the capital of the Company;

"Company" means Planet 13 Holdings Inc., a corporation existing under the laws of British Columbia, and its lawful successors from time to time;

"Company's Auditors" means the chartered (professional) accountant or firm of chartered (professional) accountants duly appointed as auditor or auditors of the Company from time to time, including prior auditors of the Company, as applicable;

"Confirmation" has the meaning ascribed that term in Section 3.1(4);

"counsel" means a barrister and solicitor or lawyer or a firm of barristers and solicitors or lawyers, in both cases acceptable to the Warrant Agent;

"CSE" means the Canadian Securities Exchange;

"Current Market Price" means, at any date, the volume weighted average price per share at which the Common Shares have traded:

(a)

on the CSE;

(b)

if the Common Shares are not listed on the CSE, on any stock exchange upon which the Common Shares are listed, as may be selected for this purpose by the board of directors of the Company, acting reasonably; or

(c)

if the Common Shares are not listed on any stock exchange, on any over-the-counter market on which the Common Shares are trading, as may be selected for this purpose by the board of directors of the Company, acting reasonably;

during the 20 consecutive trading days (on each of which at least 500 Common Share are traded in board lots) ending the second trading day before such date; provided that the volume weighted average price shall be determined by dividing the aggregate sale price of all Common Shares sold in board lots on the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares so sold on said exchange or market or, if not traded on any recognized exchange or market, as determined by the directors of the Company, acting reasonably;

"director" means a member of the board of directors of the Company for the time being, and unless otherwise specified herein, reference to "action by the board of directors" means action by the board of directors of the Company as a board or, whenever duly empowered, action by a committee of the board;

"Dividend Paid in the Ordinary Course" means dividends paid in any financial year of the Company, whether in (i) cash, (ii) shares of the Company, (iii) warrants or similar rights to purchase any shares of the Company or property or other assets of the Company provided that the value of such dividends per outstanding Common Share does not in such financial year exceed in aggregate 5% of the Exercise Price;

"Exchange Basis" means, at any time, the number of Warrant Shares or other classes of shares or securities or property which a Warrantholder is entitled to receive upon the exercise of the rights attached to the Warrants pursuant to the terms of this Indenture, as the number may be adjusted pursuant to Article 2 hereof, such number being equal to one Warrant Share per Warrant as of the date hereof;

"Exercise Date" with respect to any Warrant means the date on which such Warrant is duly surrendered for exercise in accordance with the provisions of Article 3 hereof;

"Exercise Notice" has the meaning ascribed that term in Section 3.1(4);

"Exercise Price" means $2.85 for each Warrant Share, subject to adjustment in accordance with the provisions of Article 2 hereof;

“Expiry Date” means July 3, 2022;

"extraordinary resolution" has the meaning ascribed to that term in sections 6.12 and 6.15;

"Internal Procedures" means in respect of the making of any one or more entries to, changes in or deletions of any one or more entries in the register at any time (including without limitation, original issuance or registration of transfer of ownership) the minimum number of the Warrant Agent's internal procedures customary at such time for the entry, change or deletion made to be complete under the operating procedures followed at the time by the Warrant Agent;

"Offering" has the meaning ascribed thereto in Recital A of this Indenture;

“Original U.S. Purchaser” means a Qualified Institutional Buyer who purchased Warrants as part of the Offering;

"Over-Allotment Option" means the option granted by the Company to the Underwriters, which may be exercised in the Underwriters' sole discretion and without obligation, to purchase up to an additional 699,000 Units, including up to 699,000 Unit Shares and up to 349,500 Warrants, for the purpose of covering over-allotments made in connection with the Offering and for market stabilization purposes, and which is exercisable for any combination of additional Units, additional Unit Shares and/or additional Warrants, from and including thirty (30) days following the Closing Date;

"Participant" means a person recognized by CDS as a participant in the Book-Entry Only System;

"person" means an individual, a corporation, a limited liability company, a partnership, a syndicate, a trustee or any unincorporated organization and words importing persons are intended to have a similarly extended meaning;

“Price” means the Exercise Price;

“Qualified Institutional Buyer” means a “qualified institutional buyer” as such term is defined in Rule 144A under the U.S. Securities Act;

"QIB Letter" means the Qualified Institutional Buyer Letter signed by the Original U.S. Purchaser;

"Regulation S" means Regulation S as promulgated under the U.S. Securities Act; "Rights Offering" has the meaning ascribed to that term in Section 2.13(2); "Rights Offering Price" has the meaning ascribed to that term in Section 2.14(8);

"Securities Laws" means, collectively, the applicable securities laws and regulations of each of the provinces of Canada, except Quebec, the United States and each of the states of the United States, together with all respective regulations made and forms prescribed thereunder, published rules, policy statements, notices, orders and rulings of the securities commissions or similar regulatory authorities thereto, as applicable, including the rules and policies of the CSE;

"shareholder" means an owner of record of one or more Common Shares or shares of any other class or series of the Company;

"Special Distribution" has the meaning ascribed to that term in Section 2.13(3);

"Subsidiary" means a corporation, a majority of the outstanding voting shares of which are owned, directly or indirectly, by the Company or by one or more subsidiaries of the Company and, as used in this definition, "voting shares" means shares of a class or classes ordinarily entitled to vote for the election of the majority of the directors of a corporation irrespective of whether or not shares of any other class or classes shall have or might have the right to vote for directors by reason of the happening of any contingency;

"successor company" has the meaning ascribed to that term in Section 7.2;

"this Indenture", "herein", "hereby" and similar expressions mean or refer to this Common Share purchase warrant indenture and any indenture, deed or instrument supplemental or ancillary hereto; and the expressions "Article", "section", or "paragraph" followed by a number or letter mean and refer to the specified Article, section, or paragraph of this Indenture;

"Time of Expiry" means 5:00 p.m. (Toronto time) on the Expiry Date;

"trading day" means a day on which the CSE (or such other exchange on which the Common Shares are listed) is open for trading, and if the Common Shares are not listed on a stock exchange, a day on which an over-the-counter market where such shares are traded is open for business;

"transaction instruction" means a written order signed by the holder or CDS, entitled to request that one or more actions be taken, or such other form as may be reasonably acceptable to the Warrant Agent, requesting one or more such actions to be taken in respect of an Uncertificated Warrant;

"Transfer Agent" means the transfer agent or agents for the time being for the Common Shares;

"U.S. Person" means a U.S. person as that term is defined under Regulation S; "U.S. Securities Act" means the United States Securities Act of 1933, as amended;

"Uncertificated Warrant" means any Warrant which is issued under the Book-Entry Only System or any Warrant which is not a certificated Warrant;

"Underwriters" means collectively Beacon Securities Limited and Canaccord Genuity Corp.;

"Unit Share" means a Common Share comprising part of each Unit;

"United States" means the United States as that term is defined in Regulation S;

"Units" means the units of the Company, each Unit being comprised of one Unit Share and one-half Warrant;

"Warrant Agent" means Odyssey Trust Company, a trust company incorporated under the laws of Alberta and authorized to carry on business in the provinces of Alberta and British Columbia or any lawful successor thereto including through the operation of Section 8.8;

"Warrant Certificates" means the certificates representing Warrants substantially in the form attached as Schedule "A" hereto or such other form as may be approved by the Company and the Warrant Agent;

"Warrant Shares" means the Common Shares or, as a result of any adjustment to the subscription rights pursuant to Article 2 hereof, other securities or property issuable upon the exercise of the Warrants;

"Warrantholders" or "holders" means the persons whose names are entered for the time being in the register maintained pursuant to Section 2.8;

"Warrantholders' Request" means an instrument, signed in one or more counterparts by Warrantholders representing, in the aggregate, at least 20% of the aggregate number of Warrants then outstanding, which requests the Warrant Agent to take some action or proceeding specified therein;

"Warrants" means the Common Share purchase warrants of the Company issued and Authenticated hereunder as Uncertificated Warrants or to be issued and countersigned in the form of Warrant Certificates, in either case, entitling the holders thereof to purchase Warrant Shares on the basis of one Warrant Share for each Warrant upon payment of the Exercise Price prior to the Time of Expiry; provided that in each case the number and/or class of securities or property receivable on the exercise of the Warrants may be subject to increase or decrease or change in accordance with the terms and provisions hereof; and

"written direction of the Company", "written request of the Company", "written consent of the Company", "Officer's Certificate" and "certificate of the Company" and any other document required to be signed by the Company, means, respectively, a written direction, request, consent, certificate or other document signed in the name of the Company by any officer or director and may consist of one or more instruments so executed.

1.2

Words Importing the Singular

Unless elsewhere otherwise expressly provided, or unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

1.3

Interpretation not Affected by Headings

The division of this Indenture into Articles, sections, and paragraphs, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Indenture.

1.4

Day not a Business Day

If any day on or before which any action is required or permitted to be taken hereunder is not a Business Day, then such action shall be required or permitted to be taken on or before the requisite time on the next succeeding day that is a Business Day.

1.5

Time of the Essence

Time shall be of the essence in all respects of this Indenture and the Warrants issued hereunder.

1.6

Governing Law

This Indenture and the Warrants issued hereunder shall be construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts.

1.7

Meaning of "outstanding" for Certain Purposes

Every Warrant Authenticated or certified by the Warrant Agent hereunder shall be deemed to be outstanding until it shall be cancelled or delivered to the Warrant Agent for cancellation, exercised pursuant to Section 3.1 or until the Time of Expiry; provided that where a new Warrant Certificate has been issued pursuant to Section 2.6 to replace one which is lost, mutilated, stolen or destroyed, the Warrants represented by only one of such Warrant Certificates shall be counted for the purpose of determining the aggregate number of Warrants outstanding.

1.8

Currency

Unless otherwise stated, all dollar amounts referred to in this Indenture are in Canadian dollars.

1.9

Termination

This Indenture shall continue in full force and effect until the earlier of: (a) the Time of Expiry; and (b) provided that no Warrants remain issuable pursuant to the terms of this Indenture, the date that no Warrants are outstanding hereunder; provided that this Indenture shall continue in effect thereafter, if applicable, until the Company and the Warrant Agent have fulfilled all of their respective obligations under this Indenture.

ARTICLE 2 ISSUE OF WARRANTS

2.1

Issue of Warrants

Subject to adjustment in accordance with the provisions hereof, the Company creates and authorizes the issuance of up to 2,679,500 Warrants entitling the registered holders thereof to acquire an aggregate of up to 2,679,500 Warrant Shares, all of which are hereby created and authorized to be issued hereunder at the Exercise Price upon the terms and conditions as set forth herein. Uncertificated Warrants shall be Authenticated by the Warrant Agent and deposited in CDS and Warrant Certificates evidencing the Warrants shall be executed by the Company, certified by or on behalf of the Warrant Agent and delivered by the Warrant Agent in accordance with a written direction of the Company, all in accordance with sections 2.3 and 2.4. Subject to adjustment in accordance with the provisions of this Indenture, each of the Warrants issued hereunder shall entitle the holder thereof to receive from the Company, at the Exercise Price, the number of Warrant Shares equal to the Exchange Basis in effect on the Exercise Date.

2.2

Form and Terms of Warrants

(1) The Warrants may be issued in either certificated or uncertificated form. The Warrant Certificates shall be substantially in the form attached as Schedule "A" hereto, subject to the provisions of this Indenture, with such additions, variations and changes as may be required or permitted by the terms of this Indenture, and to give effect to any Warrants not being issued as Uncertificated Warrants, and which may from time to time be agreed upon by the Warrant Agent and the Company, and shall have such legends, distinguishing letters and numbers as the Company may, with the approval of the Warrant Agent, prescribe. Except as hereinafter provided in this Article 2, all Warrants shall, save as to denominations, be of like tenor and effect. The Warrant Certificates may be engraved, printed, lithographed, photocopied or be partially in one form or another, as the Company may determine. No change in the form of the Warrant Certificate shall be required by reason of any adjustment made pursuant to this Article 2 in the number and/or class of securities or type of securities or property that may be acquired pursuant to the Warrants. All Warrants issued to CDS may be in either a certificated or uncertificated form, such uncertificated form being evidenced by a book position on the register of Warrantholders to be maintained by the Warrant Agent in accordance with Section 2.8.

(2) Each Warrant authorized to be issued hereunder shall entitle the registered holder thereof to acquire (subject to sections 2.13, 2.14 and 2.15) upon due exercise and upon the transaction instruction or due execution of the exercise form endorsed on the Warrant Certificate, as applicable, or other instrument of exercise in such form as the Warrant Agent and/or the Company may from time to time prescribe and upon payment of the Exercise Price, one Warrant Share or such other kind and amount of shares or securities or property, calculated pursuant to the provisions of sections 2.13 and 2.14, as the case may be, at any time after the date of issuance of such Warrants and prior to the Time of Expiry, in accordance with the provisions of this Indenture.

(3) Fractional Warrants shall not be issued or otherwise provided for. If any fraction of a Warrant would otherwise be issuable and result in a fraction of a Warrant Share being issuable, any such fractional Warrant so issued shall be rounded down to the nearest whole Warrant without compensation therefor.

2.3

Signing of Warrant Certificates

Warrant Certificates shall be signed by any one of the directors or officers of the Company and may, but need not be under the corporate seal of the Company or a reproduction thereof. The signature of any such director or officer may be mechanically reproduced in facsimile or other electronic format and Warrant Certificates bearing such facsimile or other electronic format signatures shall be binding upon the Company as if they had been manually signed by such director or officer. Notwithstanding that the person whose manual or electronic signature appears on any Warrant Certificate as a director or officer may no longer hold office at the date of issue of the Warrant Certificate or at the date of certification or delivery thereof, any Warrant Certificate Authenticated or signed as aforesaid shall, subject to Section 2.4, be valid and binding upon the Company and the registered holder thereof will be entitled to the benefits of this Indenture.

2.4

Authentication by the Warrant Agent

(1) No Warrant shall be issued or, if issued, shall be valid for any purpose or entitle the registered holder to the benefit hereof or thereof until it has been Authenticated by or on behalf of the Warrant Agent, as applicable, and such Authentication by the Warrant Agent shall be conclusive evidence as against the Company that the Warrant so Authenticated has been duly issued hereunder and the holder is entitled to the benefits hereof.

(2) The Warrant Agent shall Authenticate Uncertificated Warrants (whether upon original issuance, exchange, registration of transfer, partial payment, or otherwise) by completing its Internal Procedures and the Company shall, and hereby acknowledges that it shall, thereupon be deemed to have duly and validly issued such Uncertificated Warrants under this Indenture. Such Authentication shall be conclusive evidence that such Uncertificated Warrant has been duly issued hereunder and that the holder or holders are entitled to the benefits of this Indenture. The register shall be final and conclusive evidence as to all matters relating to Uncertificated Warrants with respect to which this Indenture requires the Warrant Agent to maintain records or accounts. In case of differences between the register at any time and any other time, the register at the later time shall be controlling, absent manifest error and such Uncertificated Warrants are binding on the Company.

(3) Any Warrant Certificate validly issued in accordance with the terms of this Indenture in effect at the time of issue shall, subject to the terms of this Indenture and applicable law, validly entitle the holder to acquire Warrant Shares, notwithstanding that the form of such Warrant Certificate may not be in the form currently required by this Indenture.

(4) No Warrant Certificate shall be considered issued or shall be obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by or on behalf of the Warrant Agent substantially in the form of the Warrant Certificate set out in Schedule "A" hereto. Such Authentication on any such Warrant Certificate shall be conclusive evidence that such Warrant Certificate is duly Authenticated and is valid and a binding obligation of the Company and that the holder is entitled to the benefits of this Indenture.

(5) The Authentication or certification of the Warrant Agent on the Warrants issued hereunder, including by way of entry on the register, shall not be construed as a representation or warranty by the Warrant Agent as to the validity of this Indenture or the Warrants (except the due Authentication and certification thereof) or as to the performance by the Company of its obligations under this Indenture and the Warrant Agent shall in no respect be liable or answerable for the use made of the Warrants or any of them or of the consideration therefor except as otherwise specified herein.

2.5

Warrantholder not a Shareholder, etc.

Nothing in this Indenture or the holding of a Warrant shall be construed as conferring upon a Warrantholder any right or interest whatsoever as a shareholder, including but not limited to the right to vote at, to receive notice of, or to attend meetings of shareholders or any other proceedings of the Company, nor entitle the holder to any right or interest in respect thereof except as herein and in the Warrants expressly provided.

2.6

Issue in Substitution for Lost Warrant Certificates

(1) If any Warrant Certificates issued and certified under this Indenture shall become mutilated or be lost, destroyed or stolen, the Company, subject to applicable law, and Section 2.6(2), shall issue and thereupon the Warrant Agent shall certify and deliver a new Warrant Certificate of like denomination, date and tenor as the one mutilated, lost, destroyed or stolen in exchange for, in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the substituted Warrant Certificate shall be substantially in the form set out in Schedule "A" hereto and Warrants evidenced by it will entitle the holder thereof to the benefits hereof and shall rank equally in accordance with its terms with all other Warrant Certificates issued or to be issued hereunder.

(2) The applicant for the issue of a new Warrant Certificate pursuant to this Section shall bear the reasonable cost of the issue thereof and in the case of mutilation shall, as a condition precedent to the issue thereof, deliver to the Warrant Agent the mutilated Warrant Certificate, and in the case of loss, destruction or theft shall, as a condition precedent to the issue thereof, furnish to the Company and to the Warrant Agent such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as shall be satisfactory to the Company and to the Warrant Agent in their sole discretion, acting reasonably, and such applicant may be required to furnish an indemnity and surety bond in amount and form satisfactory to the Company and the Warrant Agent in their sole discretion, acting reasonably, and shall pay the reasonable charges of the Company and the Warrant Agent in connection therewith.

2.7

Warrants to Rank Pari Passu

All Warrants shall rank pari passu with all other Warrants, whatever may be the actual date of issue of the Warrants.

2.8

Registration and Transfer of Warrants

(1) The Warrant Agent will create and keep at the principal stock transfer offices of the Warrant Agent in the City of Calgary, Alberta:

(a)

a register of holders in which shall be entered in alphabetical order the names and addresses of the holders of Warrants and particulars of the Warrants held by them and the Warrant Agent shall be entitled to rely on such register in connection with the exchange, transfer, exercise or deemed exercise of any Warrant(s) pursuant to the terms of this Indenture or the terms thereof; and

(b)

a register of transfers in which all transfers of Warrants and the date and other particulars of each such transfer shall be entered.

(2) No transfer of any Warrant will be valid unless entered on the register of transfers referred to in Section 2.8(1), upon surrender to the Warrant Agent of the Warrant Certificate evidencing such Warrant, and a duly completed and executed transfer form endorsed on the Warrant Certificate or in the case of Uncertificated Warrants a duly executed transaction instruction from the holder (or such other instructions, in form satisfactory to the Warrant Agent) executed by the registered holder or his executors, administrators or other legal representatives or his attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent, if applicable, and, upon compliance with such requirements and such other reasonable requirements as the Warrant Agent may prescribe and all applicable securities requirements of regulatory authorities, such transfer will be recorded on the register of transfers by the Warrant Agent. Upon compliance with such requirements, the Warrant Agent shall issue to the transferee a Warrant Certificate, or in the case of an Uncertificated Warrant, the Warrant Agent shall Authenticate and deliver a Warrant Certificate upon request that part of the Uncertificated Warrant be certificated. Transfers within the systems of CDS are not the responsibility of the Warrant Agent and will not be noted on the register maintained by the Warrant Agent.

(3) The transferee of any Warrant will, after surrender to the Warrant Agent of the Warrant as required by Section 2.8(2) and upon compliance with all other conditions in respect thereof required by this Indenture or by law, be entitled to be entered on the register of holders referred to in Section 2.8(1) as the owner of such Warrant free from all equities or rights of setoff or counterclaim between the Company and the transferor or any previous holder of such Warrant, except in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction.

(4) The Company will be entitled, and may direct the Warrant Agent, to refuse to recognize any transfer, or enter the name of any transferee, of any Warrant on the registers referred to in Section 2.8(1), if such transfer would constitute a violation of the Securities Laws of any applicable jurisdiction or the rules, regulations or policies of any regulatory authority having jurisdiction. The Warrant Agent is entitled to assume compliance with all applicable Securities Laws unless otherwise notified in writing by the Company. No duty shall rest with the Warrant Agent to determine compliance of the transferee or transferor of any Warrant with applicable Securities Laws.

(5) Any Warrant issued to a transferee upon transfers contemplated by this section 2.8 shall bear the appropriate legend as set forth in Section 2.20(2), if applicable.

(6) If a Warrant tendered for transfer bears the legend set forth in Section 2.20(2), the Warrant Agent shall not register such transfer unless the transferor has provided the Warrant Agent with the Warrant and complies with the requirements of the said Section 2.20(2).

(7) Warrants, in certificated form, bearing the legend set forth in Section 2.20(2) shall not be offered, sold, pledged or otherwise transferred, directly or indirectly, except (A) to the Company; (B) outside the United States in compliance with Rule 904 of Regulation S, if available, and in compliance with applicable local laws and regulations; (C) pursuant to an exemption from registration under the U.S. Securities Act provided by (i) Rule 144 or (ii) Rule 144A thereunder, if available, and in compliance with applicable U.S. state securities laws; (D) in compliance with another exemption from registration under the U.S. Securities Act and applicable state securities laws; or (E) under an effective registration statement under the U.S. Securities Act, provided that in the case of transfers pursuant to (C)(i) or (D) above, a legal opinion or other evidence, reasonably satisfactory to the Company, must first be provided to the Company and the Warrant Agent to the effect that such transfer is exempt from registration under the U.S. Securities Act and applicable state securities laws..

(8) The Warrant Agent shall give notice to the Company of the transfer made by a Warrantholder pursuant to Section 2.8(7) and the Company shall provide written authorization to proceed with the transfer before such transfer is made effective by the issuance of the Warrant.

2.9

Registers Open for Inspection

The registers referred to in Section 2.8(1) shall be open at all reasonable times during business hours on a Business Day for inspection by the Company or any Warrantholder. The Warrant Agent shall, from time to time when requested to do so in writing by the Company, furnish the Company with a list of the names and addresses of holders of Warrants entered in the register of holders kept by the Warrant Agent and showing the number of Warrants held by each such holder.

2.10

Exchange of Warrants

(1) Warrants may, upon compliance with the reasonable requirements of the Warrant Agent, be exchanged for Warrants in any other authorized denomination representing in the aggregate an equal number of Warrants as the number of Warrants represented by the Warrants being exchanged. The Company shall sign and the Warrant Agent shall Authenticate or certify, in accordance with sections 2.3 and 2.4, all Warrants necessary to carry out the exchanges contemplated herein.

(2) Warrants may be exchanged only at the principal stock transfer offices of the Warrant Agent in the City of Calgary, Alberta or at any other place that is designated by the Company with the approval of the Warrant Agent. Any Warrants tendered for exchange shall be surrendered to the Warrant Agent and cancelled.

(3) Except as otherwise herein provided, the Warrant Agent may charge Warrantholders requesting an exchange a reasonable sum for each Warrant Certificate issued; and payment of such charges and reimbursement of the Warrant Agent or the Company for any and all taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange as a condition precedent to such exchange.

2.11

Ownership of Warrants

The Company and the Warrant Agent and their respective agents may deem and treat the registered holder of any Warrant as the absolute owner of the Warrant represented thereby for all purposes and the Company and the Warrant Agent and their respective agents shall not be affected by any notice or knowledge to the contrary except as required by statute or order of a court of competent jurisdiction. The holder of any Warrant shall be entitled to the rights evidenced by that Warrant free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof, except in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction and all persons may act accordingly and the receipt by any holder of the Warrant Shares or monies obtainable pursuant to the exercise of the Warrant shall be a good discharge to the Company and the Warrant Agent for the same and neither the Company nor the Warrant Agent shall be bound to inquire into the title of any holder.

2.12

Uncertificated Warrants

(1) Registration and re-registration of beneficial interests in and transfers of Warrants held by CDS shall be made only through the Book-Entry Only System and no Warrant Certificates shall be issued in respect of such Warrants except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by CDS, as determined by the Company, from time to time. Except as provided in this Section 2.12, owners of beneficial interests in any Uncertificated Warrants shall not be entitled to have Warrants registered in their names and shall not receive or be entitled to receive Warrants in definitive form or to have their names appear in the register referred to in Section 2.8 herein. Notwithstanding any terms set out herein, Warrants subject to the restrictions and any legend set forth in Section 2.20 herein and held in the name of CDS may only be held in the form of Uncertificated Warrants with the prior consent of the Company and CDS.

(2) If any Warrant is issued in uncertificated form and any of the following events occurs:

(a)

CDS or the Company has notified the Warrant Agent that (A) CDS is unwilling or unable to continue as depository or (B) CDS ceases to be a clearing agency in good standing under applicable laws and, in either case, the Company is unable to locate a qualified successor depository within ninety (90) days of delivery of such notice;

(b)

the Company has determined, in its sole discretion, acting reasonably, to terminate the Book-Entry Only System in respect of such Uncertificated Warrants and has communicated such determination to the Warrant Agent in writing;

(c)

the Company or CDS is required by applicable law to take the action contemplated in this section;

(d)

there is an exercise of Warrants pursuant to 3.1(4) and the Warrantholder is unable to make the representations in 3.1(4) (a), (b), (c) and (d) thereto; or

(e)

the Book-Entry Only System administered by CDS ceases to exist,

then one or more definitive fully registered Warrant Certificates shall be executed by the Company and certified and delivered by the Warrant Agent to CDS in exchange for the Uncertificated Warrants held by CDS. The Company shall provide an Officer's Certificate giving notice to the Warrant Agent of the occurrence of any event outlined in this Section 2.12(2).

Fully registered Warrant Certificates issued and exchanged pursuant to this section shall be registered in such names and in such denominations as CDS shall instruct the Warrant Agent, provided that the aggregate number of Warrants represented by such Warrant Certificates shall be equal to the aggregate number of Uncertificated Warrants so exchanged. Upon exchange of Uncertificated Warrants for one or more Warrant Certificates in definitive form, such Uncertificated Warrants shall be cancelled by the Warrant Agent.

(3) Subject to the provisions of this Section 2.12, any exchange of Warrants for Warrants which are not Uncertificated Warrants may be made in whole or in part in accordance with the provisions of Section 2.10, mutatis mutandis. All such Warrants issued in exchange for Uncertificated Warrants or any portion thereof shall be registered in such names as CDS for such Uncertificated Warrants shall direct and shall be entitled to the same benefits and subject to the same terms and conditions (except insofar as they relate specifically to Uncertificated Warrants) as the Uncertificated Warrants or portion thereof surrendered upon such exchange.

(4) Every Warrant Authenticated upon registration of transfer of Uncertificated Warrants, or in exchange for or in lieu of Uncertificated Warrants or any portion thereof, whether pursuant to this Section 2.12, or otherwise, shall be Authenticated in the form of, and shall be, an Uncertificated Warrant, unless such Warrant is registered in the name of a person other than CDS for such Uncertificated Warrant or a nominee thereof.

(5) Notwithstanding anything to the contrary in this Indenture, subject to Applicable Legislation, the Warrants to be issued to CDS or a nominee thereof will be issued as an Uncertificated Warrant, unless otherwise requested in writing by CDS or the Company.

(6) The rights of Beneficial Owners of Warrants who hold securities entitlements in respect of the Warrants through the Book-Entry Only System shall be limited to those established by applicable law and agreements between CDS and the Participants and between such Participants and the Beneficial Owners of Warrants who hold securities entitlements in respect of the Warrants through the Book-Entry Only System, and such rights must be exercised through a Participant in accordance with the rules and procedures of CDS.

(7) Notwithstanding anything herein to the contrary, neither the Company nor the Warrant Agent nor any agent thereof shall have any responsibility or liability for:

(a)

the electronic records maintained by CDS relating to any ownership interests or any other interests in the Warrants or the depository system maintained by CDS, or payments made on account of any ownership interest or any other interest of any person in any Warrant represented by an electronic position in the Book-Entry Only System (other than CDS or its nominee);

(b)

maintaining, supervising or reviewing any records of CDS or any Participant relating to any such interest; or

(c)

any advice or representation made or given by CDS or those contained herein that relate to the rules and regulations of CDS or any action to be taken by CDS on its own direction or at the direction of any Participant.

(8) The Company may terminate the application of this Section 2.12 in its sole discretion, acting reasonably, in which case all Warrants shall be evidenced by Warrant Certificates registered in the name(s) of a person other than CDS.

2.13

Adjustment of Exchange Basis

Subject to Section 2.14, the Exchange Basis shall be subject to adjustment from time to time in the events and in the manner provided as follows:

(1) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall:

(a)

issue Common Shares or securities exchangeable for or convertible into Common Shares to all or substantially all the holders of the Common Shares as a stock dividend or other distribution (other than a distribution of Common Shares upon the exercise of Warrants); or

(b)

subdivide, redivide or change its then outstanding Common Shares into a greater number of Common Shares; or

(c)

reduce, combine or consolidate its then outstanding Common Shares into a lesser number of Common Shares,

(any of such events in these paragraphs (a), (b) or (c) being called a "Common Share Reorganization"), then the Exchange Basis in effect on the effective date of such subdivision or consolidation, or on the record date of such stock dividend or other distribution, as the case may be, shall be adjusted by multiplying the Exchange Basis in effect immediately prior to such effective or record date by a fraction:

(a)

the numerator of which shall be the total number of Common Shares outstanding on such date immediately after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date, assuming in any case where such securities are not then convertible or exchangeable but subsequently become so, that they were convertible or exchangeable on the record date on the basis upon which they first become convertible or exchangeable), and

(b)

the denominator of which shall be the total number of Common Shares outstanding on such date before giving effect to such Common Share Reorganization.

The resulting product, adjusted to the nearest 1/100th, shall thereafter be the Exchange Basis until further adjusted as provided in this Article 2. To the extent that any adjustment in the Exchange Basis occurs pursuant to this Section 2.13(1) as a result of the fixing by the Company of a record date for the distribution of securities exchangeable for or convertible into Common Shares and the Common Share Reorganization does not occur or any conversion or exchange rights are not fully exercised, the Exchange Basis shall be readjusted immediately after the expiry of any relevant exchange or conversion right or the termination of the Common Share Reorganization, as the case may be, to the Exchange Basis that would then be in effect, based upon the number of Common Shares actually issued and remaining issuable pursuant to the Common Share Reorganization after such expiry and shall be further readjusted in such manner upon the expiry of any further such right.

(2) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall fix a record date for the distribution to all or substantially all of the holders of its outstanding Common Shares of rights, options or warrants entitling them, for a period expiring not more than forty-five (45) days after such record date, to subscribe for or purchase Common Shares, or securities exchangeable for or convertible into Common Shares, at a price per share to the holder (or at an exchange or conversion price per share) of less than 95% of the Current Market Price on such record date (any of such events being called a "Rights Offering"), then the Exchange Basis shall be adjusted effective immediately after such record date for the Rights Offering by multiplying the Exchange Basis in effect immediately prior to such record date by a fraction:

(a)

the numerator of which shall be the number of Common Shares which would be outstanding after giving effect to the Rights Offering (assuming the exercise of all of the rights, options or warrants under the Rights Offering and assuming the exchange for or conversion into Common Shares of all exchangeable or convertible securities issued upon exercise of such rights, options or warrants, if any), and

(b)

the denominator of which shall be the aggregate of:

(i)

the total number of Common Shares outstanding as of the record date for the Rights Offering, and

(ii)

a number of Common Shares determined by dividing

(A)

the amount equal to the aggregate consideration payable on the exercise of all of the rights, options and warrants under the Rights Offering plus the aggregate consideration, if any, payable on the exchange or conversion of the exchangeable or convertible securities issued upon exercise of such rights, options or warrants (assuming the exercise of all rights, options and warrants under the Rights Offering and assuming the exchange or conversion of all exchangeable or convertible securities issued upon exercise of such rights, options and warrants);

(B)

the Current Market Price as of the record date for the Rights Offering.

The resulting product, adjusted to the nearest 1/100th, shall thereafter be the Exchange Basis until further adjusted as provided in this Article 2. Any Common Shares owned by or held for the account of the Company or any of its Subsidiaries or a partnership in which the Company is directly or indirectly a party to will be deemed not to be outstanding for the purpose of any computation. If, at the date of expiry of the rights, options or warrants subject to the Rights Offering, less than all the rights, options or warrants have been exercised, then the Exchange Basis shall be readjusted immediately after the date of expiry to the Exchange Basis that would have been in effect on the date of expiry if only the rights, options or warrants issued had been those exercised. If at the date of expiry of the rights of exchange or conversion of any securities issued pursuant to the Rights Offering less than all of such securities have been exchanged or converted into Common Shares, then the Exchange Basis shall be readjusted immediately after the date of expiry to the Exchange Basis that would have been in effect on the date of expiry if only the exchangeable or convertible securities issued had been those securities actually exchanged for or converted into Common Shares.

(3) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall fix a record date for the issuance or distribution to all or substantially all the holders of its outstanding Common Shares of:

(a)

shares of the Company of any class other than Common Shares; or

(b)

rights, options or warrants to acquire Common Shares or securities exchangeable for or convertible into Common Shares; or

(c)

evidences of indebtedness; or

(d)

cash, securities or any property or other assets,

and if such issuance or distribution does not constitute a Common Share Reorganization or a Rights Offering (any of such non-excluded events being herein called a "Special Distribution"), the Exchange Basis shall be adjusted effective immediately after such record date for the Special Distribution by multiplying the Exchange Basis in effect immediately prior to such record date by a fraction:

(a)

the numerator of which shall be the number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, and

(b)

the denominator of which shall be:

(A)

the number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, less

(B)

the fair market value, as determined by action by the board of directors acting reasonably and in good faith (whose determination, absent manifest error, shall be conclusive), to the holders of the Common Shares of the shares, rights, options, warrants, evidences of indebtedness or securities, property or other assets issued or distributed in the Special Distribution provided that no such adjustment shall be made if the result of such adjustment would be to decrease the Exchange Basis in effect immediately before such record date.

(4) If and whenever, at any time after the date hereof and prior to the Time of Expiry, there shall be a reclassification of the Common Shares at any time outstanding or change or exchange of the Common Shares into or for other shares or into or for other securities or property (other than a Common Share Reorganization), or a consolidation, amalgamation, arrangement or merger of the Company with or into any other corporation or other entity (other than a consolidation, amalgamation, arrangement or merger which does not result in any reclassification of the outstanding Common Shares or a change or exchange of the Common Shares into or for other shares, securities or property), or a transfer (other than to a Subsidiary) of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation or other entity (any of such events being herein called a "Capital Reorganization"), any Warrantholder who thereafter shall exercise his right to receive Warrant Shares pursuant to Warrant(s) shall be entitled to receive, and shall accept in lieu of the number of Warrant Shares to which such holder was theretofore entitled upon such exercise, the aggregate number of shares, other securities or other property resulting from the Capital Reorganization which such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date or record date thereof, as the case may be, the Warrantholder had been the registered holder of the number of Warrant Shares to which such holder was theretofore entitled upon exercise. If appropriate, adjustments shall be made as a result of any such Capital Reorganization in the application of the provisions in this Indenture with respect to the rights and interests thereafter of Warrantholders to the end that the provisions in this Indenture shall thereafter correspondingly be made applicable as nearly as may reasonably be possible in relation to any shares, other securities or other property thereafter deliverable upon the exercise of any Warrant. Any such adjustment shall be made by and set forth in an indenture supplemental hereto approved by the directors of the Company and by the Warrant Agent and entered into pursuant to the provisions of this Indenture and shall for all purposes be conclusively deemed to be an appropriate adjustment.

(5) Any adjustment to the Exchange Basis as set forth herein shall also include a corresponding adjustment to the Price which shall be calculated by multiplying the Price by a fraction: (a) the numerator of which shall be the Exchange Basis prior to the adjustment, and

(b) the denominator of which shall be the Exchange Basis after the adjustment.

2.14

Rules Regarding Calculation of Adjustment of Exchange Basis

For the purposes of Section 2.13:

(1) The adjustments provided for in Section 2.13 shall be cumulative and such adjustments shall be made successively whenever an event referred to in Section 2.13 shall occur, subject to the following subsections of this Section 2.14.

(2) No adjustment in the: (a) Exchange Basis shall be required unless such adjustment would result in a change of at least 0.01 of a Warrant Share based on the prevailing Exchange Basis; or (b) the Price shall be required unless such adjustment would result in a change of at least 1% of the Price, provided that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment.

(3) No adjustment in the Exchange Basis or the Price shall be made in respect of any event described in Section 2.13, other than the events referred to in paragraphs (b) and

(c) of subsection (1) thereof, if Warrantholders are entitled to participate in such event on the same terms, mutatis mutandis, as if Warrantholders had exercised their Warrants prior to or on the effective date or record date of such event, any such participation being subject to regulatory approval.

(4) No adjustment in the Exchange Basis or the Price shall be made pursuant to Section 2.13 in respect of (i) the issue from time to time of Warrant Shares purchasable on exercise of the Warrants and any such issue shall be deemed not to be a Common Share Reorganization; (ii) a Dividend Paid in the Ordinary Course; or (iii) a distribution of Common Shares pursuant to the exercise of stock options granted under stock option plans of the Company.

(5) If a dispute shall at any time arise with respect to adjustments provided for in Section 2.13, such dispute shall, absent manifest error, be conclusively determined by the Company's Auditors, or if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by the directors and any further determination, absent manifest error, shall be binding upon the Company, the Warrant Agent and the Warrantholders.

(6) If the Company shall set a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or any subscription or purchase rights and shall, thereafter and before the distribution to such shareholders of any such dividend, distribution, or subscription or purchase rights, legally abandon its plan to pay or deliver such dividend, distribution, or subscription or purchase rights, then no adjustment in the Exchange Basis shall be required by reason of the setting of such record date.

(7) In the absence of a resolution of the directors fixing a record date for a Rights Offering or Special Distribution, the Company shall be deemed to have fixed as the record date therefor the date on which the Rights Offering or Special Distribution is effected.

(8) If the purchase price provided for in any Rights Offering (the "Rights Offering Price") is decreased, the Exchange Basis shall forthwith be changed so as to increase the Exchange Basis to such Exchange Basis as would have been obtained had the adjustment to the Exchange Basis made pursuant to Section 2.13(2) upon the issuance of such Rights Offering been made upon the basis of the Rights Offering Price as so decreased, provided that the provisions of this subsection shall not apply to any decrease in the Rights Offering Price resulting from provisions in any such Rights Offering designed to prevent dilution if the event giving rise to such decrease in the Rights Offering Price itself requires an adjustment to the Exchange Basis pursuant to the provisions of Section 2.13.

(9) As a condition precedent to the taking of any action that would require any adjustment in any of the subscription rights pursuant to any of the Warrants, including the Exchange Basis, the Company shall take any corporate action which may, in the opinion of counsel, be necessary in order that the Company have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities that all the holders of such Warrants are entitled to receive on the exercise of all the subscription rights attaching thereto in accordance with the provisions thereof.

(10) In case the Company, after the date hereof, shall take any action affecting any Common Shares, other than action described in Section 2.13, which in the opinion of the directors acting reasonably and in good faith would materially affect the rights of Warrantholders, the Exchange Basis shall be adjusted in such manner, if any, and at such time, as the directors, in their sole discretion acting reasonably and in good faith, may determine to be equitable in the circumstances. Failure of the taking of any action by the directors so as to provide for an adjustment in the Exchange Basis prior to the effective date of any action by the Company affecting the Common Shares shall be conclusive evidence that the directors have determined that it is equitable to make no adjustment in the circumstances.

(11) The Warrant Agent shall be entitled to act and rely on any adjustment calculations by the Company or the Company's Auditors.

2.15

Postponement of Subscription

In any case where the application of Section 2.13 results in an increase in the number of Common Shares that are issuable upon exercise of the Warrants taking effect immediately after the record date for a specific event, if any Warrant is exercised after that record date and prior to completion of such specific event, the Company may postpone the issuance to the Warrantholder of the Warrant Shares to which he is entitled by reason of such adjustment, but such Warrant Shares shall be so issued and delivered to that holder upon completion of that event, with the number of such Warrant Shares calculated on the basis of the number of Warrant Shares on the date that the Warrant was exercised, adjusted for completion of that event and the Company shall deliver to the person or persons in whose name or names the Warrant Shares are to be issued an appropriate instrument evidencing the right of such person or persons to receive such Warrant Shares and the right to receive any dividends or other distributions which, but for the provisions of this Section 2.15, such person or persons would have been entitled to receive in respect of such Warrant Shares from and after the date that the Warrant was exercised in respect thereof.

2.16

Notice of Adjustment

(1) At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require adjustment pursuant to Section 2.13, the Company shall:

(a)

file with the Warrant Agent a certificate of the Company specifying the particulars of such event (including the record date or the effective date for such event) and, if determinable, the required adjustment and the computation of such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based; and

(b)

give notice to the Warrantholders of the particulars of such event (including the record date or the effective date for such event) and, if determinable, the required adjustment.

(2) In case any adjustment for which a notice in Section 2.16(1) has been given is not then determinable, the Company shall promptly after such adjustment is determinable:

(a)

file with the Warrant Agent a computation of such adjustment; and

(b)

give notice to the Warrantholders of the adjustment.

(3) The Warrant Agent may and shall be protected in so doing, absent manifest error, act and rely upon certificates of the Company and other documents filed by the Company pursuant to this Section 2.16 for all purposes of the adjustment.

2.17

No Action after Notice

The Company covenants with the Warrant Agent that it will not close its books nor take any other corporate action which might deprive a Warrantholder of the opportunity of exercising the rights of acquisition pursuant thereto during the period of ten (10) days after the giving of the notice set forth in paragraph (b) of Sections 2.16(1) and (2).

2.18

Purchase of Warrants for Cancellation

The Company may, at any time and from time to time, purchase Warrants by invitation to tender, by private contract, on any stock exchange (if then listed) or otherwise (which shall include a purchase through an investment dealer or firm holding membership on a Canadian stock exchange) on such terms as the Company may determine. All Warrants purchased pursuant to the provisions of this Section 2.18 shall be forthwith delivered to and cancelled by the Warrant Agent and shall not be reissued. If required by the Company, the Warrant Agent shall furnish the Company with a certificate as to such destruction.

2.19 Protection of Warrant Agent

The Warrant Agent shall not:

(a)

at any time be under any duty or responsibility to any registered holder of Warrants to determine whether any facts exist that may require any adjustment contemplated by this Article 2, nor to verify the nature and extent of any such adjustment when made or the method employed in making the same;

(b)

be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any other securities or property that may at any time be issued or delivered upon the exercise of the Warrants;

(c)

be responsible for any failure of the Company to make any cash payment, to issue, transfer or deliver Warrant Shares or certificates upon the surrender of any Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in Section 2.13; or

(d)

incur any liability or responsibility whatsoever or be in any way responsible for the consequence of any breach on the part of the Company of any of the representations, warranties or covenants of the Company or any acts or deeds of the agents or servants of the Company.

2.20 U.S. Legend on Warrant Certificates and Warrant Share certificates

(1) The Warrant Agent understands and acknowledges that the Warrants and the Warrant Shares issuable upon exercise of the Warrants have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States.

(2) Each Warrant, in certificated form, originally issued in the United States or, to or for the account or benefit of, a U.S. Person, and all Warrant Shares issued upon exercise of such Warrants, and all certificates issued in exchange or in substitution thereof or upon transfer thereof, shall bear the following legend:

"THE SECURITIES REPRESENTED HEREBY [for Warrants, add: AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF] HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND THE SECURITIES REPRESENTED HEREBY [for Warrants, add: AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF] MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (E) UNDER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(i) OR (D) ABOVE, A LEGAL OPINION OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, MUST FIRST BE PROVIDED TO THE COMPANY AND THE COMPANY'S TRANSFER AGENT TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

[for Warrants, include: "THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT."]

provided that, if the Warrants or Warrant Shares issuable upon exercise of the Warrants are being sold in accordance with Rule 904 of Regulation S, the legend may be removed by providing to the Warrant Agent or the Transfer Agent, as the case may be, (i) a declaration in the form attached hereto as Schedule "B" (or as the Company may prescribe from time to time in order to address changes in applicable laws) and (ii) if required by the Transfer Agent, an opinion of counsel, of recognized standing reasonably satisfactory to the Company, or other evidence reasonably satisfactory to the Company, that the proposed transfer may be effected without registration under the U.S. Securities Act.

provided further, that if the Warrants or Warrant Shares are being sold pursuant to Rule 144 under the U.S. Securities Act, if available, the legend may be removed by delivering to the Company and the Warrant Agent or the Transfer Agent, as the case may be, an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company, to the effect that the legend is no longer required under applicable requirements of the U.S. Securities Act.

(3) If a Warrant or Warrant Share issued with respect to an exercise of Warrants is tendered for transfer and bears the legend set forth in Section 2.20(2) herein and the holder thereof has not obtained the prior written consent of the Company, the Warrant Agent or the Transfer Agent, as the case may be, shall not register such transfer unless the holder complies with the requirements of the said Section 2.20(2) hereof.

ARTICLE 3 EXERCISE OF WARRANTS

3.1

Method of Exercise of Warrants

(1) The registered holder of any Warrant may exercise the rights thereby conferred on him to acquire all or any part of the Warrant Shares to which such Warrant entitles the holder, by surrendering the Warrant Certificate representing such Warrants to the Warrant Agent at any time prior to the Time of Expiry at its principal stock transfer offices in the City of Calgary, Alberta (or at such additional place or places as may be decided by the Company from time to time with the approval of the Warrant Agent), with a duly completed and executed exercise form of the registered holder or his executors, administrators or other legal representative or his attorney duly appointed by an instrument in writing in the form and manner satisfactory to the Warrant Agent, substantially in the form endorsed on the Warrant Certificate specifying the number of Warrant Shares subscribed for together with a certified cheque, bank draft or money order in lawful money of Canada, payable to or to the order of the Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares subscribed for. A Warrant Certificate with the duly completed and executed exercise form and payment of the Exercise Price shall be deemed to be surrendered only upon personal delivery thereof to or, if sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent.

(2) Any exercise form referred to in Section 3.1(1) shall be signed by the Warrantholder, or his executors, or administrators or other legal representative or his attorney duly appointed by an instrument in writing in the form and manner satisfactory to the Warrant Agent, but such exercise form need not be executed by CDS. Such exercise form shall specify the person(s) in whose name such Warrant Shares are to be issued, the address(es) of such person(s) and the number of Warrant Shares to be issued to each person, if more than one is so specified. If any of the Warrant Shares subscribed for are to be issued to person(s) other than the Warrantholder, the Warrantholder shall also complete the transfer form, substantially in the form endorsed on the Warrant Certificate. The signatures set out in the exercise form referred to in Section 3.1(1) and the signatures set out in the transfer form shall be guaranteed by a Canadian Schedule 1 chartered bank or a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program and the Warrantholder shall pay to the Company or the Warrant Agent all applicable transfer or similar taxes and the Company shall not be required to issue or deliver certificates evidencing Warrant Shares unless or until such Warrantholder shall have paid to the Company or the Warrant Agent on behalf of the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid or that no tax is due.

(3) If, at the time of exercise of the Warrants, in accordance with the provisions of Section 3.1(1), there are any trading restrictions on the Warrant Shares pursuant to applicable Securities Laws or stock exchange requirements, the Company shall, on the advice of counsel, endorse any certificates representing the Warrant Shares to such effect. The Warrant Agent is entitled to assume compliance with all applicable Securities Laws unless otherwise notified in writing by the Company.

(4) A Beneficial Owner who desires to exercise his, her or its Uncertificated Warrants, must do so by causing a Participant to deliver to CDS (at its office in the City of Toronto, Ontario), on behalf of the Beneficial Owner at any time prior to the Time of Expiry, a written notice of the Beneficial Owner's intention to exercise Warrants (the "Exercise Notice"); provided, that a Beneficial Owner holding Uncertificated Warrants that is in the United States or that is a U.S. Person will first request the withdrawal of the Uncertificated Warrant(s) from the Book-Entry Only System and request certificated Warrant(s) in exchange for such Uncertificated Warrant(s). Forthwith upon receipt by CDS of such notice, as well as payment for the Exercise Price, CDS shall deliver to the Warrant Agent confirmation of its intention to exercise Warrants (the "Confirmation") in a manner acceptable to the Warrant Agent, including by electronic means through the Book-Entry Only System, including CDSX. An electronic exercise of the Warrants initiated by the Beneficial Owner through a Book-Entry Only System, including CDSX, shall constitute a representation to both the Company and the Warrant Agent that the Beneficial Owner at the time of exercise of such Warrants (a) is not in the United States; (b) did not acquire the Warrants in the United States or on behalf of, or for the account or benefit of, a U.S. Person or a person in the United States; (c) is not a U.S. Person and is not exercising such Warrants on behalf of a U.S. Person or a person in the United States; and (d) did not execute or deliver the notice of the owner's intention to exercise such Warrants in the United States. If the Participant is not able to make or deliver the foregoing representation by initiating the electronic exercise of the Warrants, then such Warrants shall be withdrawn from the Book-Entry Only System, including CDSX, by the Participant and an individually registered Warrant Certificate shall be issued by the Warrant Agent to such Beneficial Owner or Participant and the exercise procedures set forth in Section 3.1(1) shall be followed. Payment representing the aggregate Exercise Price must be provided to the appropriate office of the Participant in a manner acceptable to it. A notice in form acceptable to the Participant and payment from such Beneficial Owner should be provided through the Book-Entry Only System sufficiently in advance so as to permit the Participant to deliver notice and payment to CDS and for CDS in turn to deliver notice and payment to the Warrant Agent prior to Time of Expiry. CDS will initiate the exercise by way of the Confirmation and forward the aggregate Exercise Price electronically to the Warrant Agent and the Warrant Agent will execute the exercise by issuing to CDS through the Book- Entry Only System the Warrant Shares to which the exercising Beneficial Owner is entitled pursuant to the exercise. Any expense associated with the preparation and delivery of Exercise Notices will be for the account of the Beneficial Owner exercising the Warrants.

(5) By causing a Participant to deliver notice to CDS, a Warrantholder shall be deemed to have irrevocably surrendered his, her or its Warrants so exercised and appointed such Participant to act as his, her or its exclusive settlement agent with respect to the exercise and the receipt of Warrant Shares in connection with the obligations arising from such exercise.

(6) Any notice which CDS determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Participant to exercise or to give effect to the settlement thereof in accordance with the Beneficial Owner's instructions will not give rise to any obligations or liability on the part of the Company or Warrant Agent to the Participant or the Beneficial Owner.

(7) Any exercise referred to in this Section 3.1 shall require that the entire Exercise

Price for the Warrant Shares subscribed for must be paid at the time of subscription and such Exercise Price and original Exercise Notice or exercise form executed by the Registered Warrantholder or the Confirmation from CDS must be received by the Warrant Agent prior to the Time of Expiry.

(8) Warrants may only be exercised pursuant to this Section 3.1 by or on behalf of a Warrantholder, as applicable, who makes the certifications set forth on the exercise form substantially in the form endorsed on the Warrant Certificate.

(9) If the exercise form set forth in the Warrant Certificate shall have been amended, the Company shall cause the amended exercise form to be forwarded to all registered Warrantholders.

(10) Exercise forms, Exercise Notices and Confirmations must be delivered to the Warrant Agent at any time during the Warrant Agent's actual business hours on any Business Day prior to the Time of Expiry. Any exercise form, Exercise Notice or Confirmation received by the Warrant Agent after business hours on any Business Day other than the Time of Expiry will be deemed to have been received by the Warrant Agent on the next following Business Day.

(11) Any Warrant with respect to which a Confirmation is not received by the Warrant Agent before the Time of Expiry shall be deemed to have expired and become void and all rights with respect to such Warrants shall terminate and be cancelled.

3.2

No Fractional Shares

Under no circumstances shall the Company be obliged to issue any fractional Warrant Shares or any cash or other consideration in lieu thereof upon the exercise of one or more Warrants. To the extent that the holder of one or more Warrants would otherwise have been entitled to receive on the exercise or partial exercise thereof a fraction of a Warrant Share, that holder may exercise that right in respect of the fraction only in combination with another Warrant or Warrants that in the aggregate entitle the holder to purchase a whole number of Warrant Shares.

3.3

Effect of Exercise of Warrants

(1) Upon compliance by the Warrantholder with the provisions of Section 3.1, the Warrant Shares subscribed for shall be deemed to have been issued and the person to whom such Warrant Shares are to be issued shall be deemed to have become the holder of record of such Warrant Shares on the Exercise Date unless the transfer registers of the Company for the Common Shares shall be closed on such date, in which case the Warrant Shares subscribed for shall be deemed to have been issued and such person shall be deemed to have become the holder of record of such Warrant Shares on the date on which such transfer registers are reopened.

(2) The Warrant Agent shall as soon as practicable account to the Company with respect to Warrants exercised, and shall as soon as practicable forward to the Company (or into an account or accounts of the Company with the bank or trust company designated by the Company for that purpose), all monies received by the Warrant Agent on the subscription of Warrant Shares through the exercise of Warrants. All such monies and any securities or other instruments, from time to time received by the Warrant Agent, shall be received in trust for the Warrantholders and the Company as their interests may appear and shall be segregated and kept apart by the Warrant Agent.

(3) Within five Business Days following the due exercise of a Warrant pursuant to Section 3.1, the Company shall cause the Transfer Agent to issue and the Warrant Agent to deliver, within such five Business Day period, to CDS through the Book-Entry Only System the Warrant Shares to which the exercising Warrantholder is entitled pursuant to the exercise or mail to the person in whose name the Warrant Shares so subscribed for are to be issued, as specified in the exercise form completed on the Warrant Certificate, at the address specified in such exercise form, a certificate or certificates for the Warrant Shares to which the Warrantholder is entitled or, if so specified in writing by the holder, cause to be delivered to such person or persons at the office of the Warrant Agent where the Warrant Certificate was surrendered, a certificate or certificates for the appropriate number of Warrant Shares subscribed for, or any other appropriate evidence of the issuance of Warrant Shares to such person or persons in respect of Warrant Shares issued under the Book-Entry Only System and, if applicable, shall cause the Warrant Agent to mail a Warrant Certificate representing any Warrants not then exercised.

3.4

Cancellation of Warrants

All Warrants surrendered to the Warrant Agent pursuant to sections 2.6, 2.8(2), 2.10 or 3.1 shall be cancelled by the Warrant Agent and the Warrant Agent shall record the cancellation of such Warrants on the register of holders maintained by the Warrant Agent pursuant to Section 2.8(1). The Warrant Agent shall, if required by the Company, furnish the Company with a certificate identifying the Warrants so cancelled. All Warrants that have been duly cancelled shall be without further force or effect whatsoever.

3.5

Subscription for less than Entitlement

The holder of any Warrant may subscribe for and purchase a whole number of Warrant Shares that is less than the number that the holder is entitled to purchase pursuant to a surrendered Warrant. In such event, the holder thereof shall be entitled to receive a new Warrant Certificate in respect of the balance of Warrants that were not then exercised, such new Warrant Certificate to contain the same legend as provided for in Section 2.20(2), if applicable.

3.6

Expiration of Warrant

After the Time of Expiry, all rights under any Warrant in respect of which the right of subscription and purchase herein and therein provided for shall not theretofore have been exercised shall wholly cease and terminate and such Warrant shall be void and of no effect.

3.7

Prohibition on Exercise by U.S. Persons; Exception

(1) Warrants may not be exercised within the United States or by or on behalf of, or for the account or benefit of, any U.S. Person or any person in the United States unless an exemption is available from the registration requirements of the U.S. Securities Act and applicable state securities laws. The Warrant Agent shall be entitled to rely upon the registered address of the Warrantholder as set forth in the Warrantholders register for the purchase of Units in determining whether the address is in the United States or the Warrantholder is a U.S. Person.

(2)

Any holder which exercises any Warrants shall provide to the Company either:

(a)

a written certification that such holder (a) at the time of exercise of the Warrants is not in the United States; (b) is not a U.S. Person and is not exercising the Warrants on behalf of a U.S. Person or person in the United States; (c) did not execute or deliver the exercise form for the Warrants in the United States; and (d) has in all other aspects complied with the terms of an "offshore transaction" as defined under Regulation S (which written certification shall be deemed delivered by checking Box 1 in the Exercise Form attached to the Warrant, as provided for in Schedule “A” hereof); or

(b)

a written certification that the holder (i) purchased the Warrants as part of the Units in the Offering; (ii) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Offering and for whose account such holders exercises sole investment discretion; (iii) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is, a Qualified Institutional Buyer both on the date the Units were purchased in the Offering and on the Exercise Date; and (iv) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in such holder’s QIB Letter remain true and correct on the Exercise Date (which written certification shall be deemed delivered by checking Box 2 in the Exercise Form attached to the Warrant, as provided for in Schedule “A” hereof); or

(c)

a written opinion of counsel of recognized standing in form and substance satisfactory to the Company or evidence satisfactory to the Company to the effect that an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available for the issuance of the Warrant Shares issuable on exercise of the Warrants.

(3) No Warrant Shares will be registered or delivered to an address in the United States unless the holder of Warrants complies with the requirements of paragraph (b) or (c) of Section 3.7(2).

ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT

4.1

General Covenants of the Company

The Company represents, warrants and covenants with the Warrant Agent for the benefit of the Warrant Agent and the Warrantholders that:

(1) The Company will at all times, so long as any Warrants remain outstanding or issuable hereunder, maintain its existence, unless otherwise inconsistent with the fiduciary duties of the board of directors of the Company, and will keep or cause to be kept proper books of account in accordance with applicable law until the Time of Expiry.

(2) The Company is duly authorized to create and issue the Warrants to be issued hereunder and the Warrants, when issued, Authenticated and countersigned, as applicable, will be legal, valid, binding and enforceable obligations of the Company.

(3) The Company will reserve and keep available a sufficient number of Warrant Shares for the purpose of enabling the Company to satisfy its obligations to issue Common Shares upon the exercise of the Warrants, and all Warrants Shares shall, when issued as provided herein, be valid and enforceable against the Company.

(4) The Company will cause the Warrant Shares from time to time subscribed for pursuant to the Warrants issued by the Company hereunder, in the manner herein provided, to be duly issued in accordance with the Warrants and the terms hereof.

(5) All Warrant Shares that shall be issued by the Company upon exercise of the rights provided for herein shall be issued as fully paid and non-assessable Common Shares of the Company.

(6) The Company will use commercially reasonable efforts to ensure that the Warrants, and the Common Shares outstanding on the date hereof and issuable from time to time on the exercise of the Warrants, continue to be or are listed and posted for trading on the CSE (or such other Canadian stock exchange acceptable to the Company), provided that this Section 4.1(6) shall not be construed as limiting or restricting the Company from completing a consolidation, amalgamation, arrangement, takeover bid, merger or other form of business combination that would result in the Warrants and/or the Common Shares ceasing to be listed and posted for trading on such exchanges, so long as the holders of Common Shares have approved the transaction in accordance with the requirements of applicable corporate and securities laws and the policies of such exchanges or the holders of Common Shares receive securities of an entity which is listed on a stock exchange in North America or cash.

(7) Except to the extent that the Company participates in a takeover bid, consolidation, merger, arrangement, amalgamation, or other form of business combination transaction, the Company will use its commercially reasonable efforts to maintain its status as a "reporting issuer" (or the equivalent thereof) in each of the provinces of Canada and other Canadian jurisdictions in which it is currently or becomes a reporting issuer, make all requisite filings under applicable Securities Laws including those necessary to remain a reporting issuer not in default of the requirements of the applicable Securities Laws of such province or jurisdiction, until the Time of Expiry.

(8) The Company will perform and carry out all of the acts or things to be done by it as provided in this Indenture.

(9) The Company will not take any action or omit to take any action which would have the effect of preventing the Warrantholders from receiving any of the Warrant Shares issuable upon the exercise of the Warrants.

(10) The Company will promptly advise the Warrant Agent and the Warrantholders in writing of any breach or default under the terms of this Indenture no later than five (5) Business Days following the occurrence of such breach or default.

(11) If, in the opinion of counsel, any instrument is required to be filed with, or any permission, order or ruling is required to be obtained from any securities regulatory authority, or any other step is required under any federal or provincial law of Canada before the Warrant Shares may be issued and delivered to a Warrantholder, the Company covenants that it will use its best efforts to file such instrument, obtain such permission, order or ruling or take all such other actions, at its expense, as is required or appropriate in the circumstances.

4.2

Warrant Agent's Remuneration and Expenses

The Company covenants that it will pay to the Warrant Agent from time to time reasonable remuneration for its services hereunder and will pay or reimburse the Warrant Agent upon its request for all reasonable expenses and disbursements and advances incurred or made by the Warrant Agent in the administration or execution of the trusts hereby created (including the reasonable compensation and the disbursements of its counsel and all other advisers, experts, accountants and assistants not regularly in its employ) both before any default hereunder and thereafter until all duties of the Warrant Agent hereunder shall be finally and fully performed. Any amount owing hereunder and remaining unpaid after thirty (30) days from the invoice date will bear interest at the then current rate charged by the Warrant Agent against unpaid invoices and shall be payable upon demand. This section shall survive the resignation or removal of the Warrant Agent and/or the termination of this Indenture.

4.3

Performance of Covenants by Warrant Agent

Subject to Section 8.7, if the Company shall fail to perform any of its covenants contained in this Indenture and the Company has not rectified such failure within twenty-five (25) Business Days after either giving notice of such default pursuant to Section 4.1(10) or receiving written notice from the Warrant Agent of such failure, the Warrant Agent may notify the Warrantholders of such failure on the part of the Company or may itself perform any of the said covenants capable of being performed by it, but shall be under no obligation to perform said covenants. All reasonable sums expended or disbursed by the Warrant Agent in so doing shall be repayable as provided in Section 4.2. No such performance, expenditure or advance by the Warrant Agent shall be deemed to relieve the Company of any default hereunder or of its continuing obligations under the covenants herein contained.

4.4

Enforceability of Warrants

The Company covenants and agrees that it is duly authorized to create and issue the Warrants to be issued hereunder and that the Warrants, when issued and Authenticated as herein provided, will be valid and enforceable against the Company in accordance with the provisions hereof and that, subject to the provisions of this Indenture, the Company will cause the Warrant Shares from time to time acquired upon exercise of Warrants issued under this Indenture to be duly issued and delivered in accordance with the terms of this Indenture.

ARTICLE 5 ENFORCEMENT

5.1

Suits by Warrantholders

Subject to Section 6.10, all or any of the rights conferred upon a Warrantholder by the terms of the Warrants held by him and/or this Indenture may be enforced by such Warrantholder by appropriate legal proceedings but without prejudice to the right that is hereby conferred upon the Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the holders of the Warrants from time to time outstanding. The Warrant Agent shall also have the power at any time and from time to time to institute and to maintain such suits and proceedings as it may reasonably be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Warrantholders.

5.2

Limitation of Liability

The obligations hereunder (including without limitation under Section 8.7(5)) are not personally binding upon, nor shall resort hereunder be had to, the private property of any of the past, present or future directors or shareholders of the Company or any of the past, present or future officers, employees or agents of the Company, but only the property of the Company (or any successor person) shall be bound in respect hereof.

5.3

Waiver of Default

Upon the happening of any default hereunder:

(a)

the Warrantholders of not less than 50% plus 1 of the Warrants then outstanding shall have power (in addition to the powers exercisable by Extraordinary Resolution) by requisition in writing to instruct the Warrant Agent to waive any default hereunder and the Warrant Agent shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or

(b)

the Warrant Agent shall have power to waive any default hereunder upon such terms and conditions as the Warrant Agent may deem advisable, on the advice of counsel, if, in the Warrant Agent's opinion, based on the advice of counsel, the same shall have been cured or adequate provision made therefor,

provided that no delay or omission of the Warrant Agent or of the Warrantholders to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein and provided further that no act or omission either of the Warrant Agent or of the Warrantholders in the premises shall extend to or be taken in any manner whatsoever to affect any subsequent default hereunder of the rights resulting therefrom.

ARTICLE 6 MEETINGS OF WARRANTHOLDERS

6.1

Right to Convene Meetings

The Warrant Agent may at any time and from time to time, and shall on receipt of a written request of the Company or of a Warrantholders' Request, convene a meeting of the Warrantholders provided that the Warrant Agent has been provided with sufficient funds and is indemnified to its reasonable satisfaction by the Company or by the Warrantholders signing such Warrantholders' Request against the costs, charges, expenses and liabilities that may be incurred in connection with the calling and holding of such meeting. If within fifteen (15) Business Days after the receipt of a written request of the Company or a Warrantholders' Request, funding and indemnity given as aforesaid the Warrant Agent fails to give the requisite notice specified in Section 6.2 to convene a meeting, the Company or such Warrantholders, as the case may be, may convene such meeting. Every such meeting shall be held in the City of Toronto, Ontario or at such other place as may be approved or determined by the Warrant Agent.

6.2

Notice

At least fourteen (14) days prior notice of any meeting of Warrantholders shall be given to the Warrantholders at the expense of the Company in the manner provided for in Section 9.2 and a copy of such notice shall be delivered to the Warrant Agent unless the meeting has been called by it, and to the Company unless the meeting has been called by it. Such notice shall state the date, time and place of the meeting, the general nature of the business to be transacted and shall contain such information as is reasonably necessary to enable the Warrantholders to make a reasoned decision on the matter, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 6. The notice convening any such meeting may be signed by an appropriate officer of the Warrant Agent or of the Company or the person designated by such Warrantholders, as the case may be.

6.3

Chairman

The Warrant Agent may nominate in writing an individual (who need not be a Warrantholder) to be chairman of the meeting and if no individual is so nominated, or if the individual so nominated is not present within fifteen (15) minutes after the time fixed for the holding of the meeting, the Warrantholders present in person or by proxy shall appoint an individual present to be chairman of the meeting. The chairman of the meeting need not be a Warrantholder.

6.4

Quorum

Subject to the provisions of Section 6.11, at any meeting of the Warrantholders a quorum shall consist of two Warrantholders present in person or represented by proxy and representing at least 20% of the aggregate number of Warrants then outstanding. If a quorum of the Warrantholders shall not be present within one-half hour from the time fixed for holding any meeting, the meeting, if summoned by the Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day in which case it shall be adjourned to the next following Business Day) at the same time and place to the extent possible and, subject to the provisions of Section 6.11, no notice of the adjournment need be given. Any business may be brought before or dealt with at an adjourned meeting that might have been dealt with at the original meeting in accordance with the notice calling the same. At the adjourned meeting the Warrantholders present in person or represented by proxy shall form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not represent at least 20% of the aggregate number of Warrants then unexercised and outstanding. No business shall be transacted at any meeting, except an adjourned meeting as described above, unless a quorum is present at the commencement of business.

6.5

Power to Adjourn

The chairman of any meeting at which a quorum of the Warrantholders is present may, with the consent of the meeting, adjourn any such meeting, and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.

6.6

Show of Hands

Every question submitted to a meeting shall be decided in the first place by a majority of the votes given on a show of hands except that votes on an extraordinary resolution shall be given in the manner hereinafter provided. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact.

6.7

Poll and Voting

On every extraordinary resolution, and when demanded by the chairman or by one or more of the Warrantholders acting in person or by proxy on any other question submitted to a meeting and after a vote by show of hands, a poll shall be taken in such manner as the chairman shall direct. Questions other than those required to be determined by extraordinary resolution shall be decided by a majority of the votes cast on the poll. On a show of hands, every person who is present and entitled to vote, whether as a Warrantholder or as proxy for one or more absent Warrantholders, or both, shall have one vote. On a poll, each Warrantholder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote in respect of each whole Warrant then held by her. A proxy need not be a Warrantholder. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Warrants, if any, held or represented by her.

6.8

Regulations

Subject to the provisions of this Indenture, the Warrant Agent or the Company with the approval of the Warrant Agent may from time to time make and from time to time vary such regulations as it shall consider necessary or appropriate generally for the calling of meetings of Warrantholders and the conduct of business thereat including setting a record date for Warrantholders entitled to receive notice of or to vote at such meeting.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be recognized at any meeting as a Warrantholder, or be entitled to vote or be present at the meeting in respect thereof (subject to Section 6.9), shall be Warrantholders or persons holding proxies of Warrantholders.

6.9

Company, Warrant Agent and Counsel may be Represented

The Company and the Warrant Agent, by their respective directors, officers and employees and the counsel for each of the Company, the Warrantholders and the Warrant Agent may attend any meeting of the Warrantholders and speak thereat but shall not be entitled to vote unless in their capacities as Warrantholders or proxies therefor.

6.10 Powers Exercisable by Extraordinary Resolution

In addition to all other powers conferred upon them by any other provisions of this Indenture or by law, the Warrantholders at a meeting shall have the power, exercisable from time to time by extraordinary resolution:

(a)

to agree with the Company to any modification, alteration, compromise or arrangement of the rights of Warrantholders and/or the Warrant Agent in its capacity as Warrant Agent hereunder (subject to the Warrant Agent's approval) or on behalf of the Warrantholders against the Company, whether such rights arise under this Indenture or the Warrants or otherwise;

(b)

to amend, modify or repeal any extraordinary resolution previously passed or sanctioned by the Warrantholders;

(c)

to direct or authorize the Warrant Agent (subject to the Warrant Agent receiving funding and indemnity) to enforce any of the covenants on the part of the Company contained in this Indenture or the Warrants or to enforce any of the rights of the Warrantholders in any manner specified in such extraordinary resolution or to refrain from enforcing any such covenant or right;

(d)

to waive, authorize and direct the Warrant Agent to waive any default on the part of the Company in complying with any provisions of this Indenture or the Warrants either unconditionally or upon any conditions specified in such extraordinary resolution;

(e)

to restrain any Warrantholder from taking or instituting any suit, action or proceeding against the Company for the enforcement of any of the covenants on the part of the Company contained in this Indenture or the Warrants or to enforce any of the rights of the Warrantholders;

(f)

to direct any Warrantholder who, as such, has brought any suit, action or proceeding to stay or discontinue or otherwise deal with any such suit, action or proceeding, upon payment of the costs, charges and expenses reasonably and properly incurred by such Warrantholder in connection therewith;

(g)

to assent to any change in or omission from the provisions contained in this Indenture or any ancillary or supplemental instrument which may be agreed to by the Company, and to authorize the Warrant Agent to concur in and execute any ancillary or supplemental indenture embodying the change or omission; and

(h)

with the consent of the Company, such consent not to be unreasonably withheld, to remove the Warrant Agent or its successor in office and to appoint a new warrant agent or warrant agents to take the place of the Warrant Agent so removed.

6.11 Meaning of "Extraordinary Resolution"

(1)

The expression "extraordinary resolution" when used in this Indenture means, subject as hereinafter in this Section 6.11 and in Section 6.14 provided, a resolution proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 6 at which there are present in person or by proxy at least two Warrantholders representing at least 20% of the aggregate number of all the then outstanding Warrants and passed by the affirmative votes of Warrantholders representing not less than 662/3% of the aggregate number of all the then outstanding Warrants represented at the meeting and voted on the poll upon such resolution.

(2) If, at any meeting called for the purpose of passing an extraordinary resolution, Warrantholders representing at least 20% of the aggregate number of all the then outstanding Warrants are not present in person or by proxy within one-half hour after the time appointed for the meeting, then the meeting, if convened by Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any other case it shall stand adjourned to such day, being not less than ten (10) Business Days later, and to such place and time as may be appointed by the chairman. Not less than three (3) Business Days prior notice shall be given of the time and place of such adjourned meeting in the manner provided in sections 9.1 and 9.2. Such notice shall state that at the adjourned meeting the Warrantholders present in person or represented by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting the Warrantholders present in person or represented by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed by the requisite vote as provided in Section 6.11(1) shall be an extraordinary resolution within the meaning of this Indenture notwithstanding that Warrantholders representing at least 20% of all the then outstanding Warrants are not present in person or represented by proxy at such adjourned meeting.

(3) Votes on an extraordinary resolution shall always be given on a poll and no demand for a poll on an extraordinary resolution shall be necessary.

6.12 Powers Cumulative

It is hereby declared and agreed that any one or more of the powers or any combination of the powers in this Indenture stated to be exercisable by the Warrantholders by extraordinary resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the right of the Warrantholders to exercise such powers or combination of powers then or thereafter from time to time.

6.13 Minutes

Minutes of all resolutions and proceedings at every meeting of Warrantholders as aforesaid shall be made and duly entered in books to be provided for that purpose by the Warrant Agent at the expense of the Company and any minutes as aforesaid, if signed by the chairman of the meeting at which resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Warrantholders, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly convened and held, and all resolutions passed thereat or proceedings taken, to have been duly passed and taken.

6.14 Instruments in Writing

All actions that may be taken and all powers that may be exercised by the Warrantholders at a meeting held as provided in this Article 6 may also be taken and exercised by Warrantholders representing a majority, or in the case of an extraordinary resolution at least 662/3%, of the aggregate number of all the then outstanding Warrants by an instrument in writing signed in one or more counterparts by such Warrantholders in person or by attorney duly appointed in writing, and the expression "extraordinary resolution" when used in this Indenture shall include an instrument so signed.

6.15 Binding Effect of Resolutions

Every resolution and every extraordinary resolution passed in accordance with the provisions of this Article 6 at a meeting of Warrantholders shall be binding upon all the Warrantholders, whether present at or absent from such meeting, and every instrument in writing signed by Warrantholders in accordance with Section 6.14 shall be binding upon all the Warrantholders, whether signatories thereto or not, and each and every Warrantholder and the Warrant Agent (subject to the provisions for indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing. In the case of an instrument in writing, the Warrant Agent shall give notice in the manner contemplated in sections 9.1 and 9.2 of the effect of the instrument in writing to all Warrantholders and the Company as soon as is reasonably practicable.

6.16 Holdings by the Company or Subsidiaries of the Company Disregarded

In determining whether Warrantholders are present at a meeting of Warrantholders for the purpose of determining a quorum or have concurred in any consent, waiver, extraordinary resolution, Warrantholders' Request or other action under this Indenture, Warrants owned legally or beneficially by the Company or its Subsidiaries or in partnership of which the Company is directly or indirectly a party to shall be disregarded.

6.17 Common Shares or Warrants Owned by the Company or its Subsidiaries – Certificate to be Provided

For the purpose of disregarding any Warrants owned legally or beneficially by the Company in Section 6.16, the Company shall provide to the Warrant Agent, upon written request, a certificate of the Company setting forth as at the date of such certificate:

(a)

the names (other than the name of the Company) of the Warrantholders which, to the knowledge of the Company, hold Warrants that are owned by or held for the account of the Company; and

(b)

the number of Warrants owned legally or beneficially by the Company, and the Warrant Agent, in making the computations in Section 6.16, shall be entitled to rely on such certificate without any additional evidence

ARTICLE 7

SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES

7.1

Provision for Supplemental Indentures for Certain Purposes

From time to time the Company (if properly authorized by its directors) and the Warrant Agent may, subject to the provisions hereof, and they shall, when so directed in accordance with the provisions hereof, execute and deliver by their proper officers, indentures or instruments supplemental hereto, which thereafter shall form part hereof, for any one or more or all of the following purposes:

(a)

providing for the issuance of additional Warrants hereunder including Warrants in excess of the number set out in Section 2.1 and any consequential amendments hereto as may be required by the Warrant Agent, relying on the advice of counsel;

(b)

setting forth adjustments in the application of Article 2;

(c)

adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel are necessary or advisable, provided that the same are not in the opinion of the Warrant Agent, relying on the advice of counsel, prejudicial to the interests of the Warrantholders as a group;

(d)

giving effect to any extraordinary resolution passed as provided in Article 6;

(e)

making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder provided that such provisions are not, in the opinion of the Warrant Agent, relying on the advice of counsel, prejudicial to the interests of the Warrantholders as a group;

(f)

adding to or amending the provisions hereof in respect of the transfer of Warrants, making provision for the exchange of Warrants and making any modification in the form of the Warrant Certificate that does not affect the substance thereof;

(g)

amending any of the provisions of this Indenture or relieving the Company from any of the obligations, conditions or restrictions herein contained, provided that no such amendment or relief shall be or become operative or effective if, in the opinion of the Warrant Agent, relying on the advice of counsel, such amendment or relief impairs any of the rights of the Warrantholders as a group or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any supplemental indenture that in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative; and

(h)

for any other purpose not inconsistent with the terms of this Indenture, 40

including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors or omissions herein, provided that, in the opinion of the Warrant Agent, relying on the advice of counsel, the rights of the Warrant Agent and the Warrantholders as a group are in no way prejudiced thereby.

7.2

Successor Companies

In the case of the amalgamation, consolidation, arrangement, merger or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to or with another person (a "successor company"), the successor company resulting from the amalgamation, consolidation, arrangement, merger or transfer (if not the Company) shall be bound by the provisions hereof and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this Indenture to be performed by the Company and the successor company shall by supplemental indenture satisfactory in form to the Warrant Agent and executed and delivered to the Warrant Agent, expressly assume those obligations.

ARTICLE 8 CONCERNING THE WARRANT AGENT

8.1

Indenture Legislation

(1) If and to the extent that any provision of this Indenture limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, such mandatory requirement shall prevail.

(2) The Company and the Warrant Agent agree that each will at all times in relation to this Indenture and any action to be taken hereunder observe and comply with and be entitled to the benefit of Applicable Legislation.

8.2

Rights and Duties of Warrant Agent

(1) The Warrant Agent accepts the duties and responsibilities under this Indenture, solely as custodian, bailee and agent. No trust is intended to be, or is or will be, created hereby and the Warrant Agent shall owe no duties hereunder as a trustee.

(2) In the exercise of the rights and duties prescribed or conferred by the terms of this Indenture, the Warrant Agent shall act honestly and in good faith with a view to the best interests of the Warrantholders and shall exercise the degree of care, diligence and skill that a reasonably prudent warrant agent would exercise in comparable circumstances. No provision of this Indenture shall be construed to relieve the Warrant Agent from, or require any other person to indemnify the Warrant Agent against liability for its own gross negligence, wilful misconduct, bad faith or fraud.

Warrantholders furnishing, when required by notice in writing by the Warrant Agent, sufficient funds to commence or continue such act, action or proceeding and an indemnity reasonably satisfactory to the Warrant Agent and its counsel to protect and hold harmless the Warrant Agent, its officers, directors, employees, agents, successors and assigns against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Indenture shall require the Warrant Agent to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.

(4) The Warrant Agent may, before commencing any act, action or proceeding, or at any time during the continuance thereof require the Warrantholders at whose instance it is acting to deposit with the Warrant Agent the Warrants held by them, for which Warrants the Warrant Agent shall issue receipts.

(5) Every provision of this Indenture that, by its terms, relieves the Warrant Agent of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of Applicable Legislation.

(6) The Warrant Agent shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereunder unless and until it shall have been required to do so under the terms hereof; nor shall the Warrant Agent be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall specifically set out the default desired to be brought to the attention of the Warrant Agent and in the absence of such notice the Warrant Agent may for all purposes of this Indenture conclusively assume that no default has occurred or been made in the performance or observance of the representations, warranties and covenants, agreements or conditions herein contained. Any such notice shall in no way limit any discretion herein given to the Warrant Agent to determine whether or not the Warrant Agent shall take action with respect to any default.

(7) In this Indenture, whenever confirmations or instructions are required to be given to the Warrant Agent, in order to be valid, such confirmations and instructions shall be in writing.

8.3

Evidence, Experts and Advisers

(1) In addition to the reports, certificates, opinions and other evidence required by this Indenture, the Company shall furnish to the Warrant Agent such additional evidence of compliance with any provision hereof and in such form as may be prescribed by Applicable Legislation or as the Warrant Agent may reasonably require by written notice to the Company.

(2) In the exercise of its rights and duties hereunder, the Warrant Agent may, if it is acting in good faith, act and rely absolutely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, written requests, consents, or orders of the Company, certificates of the Company or other evidence furnished to the Warrant Agent pursuant to any provision hereof or of Applicable Legislation or pursuant to a request of the Warrant Agent, provided that such evidence complies with Applicable Legislation and that the Warrant Agent complies with Applicable Legislation and that the Warrant Agent examines the same and determines that such evidence complies with the applicable requirements of this Indenture. The Warrant Agent shall be under no responsibility in respect of the validity of this Indenture or the execution and delivery hereof by or on behalf of the Company or in respect of the validity or the execution of any Warrant Certificate by the Company and issued hereunder, nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Indenture or in any such Warrant Certificate; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any securities to be issued upon the right to acquire provided for in this Indenture and/or in any Warrant or as to whether any securities will when issued be duly authorized or be validly issued and fully paid and non-assessable.

(3) Whenever provided for in this Indenture or Applicable Legislation requires that the Company deposit with the Warrant Agent resolutions, certificates, reports, opinions, requests, orders or other documents, it is intended that the truth, accuracy and good faith on the effective date thereof and the facts and opinions stated in all such documents so deposited shall, in each and every such case, be conditions precedent to the right of the Company to have the Warrant Agent take the action to be based thereon.

(4) Proof of the execution of an instrument in writing, including a Warrantholders' Request, by any Warrantholder may be made by a certificate of a notary public or other person with similar powers that the person signing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Warrant Agent may consider adequate and in respect of a corporate Warrantholder, shall include a certificate of incumbency of such Warrantholder together with a certified resolution authorizing the person who signs such instrument to sign such instrument.

(5) The Warrant Agent may act and rely and shall be protected in acting and relying upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter, or other paper document believed by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties. The Warrant Agent has sole discretion and shall be protected in acting and relying upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter or other paper document received in facsimile or e-mail form.

(6) The Warrant Agent may employ or retain such counsel, accountants, engineers, appraisers or other experts or advisers as it may reasonably require for the purpose of determining and discharging its duties hereunder and shall pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any counsel and shall not be responsible for any misconduct or negligence on the part of any of them who has been selected with due care by the Warrant Agent. Any reasonable remuneration paid by the Warrant Agent shall be paid by the Company in accordance with Section 4.2.

(7) The Warrant Agent may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any counsel, accountant, appraiser, engineer or other expert or advisor, whether retained or employed by the Company or the Warrant Agent, in relation to any matter arising in fulfilling its duties and obligations hereof.

(8) The Warrant Agent may, as a condition precedent to any action to be taken by it under this Indenture, require such opinions, statutory declarations, reports, certificates or other evidence as it, acting reasonably, considers necessary or advisable in the circumstances.

(9) The Warrant Agent is not required to expend or place its own funds at risk in executing its duties and obligations.

8.4

Securities, Documents and Monies Held by Warrant Agent

(90) Any securities, documents of title, monies or other instruments that may at any time be held by the Warrant Agent subject to the duties and obligations hereof, for the benefit of the Company, may be placed in the deposit vaults of the Warrant Agent or of any Schedule 1 Canadian chartered bank under the Bank Act (Canada) or deposited for safekeeping with any such bank or the Warrant Agent. Any monies held pending the application or withdrawal thereof under any provisions of this Indenture, shall be held, invested and reinvested in "Permitted Investments" as directed in writing by the Company. "Permitted Investments" shall be treasury bills guaranteed by the Government of Canada having a term to maturity not to exceed ninety (90) days, or term deposits or bankers' acceptances of a Canadian chartered bank having a term to maturity not to exceed ninety (90) days, or such other investments that is in accordance with the Warrant Agent's standard type of investments. Unless otherwise specifically provided herein, all interest or other income received by the Warrant Agent in respect of such deposits and investments shall belong to the Company and shall be paid to the Company upon discharge of this Indenture.

(2) Any written direction for the investment or release of funds received shall be received by the Warrant Agent by 9:00 a.m. (Calgary time) on the Business Day on which such investment or release is to be made, failing which such direction will be handled on a commercially reasonable efforts basis and may result in funds being invested or released on the next Business Day.

(3) The Warrant Agent shall have no responsibility or liability for any diminution of any funds resulting from any investment made in accordance with this Indenture, including any losses on any investment liquidated prior to maturity in order to make a payment required hereunder.

(4) In the event that the Warrant Agent does not receive a direction or only a partial direction, the Warrant Agent may hold cash balances constituting part or all of such monies and may, but need not, invest same in its deposit department, the deposit department of one of its affiliates, or the deposit department of a Canadian chartered bank; but the Warrant Agent, its affiliates or a Canadian chartered bank shall not be liable to account for any profit to any parties to this Indenture or to any other person or entity.

8.5

Actions by Warrant Agent to Protect Interests

The Warrant Agent shall have the power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Warrantholders pursuant to the provisions of this Indenture.

8.6

Warrant Agent not Required to Give Security

The Warrant Agent shall not be required to give any bond or security in respect of the execution of the duties and obligations of this Indenture or otherwise.

8.7

Protection of Warrant Agent

By way of supplement to the provisions of any law for the time being relating to warrant agents, it is expressly declared and agreed as follows:

(1) The Warrant Agent shall not be liable for or by reason of any representations, statements of fact or recitals in this Indenture or in the Warrants (except the representation contained in Section 8.9 or in the Authentication of the Warrant Agent on the Warrants) or be required to verify the same and all such statements of fact or recitals are and shall be deemed to be made by the Company.

(2) Nothing herein contained shall impose any obligation on the Warrant Agent to see to or to require evidence of the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental hereto.

(3) The Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof.

(4) The Warrant Agent shall not incur any liability or responsibility whatsoever or be in any way responsible for the consequence of any breach on the part of the Company of any of the covenants or warranties herein contained or of any acts of any directors, officers, employees, agents or servants of the Company.

(5) Without limiting any protection or indemnity of the Warrant Agent under any other provision hereof, or otherwise at law, the Company hereby agrees to indemnify and hold harmless the Warrant Agent and its affiliates, directors, officers, agents and employees, successors and assigns (the "Indemnified Parties") from and against any and all liabilities whatsoever, losses, damages, penalties, claims, demands, proceedings, charges, actions, suits, costs, expenses and disbursements, including reasonable legal or advisor fees and disbursements on a solicitor and client basis, of whatever kind and nature which may at any time be imposed on, incurred by or asserted against the Indemnified Parties, or any of them, whether at law or in equity, in any way caused by or arising from the performance of its duties hereunder, directly or indirectly, in respect of any act, deed, matter or thing whatsoever made, done, acquiesced in or omitted in or about or in relation to the execution of the Indemnified Parties' duties, or any other services that Warrant Agent may provide in connection with or in any way relating to this Indenture. The Company agrees that its liability hereunder shall be absolute and unconditional regardless of the correctness of any representations of any third parties and regardless of any liability of third parties to the Indemnified Parties, and shall accrue and become enforceable without prior demand or any other precedent action or proceeding; provided that the Company shall not be required to indemnify the Indemnified Parties in the event of the gross negligence, fraud or wilful misconduct of the Warrant Agent, and this provision shall survive the resignation or removal of the Warrant Agent or the termination or discharge of this Indenture.

(6) Notwithstanding the foregoing or any other provision of this Indenture, any liability of the Warrant Agent shall be limited, in the aggregate, to the amount of annual retainer fees paid by the Company to the Warrant Agent under this Indenture in the twelve (12) months immediately prior to the Warrant Agent receiving the first notice of the claim; provided that this limitation shall not apply in respect of any gross negligence, fraud or wilful misconduct of the Warrant Agent. Notwithstanding any other provision of this Indenture, and whether such losses or damages are foreseeable or unforeseeable, the Warrant Agent shall not be liable under any circumstances whatsoever for any (a) breach by any other party of securities law or other rule of any securities regulatory authority, (b) lost profits or (c) special, indirect, incidental, consequential, exemplary, aggravated or punitive losses or damages.

(7) If any of the funds provided to the Warrant Agent hereunder are received by it in the form of an uncertified cheque or bank draft, the Warrant Agent shall delay the release of such funds and the related Warrant Shares until such uncertified cheque has cleared the financial institution upon which the same is drawn.

(8) The forwarding of a cheque or the sending of funds by wire transfer by the Warrant Agent will satisfy and discharge the liability of any amounts due to the extent of the sum represented thereby unless such cheque is not honoured on presentation, provided that in the event of the non-receipt of such cheque by the payee, or the loss or destruction thereof, the Warrant Agent, upon being furnished with reasonable evidence of such non-receipt, loss or destruction and indemnity reasonably satisfactory to it, will issue to such payee a replacement cheque for the amount of such cheque.

(9) The Warrant Agent shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Warrant Agent, in its sole judgement, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline. Further, should the Warrant Agent, in its sole judgement, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline, then it shall have the right to resign on ten (10) days' written notice to the Company provided: (i) that the Warrant Agent's written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Warrant Agent's satisfaction within such ten (10) day period, then such resignation shall not be effective.

8.8

Replacement of Warrant Agent

(1) The Warrant Agent may resign its appointment and be discharged from all further duties and liabilities hereunder by giving to the Company not less than sixty (60) days prior notice in writing or such shorter prior notice as the Company may accept as sufficient. The Warrantholders by extraordinary resolution shall have the power at any time to remove the existing Warrant Agent and to appoint a new warrant agent. In the event of the Warrant Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Company shall forthwith appoint a new warrant agent unless a new warrant agent has already been appointed by the Warrantholders; failing such appointment by the Company, the retiring Warrant Agent or any Warrantholder may apply to a justice of the Ontario Superior Court of Justice (the "Court") at the Company's expense, on such notice as such justice may direct, for the appointment of a new warrant agent; but any new warrant agent so appointed by the Company or by the Court shall be subject to removal as aforesaid by the Warrantholders. Any new warrant agent appointed under any provision of this Section 8.8 shall be a corporation authorized to carry on the business of a transfer agent or a trust company in one or more provinces of Canada and, if required by Applicable Legislation of any province, in such province. On any such appointment the new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Warrant Agent without any further assurance, conveyance, act or deed; but there shall be immediately executed, at the expense of the Company, all such conveyances or other instruments as may, in the opinion of counsel, be necessary or advisable for the purpose of assuring the same to the new warrant agent, provided that any resignation or removal of the Warrant Agent and appointment of a successor warrant agent shall not become effective until the successor warrant agent shall have executed an appropriate instrument accepting such appointment and, at the request of the Company, the predecessor Warrant Agent, upon payment of its outstanding remuneration and expenses, shall execute and deliver to the successor warrant agent an appropriate instrument transferring to such successor warrant agent all rights and powers of the Warrant Agent hereunder and all securities, documents of title and other instruments and all monies and properties held by the Warrant Agent hereunder.

(2) Upon the appointment of a successor warrant agent, the Company shall promptly notify the Warrantholders thereof in the manner provided for in Section 9.2.

(3) Any corporation into or with which the Warrant Agent may be merged or consolidated or amalgamated, or any corporation succeeding to the corporate trust business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without any further act on its part or of any of the parties hereto, provided that such corporation would be eligible for appointment as a new warrant agent under Section 8.8(1).

(4) Any Warrants Authenticated or certified but not delivered by a predecessor Warrant Agent may be Authenticated or certified by the new or successor warrant agent in the name of the predecessor or the new or successor warrant agent.

8.9

Conflict of Interest

(1) The Warrant Agent represents to the Company, to the best of its knowledge, that at the time of execution and delivery hereof no material conflict of interest exists which it is aware of in the Warrant Agent's role hereunder and agrees that in the event of a material conflict of interest arising which it becomes aware of hereafter it will, within ninety (90) days after ascertaining that it has such a material conflict of interest, either eliminate the same or resign its appointment hereunder. If any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Indenture and the Warrants shall not be affected in any manner whatsoever by reason thereof.

(2) Subject to Section 8.9(1), the Warrant Agent, in its personal or any other capacity, may buy, lend upon and deal in securities of the Company and generally may contract and enter into financial transactions with the Company or any Subsidiary without being liable to account for any profit made thereby.

8.10 Acceptance of Duties and Obligations

The Warrant Agent hereby accepts the duties and obligations in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein set forth and agrees to hold all rights, interests and benefits contained herein on behalf of those persons who become holders of Warrants from time to time issued under this Indenture.

8.11 Warrant Agent not to be Appointed Receiver

The Warrant Agent and any person related to the Warrant Agent shall not be appointed a receiver or receiver and manager or liquidator of all or any part of the assets or undertaking of the Company or any Subsidiary or any partnership of which the Company is directly or indirectly involved.

8.12 Authorization to Carry on Business

The Warrant Agent represents to the Company that it is registered to carry on business under Applicable Legislation in the provinces of Alberta and British Columbia.

ARTICLE 9 GENERAL

9.1

Notice to the Company and the Warrant Agent

(1) Unless herein otherwise expressly provided, any notice to be given hereunder to the Company or the Warrant Agent shall be deemed to be validly given if delivered, if sent by registered letter, postage prepaid or if transmitted by email to the following addresses or facsimile numbers:

(a) If to the Company, to:

Planet 13 Holdings Inc.

2548 West Desert Inn Road

Las Vegas, Nevada

89109

Attention: Leighton Koehler

E-mail: [REDACTED]

with a copy to:

Wildeboer Dellelce LLP

396 Bay Street, Suite 80

Toronto, ON

M5H 2V1

Attention: Charlie Malone

E-mail: [REDACTED]

(b) If to the Warrant Agent, to:

Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

Attention: Dan Sander

Email: [REDACTED]

and any notice given in accordance with the foregoing shall be deemed to have been received on the date of delivery if that date is a Business Day (and if that date is not a Business Day, on the next Business Day) or, if mailed, on the fifth Business Day following the date of the postmark on such notice or, if transmitted by email, on the Business Day following the transmission.

(2)

The Company or the Warrant Agent, as the case may be, may from time to tim notify the other in the manner provided in Section 9.1(1) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Company or the Warrant Agent, as the case may be, for all purposes of this Indenture.e

(3) If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrant Agent or to the Company hereunder could reasonably be considered unlikely to reach its destination, the notice shall be valid and effective only if it is delivered to an officer of the party to which it is addressed or if it is delivered to that party at the appropriate address provided in Section 9.1(1) by facsimile or other means of prepaid, transmitted or recorded communication and any notice delivered in accordance with the foregoing shall be deemed to have been received on the date of delivery to the officer or if delivered by facsimile or other means of prepaid, transmitted, recorded communication on the third Business Day following the date of the sending of the notice by the person giving the notice.

9.2

Notice to the Warrantholders

(1) Any notice to the Warrantholders under the provisions of this Indenture shall be deemed to be validly given if the notice is sent by prepaid mail or, if delivered by hand, to the holders at their addresses appearing in the register of holders. Any notice so delivered shall be deemed to have been received on the date of delivery if that date is a Business Day or the Business Day following the date of delivery if such date is not a Business Day or on the third Business Day if delivered by mail. All notices may be given to whichever one of the Warrantholders (if more than one) is named first in the appropriate register hereinbefore mentioned, and any notice so given shall be sufficient notice to all Warrantholders and any other persons (if any) interested in such Warrants. Accidental error or omission in giving notice or accidental failure to mail notice to any Warrantholder will not invalidate any action or proceeding founded thereon.

(2) If, by reason of strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrantholders could reasonably be considered unlikely to reach its destination, the notice may be given in a news release disseminated through a newswire service, filed on SEDAR and posted on the Company's website; provided that in the case of a notice convening a meeting of the holders of Warrants, the Warrant Agent may require such additional publications of that notice, in Toronto, Ontario or in other cities or both, as it may deem necessary for the reasonable notification of the holders of Warrants or to comply with any applicable requirement of law or any stock exchange. Any notice so given shall be deemed to have been given on the day on which it has been published in all of the cities in which publication was required.

9.3

Privacy

The Company acknowledges that the Warrant Agent may, in the course of providing services hereunder, collect or receive financial and other personal information about such parties and/or their representatives, as individuals, or about other individuals related to the subject matter hereof, and use such information for the following purposes:

(a)

to provide the services required under this Indenture and other services that may be requested from time to time;

(b)

to help the Warrant Agent manage its servicing relationships with such individuals

(c)

to meet the Warrant Agent's legal and regulatory requirements; and

(d)

if Social Insurance Numbers are collected by the Warrant Agent, to perform tax reporting and to assist in verification of an individual's identity for security purposes.

The Company acknowledges and agrees that the Warrant Agent may receive, collect, use and disclose personal information provided to it or acquired by it in the course of its acting as agent hereunder for the purposes described above and, generally, in the manner and on the terms described in its privacy code, which the Warrant Agent shall make available on its website or upon request, including revisions thereto. Some of this personal information may be transferred to servicers in the United States for data processing and/or storage. Further, the Company agrees that it shall not provide or cause to be provided to the Warrant Agent any personal information relating to an individual who is not a party to this Indenture unless the Company has assured itself that such individual understands and has consented to the aforementioned uses and disclosures.

9.4

Third Party Interests

The Company represents to the Warrant Agent that any account to be opened by, or interest to held by the Warrant Agent in connection with this Indenture, for or to the credit of such party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such party hereto agrees to complete and execute forthwith a declaration in the Warrant Agent prescribed form as to the particulars of such third party.

9.5

Securities Exchange Commission Certification

The Company confirms that as at the date of this Indenture it does not have a class of securities registered pursuant to section 12 of the U.S. Securities and Exchange Act of 1934, as amended (the "Exchange Act") or have a reporting obligation pursuant to section 15(d) of the Exchange Act.

The Company covenants that in the event that (i) any class of its securities shall become registered pursuant to section 12 of the Exchange Act or the Company shall incur a reporting obligation pursuant to section 15(d) of the Exchange Act, or (ii) any such registration or reporting obligation shall be terminated by the Company in accordance with the Exchange Act, the Company shall promptly deliver to the Warrant Agent an Officer's Certificate (in a form provided by the Warrant Agent) notifying the Warrant Agent of such registration or termination and such other information as the Warrant Agent may reasonably require at the time. The Company acknowledges that the Warrant Agent is relying upon the foregoing representation and covenants in order to meet certain United States Securities and Exchange Commission ("SEC") obligations with respect to those clients who are filing with the SEC.

9.6

Discretion of Directors

Any matter provided herein to be determined by the directors in their sole discretion and determination so made will be conclusive.

9.7

Satisfaction and Discharge of Indenture

Upon the earlier of the Time of Expiry or the date by which there shall have been delivered to the Warrant Agent for exercise or destruction in accordance with the provisions hereof all Warrants theretofore Authenticated or certified hereunder and by which no Warrants shall remain issuable hereunder, this Indenture, except to the extent that Warrant Shares and any certificates therefor have not been issued and delivered hereunder or the Company has not performed any of its obligations hereunder, shall cease to be of further effect in respect of the Company, and the Warrant Agent, on written demand of and at the cost and expense of the Company, and upon delivery to the Warrant Agent of a certificate of the Company stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with and upon payment to the Warrant Agent of the expenses, fees and other remuneration payable to the Warrant Agent, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; provided that if the Warrant Agent has not then performed any of its obligations hereunder any such satisfaction and discharge of the Company's obligations hereunder shall not affect or diminish the rights of any Warrantholder or the Company against the Warrant Agent.

9.8

Provisions of Indenture and Warrants for the Sole Benefit of Parties and Warrantholders

Nothing in this Indenture or the Warrant Certificates, expressed or implied, shall give or be construed to give to any person other than the parties hereto and the holders from time to time of the Warrants any legal or equitable right, remedy or claim under this Indenture, or under any covenant or provision therein contained, all such covenants and provisions being for the sole benefit of the parties hereto and the Warrantholders.

9.9

Indenture to Prevail

To the extent of any discrepancy or inconsistency between the terms and conditions of this Indenture and the Warrant Certificate, the terms of this Indenture will prevail.

9.10 Assignment

This Indenture nor any benefits or burdens under this Indenture shall be assignable by the Company or the Warrant Agent without the prior written consent of the other party, such consent not to be unreasonably withheld. Subject to the foregoing, this Indenture shall enure to the benefit of and be binding upon the Company and the Warrant Agent and their respective successors (including any successor by reason of amalgamation) and permitted assigns.

9.11

Severability

If, in any jurisdiction, any provision of this Indenture or its application to any party or circumstance is restricted, prohibited or unenforceable, such provision will, as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions of this Indenture and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other parties or circumstances.

9.12 Force Majeure

No party shall be liable to the other, or held in breach of this Indenture, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other similar causes (including, but not limited to, mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Indenture shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this section.

9.13 Counterparts and Formal Date

This Indenture may be simultaneously executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date set out at the top of the first page of this Indenture.

(Signature page follows)

IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper officers in that behalf.

	PLANET 13 HOLDINGS INC.

	By:	/s/ Dennis Logan
		Dennis Logan
		Chief Financial Officer

	ODYSSEY TRUST COMPANY

	By:	/s/ Dan Sander
		Authorized Signatory
	By:	/s/ Amy Douglas
		Authorized Signatory

SCHEDULE “A”

FORM OF WARRANT CERTIFICATE

WARRANTS TO PURCHASE COMMON SHARES

OF PLANET 13 HOLDINGS INC.

(a company existing under the laws of British Columbia)

[For Warrants issued in the United States or to, or for the account or benefit of, U.S. Persons, also include the following legends:]

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (E) UNDER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(i) OR (D) ABOVE, A LEGAL OPINION OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, MUST FIRST BE PROVIDED TO THE COMPANY AND THE COMPANY'S TRANSFER AGENT TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.

THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

CUSIP No. 72706K135

ISIN No.

CA72706K1350

Warrant Certificate Number: ●

Representing ● Warrants to

purchase Common shares

(as defined below)

THIS CERTIFIES that, for value received, the registered holder hereof, ● (the "holder") is entitled at any time at or before the Expiry Time (as defined below) to acquire, subject to

adjustment in certain events, the number of Common Shares ("Common Shares") of Planet 13 Holdings Inc. (the "Company") specified above, as presently constituted, by surrendering to Odyssey Trust Company (the "Warrant Agent") at its principal office in Calgary, Alberta, this Warrant Certificate with the duly completed and executed Exercise Form endorsed on the back of this Warrant Certificate, and accompanied by payment of $2.85 per Common Share (the "Warrant Exercise Price") by certified cheque, bank draft or money order in lawful money of Canada payable to, or to the order of, the Company at par at the above-mentioned office of the Warrant Agent. The holder of this Warrant Certificate may purchase less than the number of Common Shares which he is entitled to purchase on the exercise of the Warrants represented by this Warrant Certificate, in which event a new Warrant Certificate representing the Warrants not then exercised will be issued to the holder.

The Warrants evidenced under this Warrant Certificate are exercisable on or before 5:00 p.m. (Toronto time) (the "Expiry Time") on July 3, 2022 (the "Expiry Date"). After the Expiry Time, Warrants evidenced hereby shall be deemed to be void and of no further force or effect.

This Warrant Certificate represents Warrants of the Company issued or issuable under the provisions of a warrant indenture (which indenture together with all other instruments supplemental or ancillary thereto is herein referred to as the "Warrant Indenture") dated as of July 3, 2020, between the Company and the Warrant Agent, as may be amended from time to time, which contains particulars of the rights of the holders of the Warrants and the Company and of the Warrant Agent in respect thereof and the terms and conditions upon which the Warrants are issued and held, all to the same effect as if the provisions of the Warrant Indenture were herein set forth, to all of which the holder of this Warrant Certificate by acceptance hereof assents. Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Warrant Indenture. A copy of the Warrant Indenture can be requested by contacting the Warrant Agent. In the event of any conflict between the provisions contained in this Warrant Certificate and the provisions of the Warrant Indenture, the provisions of the Warrant Indenture shall prevail.

Upon acceptance hereof, the holder hereof hereby expressly waives the right to receive any fractional Common Shares upon the exercise hereof in full or in part and further waives the right to receive any cash or other consideration in lieu thereof. The Warrants represented by this Warrant Certificate shall be deemed to have been surrendered, and payment by certified cheque, bank draft or money order shall be deemed to have been made only upon personal delivery thereof or, if sent by post or other means of transmission, upon actual receipt thereof by the Warrant Agent at its office in the City of Calgary, Alberta.

Upon due exercise of the Warrants represented by this Warrant Certificate and payment of the Warrant Exercise Price, the Company shall cause to be issued to the person(s) in whose name(s) the Common Shares have been so subscribed for, the number of Common Shares to be issued to such person(s) (provided that if the Common Shares are to be issued to a person other than the registered holder of this Warrant Certificate, the holder's signature on the Exercise Form herein shall be guaranteed by a Schedule I Canadian chartered bank or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program), and the holder shall pay to the Company or the Warrant Agent all applicable transfer or similar taxes and the Company shall not be required to issue or deliver certificates evidencing the Common Shares unless or until the holder shall have paid the Company or the Warrant Agent the amount of such tax (or shall have satisfied the Company that such tax has been paid or that no tax is due), and such person(s) shall become a holder in respect of such Common Shares with effect from the date of such exercise, and upon due surrender of this Warrant Certificate, the Transfer Agent shall issue a certificate(s) representing such Common Shares to be issued within five Business Days after the exercise of the Warrants (or portion thereof) represented hereby.

Neither the Warrants represented by this Warrant Certificate nor the Common Shares issuable upon exercise hereof have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws. The Warrants represented by this Warrant Certificate may not be exercised within the United States or by, or for the account or benefit of, a U.S. person or a person within the United States unless registered under the U.S. Securities Act and any applicable state securities laws or unless an exemption from such registration is available. Certificates representing Common Shares issued in the United States or to, or for the account or benefit of, U.S. persons will bear a legend restricting the transfer and exercise of such securities under applicable United States federal and state securities laws. "United States" and "U.S. person" are as defined in Regulation S under the U.S. Securities Act.

The holder acknowledges that the Warrants represented by this Warrant Certificate and the Common Shares issuable upon exercise hereof may be offered, sold or otherwise transferred only in compliance with all applicable securities laws.

No transfer of any Warrant will be valid unless entered on the register of transfers, upon surrender to the Warrant Agent of the Warrant Certificate evidencing such Warrant, duly endorsed by, or accompanied by a transfer form or other written instrument of transfer in form satisfactory to the Warrant Agent executed by the registered holder or his executors, administrators or other legal representatives or his or their attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent. Subject to the provisions of the Warrant Indenture and upon compliance with the reasonable requirements of the Warrant Agent, Warrant Certificates may be exchanged for Warrants Certificates entitling the holder thereof to acquire an equal aggregate number of Common Shares subject to adjustment as provided for in the Warrant Indenture. The Company and the Warrant Agent may treat the registered holder of this Warrant Certificate for all purposes as the absolute owner hereof. The holding of the Warrants represented by this Warrant Certificate shall not constitute the holder hereof a holder of Common Shares nor entitle him to any right or interest in respect thereof except as herein and in the Warrant Indenture expressly provided.

The Warrant Indenture provides for adjustment in the number of Common Shares to be delivered upon exercise of the right of purchase hereby granted and to the Warrant Exercise Price in certain events therein set forth.

The Warrant Indenture contains provisions making binding upon all holders of Warrants outstanding thereunder resolutions passed at meetings of such holders held in accordance with such provisions and instruments in writing signed by the Warrantholders entitled to acquire upon the exercise of the Warrants a specified percentage of the Common Shares.

The Warrants and the Warrant Indenture shall be governed by and performed, construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts. Time shall be of the essence hereof and of the Warrant Indenture.

The Company may from time to time at any time prior to the Expiry Time purchase any of the Warrants by private agreement or otherwise.

This Warrant Certificate shall not be valid for any purpose until it has been certified by or on behalf of the Warrant Agent for the time being under the Warrant Indenture. All dollar amounts herein are expressed in the lawful money of Canada.

(Signature page follows)

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed by its duly authorized officer as of this _________ day of ________, 20

	PLANET 13 HOLDINGS INC.

	By:
		Authorized Signing Officer Countersigned this _______ day of ______, 20

	ODYSSEY TRUST COMPANY

	By:
		Authorized Signing Officer

EXERCISE FORM

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

The undersigned holder of the within Warrants hereby irrevocably exercises the right of such holder to be issued and hereby subscribes for Common Shares of Planet 13 Holdings Inc. (the "Company") at the Warrant Exercise Price referred to in the attached Warrant Certificate on the terms and conditions set forth in such certificate and the Warrant Indenture and encloses herewith a certified cheque, bank draft or money order payable at par in the City of Calgary, in the Province of Alberta to the order of the Company in payment in full of the subscription price of the Common Shares hereby subscribed for.

Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the warrant indenture between the Company and Odyssey Trust Company dated July 3, 2020.

(Please check the ONE box applicable):

☐

1.The undersigned certifies that it (i) is not in the United States and is not a "U.S.

person", within the meaning of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), (ii) is not exercising this Warrant for the account or benefit of any U.S. Person or person in the United States, (iii) did not execute or deliver this Exercise Form within the United States and (iv) has in all other aspects complied with the terms of Regulation S under the U.S. Securities Act.

☐

2.The undersigned certifies that it (i) purchased the Warrants as a part of the Units

in the Offering; (ii) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Offering and for whose account such holders exercises sole investment discretion; (iii) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is, a Qualified Institutional Buyer both on the date the Units were purchased in the Offering and on the Exercise Date; and (iv) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in such holder’s QIB Letter remain true and correct on the Exercise Date.

☐

3.The undersigned is delivering a written opinion of United States legal counsel or

evidence satisfactory to the Company to the effect that the Warrant and the Common Shares to be delivered upon exercise hereof have been registered under the U.S. Securities Act or are exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

It is understood that the Company may require evidence to verify the foregoing representations.

The undersigned hereby directs that the said Common Shares be issued as follows:

NAME(S) IN FULL

ADDRESS(ES)

NUMBER OFCOMMON SHARES

Please print full name in which certificates representing the Common Shares are to be issued. If any Common Shares are to be issued to a person or persons other than the registered holder, the registered holder must pay to the Warrant Agent all eligible transfer taxes or other government charges, if any, and the Transfer Form must be duly executed.

Once completed and executed, this Exercise Form must be mailed or delivered to Odyssey Trust Company, c/o Corporate Trust.

DATED this

day of

)

Witness

) (Signature of Warrantholder, to be the same as

) appears on the face of this Warrant Certificate)

)

Name of Registered Warrantholder

[

] Please check this box if the securities are to be delivered at the office where these Warrants are surrendered, failing which the securities will be mailed.

NOTES:

Certificates will not be registered or delivered to an address in the United States unless Box 2 or Box 3 above is checked.

If Box 3 above is checked, holders are encouraged to contact the Company in advance to determine that the legal opinion or evidence tendered in connection with exercise will be satisfactory in form and substance to the Company.

TRANSFER FORM

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

FOR VALUE RECEIVED, the undersigned transferor hereby sells, assigns and transfers unto

(Transferee)

(Address)

(Social Insurance Number)

of the Warrants registered in the name of the undersigned transferor represented by the Warrant Certificate.

In the case of a Warrant Certificate that contains a U.S. restrictive legend, the undersigned hereby represents, warrants and certifies that (one (only) of the following must be checked):

☐

(A) the transfer is being made only to the Company; or

☐

(B) the transfer is being made outside the United States in accordance with Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and in compliance with any applicable local securities laws and regulations and the holder has provided herewith the Declaration for Removal of Legend attached as Schedule "B" to the Warrant Indenture; or

☐

(C) the transfer is being made pursuant to the exemption from the registration requirements of the U.S. Securities Act provided by (i) Rule 144 or (ii) Rule 144A thereunder, and in either case in accordance with applicable state securities laws; or

☐

(D) the transfer is being made within the United States or to, or for the account or benefit of, U.S. persons, in accordance with a transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws and the undersigned has furnished to the Company and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company to such effect.

In the case of a transfer in accordance with (C)(i) or (D) above, the Company and the Warrant Agent shall first have received an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company, to such effect.

In the case of a Warrant Certificate that does not contain a U.S. restrictive legend, if the proposed transfer is to, or for the account or benefit of a U.S. person or to a person in the United States, the undersigned hereby represents, warrants and certifies that the transfer of the Warrants is being completed pursuant to an exemption from the registration requirements of the U.S. Securities Act and any applicable state securities laws, in which case the undersigned has furnished to the Company and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company to such effect.

"United States" and "U.S. Person" are as defined by Regulation S under the U.S. Securities Act.

DATED this

day of

SPACE FOR GUARANTEES)
OF SIGNATURES (BELOW	)
	)
	)	Signature of Transferor
	)
	)
	)
Guarantor's Signature/Stamp	)	Name of Transferor

REASON FOR TRANSFER – For US Residents only (where the individual(s) or corporation receiving the securities is a US resident). Please select only one (see instructions below).

☐ Gift

☐ Estate

☐ Private Sale

☐ Other (or no change

in ownership)

Date of Event (Date of gift, death or sale):

Value per Warrant on the date of event:


			CAD OR

USD

NOTES:

The signature to this transfer must correspond with the name as recorded on the Warrants in every particular without alteration or enlargement or any change whatever. The signature of the person executing this transfer must be guaranteed by a Schedule I Canadian chartered bank, or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program.

Warrants shall only be transferable in accordance with the warrant indenture between Planet 13 Holdings Inc. and Odyssey Trust Company dated July 3, 2020 (the "Warrant Indenture"),applicable laws and the rules and policies of any applicable stock exchange. Without limiting the foregoing, if the Warrant Certificate bears a legend restricting the transfer of the Warrants except pursuant to an exemption from registration under the U.S. Securities Act, and applicable state securities laws, this Transfer Form must be accompanied by a properly completed and executed declaration for removal of legend in the form attached as Schedule "B" to the Warrant Indenture.

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever. All securityholders or a legally authorized representative must sign this form. The signature(s) on this form must be guaranteed in accordance with the transfer agent's then current guidelines and requirements at the time of transfer. Notarized or witnessed signatures are not acceptable as guaranteed signatures. As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

●

Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE, MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words "Medallion Guaranteed", with the correct prefix covering the face value of the certificate.

●

Canada: A Signature Guarantee obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust. The Guarantor must affix a stamp bearing the actual words "Signature Guaranteed", sign and print their full name and alpha numeric signing number. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a "Signature & Authority to Sign Guarantee" Stamp affixed to the transfer (as opposed to a "Signature Guaranteed" Stamp) obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust or a Medallion Signature Guarantee with the correct prefix covering the face value of the certificate.

●

Outside North America: For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program. The corresponding affiliate will arrange for the signature to be over-guaranteed.

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever. The signature(s) on this form must be guaranteed by an authorized officer of Royal Bank of Canada, Scotia Bank or TD Canada Trust whose sample signature(s) are on file with the transfer agent, or by a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE, MSP). Notarized or witnessed signatures are not acceptable as guaranteed signatures. The Guarantor must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED", "MEDALLION GUARANTEED" OR "SIGNATURE & AUTHORITY TO SIGN GUARANTEE", all in accordance with the transfer agent's then current guidelines and requirements at the time of transfer. For corporate holders, corporate signing resolutions, including certificate of incumbency, will also be required to accompany the transfer unless there is a "SIGNATURE & AUTHORITY TO SIGN GUARANTEE" Stamp affixed to the Form of Transfer obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust or a "MEDALLION GUARANTEED" Stamp affixed to the Form of Transfer, with the correct prefix covering the face value of the certificate.

REASON FOR TRANSFER – FOR US RESIDENTS ONLY

Consistent with US IRS regulations, Odyssey Trust Company is required to request cost basis information from US securityholders. Please indicate the reason for requesting the transfer as well as the date of event relating to the reason. The event date is not the day in which the transfer is finalized, but rather the date of the event which led to the transfer request (i.e. date of gift, date of death of the securityholder, or the date the private sale took place).

SCHEDULE “B”

FORM OF DECLARATION FOR REMOVAL OF LEGEND

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

The undersigned (a) acknowledges that the sale of the securities of Planet 13 Holdings Inc. (the "Company") to which this declaration relates is being made in reliance on Rule 904 of Regulation S ("Regulation S") under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and (b) certifies that (1) it is not an affiliate of the Company (as defined in Rule 405 under the U.S. Securities Act), (2) the offer of such securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (B) the transaction was executed on or through the facilities of the Canadian Securities Exchange and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities, (4) the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the securities are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the securities sold in reliance on Rule 904 of the U.S. Securities Act with fungible unrestricted securities, and (6) the sale was not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S.

Dated:

By:

Name:

Title:

Affirmation By Seller's Broker-Dealer (required for sales in accordance with Section (b)(2)(B)

above)

We have read the foregoing representations of our customer, (the "Seller") dated , with regard to our sale, for such Seller's account, of the securities of the Company described therein, and on behalf of ourselves we certify and affirm that (A) we have no knowledge that the transaction had been prearranged with a buyer in the United States, (B) the transaction was executed on or through the facilities of designated offshore securities market, (C) neither we, nor any person acting on our behalf, engaged in any directed selling efforts in connection with the offer and sale of such securities, and (D) no selling concession, fee or other remuneration is being paid to us in connection with this offer and sale other than the usual and customary broker's commission that would be received by a person executing such transaction as agent. Terms used herein have the meanings given to them by Regulation S.

Name of Firm

By:

Authorized officer

Date:

Exhibit 4.2

PLANET 13 HOLDINGS INC.

- and -

ODYSSEY TRUST COMPANY

WARRANT INDENTURE

Providing for the Issue of

up to 3,110,750 Common Share Purchase Warrants

September 10, 2020

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION		6
1.1	Definitions	6
1.2	Words Importing the Singular	10
1.3	Interpretation not Affected by Headings	10
1.4	Day not a Business Day	11
1.5	Time of the Essence	11
1.6	Governing Law	11
1.7	Meaning of "outstanding" for Certain Purposes	11
1.8	Currency	11
1.9	Termination	11
ARTICLE 2 ISSUE OF WARRANTS		11
2.1	Issue of Warrants	11
2.2	Form and Terms of Warrants	12
2.3	Signing of Warrant Certificates	12
2.4	Authentication by the Warrant Agent	13
2.5	Warrantholder not a Shareholder, etc.	13
2.6	Issue in Substitution for Lost Warrant Certificates	14
2.7	Warrants to Rank Pari Passu	14
2.8	Registration and Transfer of Warrants	14
2.9	Registers Open for Inspection	16
2.10	Exchange of Warrants	16
2.11	Ownership of Warrants	16
2.12	Uncertificated Warrants	16
2.13	Adjustment of Exchange Basis	18
2.14	Rules Regarding Calculation of Adjustment of Exchange Basis	22
2.15	Postponement of Subscription	24
2.16	Notice of Adjustment	24
2.17	No Action after Notice	24
2.18	Purchase of Warrants for Cancellation	25
2.19	Protection of Warrant Agent	25
2.20	U.S. Legend on Warrant Certificates and Warrant Share certificates	25
ARTICLE 3 EXERCISE OF WARRANTS		27
3.1	Method of Exercise of Warrants	27
3.2	No Fractional Shares	29
3.3	Effect of Exercise of Warrants	29
3.4	Cancellation of Warrants	30
3.5	Subscription for less than Entitlement	30


3.6	Expiration of Warrant	30
3.7	Prohibition on Exercise by U.S. Persons; Exception	30
ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT		31
4.1	General Covenants of the Company	31
4.2	Warrant Agent's Remuneration and Expenses	33
4.3	Performance of Covenants by Warrant Agent	33
4.4	Enforceability of Warrants	33
ARTICLE 5 ENFORCEMENT		33
5.1	Suits by Warrantholders	33
5.2	Limitation of Liability	34
5.3	Waiver of Default	34
ARTICLE 6 MEETINGS OF WARRANTHOLDERS		34
6.1	Right to Convene Meetings	34
6.2	Notice	35
6.3	Chairman	35
6.4	Quorum	35
6.5	Power to Adjourn	36
6.6	Show of Hands	36
6.7	Poll and Voting	36
6.8	Regulations	36
6.9	Company, Warrant Agent and Counsel may be Represented	36
6.10	Powers Exercisable by Extraordinary Resolution	37
6.11	Meaning of "Extraordinary Resolution"	38
6.12	Powers Cumulative	38
6.13	Minutes	38
6.14	Instruments in Writing	39
6.15	Binding Effect of Resolutions	39
6.16	Holdings by the Company or Subsidiaries of the Company Disregarded	39
6.17	Common Shares or Warrants Owned by the Company or its Subsidiaries – Certificate to be Provided	39
ARTICLE 7 SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES		40
7.1	Provision for Supplemental Indentures for Certain Purposes	40
7.2	Successor Companies	41
ARTICLE 8 CONCERNING THE WARRANT AGENT		41
8.1	Indenture Legislation	41
8.2	Rights and Duties of Warrant Agent	41
8.3	Evidence, Experts and Advisers	42
8.4	Securities, Documents and Monies Held by Warrant Agent	44
8.5	Actions by Warrant Agent to Protect Interests	44
8.6	Warrant Agent not Required to Give Security	44

8.7	Protection of Warrant Agent	44
8.8	Replacement of Warrant Agent	46
8.9	Conflict of Interest	47
8.10	Acceptance of Duties and Obligations	47
8.11	Warrant Agent not to be Appointed Receiver	47
8.12	Authorization to Carry on Business	47
ARTICLE 9 GENERAL		48
9.1	Notice to the Company and the Warrant Agent	48
9.2	Notice to the Warrantholders	49
9.3	Privacy	49
9.4	Third Party Interests	50
9.5	Securities Exchange Commission Certification	50
9.6	Discretion of Directors	50
9.7	Satisfaction and Discharge of Indenture	51
9.8	Provisions of Indenture and Warrants for the Sole Benefit of Parties and Warrantholders
9.9	Indenture to Prevail	51
9.10	Assignment	51
9.11	Severability	51
9.12	Force Majeure	51
9.13	Rights of Rescission and Withdrawal for Holders	52
9.14	Counterparts and Formal Date	52

Schedule “A” Form of Warrant Certificate

Schedule “B” Form of Declaration for Removal of Legend

THIS WARRANT INDENTURE dated as of September 10, 2020

BETWEEN:

PLANET 13 HOLDINGS INC.,

a company existing under the laws of British Columbia

(the "Company")

AND

ODYSSEY TRUST COMPANY,

a trust company incorporated under the laws of Alberta and authorized to carry on business in the provinces of Alberta and British Columbia

(the "Warrant Agent")

RECITALS

WHEREAS:

In connection with the public offering by the Company of up to 6,221,500 Units (as defined below) pursuant to a short form prospectus dated September 2, 2020 (the "Offering"), the Company proposes to issue and sell to the public up to 3,110,750 Warrants (as defined below), of which 2,705,000 Warrants will be issuable as a part of the base Offering and up to 405,750 Warrants will be issuable upon the due exercise of the Over-Allotment Option (as defined below);

Each Warrant entitles the holder thereof to purchase, subject to adjustment in certain events, one Warrant Share (as defined below) at a price of $5.00 at any time prior to 5:00 p.m. (Toronto time) on September 10, 2022;

For such purpose the Company deems it necessary to create and issue Warrants and Warrant Certificates (as defined below) to be constituted and issued in the manner hereinafter set forth;

The Company is duly authorized to create and issue the Warrants to be issued as herein provided;

The foregoing recitals are made as statements of fact by the Company and not by the Warrant Agent; and

ARTICLE 1 INTERPRETATION

1.1

Definitions

In this Indenture, unless there is something in the subject matter or context inconsistent therewith:

"Beneficial Owner" means a person that has a beneficial interest in a Warrant;

"Book-Entry Only System" means the book-based securities system administered by CDS in accordance with its operating rules and procedures in force from time to time;

"Business Day" means a day that is not a Saturday, Sunday, or a day on which banks are closed or which is a civic or statutory holiday in the City of Toronto, Ontario or Calgary, Alberta;

"Capital Reorganization" has the meaning ascribed to that term in Section 2.13(4); "CDS" means CDS Clearing and Depository Services Inc. and its successors in interest;

"CDSX" means the CDS settlement and clearing system for equity and debt securities in Canada;

"Closing Date" means September 10, 2020 or such other date as agreed to by the Company and the Underwriters;

"Common Share Reorganization" has the meaning ascribed to that term in Section 2.13(1); "Common Shares" means the common shares in the capital of the Company;

"Company" means Planet 13 Holdings Inc., a corporation existing under the laws of British Columbia, and its lawful successors from time to time;

"Company's Auditors" means the chartered (professional) accountant or firm of chartered

(professional) accountants duly appointed as auditor or auditors of the Company from time to time, including prior auditors of the Company, as applicable;

"Confirmation" has the meaning ascribed that term in Section 3.1(4);

"counsel" means a barrister and solicitor or lawyer or a firm of barristers and solicitors or lawyers, in both cases acceptable to the Warrant Agent;

"CSE" means the Canadian Securities Exchange;

"Current Market Price" means, at any date, the volume weighted average price per share at which the Common Shares have traded:

(a)

on the CSE;

(b)

(c)

"Exercise Date" with respect to any Warrant means the date on which such Warrant is duly surrendered for exercise in accordance with the provisions of Article 3 hereof;

"Exercise Notice" has the meaning ascribed that term in Section 3.1(4);

"Exercise Price" means $5.00 for each Warrant Share, subject to adjustment in accordance with the provisions of Article 2 hereof;

“Expiry Date” means September 10, 2022;

"extraordinary resolution" has the meaning ascribed to that term in sections 6.12 and 6.15;

"Offering" has the meaning ascribed thereto in Recital A of this Indenture;

“Original U.S. Purchaser” means a Qualified Institutional Buyer who purchased Warrants as part of the Offering;

"Over-Allotment Option" means the option granted by the Company to the Underwriters, which may be exercised in the Underwriters' sole discretion and without obligation, to purchase up to an additional 811,500 Units, including up to 811,500 Unit Shares and up to 405,750 Warrants, for the purpose of covering over-allotments made in connection with the Offering and for market stabilization purposes, and which is exercisable for any combination of additional Units, additional Unit Shares and/or additional Warrants, from and including thirty (30) days following the Closing Date;

"Participant" means a person recognized by CDS as a participant in the Book-Entry Only System;

“Price” means the Exercise Price;

“Qualified Institutional Buyer” means a “qualified institutional buyer” as such term is defined in Rule 144A under the U.S. Securities Act;

"QIB Letter" means the Qualified Institutional Buyer Letter signed by the Original U.S. Purchaser;

"Regulation S" means Regulation S as promulgated under the U.S. Securities Act;

"Rights Offering" has the meaning ascribed to that term in Section 2.13(2);

"Rights Offering Price" has the meaning ascribed to that term in Section 2.14(8);

"Securities Laws" means, collectively, the applicable securities laws and regulations of each of the provinces of Canada, except Quebec, the United States and each of the states of the United States, together with all respective regulations made and forms prescribed thereunder published rules, policy statements, notices, orders and rulings of the securities commissions or similar regulatory authorities thereto, as applicable, including the rules and policies of the CSE;

"shareholder" means an owner of record of one or more Common Shares or shares of any other class or series of the Company;

"Special Distribution" has the meaning ascribed to that term in Section 2.13(3);

"successor company" has the meaning ascribed to that term in Section 7.2;

"Time of Expiry" means 5:00 p.m. (Toronto time) on the Expiry Date;

"Transfer Agent" means the transfer agent or agents for the time being for the Common Shares;

"U.S. Person" means a U.S. person as that term is defined under Regulation S;

"U.S. Securities Act" means the United States Securities Act of 1933, as amended;

"Uncertificated Warrant" means any Warrant which is issued under the Book-Entry Only System or any Warrant which is not a certificated Warrant;

"Underwriters" means collectively Beacon Securities Limited and Canaccord Genuity Corp.;

"Unit Share" means a Common Share comprising part of each Unit;

"United States" means the United States as that term is defined in Regulation S;

"Units" means the units of the Company, each Unit being comprised of one Unit Share and one-half Warrant;

"Warrantholders" or "holders" means the persons whose names are entered for the time being in the register maintained pursuant to Section 2.8;

1.2

Words Importing the Singular

1.3

Interpretation not Affected by Headings

1.4

Day not a Business Day

1.5

Time of the Essence

Time shall be of the essence in all respects of this Indenture and the Warrants issued hereunder.

1.6

Governing Law

1.7

Meaning of "outstanding" for Certain Purposes

1.8

Currency

Unless otherwise stated, all dollar amounts referred to in this Indenture are in Canadian dollars.

1.9

Termination

ARTICLE 2 ISSUE OF WARRANTS

2.1

Issue of Warrants

Subject to adjustment in accordance with the provisions hereof, the Company creates and authorizes the issuance of up to 3,110,750 Warrants entitling the registered holders thereof to acquire an aggregate of up to 3,110,750 Warrant Shares, all of which are hereby created and authorized to be issued hereunder at the Exercise Price upon the terms and conditions as set forth herein. Uncertificated Warrants shall be Authenticated by the Warrant Agent and deposited in CDS and Warrant Certificates evidencing the Warrants shall be executed by the Company, certified by or on behalf of the Warrant Agent and delivered by the Warrant Agent in accordance with a written direction of the Company, all in accordance with sections 2.3 and 2.4. Subject to adjustment in accordance with the provisions of this Indenture, each of the Warrants issued hereunder shall entitle the holder thereof to receive from the Company, at the Exercise Price, the number of Warrant Shares equal to the Exchange Basis in effect on the Exercise Date.

2.2

Form and Terms of Warrants

2.3

Signing of Warrant Certificates

2.4

Authentication by the Warrant Agent

2.5

Warrantholder not a Shareholder, etc.

2.6

Issue in Substitution for Lost Warrant Certificates

2.7

Warrants to Rank Pari Passu

All Warrants shall rank pari passu with all other Warrants, whatever may be the actual date of issue of the Warrants.

2.8

Registration and Transfer of Warrants

(1) The Warrant Agent will create and keep at the principal stock transfer offices of the Warrant Agent in the City of Calgary, Alberta:

(a)

(b)

a register of transfers in which all transfers of Warrants and the date and other particulars of each such transfer shall be entered.

(5) Any Warrant issued to a transferee upon transfers contemplated by this section 2.8 shall bear the appropriate legend as set forth in Section 2.20(2), if applicable.

(8) The Warrant Agent shall give notice to the Company of the transfer made by a

Warrantholder pursuant to Section 2.8(7) and the Company shall provide written authorization to proceed with the transfer before such transfer is made effective by the issuance of the Warrant.

2.9

Registers Open for Inspection

2.10 Exchange of Warrants

2.11 Ownership of Warrants

2.12

Uncertificated Warrants

(1)

Registration and re-registration of beneficial interests in and transfers of

Warrants held by CDS shall be made only through the Book-Entry Only System and no Warrant Certificates shall be issued in respect of such Warrants except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by CDS, as determined by the Company, from time to time. Except as provided in this Section 2.12, owners of beneficial interests in any Uncertificated Warrants shall not be entitled to have Warrants registered in their names and shall not receive or be entitled to receive Warrants in definitive form or to have their names appear in the register referred to in Section 2.8 herein. Notwithstanding any terms set out herein, Warrants subject to the restrictions and any legend set forth in Section 2.20 herein and held in the name of CDS may only be held in the form of Uncertificated Warrants with the prior consent of the Company and CDS.

(2) If any Warrant is issued in uncertificated form and any of the following events

occurs:

(a)

(b)

(c)

the Company or CDS is required by applicable law to take the action contemplated in this section;

(d)

there is an exercise of Warrants pursuant to 3.1(4) and the Warrantholder is unable to make the representations in 3.1(4) (a), (b), (c) and (d) thereto; or

(e)

the Book-Entry Only System administered by CDS ceases to exist,

for such Uncertificated Warrants shall direct and shall be entitled to the same benefits and subject to the same terms and conditions (except insofar as they relate specifically to Uncertificated Warrants) as the Uncertificated Warrants or portion thereof surrendered upon such exchange.

(7) Notwithstanding anything herein to the contrary, neither the Company nor the Warrant Agent nor any agent thereof shall have any responsibility or liability for:

(a)

(b)

maintaining, supervising or reviewing any records of CDS or any Participant relating to any such interest; or

(c)

2.13

Adjustment of Exchange Basis

Subject to Section 2.14, the Exchange Basis shall be subject to adjustment from time to time in the events and in the manner provided as follows:

(1) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall:

(a)

(b)

subdivide, redivide or change its then outstanding Common Shares into a greater number of Common Shares; or

(c)

reduce, combine or consolidate its then outstanding Common Shares into a lesser number of Common Shares,

(a)

(b)

the denominator of which shall be the total number of Common Shares outstanding on such date before giving effect to such Common Share Reorganization.

(a)

(b)

the denominator of which shall be the aggregate of:

(i)

the total number of Common Shares outstanding as of the record date for the Rights Offering, and

(ii)

a number of Common Shares determined by dividing

(A)

(B)

the Current Market Price as of the record date for the Rights Offering.

(a)

shares of the Company of any class other than Common Shares; or

(b)

rights, options or warrants to acquire Common Shares or securities exchangeable for or convertible into Common Shares; or

(c)

evidences of indebtedness; or

(d)

cash, securities or any property or other assets,

(a)

the numerator of which shall be the number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, and

(b)

the denominator of which shall be:

(A)

the number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, less

(B)

2.14

Rules Regarding Calculation of Adjustment of Exchange Basis

For the purposes of Section 2.13:

(3) No adjustment in the Exchange Basis or the Price shall be made in respect of any event described in Section 2.13, other than the events referred to in paragraphs (b) and

(11) The Warrant Agent shall be entitled to act and rely on any adjustment calculations by the Company or the Company's Auditors.

2.15

Postponement of Subscription

2.16

Notice of Adjustment

(1) At least fourteen (14) days prior to the effective date or record date, as the case may be, of any event which requires or might require adjustment pursuant to Section 2.13, the Company shall:

(a)

(b)

give notice to the Warrantholders of the particulars of such event (including the record date or the effective date for such event) and, if determinable, the required adjustment.

(2) In case any adjustment for which a notice in Section 2.16(1) has been given is not then determinable, the Company shall promptly after such adjustment is determinable:

(a)

file with the Warrant Agent a computation of such adjustment; and

(b)

give notice to the Warrantholders of the adjustment.

2.17

No Action after Notice

2.18

Purchase of Warrants for Cancellation

2.19

Protection of Warrant Agent

The Warrant Agent shall not:

(a)

(b)

(c)

(d)

2.20

U.S. Legend on Warrant Certificates and Warrant Share certificates

"THE SECURITIES REPRESENTED HEREBY [for Warrants, add: AND THE

SECURITIES ISSUABLE ON EXERCISE HEREOF] HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND THE SECURITIES REPRESENTED HEREBY [for Warrants, add: AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF] MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (E) UNDER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(i) OR (D) ABOVE, A LEGAL OPINION OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, MUST FIRST BE PROVIDED TO THE COMPANY AND THE COMPANY'S TRANSFER AGENT TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

ARTICLE 3 EXERCISE OF WARRANTS

3.1

Method of Exercise of Warrants

(7) Any exercise referred to in this Section 3.1 shall require that the entire Exercise Price for the Warrant Shares subscribed for must be paid at the time of subscription and such Exercise Price and original Exercise Notice or exercise form executed by the Registered Warrantholder or the Confirmation from CDS must be received by the Warrant Agent prior to the Time of Expiry.

(9) If the exercise form set forth in the Warrant Certificate shall have been amended, the Company shall cause the amended exercise form to be forwarded to all registered Warrantholders.

3.2

No Fractional Shares

3.3

Effect of Exercise of Warrants

3.4

Cancellation of Warrants

3.5

Subscription for less than Entitlement

3.6

Expiration of Warrant

3.7

Prohibition on Exercise by U.S. Persons; Exception

(2)

Any holder which exercises any Warrants shall provide to the Company either:

(a)

(b)

(c)

(3) No Warrant Shares will be registered or delivered to an address in the United States unless the holder of Warrants complies with the requirements of paragraph (b) or (c) of Section 3.7(2).

ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT

4.1

General Covenants of the Company

The Company represents, warrants and covenants with the Warrant Agent for the benefit of the Warrant Agent and the Warrantholders that:

(1) The Company will at all times, so long as any Warrants remain outstanding or issuable hereunder, maintain its existence, unless otherwise inconsistent with the fiduciary

duties of the board of directors of the Company, and will keep or cause to be kept proper books of account in accordance with applicable law until the Time of Expiry.

(2) The Company is duly authorized to create and issue the Warrants to be issued hereunder and the Warrants, when Authenticated, will be legal, valid, binding and enforceable obligations of the Company.

(5) All Warrant Shares that shall be issued by the Company upon exercise of the rights provided for herein shall be issued as fully paid and non-assessable Common Shares of the Company.

(8) The Company will perform and carry out all of the acts or things to be done by it as provided in this Indenture.

4.2

Warrant Agent's Remuneration and Expenses

4.3

Performance of Covenants by Warrant Agent

4.4

Enforceability of Warrants

ARTICLE 5 ENFORCEMENT

5.1

Suits by Warrantholders

Subject to Section 6.10, all or any of the rights conferred upon a Warrantholder by the terms of the Warrants held by him and/or this Indenture may be enforced by such

Warrantholder by appropriate legal proceedings but without prejudice to the right that is hereby conferred upon the Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the holders of the Warrants from time to time outstanding. The Warrant Agent shall also have the power at any time and from time to time to institute and to maintain such suits and proceedings as it may reasonably be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Warrantholders.

5.2

Limitation of Liability

5.3

Waiver of Default

Upon the happening of any default hereunder:

(a)

(b)

ARTICLE 6 MEETINGS OF WARRANTHOLDERS

6.1

Right to Convene Meetings

6.2

Notice

6.3

Chairman

6.4

Quorum

6.5

Power to Adjourn

6.6

Show of Hands

6.7

Poll and Voting

6.8

Regulations

6.9

Company, Warrant Agent and Counsel may be Represented

6.10 Powers Exercisable by Extraordinary Resolution

(a)

(b)

to amend, modify or repeal any extraordinary resolution previously passed or sanctioned by the Warrantholders;

(c)

(d)

(e)

(f)

(g)

(h)

6.11 Meaning of "Extraordinary Resolution"

(1) The expression "extraordinary resolution" when used in this Indenture means, subject as hereinafter in this Section 6.11 and in Section 6.14 provided, a resolution proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 6 at which there are present in person or by proxy at least two Warrantholders representing at least 20% of the aggregate number of all the then outstanding Warrants and passed by the affirmative votes of Warrantholders representing not less than 662/3% of the aggregate number of all the then outstanding Warrants represented at the meeting and voted on the poll upon such resolution.

(3) Votes on an extraordinary resolution shall always be given on a poll and no demand for a poll on an extraordinary resolution shall be necessary.

6.12 Powers Cumulative

6.13 Minutes

6.14

Instruments in Writing

6.15

Binding Effect of Resolutions

6.16

Holdings by the Company or Subsidiaries of the Company Disregarded

6.17

Common Shares or Warrants Owned by the Company or its Subsidiaries – Certificate to be Provided

(a)

the names (other than the name of the Company) of the Warrantholders which, to the knowledge of the Company, hold Warrants that are owned by or held for the account of the Company; and

(b)

ARTICLE 7 SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES

7.1

Provision for Supplemental Indentures for Certain Purposes

(a)

(b)

setting forth adjustments in the application of Article 2;

(c)

(d)

giving effect to any extraordinary resolution passed as provided in Article 6;

(e)

(f)

(g)

(h)

for any other purpose not inconsistent with the terms of this Indenture, including the correction or rectification of any ambiguities, defective or

inconsistent provisions, errors or omissions herein, provided that, in the opinion of the Warrant Agent, relying on the advice of counsel, the rights of the Warrant Agent and the Warrantholders as a group are in no way prejudiced thereby.

7.2

Successor Companies

ARTICLE 8 CONCERNING THE WARRANT AGENT

8.1

Indenture Legislation

(1) If and to the extent that any provision of this Indenture limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, such mandatory requirement shall prevail.

8.2

Rights and Duties of Warrant Agent

funds to commence or continue such act, action or proceeding and an indemnity reasonably satisfactory to the Warrant Agent and its counsel to protect and hold harmless the Warrant Agent, its officers, directors, employees, agents, successors and assigns against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Indenture shall require the Warrant Agent to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.

(7) In this Indenture, whenever confirmations or instructions are required to be given to the Warrant Agent, in order to be valid, such confirmations and instructions shall be in writing.

8.3

Evidence, Experts and Advisers

or on behalf of the Company or in respect of the validity or the execution of any Warrant Certificate by the Company and issued hereunder, nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Indenture or in any such Warrant Certificate; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any securities to be issued upon the right to acquire provided for in this Indenture and/or in any Warrant or as to whether any securities will when issued be duly authorized or be validly issued and fully paid and non-assessable.

(9) The Warrant Agent is not required to expend or place its own funds at risk in executing its duties and obligations.

8.4

Securities, Documents and Monies Held by Warrant Agent

8.5

Actions by Warrant Agent to Protect Interests

8.6

Warrant Agent not Required to Give Security

The Warrant Agent shall not be required to give any bond or security in respect of the execution of the duties and obligations of this Indenture or otherwise.

8.7

Protection of Warrant Agent

By way of supplement to the provisions of any law for the time being relating to warrant agents, it is expressly declared and agreed as follows:

(3) The Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof.

8.8

Replacement of Warrant Agent

(2) Upon the appointment of a successor warrant agent, the Company shall promptly notify the Warrantholders thereof in the manner provided for in Section 9.2.

8.9

Conflict of Interest

8.10 Acceptance of Duties and Obligations

8.11 Warrant Agent not to be Appointed Receiver

8.12 Authorization to Carry on Business

The Warrant Agent represents to the Company that it is registered to carry on business under Applicable Legislation in the provinces of Alberta and British Columbia.

ARTICLE 9 GENERAL

9.1

Notice to the Company and the Warrant Agent

(a) If to the Company, to:

Planet 13 Holdings Inc.

2548 West Desert Inn Road

Las Vegas, Nevada

89109

Attention: Leighton Koehler

E-mail: [REDACTED]

with a copy to:

Wildeboer Dellelce LLP

396 Bay Street, Suite 80

Toronto, ON

M5H 2V1

Attention: Charlie Malone

E-mail: [REDACTED]

(b) If to the Warrant Agent, to:

Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

Attention: Dan Sander

Email: [REDACTED]

(2) The Company or the Warrant Agent, as the case may be, may from time to time notify the other in the manner provided in Section 9.1(1) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Company or the Warrant Agent, as the case may be, for all purposes of this Indenture.

9.2

Notice to the Warrantholders

9.3

Privacy

(a)

to provide the services required under this Indenture and other services that may be requested from time to time;

(b)

to help the Warrant Agent manage its servicing relationships with such individuals;

(c)

to meet the Warrant Agent's legal and regulatory requirements; and

(d)

if Social Insurance Numbers are collected by the Warrant Agent, to perform tax reporting and to assist in verification of an individual's identity for security purposes.

9.4

Third Party Interests

9.5

Securities Exchange Commission Certification

9.6

Discretion of Directors

Any matter provided herein to be determined by the directors in their sole discretion and determination so made will be conclusive.

9.7

Satisfaction and Discharge of Indenture

9.8

Provisions of Indenture and Warrants for the Sole Benefit of Parties and Warrantholders

9.9

Indenture to Prevail

To the extent of any discrepancy or inconsistency between the terms and conditions of this Indenture and the Warrant Certificate, the terms of this Indenture will prevail.

9.10 Assignment

9.11

Severability

9.12 Force Majeure

9.13 Rights of Rescission and Withdrawal for Holders

Should a holder of Warrants exercise any legal, statutory, contractual or other right of withdrawal or rescission that may be available to it, and the holder’s funds which were paid on exercise have already been released to the Company by the Warrant Agent, the Warrant Agent shall not be responsible for ensuring the exercise is cancelled and a refund is paid back to the holder. In such cases, the holder shall seek a refund directly from the Company and subsequently, the Company, upon surrender to the Company or the Warrant Agent of any underlying Warrant Shares or other securities that may have been issued, or such other procedure as agreed to by the parties hereto, shall instruct the Warrant Agent in writing to cancel the exercise transaction and any such underlying Warrant Shares or other securities on the register that may have already been issued upon the Warrant exercise. In the event that any payment is received from the Company by virtue of the holder being a shareholder for such Warrants that were subsequently rescinded, such payment must be returned to the Company by such holder. The Warrant Agent shall not be under any duty or obligation to take any steps to ensure or enforce the return of the funds pursuant to this section, nor shall the Warrant Agent be in any other way responsible in the event that any payment is not delivered or received pursuant to this section. Notwithstanding the foregoing, in the event that the Company provides the refund to the Warrant Agent for distribution to the holder, the Warrant Agent shall return such funds to the holder as soon as reasonably practicable, and in so doing, the Warrant Agent shall incur no liability with respect to the delivery or non-delivery of any such funds.

9.14 Counterparts and Formal Date

(Signature page follows)

IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper officers in that behalf.

	PLANET 13 HOLDINGS INC.

	By:	/s/ Dennis Logan
		Dennis Logan
		Chief Financial Officer

	ODYSSEY TRUST COMPANY

	By:	/s/ Dan Sander
		Dan Sander
		VP, Corp Trust
	By:	/s/ Amy Douglas
		Amy Douglas
		Director, Corp Trust

SCHEDULE “A”

[For Warrants issued in the United States or to, or for the account or benefit of, U.S. Persons, also include the following legends:]

FORM OF WARRANT CERTIFICATE

WARRANTS TO PURCHASE COMMON SHARES

OF PLANET 13 HOLDINGS INC.

(a company existing under the laws of British Columbia)

CUSIP No. 72706K143 ISIN

No. CA72706K1434

Warrant Certificate Number: ●

Representing ● Warrants to

purchase Common Shares (as defined below)

THIS CERTIFIES that, for value received, the registered holder hereof, ● (the "holder") is entitled at any time at or before the Expiry Time (as defined below) to acquire, subject to adjustment in certain events, the number of Common Shares ("Common Shares") of Planet 13 Holdings Inc. (the "Company") specified above, as presently constituted, by surrendering to Odyssey Trust Company (the "Warrant Agent") at its principal office in Calgary, Alberta, this Warrant Certificate with the duly completed and executed Exercise Form endorsed on the back of this Warrant Certificate, and accompanied by payment of $5.00 per Common Share (the "Warrant Exercise Price") by certified cheque, bank draft or money order in lawful money of Canada payable to, or to the order of, the Company at par at the above-mentioned office of the Warrant Agent. The holder of this Warrant Certificate may purchase less than the number of Common Shares which he is entitled to purchase on the exercise of the Warrants represented by this Warrant Certificate, in which event a new Warrant Certificate representing the Warrants not then exercised will be issued to the holder.

The Warrants evidenced under this Warrant Certificate are exercisable on or before 5:00 p.m. (Toronto time) (the "Expiry Time") on September 10, 2022 (the "Expiry Date"). After the Expiry Time, Warrants evidenced hereby shall be deemed to be void and of no further force or effect.

This Warrant Certificate represents Warrants of the Company issued or issuable under the provisions of a warrant indenture (which indenture together with all other instruments supplemental or ancillary thereto is herein referred to as the "Warrant Indenture") dated as of September 10, 2020, between the Company and the Warrant Agent, as may be amended from time to time, which contains particulars of the rights of the holders of the Warrants and the Company and of the Warrant Agent in respect thereof and the terms and conditions upon which the Warrants are issued and held, all to the same effect as if the provisions of the Warrant Indenture were herein set forth, to all of which the holder of this Warrant Certificate by acceptance hereof assents. Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Warrant Indenture. A copy of the Warrant Indenture can be requested by contacting the Warrant Agent. In the event of any conflict between the provisions contained in this Warrant Certificate and the provisions of the Warrant Indenture, the provisions of the Warrant Indenture shall prevail.

The Warrant Indenture contains provisions making binding upon all holders of Warrants outstanding thereunder resolutions passed at meetings of such holders held in accordance with such provisions and instruments in writing signed by the holders entitled to acquire upon the exercise of the Warrants a specified percentage of the Common Shares.

The Company may from time to time at any time prior to the Expiry Time purchase any of the Warrants by private agreement or otherwise.

This Warrant Certificate shall not be valid for any purpose until it has been certified by or on behalf of the Warrant Agent for the time being under the Warrant Indenture.

All dollar amounts herein are expressed in the lawful money of Canada.

(Signature page follows)

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed by its duly authorized officer as of this _________ day of ________, 20

	PLANET 13 HOLDINGS INC.

	By:
		Authorized Signing Officer Countersigned this _______ day of ______, 20

	ODYSSEY TRUST COMPANY

	By:
		Authorized Signing Officer

EXERCISE FORM

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the warrant indenture between the Company and Odyssey Trust Company dated September 10, 2020.

(Please check the ONE box applicable):

☐

1.The undersigned certifies that it (i) is not in the United States and is not a "U.S.

☐

2.The undersigned certifies that it (i) purchased the Warrants as a part of the Units

☐

3.The undersigned is delivering a written opinion of United States legal counsel or

It is understood that the Company may require evidence to verify the foregoing representations.

The undersigned hereby directs that the said Common Shares be issued as follows:

NAME(S) IN FULL	ADDRESS(ES)	NUMBER OF COMMON SHARES

Once completed and executed, this Exercise Form must be mailed or delivered to Odyssey Trust Company, c/o Corporate Trust.

DATED this

day of

)

Witness

) (Signature of Warrantholder, to be the same as

) appears on the face of this Warrant Certificate)

)

Name of Registered Warrantholder

[

] Please check this box if the securities are to be delivered at the office where these Warrants are surrendered, failing which the securities will be mailed.

NOTES:

Certificates will not be registered or delivered to an address in the United States unless Box 2 or Box 3 above is checked.

TRANSFER FORM

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

FOR VALUE RECEIVED, the undersigned transferor hereby sells, assigns and transfers unto

(Transferee)

(Address)

(Social Insurance Number)

of the Warrants registered in the name of the undersigned transferor represented by the Warrant Certificate.

In the case of a Warrant Certificate that contains a U.S. restrictive legend, the undersigned hereby represents, warrants and certifies that (one (only) of the following must be checked):

☐

(A) the transfer is being made only to the Company; or

☐

"United States" and "U.S. Person" are as defined by Regulation S under the U.S. Securities Act.

DATED this

day of

SPACE FOR GUARANTEES)
OF SIGNATURES (BELOW	)
	)
	)	Signature of Transferor
	)
	)
	)
Guarantor's Signature/Stamp	)	Name of Transferor

REASON FOR TRANSFER – For US Residents only (where the individual(s) or corporation receiving the securities is a US resident). Please select only one (see instructions below).

☐ Gift

☐ Estate

☐ Private Sale

☐ Other (or no change

in ownership)

Date of Event (Date of gift, death or sale):

Value per Warrant on the date of event:


			CAD OR

USD

NOTES:

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever. All securityholders or a legally authorized representative must sign this form. The signature(s) on this form must be guaranteed in accordance with the transfer agent's then current guidelines and requirements at the time of transfer. Notarized or witnessed signatures are not acceptable as guaranteed signatures. As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

●

guidelines and requirements at the time of transfer. For corporate holders, corporate signing resolutions, including certificate of incumbency, will also be required to accompany the transfer unless there is a "SIGNATURE & AUTHORITY TO SIGN GUARANTEE" Stamp affixed to the Form of Transfer obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust or a "MEDALLION GUARANTEED" Stamp affixed to the Form of Transfer, with the correct prefix covering the face value of the certificate.

REASON FOR TRANSFER – FOR US RESIDENTS ONLY

SCHEDULE “B”

FORM OF DECLARATION FOR REMOVAL OF LEGEND

TO:

Planet 13 Holdings Inc.

c/o Odyssey Trust Company

Suite 1230, 300 5th Avenue SW

Calgary, Alberta

T2P 3C4

Dated:

By:

Name:

Title:

Affirmation By Seller's Broker-Dealer (required for sales in accordance with Section (b)(2)(B)

above)

Name of Firm

By:

Authorized officer

Date:

Exhibit 4.3

PLANET 13 HOLDINGS INC.

- and -

ODYSSEY TRUST COMPANY

WARRANT INDENTURE

Providing for the Issue of

up to 3,349,375 Common Share Purchase Warrants

November 5, 2020

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION	6
1.1 Definitions	6
1.2 Words Importing the Singular	10
1.3 Interpretation not Affected by Headings	10
1.4 Day not a Business Day	10
1.5 Time of the Essence	10
1.6 Governing Law	10
1.7 Meaning of "outstanding" for Certain Purposes	11
1.8 Currency	11
1.9 Termination	11
ARTICLE 2 ISSUE OF WARRANTS	11
2.1 Issue of Warrants	11
2.2 Form and Terms of Warrants	11
2.3 Signing of Warrant Certificates	12
2.4 Authentication by the Warrant Agent	12
2.5 Warrantholder not a Shareholder, etc	13
2.6 Issue in Substitution for Lost Warrant Certificates	13
2.7 Warrants to Rank Pari Passu	14
2.8 Registration and Transfer of Warrants	14
2.9 Registers Open for Inspection	15
2.10 Exchange of Warrants	15
2.11 Ownership of Warrants	16
2.12 Uncertificated Warrants	16
2.13 Adjustment of Exchange Basis	18
2.14 Rules Regarding Calculation of Adjustment of Exchange Basis	21
2.15 Postponement of Subscription	23
2.16 Notice of Adjustment	23
2.17 No Action after Notice	24
2.18 Purchase of Warrants for Cancellation	24
2.19 Protection of Warrant Agent	24
2.20 U.S. Legend on Warrant Certificates and Warrant Share certificates	24
ARTICLE 3 EXERCISE OF WARRANTS	26
3.1 Method of Exercise of Warrants	26
3.2 No Fractional Shares	28
3.3 Effect of Exercise of Warrants	28
3.4 Cancellation of Warrants	29
3.5 Subscription for less than Entitlement	29
3.6 Expiration of Warrant	29

ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT	30
4.1 General Covenants of the Company	30
4.2 Warrant Agent's Remuneration and Expenses	31
4.3 Performance of Covenants by Warrant Agent	32
4.4 Enforceability of Warrants	32
ARTICLE 5 ENFORCEMENT	32
5.1 Suits by Warrantholders	32
5.2 Limitation of Liability	32
5.3 Waiver of Default	33
ARTICLE 6 MEETINGS OF WARRANTHOLDERS	33
6.1 Right to Convene Meetings	33
6.2 Notice	33
6.3 Chairman	34
6.4 Quorum	34
6.5 Power to Adjourn	34
6.6 Show of Hands	34
6.7 Poll and Voting	34
6.8 Regulations	35
6.9 Company, Warrant Agent and Counsel may be Represented	35
6.10 Powers Exercisable by Extraordinary Resolution	35
6.11 Meaning of "Extraordinary Resolution"	36
6.12 Powers Cumulative	37
6.13 Minutes	37
6.14 Instruments in Writing	37
6.15 Binding Effect of Resolutions	37
6.16 Holdings by the Company or Subsidiaries of the Company Disregarded	37
6.17 Common Shares or Warrants Owned by the Company or its Subsidiaries - Certificate to be Provided	38
ARTICLE 7 SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES	38
7.1 Provision for Supplemental Indentures for Certain Purposes	38
7.2 Successor Companies	39
ARTICLE 8 CONCERNING THE WARRANT AGENT	39
8.1 Indenture Legislation	39
8.2 Rights and Duties of Warrant Agent	39
8.3 Evidence, Experts and Advisers	41
8.4 Securities, Documents and Monies Held by Warrant Agent	41
8.5 Actions by Warrant Agent to Protect Interests	41
8.6 Warrant Agent not Required to Give Security	41
8.7 Protection of Warrant Agent	43

8.8 Replacement of Warrant Agent	44
8.9 Conflict of Interest	45
8.10 Acceptance of Duties and Obligations	45
8.11 Warrant Agent not to be Appointed Receiver	45
8.12 Authorization to Carry on Business	45
ARTICLE 9 GENERAL	46
9.1 Notice to the Company and the Warrant Afent	46
9.2 Notice to the Warrantholders	47
9.3 Privacy	47
9.4 Third Party Interests	48
9.5 Securities Exchange Commission Certification	48
9.6 Discretion of Directors	48
9.7 Satisfaction and Discharge of Indenture	48
9.8 Provisions of Indenture and Warrants for the Sole Benefit of Parties and Warrantholders	49
9.9 Indenture to Prevail	49
9.10 Assignment	49
9.11 Severability	49
9.12 Force Majeure	49
9.13 Rights of Rescission and Withdrawal for Holders	49
9.14 Counterparts and Formal Date	50

Schedule “A” Form of Warrant Certificate

Schedule “B” Form of Declaration for Removal of Legend

THIS WARRANT INDENTURE dated as of November 5, 2020

BETWEEN:

PLANET 13 HOLDINGS INC.,

a company existing under the laws of British Columbia

(the "Company")

AND

ODYSSEY TRUST COMPANY,

a trust company incorporated under the laws of Alberta and

authorized to carry on business in the provinces of Alberta and

British Columbia

(the "Warrant Agent")

RECITALS

WHEREAS:

A. In connection with the public offering by the Company of up to 6,698,750 Units (as defined below) pursuant to a short form prospectus dated October 30, 2020 (the "Offering"), the Company proposes to issue and sell to the public up to 3,349,375 Warrants (as defined below), of which 2,912,500 Warrants will be issuable as a part of the base Offering and up to 436,875 Warrants will be issuable upon the due exercise of the Over-Allotment Option (as defined below);

B. Each Warrant entitles the holder thereof to purchase, subject to adjustment in certain events, one Warrant Share (as defined below) at a price of $5.80 at any time prior to 5:00 p.m. (Toronto time) on November 5, 2022;

C. For such purpose the Company deems it necessary to create and issue Warrants and Warrant Certificates (as defined below) to be constituted and issued in the manner hereinafter set forth;

D. The Company is duly authorized to create and issue the Warrants to be issued as herein provided;

E. All things necessary have been done and performed to make the Warrants, when Authenticated (as defined below) or certified by the Warrant Agent and issued as provided in this Indenture, legal, valid and binding upon the Company with the benefits of and subject to the terms of this Indenture;

F. The foregoing recitals are made as statements of fact by the Company and not by the Warrant Agent; and

G. The Warrant Agent has agreed to enter into this Indenture and to hold all rights, interests and benefits contained herein for and on behalf of those persons who become holders of Warrants issued pursuant to this Indenture from time to time;

ARTICLE 1 INTERPRETATION

1.1 Definitions

In this Indenture, unless there is something in the subject matter or context inconsistent therewith:

"Beneficial Owner" means a person that has a beneficial interest in a Warrant;

"Book-Entry Only System" means the book-based securities system administered by CDS in accordance with its operating rules and procedures in force from time to time;

"Business Day" means a day that is not a Saturday, Sunday, or a day on which banks are closed or which is a civic or statutory holiday in the City of Toronto, Ontario or Calgary, Alberta;

"Capital Reorganization" has the meaning ascribed to that term in Section 2.13(4);

"CDS" means CDS Clearing and Depository Services Inc. and its successors in interest;

"CDSX" means the CDS settlement and clearing system for equity and debt securities in Canada;

"Closing Date" means November 5, 2020 or such other date as agreed to by the Company and the Underwriters;

"Common Share Reorganization" has the meaning ascribed to that term in Section 2.13(1);

"Common Shares" means the common shares in the capital of the Company;

"Company" means Planet 13 Holdings Inc., a corporation existing under the laws of British Columbia, and its lawful successors from time to time;

"Company's Auditors" means the chartered (professional) accountant or firm of chartered

(professional) accountants duly appointed as auditor or auditors of the Company from time to time, including prior auditors of the Company, as applicable;

"Confirmation" has the meaning ascribed that term in Section 3.1(4);

"counsel" means a barrister and solicitor or lawyer or a firm of barristers and solicitors or lawyers, in both cases acceptable to the Warrant Agent;

"CSE" means the Canadian Securities Exchange;

"Current Market Price" means, at any date, the volume weighted average price per share at which the Common Shares have traded:

(a) on the CSE;

(b) if the Common Shares are not listed on the CSE, on any stock exchange upon which the Common Shares are listed, as may be selected for this purpose by the board of directors of the Company, acting reasonably; or

(c) if the Common Shares are not listed on any stock exchange, on any over-the- counter market on which the Common Shares are trading, as may be selected for this purpose by the board of directors of the Company, acting reasonably;

"Exercise Date" with respect to any Warrant means the date on which such Warrant is duly surrendered for exercise in accordance with the provisions of Article 3 hereof;

"Exercise Notice" has the meaning ascribed that term in Section 3.1(4);

"Exercise Price" means $5.80 for each Warrant Share, subject to adjustment in accordance with the provisions of Article 2 hereof;

“Expiry Date” means Novembers, 2022;

"extraordinary resolution" has the meaning ascribed to that term in sections 6.12 and 6.15;

"Offering" has the meaning ascribed thereto in Recital A of this Indenture;

“Original U.S. Purchaser” means a Qualified Institutional Buyer who purchased Warrants as part of the Offering;

"Over-Allotment Option" means the option granted by the Company to the Underwriters, which may be exercised in the Underwriters' sole discretion and without obligation, to purchase up to an additional 873,750 Units, including up to 873,750 Unit Shares and up to 436,875 Warrants, for the purpose of covering over-allotments made in connection with the Offering and for market stabilization purposes, and which is exercisable for any combination of additional Units, additional Unit Shares and/or additional Warrants, from and including thirty (30) days following the Closing Date;

"Participant" means a person recognized by CDS as a participant in the Book-Entry Only System;

“Price” means the Exercise Price;

“Qualified Institutional Buyer” means a “qualified institutional buyer” as such term is defined in Rule 144A under the U.S. Securities Act;

"QIB Letter" means the Qualified Institutional Buyer Letter signed by the Original U.S. Purchaser;

"Regulation S" means Regulation S as promulgated under the U.S. Securities Act;

"Rights Offering" has the meaning ascribed to that term in Section 2.13(2);

"Rights Offering Price" has the meaning ascribed to that term in Section 2.14(8);

published rules, policy statements, notices, orders and rulings of the securities commissions or similar regulatory authorities thereto, as applicable, including the rules and policies of the CSE;