Mr. Bernie Yeung reports

ATLAS RECEIVES $1.1 M LOAN AND PROVIDES FURTHER CORPORATE UPDATES

On Feb. 6, 2024, Shahar Management Group Company (KSN) Ltd., an entity controlled by Avi Elkayam, an insider of Atlas Global Brands Inc., has made a loan to Cambrosia Ltd., a wholly owned subsidiary of Atlas Global, in the principal amount of three million new Israeli shekels (approximately $1.11-million).

The loan

The loan was made pursuant to a loan agreement dated Jan. 8, 2024, as amended on Feb. 1, 2024, and further amended on March 12, 2024, between Cambrosia and Shahar. The loan has a term of two years commencing on Feb. 1, 2024, and bears interest at a rate of 9.75 per cent per annum. Loan repayment obligations for the first 12 months of the term shall be on an interest-only basis and, thereafter, monthly payments of interest and principal. Pursuant to the loan agreement, Cambrosia deposited 250,000 NIS in a closed bank account to ensure timely interest payments for the first year of the term. Cambrosia has the option to extend the term of the loan by an additional 12 months for an aggregate repayment term of three years.

Cambrosia's obligations under the loan agreement are secured by a pledge of its 51-per-cent interest in its three pharmacies located in Israel and its interest in any other subsequently acquired medical cannabis pharmacies to Mr. Elkayam: Tlalim Papo, MedicStore and Medic Hasharon. Shahar has the right to enforce its security interest in the pharmacies should the cease trade order not be lifted by April 15, 2024. In addition, Atlas Global guaranteed the obligations of Cambrosia under the loan agreement.

In addition to the applicable interest on the loan payable by Cambrosia, subject to and conditional upon the revocation of the cease trade order issued by the Ontario Securities Commission on Aug. 8, 2023, Atlas Global will issue to Mr. Elkayam, as sole shareholder of Shahar, and/or to Shahar 3,693,444 common shares in the capital of Atlas Global. The loan consideration shares are being issued pursuant to OSC Rule 72-503 (Distributions Outside of Canada) and, as such, will not be subject to a statutory hold period in accordance with applicable Canadian securities laws.

By virtue of his shareholdings, Mr. Elkayam is a related party of Atlas Global, as such term is defined by Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions), and a related person for the purposes of the policies of the Canadian Securities Exchange. Mr. Elkayam also owns, controls or directs all of the voting shares of Shahar. As a result, the loan constitutes a related-party transaction as such term is defined by MI 61-101, requiring the company, in the absence of exemptions, to obtain a formal valuation for, and minority shareholder approval of, the related-party transaction. In that regard, the company is relying on exemptions contained in sections 5.5(b) and 5.7(1)(e) of MI 61-101, respectively, in that the company is not listed on a specified market and is under financial hardship.

The loan is also a significant transaction for the purposes of the policies of the Canadian Securities Exchange.

Fire at Stratford facility

Atlas Global regrets to announce a fire in grow room No. 1 at its Stratford facility in the early hours of Feb. 10, 2024. The fire is believed to be accidental in nature. No other rooms or areas of the facility were affected by the incident. Furthermore, Atlas Global is thankful to report that no employees were present during the time of the fire and that there were no reported injuries as a result.

The company is currently conducting a thorough investigation into the incident, working closely with local authorities and relevant stakeholders to assess the extent of the damage and implement necessary measures to prevent such incidents in the future.

Atlas Global assures its shareholders and stakeholders that the incident should cause minimal disruptions to operations, nor will it affect its commitment to maintaining the highest standards of safety and compliance across all its facilities.

Update on Harmony litigation in Israel

As announced in January, 2024, Cambrosia filed a lawsuit against the vendors of the Harmony trading house and pharmacies in the District Court of Tel Aviv.

On Dec. 21, 2023, Cambrosia succeeded in obtaining a lien on the corporate bank accounts of the two Harmony entities and the personal bank accounts of the vendors in all banks in Israel. Harmony petitioned the District Court of Tel Aviv to lift the liens. The hearing took place on Jan. 28 and Feb. 18, 2024. On Feb. 20, 2024, the judge rendered the decision to uphold the liens. The next likely step in this matter is to schedule a hearing on the matter now that the appeal has been decided. Cambrosia is seeking to expand the liens on additional asserts of the vendors of the Harmony entities.

Update on financial reporting

Since the company's last update announced on Dec. 29, 2023, significant progress has been made toward completing the company's audited financial statements for the 15-month period ended March 31, 2023. The company is hopeful that final procedures will be completed on or prior to March 30, 2024. The unaudited interim statements for quarters ended June 30, 2023, Sept. 30, 2023, and Dec. 31, 2023, will follow shortly thereafter. On the basis that the delay is due in material part to the accounting complexities arising from the multiparty, multijurisdictional business combination completed Dec. 30, 2022, the company expects that its financial reporting will be timely going forward.

About Atlas Global Brands Inc.

Atlas Global is a global cannabis company operating in Canada and Israel with expertise across the cannabis value chain, including cultivation, manufacturing, marketing, distribution and pharmacy. Atlas Global currently distributes to eight countries: Australia, Canada, Denmark, Germany, Israel, Norway, Spain and the United Kingdom. In addition to a differentiated product mix, Atlas Global operates two licensed cannabis facilities, one of which has European Union good manufacturing practices, and three medical pharmacies in Israel.

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