NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 - GENERAL

Citrine Global, Corp. (“Citrine Global” or the “Company”) (which changed its name from TechCare Corp. effective August 26, 2020) was incorporated under the laws of the State of Delaware on May 26, 2010. The Company’s common stock is traded in the United States on the OTCQB market under the ticker symbol “CTGL.”

As reported in the Company’s annual report on Form 10-K for the year ended December 31, 2019, the Company’s board of directors explored during 2019 strategic alternatives to enhance stockholder value, which the Company had previously reported might include future acquisitions, a merger with another company, the sale of the Company, or a potential sale of certain assets, including the Company’s then wholly-owned subsidiary Novomic Ltd. (“Novomic”), a technology company engaged in the design, development, and commercialization of unique proprietary and patented delivery platform utilizing vaporization of various natural compounds for multiple health, beauty and wellness applications.

As of December 31, 2019, the Company had incurred accumulated losses of approximately $10.6 million, and based on the projected cash flows, and Company’s cash balance, the Company’s management was of the opinion that without further fundraising, it would not have sufficient resources to enable it to continue advancing its activities, including the development, manufacturing, and marketing of its products, which cast substantial doubt on the entity’s ability to continue as a going concern.

On November 21, 2019, in light of the above, and after the board of directors of the Company concluded that the Company would not be able to commercialize any products or secure sufficient financing successfully, the Company entered into a memorandum of understanding with Citrine S A L Investment & Holdings Ltd., which provided for the issuance and sale of a number of shares resulting in Citrine S A L Investment & Holdings Ltd. and/or its designee(s) holding 95% of the fully diluted capital stock of the Company, and the sale by the Company of 90% of its shares in Novomic.

On January 6, 2020, definitive agreements were executed for the sale of 90% of the shares in Novomic to Traistman Radziejewski Fundacja Ltd., which was completed on May 14, 2020, and for the issuance and sale of a number of shares equal after the issuance to 95% of the fully diluted capital stock of the Company to Citrine S A L Investment & Holdings Ltd. and a group of related persons and entities (the “Citrine Global Transaction”). Traistman Radziejewski Fundacja Ltd. is controlled by Oren Traistman, who was a holder of over 5% of the Company’s issued share capital and a director of the Company until February 27, 2020. See additional information in Note 4 below.

On February 23, 2020, the Company entered into an agreement amending and restating the January 6, 2020 agreement concerning the Citrine Global Transaction, which provided for the issuance and sale of the shares in stages. Pursuant to this agreement, on February 27, 2020 and March 5, 2020, 432,996,555 shares of common stock of the Company were issued to Citrine S A L Investment & Holdings Ltd. and its group of related persons and entities, resulting in a change of control of the Company. The amended and restated agreement provided for the issuance of 893,699,276 shares of common stock in total in consideration for $150 thousand, however, the Company was unable to complete the issuance of all these shares at that time because the Company did not have sufficient authorized capital to issue such shares of common stock. The Company’s certificate of incorporation was amended on May 14, 2020, increasing its authorized share capital by one billion shares of common stock, after filing an information statement on Form 14C.

As of September 30, 2020, the Company received the aforementioned $150 thousand mentioned above. Out of such $150 thousand, an amount of approximately $105 thousand is presented as a current liability within the Company’s condensed consolidated balance sheet as of September 30, 2020, as the shares related to this amount were not yet issued, and legally can be called back by the investors.

On November 12, 2020, the Company issued the remaining shares of common stock (refer also to Note 10 below).

Until May 14, 2020, the date on which the sale of 90% of Novomic’s shares was completed (refer to Note 4 below), the Company continued selling the Novokid® product produced by Novomic both online and physical sales channels, including through its own website. Novomic was not presented as held for sale, although the held-for-sale criteria were met, because the Company concluded that the disposal of 90% of Novomic’s shares is comprised of substantially almost all of the Company’s net assets and operations and since the separate presentation of such a significant portion of the entity’s net assets as a single line item on the balance sheet would not be meaningful to financial statement users.

Also, starting Q1 2020, the Company began its plans for new business activities. The Company’s new business activity comprises creating value and implementing expansion strategies for growth-stage technology companies. The Company believes the health, wellness, food tech and Israeli medical cannabis fields are demonstrating high growth potential, and, therefore, the Company has begun by focusing on these sectors. The Company aims to empower innovative companies to become global leaders and improve the health and quality of life of as many people as possible worldwide. The Company aims to support local and global expansion of such target companies via an array of services customized to each company’s needs, from assistance with strategic business planning to solving real estate-related and finance issues. The Company plans to offer multi-strategy solutions combining strategic marketing, business development, real estate and site management services and financing solutions. By offering such a wide spectrum of services, the Company aims to help create an integrated strategy that supports its target companies in achieving their local and global expansion ambitions. The Company seeks to work proactively and collaboratively with the target companies in order to allow them to scale quickly and achieve their milestones.

As part of this process, the Company established a new Israeli subsidiary, CTGL – Citrine Global Israel Ltd, which was incorporated on June 3, 2020 (the “Israeli Subsidiary”).

On July 21, 2020, the Israeli Subsidiary began to work with certain shareholders of the Company who have been working towards establishing a innovation Center which focuses on the medical cannabis industry, cannabidiol (CBD), hemp, botanical, food supplements and cosmetics products The Company’s board of directors approved for the Israeli Subsidiary to proceed with preparations for entering into an agreement with certain shareholders of the Company pursuant to which (1) the Israeli Subsidiary would hold approximately 60% of the shares in the Cannovation Center, and certain shareholders of the Company would hold approximately 40% of the shares; and (2) the Israeli Subsidiary would accept limitations on its rights in the Cannovation Center if and as mandated under Israeli regulations on the involvement of foreign entities.

As part of this process, the Israeli Subsidiary established a new Israeli subsidiary Cannovation Center Israel Ltd, which was incorporated on August 20, 2020 (the “Cannovation Center”) and the Company’s Israeli Subsidiary holds 60% of the shares in the Cannovation Center.

Based on the Company’s current cash balances, capital raised during the nine months ended September 30, 2020 and the irrevocable letter it has received (as further noted below), the Company has sufficient funds for its plans for the next twelve months from the issuance of these financial statements. As the Company is embarking on its new activity as detailed herein, it is incurring losses. It cannot determine with reasonable certainty when and if it will have sustainable profits.

Citrine S A L Investment & Holdings Ltd., on behalf of itself and its affiliates and related parties, has furnished the Company with an irrevocable letter of obligation to financially support the Company until December 31, 2021 that will allow it to be operational as planned and budgeted through this period.

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (SARS-CoV-2) to be a global pandemic (COVID-19), which continues to spread throughout the world. The COVID-19 pandemic is having significant effects on global markets, supply chains, businesses, and communities. Specific to the Company, COVID-19 may impact various parts of its 2020 plans, operations and financial results, including but not limited to difficulties in obtaining additional financing. The Company believes it is taking appropriate actions to mitigate the negative impact, including by focusing its activities initially only within the country of Israel. However, the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events are still developing.

On May 26, 2020, the board of directors of the Company appointed Ms. Ilanit Halperin as Chief Financial Officer of the Company, replacing Mr. Zviel Gedalihou, effective from May 27, 2020. The board of directors also appointed Ms. Halperin as Chief Financial Officer of the Company’s wholly-owned Israel subsidiary, effective once incorporated.

While management believes the Company will be successful in its current and planned operating activities, the Company intends to raise capital, through the issuance of equity or debt instruments, from other sources to grow our business and sustain our operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Unaudited Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q. In the opinion of management, the financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations, and cash flows for the three and nine-month ended September 30, 2020, and 2019. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2020.

Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on May 11, 2020, for the year ended December 31, 2019

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates include fair value estimates of derivative liabilities discussed in Notes 5 and 8, as well as the estimated service period related to share based payment to the Company’s legal advisor (refer to Note 6). Actual results could differ from those estimates.

Functional Currency and Foreign Currency Translation and Transactions.

The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the New Israeli Shekel (“NIS”).

The presentation currency of the financial statements is the U.S. dollar. Assets and liabilities are translated at year-end exchange rates, while revenues and expenses are translated at actual exchange rates during the year. Differences resulting from translation are presented in equity, under accumulated other comprehensive income (loss). Gains and losses arising from foreign currency transactions of monetary balances denominated in non-functional currencies are reflected in financial income (expense), net in the consolidated statements of operations and comprehensive loss.

Other financial expenses (income), net in the consolidated statements of operations and comprehensive loss comprised mainly of exchange rate differentials.

Trading securities and short-term loan measured at fair value

The Company accounts for its investments in trading securities in accordance with Accounting Standard Codification (“ASC”) No. 320, “Investments—Debt and Equity Securities.” The Company determines the appropriate classification of its investments in trading securities at the time of purchase and re-evaluates the fair value at each balance sheet date. The Company’s trading securities are recorded at fair value on the balance sheet as well as the short-term loan according to the Company’s election (see also Note 8). Changes in fair value of trading securities and short-term loans are recorded in financing income (expenses), net in the consolidated statement of operations. The Company classifies its trading securities as either short-term or long-term based on the Company’s expectations regarding the trading securities sale.

Investments valued under the measurement alternative

The Company’s investments, as described in Notes 3 and 4, are valued under the measurement alternative include equity securities in other proprietary investments for which the Company does not have significant influence, and fair value is not readily determinable. Accounting Standard Update (“ASU”) 2016-01 requires equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer.

Due to the lack of readily determinable fair values for such investments, for which the Company does not have significant influence, the Company accounts for these investments under the measurement alternative at cost, less impairment.

The Company performs qualitative impairment assessments on its investments recorded under the measurement alternative.

Derivatives

Derivative instruments are recognized on the balance sheet at their fair value, with changes in the fair value recognized as a component of financial expenses, net in the statements of income.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

Fair value

Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with (“ASC 820”), “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

Fair value, as defined in ASC 820, 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. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earnings are reported in the statement of income.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. This guidance replaces the current incurred loss impairment methodology. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts.

The guidance became effective on January 1, 2020, including interim periods within that year and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Under the modified retrospective method of adoption, prior year reported results are not restated. The Company has performed its analysis of the impact on its financial instruments that are within the scope of this guidance and has concluded that there was no material impact to its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU No. 2018-13”) as part of the FASB’s broader disclosure framework project. ASU No. 2018-13 removes, modifies and adds certain disclosures, providing greater focus on requirements that clearly communicate the most important information to the users of the financial statements with respect to fair value measurements. The adoption of ASU No. 2018-13 as of January 1, 2020 did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 - INVESTMENT VALUED UNDER THE MEASUREMENT ALTERNATIVE

On June 22, 2020, the Company entered into a share purchase agreement with Nanomedic Technologies Ltd., an Israeli private company and a related party as further described below (“Nanomedic”) as part of an A-1 funding round open only to existing Nanomedic shareholders and their affiliates. Nanomedic developed SpinCare™, a system that integrates electrospinning technology into a portable, bedside device, offering immediate wound and burn care treatment. The Company paid $450,000 for A-1 preferred shares of Nanomedic and also received warrants to purchase A-1 preferred shares. Such investment represents a holding of approximately 3.3% in Nanomedic. The round raised approximately $2.2 million in total. Citrine S A L Investment & Holdings Ltd and certain of its partnerships, all affiliates of the Company, were already beneficial shareholders of Nanomedic immediately prior to the A-1 funding round. Ilan Ben-Ishay, a director of the Company was already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round. Ora Meir Soffer, chairperson and CEO of the Company, was already a director of both Nanomedic and its Israeli parent company Nicast Ltd. immediately prior to the A-1 funding round, and she was also already a beneficial shareholder of Nanomedic immediately prior to the A-1 funding round.

The Company accounts for the investment in Nanomedic in accordance with the provisions of ASC 321, “Investments - Equity Securities”, and elected to use the measurement alternative therein. The investment will be re-measured upon future observable price change(s) in orderly transaction(s) or upon impairment, if any.

NOTE 4 - SALE OF NOVOMIC

As described in Note 1 above, on January 6, 2020, definitive agreements were executed for the sale of 90% of the shares in Novomic to Traistman Radziejewski Fundacja Ltd., which was completed on May 14, 2020. The remaining investment in Novomic (represents 10% holding) is not presented within the Company’s condensed consolidated balance sheet as of September 30, 2020, as it had no significant value as of that date. Starting on the deconsolidation date, the remaining investment in Novomic is accounted as an investment valued under the measurement alternative as described in Note 2 above.

The following table summarizes the assets and liabilities of Novomic as of the deconsolidation date:

NOTE 5 – CONVERTIBLE NOTES

On April 1, 2020 the Company entered into a Convertible Note Purchase Agreement (the “CL Agreement”) with Citrine S A L Investment & Holdings Ltd, WealthStone Private Equity Ltd, WealthStone Holdings Ltd, Golden Holdings Neto Ltd, Beezz Home Technologies Ltd, Citrine Biotech 5 LP, Citrine High Tech 6 LP, Citrine High Tech 7 LP, Citrine 8 LP, Citrine 9 LP and Citrine Biotech 10 LP (together, the “Buyer”), all of which are affiliated with the Company. Under the CL Agreement, the Buyer agreed to purchase and the Company agreed to issue and sell, for up to an aggregate principal amount of up to $1,800 thousand, notes convertible into shares of common stock of the Company (the “Notes”), with a drawdown period starting on April 1, 2020 and ending upon the earlier of (i) 6 months thereafter and (ii) the consummation of a public offering by the Company. The CL Agreement provides that the Notes will bear an annual interest rate of six percent (6%) and that the conversion price per share of Common Stock shall equal 85% multiplied by the market price (as defined in the Notes), representing a discount of 15%, and that each Note will mature 18 months following the payment date.

On April 19, 2020 and June 12, 2020, the Company provided draw down notices under the CL Agreement for amounts of $170 thousand and $1 million, respectively, which were received in cash by the Company.

On June 12, 2020, the CL Agreement (hereafter “CL Agreement Amendment”) was amended to provide that for each draw down made by the Company under the CL Agreement, the Buyer shall be entitled to receive two types of warrants: A Warrants and B Warrants, with the A Warrants exercisable at any time between 6 and 12 months after issuance for an exercise price per share equal to 1.25 times the average of the closing prices of the 3 trading days preceding the draw down, and the B Warrants exercisable at any time between 6 and 24 months after issuance for an exercise price per share equal to 1.5 times the average of the closing prices of the 3 trading days preceding the draw down, and that the number of each of the A Warrants and the B Warrants issued will be equal to the draw down amount divided by the average of the closing prices of the 3 trading days preceding the draw down, and that these amended terms will apply in respect of all draw downs, including drawdowns made prior to the date of the amendment.

Conversion feature

In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.

The fair value of the conversion feature (hereafter “Convertible Component”) was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value of $320,279 and derived service period of 1.2 years. The assumptions used to perform the Monte-Carlo simulation were consistent with those utilized in the Company’s Black-Scholes valuation for stock options, specifically: expected volatility of 101.62%, risk-free interest rate of return of 0.12% and dividend yield of 0.0%.

Warrants

As mentioned above, as part of the June 12, 2020 CL Agreement Amendment, the Company issued the Buyer 5,589,172 A warrants and 5,589,172 B warrants to purchase a total of 11,178,344 shares of common stock of the Company.

The fair value of such warrants as of the drawdowns dates was estimated at $301,665 using the Black-Scholes option-pricing model and is presented within the consolidated statements of changes in shareholders equity (deficit).

The following are the data and assumptions used:

Convertible Notes

The drawdowns notices amount, net of the Conversion feature and the Warrants amounts (hereafter “Convertible notes”), is $580,925 as of the agreement date. The convertible notes are accounted for according to the effective interest method.

NOTE 6 – SHAREHOLDERS’ EQUITY

On January 29, 2020, holders of 10,344,828 Redeemable convertible Series A preferred stock, par value $0.0001, converted their shares into shares of common stock, par value $0.0001. See also Note 9 below.

The terms of the transaction for the issuance of 893,699,276 shares of common stock in total are described in Note 1 above. During February and March 2020, the Company issued 432,996,555 shares of common stock, par value $0.0001, to investors in respect of the transaction described in Note 1 above, for a total consideration of $45 thousand, and on November 12, 2020, the Company issued the remaining shares of common stock (refer also to Note 10 below).

On March 5, 2020 the Company issued 15,000,000 shares of common stock to its legal advisor in respect of legal consulting services, with respect to the Citrine Global Transaction as well as other legal services, as agreed between the parties, which, as of September 30, 2020, is expected to be provided until June 30, 2021. The Company estimated the fair value of the shares issued based on the share price at the grant date at $4,785 thousand, of which $2,201 thousand and $861 thousand were recorded as share based compensation expense in the nine and three month periods ended September 30, 2020, respectively, and the remaining was recorded as prepaid share based payment. The prepaid services will be expensed over the attribution period of the remaining legal consulting services. Such expense is included in the Marketing, general and administrative expenses within the condensed consolidated statements of operations and comprehensive loss.

On May 14, 2020 the Company amended its Certificate of Incorporation to reflect the increase of its authorized capital by one billion shares of common stock.

NOTE 8 – AGREEMENTS WITH INTELICANNA LTD

On May 31, 2020, the Company entered into a strategic partnership with Intelicanna Ltd., an Israeli medical cannabis company listed on the Tel Aviv Stock Exchange with ticker symbol INTL (“Intelicanna”), via a share exchange agreement and an agreement for future issuance of shares. The share exchange agreement provides that (i) the number of shares each party issues to the other will be calculated by dividing $500 thousand by the volume weighted average price (VWAP) of the issuing party’s shares in the three trading days preceding the signing of the agreement, (ii) the issuance by Intelicanna will take place upon, and subject to, receipt of approval from the Tel Aviv Stock Exchange, and the issuance by the Company will follow immediately thereafter, and (iii) the parties may not sell the shares within the first six months after issuance, and thereafter the parties may sell the shares issued to them if the shares become registered through a prospectus approved by the relevant securities authority, or under an exemption provided by applicable securities law, subject to a limit on the number of shares either party may sell per day. The agreement for future issuance of shares provides that a fall in a share price of a party, not exceeding 20%, measured six months after issuance of shares by both parties pursuant the share exchange agreement, will be offset by the issuance of additional shares to the other party to bring up to $500 thousand the total value of the shares issued to the other party.

The features of the shares exchange agreement are considered a derivative and accounted for at fair value. The fair value of these features amounted as of September 30, 2020 to $59,629, which is presented among current liabilities within the Company’s condensed consolidated balance sheet. The fair value of such shares exchange agreement was estimated using the Black-Scholes option-pricing model.

The following are the data and assumptions used as of the balance sheet date related to future potential issuance of shares as describe above for potential fall in share price of a party, not exceeding 20%:

Furthermore, on June 25, 2020, the Israeli Subsidiary entered into a services agreement with Intelicanna to provide business development and consulting services to Intelicanna, including assistance with raising financing (the “Services Agreement”) (references in this paragraph to the Company include the Israeli Subsidiary). The terms of the Services Agreement include: (1) the Company will, for a period of 18 months, assist Intelicanna to raise up to NIS 15 million for Intelicanna’s working capital purposes, whether through issuance of convertible securities or any other means; all sums raised must be approved in advance by the Company, and in accordance with a business plan presented to the Company from time to time; the Company will have no obligation under the Services Agreement to invest in Intelicanna, and no liability if its efforts to source financing for Intelicanna are unsuccessful; (2) in the event Intelicanna raises funds through assistance from the Company, the Company will be entitled to (i) cash consideration equal to 5% of any amount raised, whether directly from the Company, or from any of its affiliates or any unrelated third party, and (ii) options to acquire a number of shares of Intelicanna equal to 5% of the amount raised divided by the Exercise Price; the “Exercise Price” will be the price per share at which the amount was raised, or if it was not raised through issuance of shares, the price per share at which Intelicanna last raised funds through issuance of shares; and (3) for one or more periods of at least 90 days, each time at Intelicanna’s request which the Company may accept or decline at its discretion, the Company will provide business development and strategy-building services, including: consulting on strategy and business plan; assistance defining financing needs; helping identify ways to develop potential sources of finance; and ongoing consulting support to Intelicanna’s management team and board. Intelicanna will pay the Company a fee of NIS 2,500 per day for such services.

Also on June 25, 2020, to assist Intelicanna to raise the first NIS 1 million towards the up to NIS 15 million mentioned in the Services Agreement, the Company and the Israeli Subsidiary entered into an agreement to grant Intelicanna NIS 1 million in cash (approximately USD 290 thousand) in direct financing for working capital purposes. The financing will bear 6% annual interest and Intelicanna will make additional payments equalling 6% of its gross revenues between the date the financing is received and the date Intelicanna’s aggregate gross revenues thereafter equal NIS 2 million. If the total of the 6% interest plus the additional payments would result in a return of less than 12% in the year to the Company, the interest will be increased to bring the total return to 12%. Every three months Intelicanna must pay the interest, and after 12 months, it must repay the capital, plus the total of the additional payments due, plus any outstanding interest, and it must pay interest of 2% per month on any late payments, provided however that until the foregoing obligations are paid in full Intelicanna must pay 50% of its gross revenues to the Company upon receipt. If Intelicanna does not pay all amounts due within 18 months, it shall, at the Company’s option, issue to the Company a number of its shares equal to NIS 1.5 million divided by the lower of (i) VWAP of the three trading days prior to the lapse of the 18 months, and (ii) VWAP of the three trading days prior to the signing of the financing agreement. The financing must be paid by the Company to Intelicanna within 30 days of signing the financing agreement, subject to completion of due diligence to the Company’s satisfaction and to Intelicanna receiving a commercial growing license.

On July 9, 2020, the Company transferred to Intelicanna NIS 500 thousand (approximately $145 thousand) on account of the above loan. The Company elected the fair value option to account for the short-term loan.

Following the strategic partnership the Company entered with Intelicanna, on September 17, 2020 the Company issued to Intelicanna 2,143,470 shares of common stock in exchange for 619,589 of Intelicanna’s ordinary shares. The Company measures its investment in Intelicanna at fair value through profit or loss at level 2. The fair value reflects the value of Intelicanna’s stock price less discounts for lack of marketability since the parties may not sell the shares within the first six months after issuance. During the period, the change in traded securities’ fair value was in the amount of approximately $50 thousand.

Ilanit Halperin, a director and the Chief Financial Officer of the Company, is also the Chief Financial Officer of Intelicanna.

NOTE 9 – RELATED PARTIES