CANADIAN CANNABIS CORP.

In 2015 the Company had begun renovations on the Brampton property and ultimately received notice that it would not be approved for the MMPR license from Health Canada. At this time, in addition to the CAD 9,400,000 first mortgage the Company had on the building, it had also taken a CAD $2,300,000 second mortgage on the building and an additional CAD $2,000,000 in loans from Avonlea-Drewry Holdings Inc. (“ADH”) and certain related parties of ADH (together with ADH, the “ADH Group”) which were secured by the building. The Company began to market the building for sale in mid-2015 and was able to sell the property in January 2016 for CAD $15,500,000, which after accounting for all accrued fees was enough to satisfy all but approximately CAD $254,000 of the debt on the building to the ADH Group. The Company subsequently entered into a forbearance agreement with the ADH Group with regard to the balance owed that included an agreement for a consulting agreement with ADH for CAD $1,000,000 and a forbearance fee of CAD $250,000. ADH and its affiliates own 3,750.000 shares, approximately 8%, of the Company’s common stock.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which gives entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the “Act”) into retained earnings. The guidance allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Act’s new federal corporate income tax rate. The guidance also allows entities to elect to reclassify other stranded tax effects that relate to the Act but do not directly relate to the change in the federal tax rate (e.g., state taxes, changing from a worldwide tax system to a territorial system). Tax effects that are stranded in accumulated other comprehensive income for other reasons (e.g., prior changes in tax law, a change in valuation allowance) may not be reclassified. The standard is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within the fiscal year. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Entities have the option to apply the guidance retrospectively or in the period of adoption. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (ASC 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU adds various SEC paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which was effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB 118, on a provisional basis. Our accounting for certain income tax effects is incomplete, but we have determined reasonable estimates for those effects and have recorded provisional amounts in our consolidated financial statements. Refer to Note 13, “Income Taxes,” for further information.

Negotiations to settle the debts owed to the ADH Group began in late 2016 and a settlement agreement was reached in March 2017, which was later revised and settled in March 2018. Under the terms of the agreement the Company assigned the assets of TCN to ADH, agree to make certain payments for expenses incurred in relation to its business and the settlement agreement with the ADH Group, close a private placement financing and listing transaction satisfactory to ADH and take steps to bring the Company’s SEC filings current. In exchange and upon completion of the Company’s requirements under the agreement, the ADH Group will execute a termination and release agreement, terminating the various agreements among the various ADH parties and the Company, and acknowledging that all of the debt owed to the ADH Group are satisfied in full, and releasing the Company and its parties from their obligations under the various agreements and any related claims which the ADH Group may have against the Company and its related parties. In addition, ADH transferred the assets of TCN to a related party and delivered 1,750,000 shares of Cura-Can Health Corp (“Cura-Can”), valued and CAD $1.00 per share, into an escrow account to satisfy the Company’s obligations under the settlement agreement. The shares will be sold to fund the items required to be paid by the Company under the settlement agreement. It is anticipated that by the time that all of the Company’s obligations have been met, all of the shares of Cura-Can will have been liquidated.

Once completed, the settlement agreement with the ADH Group will provide a clean slate for the Company to pursue new business opportunities with the intent of restoring shareholder value.