Final Prospectus (Or Any Amendment), Namely: Michael B

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This prospectus does not constitute a public offering of securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.

PROSPECTUS

Non-Offering Prospectus March 12, 2021

SUBVERSIVE ACQUISITION LP (FORMERLY SUBVERSIVE REAL ESTATE ACQUISITION REIT LP)

(Intercure Ltd. will be the resulting issuer following the closing of the Qualifying Transaction)

No securities are being offered pursuant to this prospectus. This prospectus is being filed by Subversive Real Estate Acquisition REIT LP (the “LP”) which is a limited partnership established under the Limited Partnerships Act (Ontario) (the “LPA”) for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the LP that will qualify as its qualifying transaction (the “Qualifying Transaction”) for the purposes of the rules of the Neo Exchange Inc. (“NEO”) and the Toronto Stock Exchange (the “TSX”) Company Manual. The LP is a special purpose acquisition corporation (“SPAC”) for the purposes of the rules of the NEO. Since no securities are being sold pursuant to this prospectus, no proceeds will be raised pursuant to this prospectus. The LP received US$200 million of proceeds from its initial public offering which was completed on January 8, 2020, as well as an additional US$25 million of proceeds on the closing of the over-allotment option granted in connection with its initial public offering. The total proceeds of US$225,000,000 were placed in an escrow account with Olympia Trust Company and will be released upon consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement. All capitalized terms not herein defined have the meanings ascribed to them in the “Glossary of Terms”.

On February 9, 2021, the LP, Intercure Ltd. (“Intercure”), an Israeli public corporation whose shares are listed for trading on the Tel Aviv Stock Exchange (“TASE”) under the symbol “INCR”, Intercure Sub, the General Partner and the Subversive Sponsor, as representative of the Unitholders, entered into an amended and restated definitive agreement (the “Arrangement Agreement”), pursuant to which Intercure Sub will acquire all of the outstanding Units of the LP (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for ordinary shares of Intercure (“Intercure Shares”) by way of a plan of arrangement (the “Arrangement”). On the effective time of the Arrangement (the “Closing”), the Intercure Shares will continue to be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on the Nasdaq Stock Market (the “Nasdaq”) and the Toronto Stock Exchange. Neither the NEO nor the TSX have not yet approved the Qualifying Transaction and neither the Nasdaq nor the TSX approved the listing of any Intercure Shares and there is no assurance that they will. The Arrangement constitutes the LP’s Qualifying Transaction. See “The LP” and “The Qualifying Transaction”.

This prospectus is being filed in accordance with section 10.16 of the NEO Exchange Listing Manual and section 1028 of the TSX Company Manual in connection with the completion of the LP’s Qualifying Transaction. Unless otherwise indicated, this prospectus has been prepared assuming that the Qualifying Transaction has been completed.

The LP’s currently issued and outstanding Restricted Voting Units and Rights are listed and posted for trading on the NEO and the TSX under the symbol “SVX.U” and “SVX.RT.U”, respectively (and the Restricted Voting Units trade on the OTC market under the symbol “SBVRF”). The closing price of each of the Restricted Voting Units and Rights on the NEO on January 25, 2021, the last trading day before the Qualifying Transaction was announced, was US$9.90, and US$0.34, respectively. Holders of Restricted Voting Units can elect to redeem all or a portion of their Restricted Voting Units, provided that they deposit their Restricted Voting Units for redemption prior to the Redemption Election Deadline. In connection with the Closing, (a) holders of Restricted Voting Units that do not redeem such units shall receive, for no additional consideration, a number of Intercure Shares, that is based on the Exchange Ratio, in accordance with the Plan of Arrangement, and (b) holders of Rights will be entitled to receive, for no additional consideration, a number of Intercure Shares that is equal to the product of (i) the quotient of the number of Rights held and 8; and (ii) the Exchange Ratio, subject to adjustment under the terms of the Rights Agreement, all in accordance with the Plan of Arrangement.

On January 26, 2021, the LP announced a non-brokered private placement (the “Private Placement”) of 6.5 million Limited Partnership Units for an aggregate amount of US$65 million. The Limited Partnership Units will be issued pursuant to the terms of the applicable subscription agreements, and will be acquired by Intercure pursuant to the Plan of Arrangement, such that each subscriber will receive a number of Intercure Shares, that is based on the Exchange Ratio, in accordance with the Plan of Arrangement. The closing of the Private Placement is subject to a number of conditions precedent, including the LP receiving a receipt for the final non-offering prospectus being issued, Intercure receiving a conditional listing approval for the Intercure Shares from the Nasdaq and the TSX, and the satisfactions of the conditions to closing set out in the Arrangement Agreement.

See “The Qualifying Transaction”

The completion of the Qualifying Transaction is conditional upon, among other things, acceptance by each of the NEO and TSX of the Qualifying Transaction, and the conditional approval of the Nasdaq, the TSX and the TASE to list the Intercure Shares, and the overall approval of the Israeli Securities Authority. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not approved the Qualifying Transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus, Intercure has not applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

Original purchasers of Restricted Voting Units from the Underwriters in the LP’s initial public offering may, following closing in certain circumstances, have a contractual right of action for rescission or damages against Intercure and certain other persons. See “Contractual Right of Action”.

Unitholders should be aware that there are various known and unknown risk factors in connection with the Qualifying Transaction. Unitholders should carefully consider the risks identified in this prospectus under the heading “Caution Regarding Forward-Looking Statements” and “Risk Factors” before deciding whether or not to redeem their Restricted Voting Units prior to the Redemption Election Deadline.

Unitholders should be aware that the acquisition, holding and disposition of the securities described in this prospectus may have tax consequences in Canada, Israel and elsewhere depending on each particular Unitholder’s specific circumstances. Unitholders should consult their own tax advisors with respect to such tax considerations. See “Certain Israeli Income Tax Considerations” and “Certain Canadian Federal Income Tax Considerations”.

Certain legal matters in connection with the Private Placement and this prospectus have been or will be reviewed on behalf of the LP by Goodmans LLP and Bracha & Co. (with respect to Israeli tax matters).

The LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered offices are located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3, Canada.

The LP is not a trust company and is not registered under applicable legislation governing trust companies as it does not carry on nor does it intend to carry on the business of a trust company. The Limited Partnership Units are not “deposits” within the meaning of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of that statute or any other legislation

(ii)

TABLE OF CONTENTS

Glossary of Terms ...... 1 Corporate Governance and Board Committees ..... 109

Notice to Readers...... 12 Regulatory Approvals ...... 126

Non-IFRS Measures ...... 13 Risk Factors ...... 126

Caution Regarding Forward-Looking Statements ... 14 Certain Israeli Income Tax Considerations ...... 152

Market and Industry Data ...... 16 Certain Canadian Federal Income Tax Considerations ...... 157 Prospectus Summary ...... 18 Eligibility for Investment ...... 159 Organizational Structure ...... 30 Promoters ...... 160 The LP ...... 31 Legal Proceedings...... 160 The Medical-Use Cannabis Industry ...... 31 Interests of Management and Others in Material The Business of Intercure ...... 37 Transactions ...... 160

Selected Consolidated Financial Information of Auditors, Transfer Agent and Escrow Agent ...... 160 Intercure ...... 70 Experts ...... 161 Financial Statements and Management’s Discussion and Analysis of the LP ...... 71 Material Contracts ...... 161

Management’s Discussion and Analysis of Enforcement of Judgements Against Foreign Intercure ...... 72 Persons ...... 161

The Qualifying Transaction ...... 83 Exemptions ...... 162

Capitalization And Use of Proceeds ...... 90 Contractual and Statutory Rights ...... 163

Prior Sales ...... 91 Certificate of Subversive Real Estate Acquisition REIT LP and Promoters ...... C-1 Capital Structure of Intercure ...... 91 Appendix A LP FINANCIAL STATEMENTS ..... A-1 Dividends ...... 94 Appendix B Intercure FINANCIAL Description of Material Indebtedness ...... 94 STATEMENTS ...... B-1

Escrowed Securities and Securities Subject to Appendix C Canndoc FINANCIAL Contractual Restrictions on Transfer ...... 94 STATEMENTS ...... C-1

Principal Unitholders ...... 94 Appendix D CHARTER OF THE AUDIT COMMITTEE OF Intercure ...... D-1 Directors and Officers ...... 95

Israeli corporate law matters ...... 99

Director and Officer Compensation ...... 104

Indebtedness of Directors and Executive Officers . 109

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GLOSSARY OF TERMS

“2011 Amendment” means the amendments made to the Investment Law as of January 1, 2011;

“2017 Amendment” means the amendments made to the Investment Law as of January 1, 2017;

“2018 Farm Bill” means the Agriculture Improvement Act of 2018;

“A&R LP Agreement” means the amended and restated limited partnership agreement of the LP dated January 8, 2020;

“ACMPR” means the Access to Cannabis for Medical Purposes Regulations, SOR/2016-230;

“Administrative Procedure” has the meaning set out under the heading “Certain Israeli Corporate Compliance Matters-Exculpation, Insurance and Indemnification of Office Holders”;

“Agricultural Settlement Law” means the Agricultural Settlement (Restriction on Use of Agricultural Land and of Water) Law, 5727-1967;

“Allowable capital loss” has the meaning set out under the heading “Estate and Gift Tax-Taxation of Capital Gains and Capital Losses”;

“Aphria” means Aphria Inc.;

“Aphria Agreement” has the meaning set out under the heading “The Business of Intercure-Cultivation and Processing-Aphria”;

“Aphria Initial Period” has the meaning set out under the heading “The Business of Intercure-Cultivation and Processing-Aphria”;

“Applicable Limit” has the meaning set out under the heading “Ownership Restrictions”;

“Approval Requirement” has the meaning set out under the heading “Ownership Restrictions”;

“Arrangement” means the arrangement pursuant to the provisions of section 289 of the Business Corporations Act (British Columbia) on the terms set forth in the Plan of Arrangement, subject to any amendment or supplement thereto made in accordance with the Arrangement Agreement, the Plan of Arrangement or at the discretion of the Court;

“Arrangement Agreement” has the meaning set out under the heading “The Qualifying Transaction-Overview”;

“Arrangement Resolution” means the special resolution of Unitholders approving the Plan of Arrangement as required by the A&R LP Agreement and the Interim Order;

“Audit Committee” has the meaning set out under the heading “Corporate Governance and Board Committees- Committees of the Board-Audit Committee”;

“Autism Research” has the meaning set out under the heading “The Business of Intercure-Research and Development-Clinical Trials-Assaf Harofeh”;

“Benefitted Intangible Assets” means a benefited intangible asset as defined in the Investment Law;

“BfArM” means the new subunit within Germany’s Federal Ministry of Health that is tasked with the regulation of pharmaceutical-grade dried cannabis and cannabis extracts;

“Board” or “Board of Directors” means the board of directors of the General Partner or Intercure, as the context requires;

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“BtMG” means the Federal Narcotics Act (Betäubungsmittelgesetz), a German law;

“CAGR” means compound annual growth rate;

“Canada Israel Tax Treaty” means the Canada-Israel Tax Convention Act, 2016. S.C. 2016, c. 13, s. 2.;

“Cannabis” means all parts of the plant Cannabis sativa L. containing more than 0.3 percent THC, including all compounds, manufactures, salts, derivatives, mixtures, or preparations;

“Cannabis Act” means the Cannabis Act, S.C. 2018, c. 16, as it may be amended from time to time;

“Canndoc” means Canndoc Ltd., a company incorporated pursuant to the laws of Israel, and a wholly-owned subsidiary of Intercure;

“Canndoc Annual Financial Statements” means, collectively, Canndoc’s audited financial statements for the year ended December 31, 2018 and 2017;

“Canndoc CBD” means Canndoc CBD Ltd., a company incorporated pursuant to the laws of Israel, and a wholly- owned subsidiary of Intercure;

“Cannolam” means Cannolam Ltd., a company incorporated in October 2018 pursuant to the laws of Israel, of which Intercure holds 50.1% of the issued and outstanding shares;

“CBD” means cannabidiol, a component of Cannabis;

“CBG” means cannabigerol, a component of Cannabis;

“CDS” means CDS Clearing and Depository Services Inc.;

“CDS Participant” has the meaning set out under the heading “The Qualifying Transaction-Redemption Rights”;

“Certificate” has the meaning set out under the heading “Certain Israeli Income Tax Considerations”;

“Charlotte’s Web” means Charlotte's Web Inc.;

“Charlotte’s Web Agreement” has the meaning set out under the heading “The Business of Intercure-Exclusive Partnerships-Charlotte’s Web”;

“Charter of the Audit Committee” has the meaning set out under the heading “Corporate Governance and Board Committees-Committees of the Board-Audit Committee”;

“Class A Restricted Voting Units” means 22,500,000 Class A restricted voting units of the LP, each comprised of one Restricted Voting Unit and one Right, and each a “Class A Restricted Voting Unit”;

“Class B Units” means the 524,500 Class B units of the LP sold to our Sponsors in connection with the IPO of Class A Restricted Voting Units, each comprised of 1/100 of a Proportionate Voting Unit and one Right, and each a “Class B Unit”;

“Closing” has the meaning set out on the cover page to this Prospectus;

“Companies Law” means the Israeli Companies Law, 5759-1999, as amended from time to time;

“Compensation Committee” means the compensation committee of Intercure, which is responsible for assisting the Board and overseeing human resources and compensation policies, process and practices;

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“Control” has the meaning set out under the heading “Corporate Governance and Board Committees-Board Practices- External Directors”;

“Corporate Governance and Nominating Committee” has the meaning set out under the heading “Corporate Governance and Board Committees-Committees of the Board”;

“Court” means the British Columbia Supreme Court;

“CRA” has the meaning set out under the heading “Certain Israeli Income Tax Considerations”;

“CSA” means the Controlled Substances Act (21 U.S.C. § 811);

“CSIEA” means the Controlled Substances Import and Export Act (19 C.F.R. §162.61);

“Development Zone ‘A’” means development zone “A” as defined in the Investment Law;

“Dormant Shares” has the meaning set out under the heading “Ownership Restrictions-Dormant Shares”;

“DPSP” means a deferred profit sharing plan as defined for purposes of the Tax Act;

“EBITDA” means earnings before interest, taxes, depreciation and amortization;

“Equity Incentive Plan” means Intercure’s stock option plan;

“Escrow Agent” means Olympia Trust Company;

“Escrow Agreement” means the escrow agreement dated as of January 8, 2020 between the LP, the Escrow Agent, and the Underwriters;

“EU Agreement” has the meaning set out under the heading “The Business of Intercure-Partnerships-”;

“EU Partner” has the meaning set out under the heading “The Business of Intercure-Partnerships”;

“EU-GMP standards” means the Good Manufacturing Practice of the European Union;

“Excess Intercure Shares” has the meaning set out under the heading “Prospectus Summary:

“Exchange Act” means the Securities Exchange Act of 1934 (48 Stat. 881 (codified as amended at U.S.C. § 78a));

“Exchange Ratio” has the meaning set out under the heading “The Qualifying Transaction-Overview”;

“Final Order” means the final order of the Court, issued under section 289 of the Business Corporations Act (British Columbia), expected to be issued following the Unitholder Meeting, providing, among other things, for the approval of the Arrangement and the Unitholder Meeting;

“financial and accounting expertise” has the meaning set out under the heading “Corporate Governance and Board Committees-Board Practices”;

“Forward-looking statements” has the meaning set out under the heading “Caution Regarding Forward-Looking Statements”;

“Fotmer” means Fotmer Corporation S.A.;

“Fotmer Agreement” has the meaning set out under the heading “The Business of Intercure-Cultivation and Processing-Exclusive Partnerships-Fotmer”;

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“Founders” means our Sponsors and the General Partner’s directors, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart as the holders of the Founders’ Proportionate Voting Units;

“Founders’ Proportionate Voting Units” means the 57,561 proportionate voting limited partnership units of the LP issued to our Founders prior to the closing of the IPO, and for greater certainty does not include the Proportionate Voting Units forming part of the Class B Units purchased by our Sponsors;

“General Partner” or “GP” means Subversive Real Estate Acquisition REIT (GP) Inc., a company incorporated under the laws of the Province of British Columbia;

“German Distribution Agreement” has the meaning set out under the heading “The Business of Intercure- Partnerships-Germany”;

“GDPR” means the European Unions’ General Data Protection Regulation;

“GMP standards” means the good manufacturing practice standards, designed to minimize the risks involved in any pharmaceutical production that cannot be eliminated through testing the final product;

“Guidelines” means collectively National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201 – Corporate Governance Guidelines;

“Holder” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations”;

“IDF” means the Israeli Defence Force;

“IFRS” means International Financial Reporting Standards;

“IMC-GAP standards” has the meaning set out under the heading “Pharmaceutical-Grade Cannabis for Medical Use”;

“IMC-GCP standards” has the meaning set out under the heading “Pharmaceutical-Grade Cannabis for Medical Use”;

“IMC-GDP standards” has the meaning set out under the heading “Pharmaceutical-Grade Cannabis for Medical Use”;

“IMC-GMP standards” has the meaning set out under the heading “Pharmaceutical-Grade Cannabis for Medical Use”;

“IMC-GSP standards” has the meaning set out under the heading “Pharmaceutical-Grade Cannabis for Medical Use”;

“IMCA” means the Israeli Medical Cannabis Agency;

“Inception Sponsor” means Inception Altanova Sponsor, LLC;

“Independent” means independent as defined in NI 58-101;

“Indoor Products” has the meaning set out under the heading “The Business of Intercure-Cultivation and Processing”;

“Industrial Company” or “Industrial Companies” means an industrial company as defined in the Industry Encouragement Law;

“Industrial Enterprise” means an industrial enterprise as defined in the Investment Law;

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“Industry Encouragement Law” means the Law for the Encouragement of Industry (Taxes), 5729-1969;

“Inflationary surplus” means an inflationary surplus as defined in the Israeli Tax Ordinance;

“Insider Trading Policy” has the meaning set out under the heading “Corporate Governance and Board Committees”;

“Intercure” has the meaning set out on the cover page of this Prospectus;

“Intercure Articles” means Intercure’s amended and restated articles of association and memorandum in place on the date of this prospectus, as may be amended from time to time in accordance with applicable law;

“Intercure Financial Statements” means, collectively, (i) Intercure’s audited financial statements for the year ended December 31, 2019, and 2018 (the “Intercure Annual Financial Statements”) and (ii) Intercure’s unaudited interim financial statements for the nine months ended September 30, 2020;

“Intercure Shareholder Approval” means the approval by the shareholders of Intercure at a meeting of the Intercure shareholders scheduled to be held prior to the Closing of the following matters: (a) approve the Arrangement Agreement and the transactions contemplated therein, (b) approve a reverse split of the Intercure Shares intended to adjust the Intercure Share Value to $10.00 per Intercure Share (the "Intercure Share Consolidation"), (c) assuming the Intercure Share Consolidation has taken place, approve the increase of the authorized share capital of Intercure by 55,048,671 additional Intercure Shares (from the 44,951,329 authorized post-Intercure Share Consolidation), (d) approve the listing of the Intercure Shares on the Nasdaq and the TSX, (e) amend the Intercure Articles to reflect the resolutions detailed herein and any additional amendments required to effect the transactions contemplated by the Arrangement Agreement, (f) appoint, subject to completion of the Arrangement, new directors to the Board; and (g) amend the compensation policy of Intercure to reflect certain director & officer insurance thresholds required as a result of the transactions contemplated by the Arrangement Agreement;

“Intercure Share Consolidation” has the meaning set out under the heading “Capital Structure of Intercure- Overview”;

“Intercure Share Value” has the meaning set out under the heading “The Qualifying Transaction-Overview- Aggregate Consideration and Treatment of Securities”;

“Intercure Shares” means the ordinary shares in the capital of Intercure;

“Intercure Sub” means Canndoc Acquisition Subco Ltd., a wholly-owned subsidiary of Intercure incorporated under the laws of British Columbia;

“Interim Order” means the interim order of the Court dated March 8, 2021, issued under section 289 of the Business Corporations Act (British Columbia) providing, among other things, for declarations and directions with respect to the Arrangement and the Unitholder Meeting, as such order may be varied or amended at any time prior to the Unitholder Meeting;

“Investment Assets” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations-Offshore Investment Fund Property Rules”;

“Investment Law” means the Law for the Encouragement of Capital Investments, 5719-1959;

“IPO” means the LP’s initial public offering of Class A Restricted Voting Units offered to the public under the LP’s final long form prospectus dated December 23, 2019;

“ISA” has the meaning set out under the heading “Notice to Readers”;

“Israeli Cannabis Laws” has the meaning set out under the heading “Capital Structure of Intercure-Ownership Restrictions”;

“Israeli DDO” means the Israeli Dangerous Drugs Ordinance [New Version], 5733-1973; - 5 -

“Israeli Partnerships” means the Northern Kibbutz Partnership and the Southern Kibbutz Partnership;

“Israeli resident” has the meaning set out under the heading “Certain Israeli Income Tax Considerations-General Corporate Tax Structure in Israel”;

“Israeli Securities Authority” means the national securities regulator of Israel;

“Israeli Tax Authority” means the taxation authority in Israel, operating as an agency of the Ministry of Finance;

“Israeli Tax Ordinance” means the Israeli Income Tax Ordinance [New Version], 5721- 1961;

“Kibbutz” means an Israeli collective agricultural community;

“Land Administration” means the Israel Land Administration, the government authority responsible for managing land in Israel which is in the public domain;

“Limited Partnership Units” means the Restricted Voting Units following the renaming of such class of securities to “Limited Partnership Units” pursuant to the Plan of Arrangement, and each a “Limited Partnership Unit”;

“LP” has the meaning set out on the cover page of this Prospectus;

“LP Financial Statements” means, collectively, the LP’s audited financial statements as at December 31, 2019 and for the period from formation on November 12, 2019 to December 31, 2019, and unaudited interim financial statements for the nine months ended September 30, 2020;

“LPA” has the meaning set out on the cover page of this Prospectus;

“LPA Amendment” means the amendment to the A&R LP Agreement;

“MD&A” means Management Discussion & Analysis;

“means of control” has the meaning set out under “Certain Israeli Income Tax Considerations-Certain Israeli Corporate Compliance Matters-Israeli Resident Shareholders”;

“medical-use cannabis” means the herbal substance derived from plants of the genus Cannabis that is used as part of the treatment for a specific symptom or disease;

“MOH” means the Israeli Ministry of Health;

“Money Laundering Control Act” means the Money Laundering Control Act of 1986 (Public Law 99-570, 100 Stat. 3207);

“Narcotics Convention” means the United Nations Single Convention on Narcotic Drugs of 1961;

“Nasdaq” means Nasdaq Stock Market;

“Nasdaq Marketplace Rules” means the rules, regulations, interpretations and practices of the National Association of Securities Dealers, Inc. and the Nasdaq.;

“NATI” has the meaning set out under the heading “Certain Israeli Income Tax Considerations-Tax benefits Under the 2017 Amendment”;

“NEO” shall mean the NEO Exchange Inc.;

“NEO Exchange Listing Manual” means NEO’s listing manual;

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“NEOs” means the named executive officers of Intercure;

“New Regulations” means the regulations published by the IMCA in 2016;

“NI 41-101” means National Instrument 41-101 – General Prospectus Requirements;

“NI 41-101F1” means National Instrument 41-101F1 – Information Required in a Prospectus;

“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations;

“NI 52-110” has the meaning set out under the heading “Directors and Officers”;

“NI 58-101” has the meaning set out under the heading “Corporate Governance and Board Committees”;

“NIS” means the Israeli New Shekel, the currency of Israel;

“NOI” has the meaning set out under the heading “Non-IFRS Measures”;

“Non-Significant Acquisitions” has the meaning set out under the heading “Exemptions”;

“Northern Kibbutz” has the meaning set out under the heading “The Business of Intercure-Partnerships-Israel-The Northern Kibbutz”;

“Northern Kibbutz Agreement” has the meaning set out under the heading “The Business of Intercure-Partnerships- Israel-The Northern Kibbutz”;

“Northern Kibbutz License” has the meaning set out under the heading “The Business of Intercure”.

“Northern Kibbutz Partnership” has the meaning set out under the heading “The Business of Intercure-Partnerships- Israel-The Northern Kibbutz”;

“Office holder” has the meaning set out under the heading “Israeli corporate law matters-Acquisitions under Israeli law-Special tender offer”;

“OIFP Rules” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations- Offshore Investment Fund Property Rules”;

“Organigram” means Organigram, Inc.;

“Organigram Agreement” has the meaning set out under the heading “The Business of Intercure-Exclusive Partnerships-Organigram-”;

“Organigram Initial Period” has the meaning set out under the heading “The Business of Intercure-Exclusive Partnerships-Organigram”;

“OSC” means the Ontario Securities Commission”;

“Patent Law” has the meaning set out under the heading “Risk Factors-Risk Factors Related to the Incorporation and Operations in Israel”;

“Permitted Timeline” means the allowable time period within which the LP must consummate a qualifying transaction, being 12 months from the closing date of the IPO (or 15 months from the closing date of the IPO if we have executed a definitive agreement for a qualifying transaction within 12 months from the closing date of the IPO but have not completed such qualifying transaction within such 12-month period), as it may be extended as described in this Prospectus;

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“PIPEDA” means the Personal Information Protection and Electronics Documents Act (Canada) S.C. 2000, c. 5;

“Plan of Arrangement” means the plan of arrangement attached to the Arrangement Agreement, as amended or supplemented from time to time in accordance with the terms thereof, the terms of the Arrangement Agreement or at the discretion of the Court, with the consent of the General Partner and Intercure, each acting reasonably;

“Plan of Arrangement Steps” has the meaning set out under the heading “The Qualifying Transaction-Principal Steps of the Plan of Arrangement and Related Transactions”;

“Plant Convention” means the international convention with respect to the Protection of New Varieties of Plants;

“Preferred Company” means a preferred company as defined in the Investment Law;

“Preferred Enterprise” means a preferred enterprise as defined in the Investment Law;

“Preferred Technology Enterprise” means a preferred technology enterprise as defined in the Investment Law;

“Preferred Technology Income” means preferred technology income as defined in the Investment Law;

“Private Placement” has the meaning set out on the cover page of this Prospectus;

“professional expertise” means professional expertise as defined in the Companies Law;

“Professional Expertise” means professional expertise as defined in the Companies Law;

“Proportionate Voting Unit Exchange” has the meaning set out under the heading “The Qualifying Transaction- Overview”;

“Proportionate Voting Units” means the proportionate voting limited partnership units of the LP forming part of the Class B Units, and where applicable, the Founders’ Proportionate Voting Units, and each a “Proportionate Voting Unit”;

“Proposed Amendments” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations”;

“public companies”: means public companies as defined in the Companies Law;

“Qualifying Transaction” has the meaning set out on the cover page of this Prospectus;

“Qualifying Transaction Redemption Price” means an amount per Restricted Voting Unit, payable in cash, equal to the pro-rata portion of: (a) the escrowed funds available in the escrow account at the time immediately prior to the Redemption Election Deadline, including interest and other amounts earned thereon; less (b) an amount equal to the total of (i) any applicable taxes payable by the LP on such interest and other amounts earned in the escrow account, and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the General Partner, subject to the limitations described in this Prospectus, which is expected to be approximately US$10.04;

“RDSP” means a registered disability savings plan as defined for purposes of the Tax Act;

“real capital gain” has the meaning set out under the heading “Certain Israeli Income Tax Considerations-Capital Gains—General”;

“Redemption Election Deadline” means a date that is 21 days after the date this prospectus is issued a final receipt;

“Redemption Limitation” has the meaning set out under the heading “The Qualifying Transaction-Redemption Rights”;

“Redemption Notice” has the meaning set out under the heading “The Qualifying Transaction-Redemption Rights”; - 8 -

“Redemption Right” has the meaning set out under the heading “The Qualifying Transaction-Principal Steps of the Plan of Arrangement and Related Transactions”;

“Registered Plan” has the meaning set out under the heading “Eligibility for Investment”;

“Representative” has the meaning set out under the heading “The Qualifying Transaction”;

“Resolution 2018/2775(RSP)” has the meaning set out under the heading “Applicable Laws and Regulations”;

“RESP” means a registered education savings plan as defined for purposes of the Tax Act;

“Restricted Voting Units” means the restricted voting limited partnership units of the LP forming part of the Class A Restricted Voting Units, which may be considered “restricted securities” within the meaning of such term under applicable Canadian securities laws, and each a “Restricted Voting Unit”;

“Restricted Voting Unit Reclassification” has the meaning set out under the heading “The Qualifying Transaction- Overview”;

“Rights” means the 23,024,500 rights underlying the Class A Restricted Voting Units and the Class B Units to receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit following the Closing (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Rights Agreement);

“Rights Agent” means Olympia Trust Company;

“Rights Agreement” means the rights agency agreement dated January 8, 2020 between the LP and the Rights Agent;

“Rights Exercise” has the meaning set out under the heading “The Qualifying Transaction-Overview”;

“RRIF” means a registered retirement income fund as defined for purposes of the Tax Act;

“RRSP” means a registered retirement saving plan as defined for purposes of the Tax Act;

“Sarbanes-Oxley Act of 2002” means the Sarbanes-Oxley Act of 2002 (Public Law 107-204, 116 Stat. 745);

“SEC” means the Securities and Exchange Commission;

“Securities Act” means the Securities Act (Ontario) R.S.O. 1990, c. S. 5;

“Security Based Compensation Arrangement” means security based compensation arrangement as defined in the NEO Exchange Listing Manual;

“Section 404” means Section 404 of the Sarbanes-Oxley Act of 2002;

“SEDAR” means the System for Electronic Document Analysis and Retrieval;

“Share Forfeiture” has the meaning set out under the heading “The Qualifying Transaction”;

“Special Preferred Technology Enterprise” means a special preferred technology enterprise as defined in the Investment Law;

“signatories” has the meaning set out under the heading “Contractual and Statutory Rights–Purchasers of Restricted Voting Units”;

“SLE” means Salomon Levin & Elstein Ltd.;

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“SLE Agreement” has the meaning set out under the heading “The Business of Intercure-Sales and Distribution- Israel”;

“Southern Kibbutz” has the meaning set out under the heading “The Business of Intercure-Partnerships-Israel-The Southern Kibbutz”;

“Southern Kibbutz Agreement” has the meaning set out under the heading “The Business of Intercure-Partnerships- Israel-The Southern Kibbutz”;

“Southern Kibbutz License” has the meaning set out under the heading “The Business of Intercure”.

“Southern Kibbutz Partnership” has the meaning set out under the heading “The Business of Intercure-Partnerships- Israel-The Southern Kibbutz”;

“SPAC” has the meaning ascribed to it in the NEO Exchange Listing Manual;

“Special Approval for Compensation” has the meaning set out under the heading “Corporate Governance and Board Committees-Committees of the Board”;

“Special Preferred Technology Enterprise” means a special preferred technology enterprise as defined in the Investment Law;

“Sponsor Unit Transfer” has the meaning set out under the heading “The Qualifying Transaction”;

“Sponsors” means collectively, CG IV, Inception Sponsor and Subversive Sponsor;

“Substantial Shareholder” has the meaning set out under the heading “Certain Israeli Income Tax Considerations- General Corporate Tax Structure in Israel”;

“Subversive Capital” means Subversive Capital LLC;

“Subversive Sponsor” means Subversive Real Estate Sponsor LLC;

“Super Pharm” means Super-Pharm Ltd.;

“Super Pharm Agreement” has the meaning set out under the heading “The Business of Intercure-Sales and Distribution-Israel”;

“Super Pharm Pharmacies” has the meaning set out under the heading “The Business of Intercure”;

“TASE” has the meaning set out on the cover page of this Prospectus;

“Tax Act” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations”;

“taxable capital gain” has the meaning set out under the heading “Certain Canadian Federal Income Tax Considerations-Taxation of Capital Gains and Capital Losses”;

“Technology Enterprise” means a technology enterprise as defined in the Investment Law;

“TFSA” means a tax-free savings account as defined for purposes of the Tax Act;

“THC” means delta-9-tetrahydrocannabinol and its isomers and stereoisomers;

“Tilray” means Tilray, Inc.;

“Tilray Agreements” has the meaning set out under the heading “The Business of Intercure”;

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“Transfer Agent” means Olympia Trust Company;

“TSX” means the Toronto Stock Exchange;

“TSX Company Manual” means the Company Manual of the TSX;

“UK Joint Venture” has the meaning set out under the heading “The Business of Intercure”;

“UK JV Agreement” has the meaning set out under the heading “The Business of Intercure”;

“UK Partner” has the meaning set out under the heading “The Business of Intercure”;

“Underwriter” means Canaccord Genuity Corp. and Echelon Wealth Partners Inc.;

“Underwriting Agreement” means the underwriting agreement dated December 23, 2019 among the LP, the General Partner, our Sponsors and Canaccord Genuity Corp. and Echelon Wealth Partners Inc., as underwriters;

“United States” or “U.S.” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia;

“Unitholder Meeting” means the special meeting of the Unitholders to be held prior to the Closing to approve, among other things, the Arrangement Resolution;

“Unitholders” means the holders of Units, collectively, and each a “Unitholder”;

“Units” means the Restricted Voting Units, Proportionate Voting Units and Limited Partnership Units to the extent issued and outstanding, collectively, and each a “Unit”; and

“Voting Agreement” means the voting agreement dated January 8, 2020 between the LP, the General Partner and Subversive Sponsor, that provides the LP with a number of rights.

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NOTICE TO READERS

The LP, which is a limited partnership formed under the LPA and a SPAC for the purposes of the rules of the NEO, was organized for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the LP that will qualify as its qualifying transaction for the purposes of the rules of the NEO. This prospectus is being filed by the LP in accordance with section 10.16 of the NEO Exchange Listing Manual and section 1028 of the TSX Company Manual in connection with the completion of the Qualifying Transaction.

Unless otherwise indicated, (a) the disclosure in this prospectus (i) is provided as of the date of this prospectus, (ii) has been prepared assuming that the Plan of Arrangement has been completed (including the closing of the Qualifying Transaction and the dissolution of the LP, but not including the Intercure Share Consolidation), and (iii) assumes (A) the issuance of (1)100,108,276 Intercure Shares in connection with the Qualifying Transaction to the Unitholders, (2) 31,700,954 Intercure Shares in connection with the Private Placement; (3) 889,851 Limited Partnership Units to the Underwriters in consideration for the satisfaction of the obligations of the LP pursuant to the Underwriting Agreement in connection with Closing; and (4) 12,805,239 Intercure Shares to the holders of Rights, and (B) no Share Forfeiture occurring, (b) all references to “$”, “US$”, “United States dollars” or “U.S. dollars” are to the currency of the United States, all references to “NIS” are to the Israeli New Shekel, the currency of Israel, and all references to “C$” are to the currency of Canada, (c) all references to “management” refer to the executive officers and other members of senior management of the General Partner or Intercure, as the context requires, and (d) all references to “us”, “we” or “our” refers to the LP or Intercure (including all of their direct and indirect subsidiaries), as the context requires.

The following table sets forth, for the periods indicated, the high, low, average and period-end rates of exchange for one U.S. dollar, expressed in Canadian dollars, based on the daily exchange rate published by the Bank of Canada during the respective periods.

Nine Months Ended Year Ended September 30, December 31, 2018 2019 2020 2018 2019 2020 Rate at end of period...... 1.2803 1.3243 1.3339 1.3642 1.2988 1.2732 Average rate during period ...... 1.2876 1.3292 1.3641 1.2957 1.3269 1.3415 High rate for period ...... 1.3310 1.3600 1.4496 1.3642 1.3600 1.4496 Low rate for period ...... 1.2288 1.3088 1.2970 1.2288 1.2988 1.2718

On March 11, 2021, the final business day prior to the date hereof, the daily average rate of exchange posted by the Bank of Canada for conversion of U.S. dollars into Canadian dollars was US$1.00 equals C$1.2561.

The following table sets forth, for the periods indicated, the high, low, average and period-end rates of exchange for one NIS, expressed in Canadian dollars, based on the daily exchange rate published by the Bank of Israel during the respective periods.

Nine Months Ended Year Ended September 30, December 31, 2018 2019 2020 2018 2019 2020 Rate at end of period...... 2.7869 2.6267 2.5697 2.7517 2.6535 2.5217

Average rate during period ...... 2.7653 2.7005 2.5695 2.7755 2.6868 2.5663 High rate for period ...... 2.8490 2.7854 2.7274 2.8490 2.7854 2.7274 Low rate for period ...... 2.6414 2.6198 2.4895 2.6414 2.5956 2.4895

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On March 11, 2021, the final business day prior to the date hereof, the daily average rate of exchange posted by the Bank of Israel for conversion of NIS into Canadian dollars was NIS1.00 equals C$2.6380.

NON-IFRS MEASURES

In this prospectus, Intercure uses certain non-IFRS financial measures to measure, compare and explain the operating results and financial performance of Intercure. These measures are commonly used by companies operating in the cannabis industry as useful metrics for measuring performance. However, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Intercure defines such financial measures as follows:

“Adjusted EBITDA” means EBITDA adjusted for changes in the fair value of inventory, share-based payment expense, impairment losses (and gains) on financial assets, non-controlling interest and other expenses (or income);

“CAGR” means the compounded annual growth rate of revenue during a specified period;

“EBITDA” means net income (loss) before interest, taxes, depreciation and amortization;

“EBITDA Margin” means EBITDA divided by revenue; and

“Run Rate Revenue” means revenue, annualized irrespective of the length of the applicable period.

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this prospectus constitute “forward-looking information” for the purpose of applicable Canadian securities legislation (“forward-looking statements”). These statements reflect management’s expectations with respect to future events, Intercure’s financial performance and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of the words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intends”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “should”, “would”, and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not a forward-looking statement. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated or implied in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this prospectus should not be unduly relied upon. Unless otherwise indicated, these statements speak only as of the date of this prospectus.

In particular, this prospectus contains forward-looking statements pertaining to the following, among other things:

• our ability to complete the Qualifying Transaction and Private Placement, expected timing related thereto, and its potential success (including the listing of the Intercure Shares on the Nasdaq and the TSX);

• the expected benefits and effects of the Qualifying Transaction to, and resulting treatment of, the shareholders of Intercure;

• the anticipated approval of the Plan of Arrangement by the Court;

• the anticipated approval of the Arrangement Resolution by the Unitholders at the Unitholder Meeting;

• the anticipated Intercure Shareholder Approval;

• the redemption amount in respect of the Restricted Voting Units;

• our financial performance following the Qualifying Transaction;

• our ability to obtain, and the timing of, regulatory approvals to produce, manufacture, distribute, export and import pharmaceutical-grade cannabis and cannabis-based products;

• our partner’s ability to obtain, and the timing of, regulatory approvals to produce, manufacture, distribute, export and import pharmaceutical-grade cannabis and cannabis-based products;

• the development and regulation of cannabis and, more specifically, the medical-use cannabis industry;

• the outcomes of preclinical studies, clinical trials and other research regarding the safety and efficacy of cannabis and the ability of such trials to increase acceptance of cannabis in the medical community;

• the commercialization and pricing of our products;

• our competitors’ development, marketing and sale of products that compete with our products;

• our expectations regarding future growth, including our ability to complete the expansion of our facilities in northern Israel, southern Israel, the European Union and Canada, as well as the overall expansion of the Cannolam pharmacy chain in 2021;

• our estimates regarding the growth of the Israeli medical cannabis market (including the number of patients);

• our ability to enter into arrangements with distributors, including any required regulatory approvals; - 14 -

• our ability to develop an active trading market for the Intercure Shares and whether the market price of the Intercure Shares is volatile;

• our ability to execute our growth strategies;

• our competitive position within the industry;

• expectations for regulatory and/or competitive factors related to the cannabis industry generally, including the permanent export permit from the Israeli Medical Cannabis Agency (the “IMCA”) and Israeli authorities, as well as the ability to obtain import permits into Israel for future cannabis shipments;

• the listing or continued listing of the Intercure Shares;

• the provisions in the LPA and the Intercure Articles;

• the number of Intercure Shares outstanding following the Qualifying Transaction and the potential forfeiture of certain Intercure Shares acquired by the Founders;

• expectations regarding future director and executive compensation levels and plans;

• the continuing anticipated and potential adverse impacts resulting from the COVID-19 pandemic;

• expected industry trends;

• general economic trends;

• fluctuations in foreign exchange rates; and

• fluctuations in interest rates.

Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations, which are difficult to predict and many of which are beyond the control of the LP and Intercure, including that the transactions contemplated herein are completed.

Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date of this prospectus, are inherently subject to significant business, economic and competitive uncertainties and contingencies. While management believes that the expectations reflected in such forward-looking statements are reasonable and represent management’s internal projections, expectations and beliefs at this time, management’s estimates, beliefs and assumptions may prove to be incorrect and include the various assumptions set forth herein, including, but not limited to, the anticipated receipt of any required regulatory approvals and consents (including the final acceptance of the TSX, as well as the listing approval of the TSX, Nasdaq and TASE); the approval by the Israeli Securities Authority; the anticipated receipt of all securityholder approvals (including the approval of the Arrangement Resolution by the Unitholders at the Unitholder Meeting and the Intercure Shareholder Approval); receipt of the Final Order; the expectation that the Closing takes place; the expectation that no event, change or other circumstance will occur that could give rise to the termination of the Arrangement Agreement; expectations with respect to redemptions; expectations with respect to Intercure’s future growth potential, results of operations, future prospects and opportunities; expectations with respect to demographic and industry trends; expectations with respect to legislative or regulatory matters, future levels of indebtedness, or tax laws as currently in effect; expectations with respect to the fluctuating global economic conditions caused by the continuing impact of the COVID-19 pandemic, the scope and duration of the COVID-19 pandemic and its impact on the LP and Intercure; and expectations regarding the continuing availability of capital, fluctuations in foreign exchange rates; and current economic conditions.

When relying on forward-looking statements to make decisions, the LP cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. Forward-looking - 15 -

statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at, or by which, such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to the factors discussed under “Risk Factors“.

Although management has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known that management believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information.

Note Regarding Financial Outlook and Future-Oriented Financial Information

All financial outlook and future-oriented financial information contained in this prospectus about prospective financial performance, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available, and to become available in the future. In particular, this prospectus contains projected operational information for Intercure. These projections contain forward-looking statements and are based on a number of material assumptions and the factors set out above. Actual results may differ significantly from the projections presented herein. These projections may also be considered to contain future-oriented financial information or a financial outlook under applicable securities laws. The actual results of Intercure’s operations for any period will likely vary from the amounts set forth in these projections, and such variations may be material. See above and under the heading “Risk Factors“ for a discussion of the risks that could cause actual results to vary. The future-oriented financial information and financial outlooks contained in this prospectus have been approved by management as of the date of this prospectus and have been provided for the purpose of describing management’s expectations. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein.

The prospective financial information included in this prospectus has been prepared by, and is the responsibility of, management. Intercure and the LP do not as a matter of course make public projections as to future sales, earnings, or other results. However, management has prepared the prospective financial information and projections set forth in this prospectus to present the future growth potential of Intercure. The accompanying prospective financial information and projections were prepared by and is the responsibility of management. The information was not prepared with view toward complying with any specific guidelines established with respect to prospective financial information, but, in the view of management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management's knowledge and belief, the expected course of action and the expected future financial performance of Intercure. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.

Neither Intercure nor the LP’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the prospective financial information.

Any forward-looking statement included in this prospectus is expressly qualified by this cautionary statement, and except as otherwise indicated, is made as of the date of this prospectus. None of the LP, the Founders (including the Sponsors), or Intercure assume or undertake any obligation to update or revise any forward-looking statements or departures from them, except as required by applicable law. New factors emerge from time to time, and it is not possible for management to predict all such factors and to assess in advance the impact of each such factor on the business of Intercure or the LP or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

MARKET AND INDUSTRY DATA

This prospectus includes market and industry data and forecasts that were obtained from third-party sources, industry publications and publicly available information as well as industry data prepared by management on the basis of its knowledge of the industry in which Intercure operates (including management’s estimates and assumptions relating - 16 -

to the industry based on that knowledge). Management’s knowledge of the cannabis industry has been developed through its experience and participation in the industry. Management believes that its industry data is accurate and that its estimates and assumptions are reasonable, but there can be no assurance as to the accuracy or completeness of this data. Third-party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. Although management believes it to be reliable, neither the LP nor Intercure have independently verified any of the data from management or third-party sources referred to in this prospectus, or analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying economic assumptions relied upon by such sources.

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PROSPECTUS SUMMARY

The following is a summary of this prospectus and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus. Investors should read the entire prospectus and not rely solely on the contents of this summary.

THE LP

Subversive Real Estate Acquisition REIT LP is a limited partnership established under the LPA for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the LP that will qualify as its Qualifying Transaction. The LP is a SPAC for the purposes of the rules of the NEO. The LP received US$200 million of proceeds from its initial public offering which was completed on January 8, 2020, as well as an additional US$25 million of proceeds on the closing of the over-allotment option granted in connection with its initial public offering. The total proceeds of US$225,000,000 were placed in an escrow account with Olympia Trust Company and will be released upon consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement.

As a result of the Plan of Arrangement, on Closing, the LP will be dissolved and Intercure will become a reporting issuer, while Unitholders that have not exercised any Redemption Right available to them and holders of Rights will become holders of the Intercure Shares.

See “The LP” and “The Qualifying Transaction”.

THE MEDICAL-USE CANNABIS INDUSTRY

The Industry – Overview

Although cannabis is still heavily regulated in the jurisdictions in which we do business or seek to do business, we believe we are witnessing a global paradigm shift from the prohibition to legalization of cannabis. Cannabis for medical use is authorized at the national or federal level in over 40 countries and regulatory change has occurred globally at a rapid pace, with dozens of countries having introduced significant reforms to their cannabis-use laws to broaden the scope of permitted use since the beginning of 2015. According to a report by Energias Market Research, the global medical-use cannabis market was valued at $13.4 billion in 2020, and is projected to soar in value to $44 billion by 2025.1 We expect significant growth in the use of cannabis-based products for medicinal purposes as additional territories adopt legalization and develop regulatory standards.

The adoption and implementation of local laws and regulations has been both the primary driver in the development of the industry and its primary barrier to entry and, accordingly, the market for medical-use cannabis varies on a jurisdiction-by-jurisdiction basis. We believe that in order to overcome the barriers to entry in the regulated medical- use cannabis industry, participants must demonstrate sophistication through the development of strong business, operational, and compliance practices that give the sector added legitimacy and establish public confidence in the viability of cannabis for medical use, including support among patients and physicians. We believe that a convergence of changing public attitudes, momentum towards legalization in various jurisdictions, and increased efforts to research the benefits, efficacy and safety of cannabis use creates an attractive opportunity for participants in the regulated medical-use cannabis industry.

Pharmaceutical-Grade Cannabis for Medical Use

1 Source: https://www.marketdataforecast.com/market-reports/medical-cannabis-market - 18 -

pharmaceutical-grade medical-use cannabis imposes the need for consistency and quality of product, ensures a physician-diagnosed medical need for cannabis, and can enable the reimbursement of patient prescription costs in certain jurisdictions. The use of pharmacies for distribution eases the education of distribution partners, because pharmaceutical-grade cannabis will use the same distribution channels as other pharmaceutical products. In certain countries, such as Israel, Germany, the United Kingdom and Denmark, only pharmaceutical-grade cannabis is permitted to be sold for medical use and we believe that other countries will adopt similar pharmaceutical-grade regulatory parameters for medical-use cannabis.

Competition

The medical-use cannabis industry is characterized by intense competition and an increasing focus on quality and standards. While we believe that we hold many competitive advantages within the pharmaceutical-grade cannabis market, we face competition from many different sources, which include other companies that produce and distribute cannabis for medical use, as well as major pharmaceutical, specialty pharmaceutical and biotechnology companies. We anticipate intensifying competition in the medical-use cannabis industry as new jurisdictions allow the production and distribution of cannabis products, new therapies are approved for the treatment of medical indications, and advanced technologies become available.

Within the pharmaceutical-grade cannabis industry, we currently compete directly with manufacturers in Israel, including Breath Of Life Pharma, Ltd. and IM Cannabis Corp., and internationally with local licensed producers such as Bedrocan International B.V. and Aurora Cannabis Inc. In Canada, we currently compete with licensed producers who decide to market products in the Canadian medical-use cannabis market. In the future, we expect to compete with licensed producers which choose to distribute pharmaceutical-grade cannabis products in fully regulated jurisdictions. Any product that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Many of our competitors will have substantially greater financial, technical and human resources than we do. Competitors may also have more experience developing, obtaining regulatory approval for, and marketing products or treatments in the markets where we operate or where we are planning to operate. These factors could give our competitors an advantage over us in recruiting and retaining qualified personnel, completing clinical development of their products, and commercializing their products.

See “The Medical-Use Cannabis Industry”.

THE BUSINESS OF INTERCURE

Intercure is an Israeli public corporation whose shares are listed for trading on the TASE under the symbol “INCR”. On Closing, the Intercure Shares are expected to be listed for trading on the TASE, the Nasdaq and the TSX, but are not expected to be listed on the NEO or the OTC market.

Intercure has three direct subsidiaries, Canndoc, Cannolam and Canndoc CBD. Intercure currently owns all of the issued and outstanding shares of Canndoc and Canndoc CBD, and 50.1% of the issued and outstanding shares of Cannolam. The other 49.9% of the issued and outstanding shares of Cannolam are owned by a private company controlled by Mr. Ori Mimon and Asaf Ohayon, the founders and existing co-CEOs of Cannolam. By virtue of their ownership of the private company, each of the individuals hold 23.6% of the non-Intercure Cannolam shares. The remaining shares (~2.7%) are held by third parties that are not related to Intercure and/or its insiders.

Canndoc’s operations are focused on the production (including the breeding, cultivating, importing and processing), manufacturing, exporting and distribution of pharmaceutical-grade cannabis and cannabis-based products for medical use.

Cannolam’s operations are focused on establishing and operating dedicated pharmacies for the distribution of pharmaceutical-grade cannabis under the brand name “Givol”, including a “Cookies”-branded location. In addition, Cannolam is looking to establish a distribution network for recreational cannabis and cannabis-based products throughout Israel, primarily through licensing and distribution agreements, that will become effective once the recreational use of cannabis for adults over the age of 21 is legalized in Israel.

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Canndoc CBD is the entity that Intercure intends to use for the purposes of operating in the CBD industry once CBD is removed from the Israeli DDO.

Unless otherwise specified, references in this section to “we”, “our” and “us” refer to the business of Intercure and its subsidiaries.

History

We (more specifically through Canndoc and its founder, Mr. Avner Barak, who is Canndoc’s President) are a pioneer in the production (including the breeding, cultivating and processing), manufacturing and distribution of pharmaceutical-grade cannabis and cannabis-based products for medical use. For more than 13 years, we have been a leader in the licensed production and distribution of cannabis and cannabis-based products throughout Israel, one of the first countries with a governmentally-sanctioned regime for the production, manufacturing and distribution of cannabis for medical use. Our goal is to be a global leader in the production and distribution of high quality pharmaceutical-grade cannabis and cannabis-based products to patients in all territories that permit and regulate the distribution of cannabis for medical use, including Israel, the European Union and Canada.

Notwithstanding our plans for growth, we will operate only in countries where cannabis may be legally used for medical purposes and permitted under all applicable laws. Despite being authorized for medical and adult use by many U.S. states, we do not, nor do we plan to, produce, process or distribute cannabis in the United States while it remains a controlled substance with no currently accepted medical use under U.S. federal law.

We were an early leader in the global medical-use cannabis market and we were one of the first licensed producers of cannabis for medical use in Israel, where medical use of cannabis has been permitted and regulated since 2008. Our pharmaceutical-grade cannabis products are manufactured using processes that are certified and in compliance with the IMCA, standards, including IMC-GMP standards, which are substantially similar to the Good Manufacturing Practice of the European Union (“EU-GMP”) standards. GMP certification is an internationally recognized standard that is the primary quality standard that pharmaceutical companies must meet in their production processes. Leveraging our more than 13 years of experience, we have developed production methods for consistent batches with well-defined cannabinoid profiles by following strict protocols, utilizing proprietary cannabis genetics and leveraging our scalable climatized greenhouse technology. All of our products are analyzed by IMCA-certified laboratories using established testing procedures that ensure standardized cannabinoid compound ratios and potency, or cannabinoid profiles.

We believe that our future growth is dependent upon our ability to further develop and commercialize our extensive know-how regarding the production of high-quality pharmaceutical-grade cannabis and on our success in implementing our plans to increase our production capabilities and to expand our global distribution network, enabling us to distribute our products in Israel, the European Union and Canada.

To date, we have conducted our operations primarily through our production facility located in the Southern Kibbutz, with a gross area of 1.7 million square feet, of which 300,000 square feet are operational and which can produce up to 7,000 kilograms of pharmaceutical-grade cannabis per year. Full operation of the Southern Kibbutz will allow us to produce 88 tons of pharmaceutical-grade cannabis per year. In addition, we also operate the Northern Kibbutz, a production facility with a gross area of 55,000 square feet that produces 3,000 kilograms of pharmaceutical-grade cannabis per year.

In Israel, we distribute our products through licensed retail pharmacy locations, where patients may fill their prescriptions on site or have our products delivered directly to their residence. To diversify and expand our global production and distribution capabilities to meet current and future demand in our target markets, we have entered into joint ventures and distribution agreements in the European Union and Canada with local licensed producers and distributors that have significant distribution networks. We have partnered with a Danish licensed producer that owns and operates a pharmaceutical production and/or manufacturing facility. We have also engaged a separate German pharmaceutical distributor. We have also entered into a joint venture agreement with a licensed EU-GMP pharmaceutical manufacturer and distributor that has a license to import cannabis into the United Kingdom for medicinal purposes. In Canada, our partner has an established indoor production and manufacturing facility and has the capability to distribute our products. We plan to have our products distributed globally under the “CANNDOC” brand and produced by us or through our partnerships and manufactured under GMP standards. As of the date of this - 20 -

prospectus, our products have not yet been distributed through our partnerships. Our ability to do so is impacted by various regulatory matters, as regulatory permits and/or licenses are currently required for both the import and export of cannabis products in the jurisdictions where we operate. As such, the regulatory regime present in these jurisdictions has a direct impact on our business and our ability to grow it.

We have received IMCA feasibility approval to initiate nine clinical trials and commence one phase 3 clinical trial. We initiated a phase 3 clinical trial in a leading Israeli medical center to study our product’s influence on cognitive and adjacent capabilities on children who are on the autistic spectrum.

We believe our management team is one of the most knowledgeable and experienced in the cannabis industry and consists of pioneers in the cannabis space, including our founder and president, who is globally recognized as an expert cultivator of medical cannabis. We believe that our extensive cannabis production expertise, lengthy operating experience and strong relationships with governmental institutions gives us an advantage over our competitors.

Our Strengths

We believe our key competitive strengths include the following:

We have been a pioneer of cannabis for medical use for over 13 years. We have been producing cannabis for medical use since 2008 and are one of the first licensed producers and distributors of cannabis and cannabis-based products in Israel, one of the first countries with a governmentally-sanctioned regime for the production and distribution of cannabis for medical uses. We were the first to import cannabis for medical use into Israel for distribution in the Israeli market and we were the first to export cannabis for medical use to a country in the European Union.

Our products and processes meet the highest standards required by regulators for the whole value-chain of pharmaceutical-grade cannabis. We were one of the first cannabis companies in Israel to supply products that meet the GMP standards established by the IMCA. Our facilities and the production processes implemented in them are certified under the IMC-GAP standards and comply with the Good Agriculture Collection Practices (GACP) following an audit made by an EU-GMP-certified entity. We use a third-party packing facility for packaging our branded products in accordance with the IMC-GMP and EU-GMP standards. Finally, our distributors, including pharmacies, store and distribute our products using facilities and processes that meet the IMC-GDP standards. Our products comply with the highest standards and we believe our products will be competitive in any medical-use cannabis market.

Strategic Partnerships. We (as well as Cannolam) have entered into long-term exclusive strategic partnerships with leading companies. We have exclusive long-term partnerships with Tilray, Aphria, Organigram, Charlotte's Web and Cookies. These partnerships provide us with product sources and access to our partner’s facilities. This allows us to increase our global footprint and provide access to increased raw material if we need it to meet demand. Together with our local and EU production and distribution channels, we are able to create a dynamic international supply chain for our GMP-branded products.

Expansion into the CBD market. Our strategic partnership with the number one global leader in hemp extracts, Charlotte's Web, was the first partnership we undertook in the CBD space. This agreement includes long-term exclusive distribution rights of Charlotte’s Web's products in Israel and further distribution rights in the European market. This strategic partnership entails research and development, new product development in Israel, the supply of raw material for Israeli industrialists and manufacturing in Israel and Europe. The noted partnership is subject to the receipt of the required regulatory approvals and the removal of CBD from the DDO.

We have developed rigorous, cultivation and harvest protocols to ensure consistency, quality and efficiency as we increase the scale of our operations globally. We pride ourselves on consistently delivering high-quality products with precise chemical compositions using scalable and efficient production techniques. We have leveraged our extensive production experience and proven protocols while expanding our production capabilities at our sites in Israel. We have entered into joint ventures with local licensed producers in both the European Union and Canada. Although producing GMP-certified products generally requires additional costs, we have developed production techniques that enable us to maintain a low-cost structure as we further scale our operations. We currently utilize climatized greenhouses instead of more costly indoor facilities in order to produce GMP-certifiable products at a lower cost.

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We have established a global distribution network. We distribute pharmaceutical-grade cannabis products in Israel (using authorized distributors that are IMC-GDP certified) to 100% of the pharmacies in Israel that are authorized to distribute cannabis products. In addition, through Cannolam, we operate four pharmacies (of which two were purchased in January 2021 and one is a joint-venture with the owner solely with respect to the distribution of medical cannabis). One of the two new locations that we purchased in January 2021 is already certified to sell medical cannabis, while the other is expected to be certified over the next few months. We intend to expand our pharmaceutical operations in 2021 by opening at least two more pharmacies. We have also established a joint venture with a licensed producer and distributor in Denmark and a distribution agreement with a pharmaceutical distributor in Germany. We have also entered into a joint venture agreement with a licensed EU-GMP pharmaceutical distributor that has a license to import cannabis into the United Kingdom for medicinal purposes. In Canada, we have established a joint venture with a partner that has an established indoor production and manufacturing facility and capabilities to distribute our products. As of the date of this prospectus, our products have not been distributed through these partnerships. While these partnerships depend on future favourable amendments to import and export laws with respect to cannabis, we believe that we are well positioned to quickly monetize these partnerships in the event that the cannabis import and export regulatory framework is revised in a manner favorable to us.

We have accumulated extensive patient use and experience data for our products. Since 2008, our products have been used by thousands of patients on a monthly basis to treat all medical conditions approved by the MOH, which primarily include: pain, neurological indications (such as epilepsy, ALS & MS), cancer, post-traumatic stress disorder (PTSD), gastrointestinal indications (such as Crohn’s disease, colitis, inflammatory bowel disease) and terminal illnesses. As a result, we have extensive patient use and experience data from which to educate physicians and enable them to prescribe our products with the appropriate cannabinoid profile, dosage and duration for a medical indication.

We are a market leader in research and innovation within our industry. We believe that innovation is a key component of our competitiveness and growth in the medium and long-term. We engage in the research of agricultural techniques to improve the yield of cannabis plants and our production of various cannabinoids. Our research and development programs have also involved the development of high-quality protocols and elite genetics. Further, to ensure the quality and reliability of our products as well as the optimization of methods to provide more effective products, we engage in a series of analyses regarding our products.

We have a highly experienced leadership team. We believe our management team is amongst the most knowledgeable and experienced in the cannabis industry and consists of pioneers in the cannabis space, including our founder and president who is globally recognized as an expert cultivator of cannabis. As a long-term operator in this industry, our team has been at the forefront of assisting governments to develop regulations around the production and distribution of pharmaceutical-grade cannabis. We believe that our extensive cannabis production expertise, operating experience and strong relationships with governmental institutions, including the IMCA, gives us a competitive advantage over other participants in the medical-use cannabis industry.

We focus on operational excellence. We have developed a quality management system that has enabled us to meet pharmaceutical-grade production standards while achieving and maintaining profitability. We believe that as we continue to grow, we will leverage our technologies and knowledge to optimize our operational efficiency while maintaining the highest level of safety and quality.

Our Strategies

Our goal is to be a vertically integrated global leader in the production and distribution of high-quality pharmaceutical- grade cannabis-based products to patients in all territories that permit and regulate the distribution of cannabis for medical use. To achieve this goal, we plan to implement the following strategies:

Focus only on high-quality cannabis products. We focus solely on high-quality pharmaceutical-grade cannabis for the treatment of medical conditions. Given our sole focus, we have accumulated more years of experience than most of our competitors in producing consistent pharmaceutical-grade cannabis under the highest quality standards. We believe that we have a head start to becoming a dominant player in this industry on a global level and will be competitive in all markets, including those with the strictest regulatory standards. In addition, subject to applicable local laws, we believe that our expertise and distribution capabilities have positioned us well for dominating the recreational cannabis and CBD market in Israel once, and if, Israeli regulations permit the sale of recreational cannabis and CBD products.

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Focus only on territories that are fully-regulated medical-use cannabis markets. We believe that focusing on markets that have fully-regulated medical-use regimes provides us with legal certainty for our operations and enables us to leverage our high standards to gain an advantage when competing in these markets. We plan to leverage these benefits to expand our global footprint, maintain our reputation, strengthen our brand and broaden our access to capital.

Build a leading global brand. Our plan is to distribute all products produced by us, our joint ventures and our partners under a single global “CANNDOC” brand and our sub-brands (including, “Indoor”, “Diamonds”, “Stars”, “Utopia”) in order to build global brand awareness of and loyalty to our pharmaceutical-grade products. We design our packaging to have a look and feel that is consistent with other prescribed medicines to reflect the pharmaceutical-grade quality of our products. Our packaging displays ratios of specific cannabinoid compounds and the required disclosures for the relevant jurisdiction of distribution. We believe this strategy will instill physician and patient confidence in us, leading to a greater adoption of our products.

Establish distribution networks in all territories with full regulation of the medical-use cannabis industry. . In addition to our distribution networks in Israel, we have established distribution channels for our products in all fully-regulated markets, including Germany, the United Kingdom and Canada. These distribution channels, established by way of joint ventures and distribution agreements with local licensed distributors, address both the current and anticipated demand for medical use cannabis. We have also established relationships with the distributors of pharmaceutical products in markets where we expect cannabis for medical use will become fully regulated in the near future. Having established distribution capabilities with local partners will allow us to be an early mover and ultimately a leader in these future markets.

Optimize our supply by diversifying production capabilities and maintaining inventory to meet demand. We are continuing to expand our production capabilities in Israel. To ensure that we have a sufficient supply of product available to enter the European Union market, including the German market, in the near term, we have also set up a joint venture with a licensed producer that has pharmaceutical production and/or manufacturing facilities in Denmark. We have also entered into a joint venture with a local licensed producer in Canada in order to supply the Canadian medical use market, which does not currently allow for the import of cannabis products for commercial purposes. Although our products are not currently produced in any European Union countries or in Canada, we plan to implement a worldwide footprint to optimize our management of supply based on cost of production and to ensure that we have a consistent supply for the markets that we are targeting.

Maximize operational efficiency through vertical integration. We made a strategic decision to outsource manufacturing and distribution operations to IMC-GMP and IMC-GDP certified third parties in 2016, when new Israeli regulations significantly increased the costs of these functions. Beginning in 2020 with the acquisition of Cannolam, we expanded our business model to include pharmacies. We expect to have six operational pharmacies by the end of 2021. As we scale our operations and expand into larger markets outside of Israel, we plan to once again become a vertically integrated company in order to control the entire value-chain, from our genetics to the distribution of our branded products to pharmacies. We believe that our prior experience operating throughout the entire value- chain will enable us to achieve our goal of maximizing operational efficiency while maintaining our high quality.

Support clinical trials using our GMP-certified products and leverage our extensive patient experience database. We plan to provide our pharmaceutical-grade products for use in clinical trials, performed by our partners or ourselves. When designing clinical trials, we plan to utilize our patient database, which has been tracking patient use and experience information for over a decade from tens of thousands of patients.

Future Growth

Financial Metrics

Currently, we are the most profitable medical cannabis company in Israel. We more than doubled our revenue growth from the forth quarter of 2019 to the third quarter of 2020 and we project a continuation of this strong revenue growth into the future, which growth will be coupled with positive cash flow:

Q4 2020 (Estimated) 2021 (Projection) Gross Margin ...... 46% 53%

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Q4 2020 (Estimated) 2021 (Projection) EBITDA Margin ...... 29% 38%

EBITDA Margin is a non-IFRS measure. See “Non-IFRS Measures”.

For 2021, we project revenues of $74 million, EBITDA of $25 million and Net Income of $16 million, and by 2022, we project revenues of over $137 million, a gross margin of 55%, EBITDA of $52 million and Net Income of $37 million. For revenue projections, we primarily relied on industry data for patient growth and consumption and Intercure’s current market share based on publicly available information. We also used Intercure’s market share as of Q4 of 2020, which was approximately 15% and assumed an overall market monthly growth rate of approximately 4%, meaning that the number of monthly patients are expected to grow to 180,000 in 2022. Our forecast maintains the 15% market share and the current product prices, but assumes the completion of three pharmacy purchases in Q2 or Q3 of 2021 (thus growing from one to six within pharmacies). Going forward, we assumed that market share and revenue would also increase due to Intercure expanding its pharmacy retail locations from two to six in the first half of 2021. Gross margins are expected to improve in the pro forma period due to the gradual shift from imported bulk wholesale to internal cultivation, along with the retail sales of its own branded products. Operating expenses are expected to increase accordingly as Intercure focuses on expanding its footprint, brands and products, but we believe economies of scale across cultivation, manufacturing and retail will drive EBITDA margins higher. In addition, for avoidance of doubt, the projections set out herein are also subject to the assumptions and qualifications set out under the headings “Caution Regarding Forward-Looking Statements”, “Note Regarding Financial Outlook and Future- Oriented Financial Information” and “Risk Factors”.

Notes: (1) Pro forma for recent Ashdod pharmacy acquisition. (2) Revenue, gross profit, gross margin and EBITDA margin reflect consolidated financials, adjusted EBITDA and cash flow metrics reflect attributable financials net of minority interest. (3) Amounts represent only the medical market. (4) Exchange rate used is 1.00 NIS to $0.31. EBITDA, Adjusted EBITDA and EBITDA Margin are a non-IFRS measure. See “Non-IFRS Measures”.

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Notes: (1) Pro forma for recent Ashdod pharmacy acquisition. (2) Excludes intercompany sales. (3) Metrics reflect consolidated financial statements. (4) Amounts represent only the medical market. (5) Exchange rate used is 1.00 NIS to $0.31. Pharmacy Strategy

We operate four pharmacies (of which two were purchased in January 2021 and one was a joint-venture with the owner solely with respect to the distribution of medical cannabis). One of the two new locations that we purchased in January 2021 is already certified to sell medical cannabis, while the other is expected to be certified over the next few months. We intend to expand our pharmaceutical operations in 2021 by opening at least two more pharmacies. Our estimated Israeli pharmacy Run Rate Revenue for the forth quarter for 2020 is $12.6 million and we project our Israeli pharmacy revenue for 2021 and 2022 to be $36.1 million and $68.2 million, respectively. Our revenue projections for the sale of medical cannabis from pharmacy locations are as follows:

Notes: (1) Amounts based on the number of two of the biggest pharmacies in Israel. - 25 -

“RR” or run rate revenue is a non-IFRS measure. See “Non-IFRS Measures”

In addition, for avoidance of doubt, the projections set out herein are also subject to the assumptions and qualifications set out under the headings “Caution Regarding Forward-Looking Statements”, “Note Regarding Financial Outlook and Future-Oriented Financial Information” and “Risk Factors”.

See “The Business of Intercure”.

THE QUALIFYING TRANSACTION

On February 9, 2021, the LP, Intercure, Intercure Sub, the General Partner and the Subversive Sponsor, as representative of the Unitholders (in such capacity, the “Representative”), entered into an amended and restated definitive agreement (the “Arrangement Agreement”), pursuant to which Intercure Sub acquired all of the outstanding Limited Partnership Units (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for Intercure issuing Intercure Shares to Unitholders by way of a plan of arrangement. On Closing, the Intercure Shares will continue to be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on Nasdaq and the TSX. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not approved the Qualifying Transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus Intercure has not applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

Private Placement

On January 26, 2021, the LP announced a non-brokered private placement (the “Private Placement”) of 6.5 million Limited Partnership Units for an aggregate amount of US$65 million. The Limited Partnership Units will be issued pursuant to the terms of the applicable subscription agreements, and will be acquired by Intercure pursuant to the Plan of Arrangement, such that each subscriber will receive a number of Intercure Shares, that is based on the Exchange Ratio, in accordance with the Plan of Arrangement. The closing of the Private Placement is subject to a number of conditions precedent, including the LP receiving a receipt for the final non-offering prospectus being issued, Intercure receiving a conditional listing approval for the Intercure Shares from the Nasdaq and the TSX, and the satisfaction of the conditions to closing set out in the Arrangement Agreement.

In connection with the Private Placement, and for no consideration payable directly to the Sponsors, but subject to the Closing, the Sponsors agreed to transfer to the subscribers under the Private Placement 625,000 Limited Partnership Units the Sponsors would otherwise hold immediately prior to Closing (the “Sponsor Unit Transfer”).

Non-Redemption Agreements

The Sponsors have engaged in discussions with certain holders of Class A Restricted Voting Units with a view to entering into agreements, pursuant to which such holders agreed not to tender their units for redemption prior to Closing. Prior to Closing, the Sponsors, Intercure and/or affiliates of the GP may enter into additional agreements with investors that subscribe for additional securities under a private placement.

Generally

The LP expects that expenses relating to the completion of the Qualifying Transaction as well as funds required for the ongoing operations of the LP going forward will be funded from a combination of cash available to the LP from its IPO plus accrued interest less any amounts used to settle redemptions of Restricted Voting Units, if any (currently held in escrow), the net proceeds from the Private Placement and cash on hand.

Subject to obtaining certain approvals and the satisfaction of certain conditions, it is anticipated that the Qualifying Transaction will be completed in April 2021. The outside date for the Qualifying Transaction is September 30, 2021 or such other date as Intercure and the LP may mutually agree to in writing.

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Principal Steps of the Plan of Arrangement and Related Transactions

Pursuant to the Plan of Arrangement, the following steps shall occur in connection with and to effect the Qualifying Transaction:

• The A&R LP Agreement shall be amended to the extent necessary to facilitate the Arrangement, including the Qualifying Transaction, and the implementation of the steps and transactions set out in the Plan of Arrangement (including, among other things, any amendments necessary to change the name of the LP to a name that does not include “Subversive”) or otherwise contemplated in the Agreement.

• Any Restricted Voting Unit held by a Unitholder who duly exercised his, her or its redemption rights in accordance with the A&R LP Agreement in respect of such Unit shall be redeemed and cancelled in consideration for the Qualifying Transaction Redemption Price and such Restricted Voting Unit shall cease to be outstanding, and each such Unitholder shall cease to have any rights as a Unitholder in respect of such Unit other than the right to be paid the Qualifying Transaction Redemption Price for the Restricted Voting Unit so redeemed in accordance with the A&R LP Agreement and the Escrow Agreement.

• All Restricted Voting Units issued and outstanding (for greater certainty, excluding Restricted Voting Units redeemed pursuant to the previous step) shall be reclassified, as Limited Partnership Units (the “Restricted Voting Unit Reclassification”).

• Holders of Rights will be deemed to have exercised their Rights and shall be entitled to receive, for no additional consideration, a number of Limited Partnership Units that is equal to the quotient of the number of Rights held and eight (8) (the “Rights Exercise”).

• All Proportionate Voting Units issued and outstanding shall be automatically exchanged for Limited Partnership Units, using an exchange ratio of one Proportionate Voting Unit for 100 Limited Partnership Units (the “Proportionate Voting Unit Exchange”).

• All Limited Partnership Unit issued and outstanding shall be transferred to Intercure Sub in consideration for Intercure Shares issued by Intercure based upon the Exchange Ratio.

• Intercure Sub shall issue additional common shares in its capital to Intercure in consideration for the issuance of the Intercure Shares pursuant to the preceding step.

• Intercure Sub shall acquire all of the issued and outstanding shares of the GP for $100.

• The LP shall be dissolved.

(collectively, the “Plan of Arrangement Steps”).

The completion of the Qualifying Transaction is conditional upon, among other things, acceptance by the NEO and the TSX of the Qualifying Transaction, and the conditional approval of the Nasdaq, the TSX and the TASE to list the Intercure Shares, and the overall approval of the Israeli Securities Authority. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not accepted the Qualifying Transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus, neither the LP nor Intercure have applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market

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concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

Redemption Rights

Pursuant to the A&R LP Agreement, holders of Restricted Voting Units have the right to redeem (the “Redemption Right”) all or a portion of their Restricted Voting Units in connection with the Qualifying Transaction, provided that they deposit their Restricted Voting Units for redemption prior to the Redemption Election Deadline. The Closing is not conditional on any maximum number of redemptions being exercised by holders of Class A Restricted Voting Units.

See “The Qualifying Transaction”.

DIRECTORS AND OFFICERS

The following table sets forth the names and municipalities of residence, positions and offices held with Intercure and corresponding start dates and principal occupation during the last five years:

Present principal Name and municipality Office held with Director and/or occupation and of residence Intercure Officer Since positions held(1) Ehud Barak Chairman of Intercure Chairman of the Board September 2018 Tel Aviv, Israel and Canndoc(2) Alexander Rabinovich Chief Executive Officer, Chief Executive Officer October 2018 Bat Chen, Israel Director of Intercure(3) David Salton Director December 2014 Director(4) Hod Hasharon, Israel Lennie Grinbaum External Director September 2015 External Director Ramat Hasharon, Israel Gideon Hirschfeld External Director November 2018 External Director(5) Tel Aviv, Israel Alon Granot Chief Executive Officer Director November 2020 Haifa, Israel of Canndoc and director(6) Amos Cohen January 2020 Chief Financial Officer of Chief Financial Officer Kiryat Ono, Israel Intercure(7) Michael Auerbach On Closing General Partner of Director New York, United States Subversive Capital Rami Levy Chief of Operations August 2019 Chief of Operations (8) Tel-Aviv, Israel Canndoc Ltd. Moshe Gavrielov Vice President S&M January 2020 Vice President S&M Shoham, Israel Canndoc Ltd. Canndoc Ltd. (9) Asaf Ohyaon Co-CEO July 2020 Co-CEO Netanya, Israel Cannolam Ltd. Cannolam Ltd. (10) Ori Mimon Co-CEO July 2020 Co-CEO Herzliya, Israel Cannolam Ltd. Cannolam Ltd. (11)

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(6) Alon Granot served as Canndoc’s Chief Executive Officer until December 2020 and Chief Financial Officer and Executive Vice President at Frutarom Industries Ltd. from 2001 – 2018. (7) Prior to joining Intercure, Amos Cohen was the CFO at Trendline Information and Communication Services Ltd., a TASE-listed company. (8) Prior to joining Canndoc, Rami Levy served as CEO in Plasgad Plastic Products ACS Ltd. (9) Prior to joining Canndoc, Moshe Gavrielov, served as VP of the European activity of Rhenium Oncotest Ltd. (10) Prior to establishing CannOlam operations, Asaf Ohayon was an advocate in the medical cannabis and the capital market industries. (11) Prior to establishing CannOlam operations, Ori was managing income-producing real estate properties.

As all of the directors of Intercure set forth above, other than Michael Auerbach, who is currently a director of the GP, are not current directors of the GP and as such, will not be subject to liability as directors for any misrepresentation in this prospectus.

See “Directors and Officers”.

RESTRICTIONS ON OWNERSHIP AND TRANSFER OF THE INTERCURE SHARES

In order to comply with the terms of our licenses under applicable Israeli cannabis regulations, the Intercure Articles contain a restriction that provides that in the event that any shareholder (or group of shareholders acting jointly and in concert) holds, controls or otherwise beneficially owns, more than 4.99% of the issued and outstanding Intercure Shares at one time, those shares (the “Excess Intercure Shares”) become "dormant" (or should the Board decide otherwise, be forfeited for no consideration), resulting in the Excess Intercure Shares losing all rights attached to them (including the right to vote and the right to receive any dividends). Any Excess Intercure Shares shall have all of the rights restored (whether forfeited or dormant) once the respective shareholder (or group of shareholders acting joint and in concert) receives certain regulatory approvals from IMCA.

See “Prospectus Summary”.

RISK FACTORS

Unitholders should be aware that there are various known and unknown risk factors in connection with the Qualifying Transaction and the ownership of Intercure Shares. Unitholders should carefully consider the risks identified in this prospectus under the heading “Caution Regarding Forward-Looking Statements” and “Risk Factors” before deciding whether or not to exercise any redemption right that they may have.

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ORGANIZATIONAL STRUCTURE

Subversive Real Estate Acquisition REIT LP was established under the LPA on November 12, 2019. Its head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3, Canada.

The LP’s currently issued and outstanding Restricted Voting Units and Rights are listed and posted for trading on the NEO and the TSX under the symbols “SVX.U” and “SVX.RT.U”, respectively (and the Restricted Voting Units trade on the OTC market under the symbol “SBVRF”).

Intercure is a company established pursuant to the laws of the State of Israel. Its head office and registered office is located at 85 Medinat ha-Yehudim Street, Herzliya, 4676670, Israel. Intercure’s ordinary shares are currently listed for trading on the TASE under the symbol “INCR”.

The following chart sets out the organizational structure of Intercure, excluding non-active and immaterial entities, immediately following Closing:

Notes: (1) Holder of the operating license with respect to the Northern Kibbutz. Canndoc has a number of convertible securities issued and outstanding that are not held by Intercure, that if converted, will constitute approximately 0.4% of the issued and outstanding equity securities in the capital of Canndoc. (2) Holder of the operating license with respect to the Southern Kibbutz. (3) Intercure’s CBD operating. (4) Owner, operator and license holder of pharmacies. (5) Blue boxes indicate businesses and ventures, not separate legal entities. (6) The Ashdod pharmacy was acquired in January 2021 and is fully operational. (7) The Herzliya pharmacy was acquired in January 2021 and is operational but pending the receipt of certain governmental permits; the Jerusalem and Be-er Sheva pharmacies are under construction. (8) Our partner, the owner of an operating pharmacy with a license to sell medical cannabis, has entered into an agreement with Cannolam, pursuant to which, we are entitled to 90% of the net profits generated in the pharmacy from the sale of medical cannabis, in consideration for consulting services and the licensing of the “Givol” trademark to the pharmacy.

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THE LP

Overview

Subversive Real Estate Acquisition REIT LP is a limited partnership established under the LPA for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the LP that will qualify as its Qualifying Transaction Exchange. The LP is a SPAC for the purposes of the rules of the NEO. The LP received US$200 million of proceeds from its initial public offering which was completed on January 8, 2020, as well as an additional US$25 million of proceeds on the closing of the over- allotment option granted in connection with its initial public offering. The total proceeds of US$225,000,000 were placed in an escrow account with Olympia Trust Company and will be released upon consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement.

The LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3, Canada.

On February 9, 2021, the LP, the General Partner and the Subversive Sponsor, as representatives of the Unitholders, entered into the Arrangement Agreement, pursuant to which Intercure Sub, a wholly-owned subsidiary of Intercure, an Israeli public corporation whose shares are listed for trading on the TASE under the symbol “INCR”, will acquire all of the outstanding Units of the LP (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for Intercure issuing Intercure Shares to Unitholders by way of the Arrangement. On Closing, the Intercure Shares will be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on the Nasdaq and the TSX. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not accepted the Qualifying Transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus, neither the LP nor Intercure have applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

See “The Qualifying Transaction”.

THE MEDICAL-USE CANNABIS INDUSTRY

The Industry – Overview

Although cannabis is still heavily regulated in the jurisdictions in which we do business or seek to do business, we believe we are witnessing a global paradigm shift from the prohibition to legalization of cannabis. Cannabis for medical use is authorized at the national or federal level in over 40 countries and regulatory change has occurred globally at a rapid pace, with dozens of countries having introduced significant reforms to their cannabis-use laws to broaden the scope of permitted use since the beginning of 2015. According to a report by Energias Market Research, the global medical-use cannabis market was valued at $13.4 billion in 2020, and is projected to soar in value to $44 billion by 2025.2 We expect significant growth in the use of cannabis and cannabis-based products for medicinal purposes as additional territories adopt legalization and develop regulatory standards.

2 Source: https://www.marketdataforecast.com/market-reports/medical-cannabis-market - 31 -

of changing public attitudes, momentum toward legalization in various jurisdictions, and increased efforts to research the benefits, efficacy and safety of cannabis use creates an attractive opportunity for participants in the regulated medical-use cannabis industry.

Pharmaceutical-Grade Cannabis for Medical Use

Within the medical-use cannabis market there is a higher set of standards in place for pharmaceutical-grade cannabis. Pharmaceutical-grade cannabis requires manufacturing under GMP standards, prescription-only access and distribution through pharmacies. GMP certification is an internationally recognized standard that is the primary quality standard that pharmaceutical companies must meet in their production processes. The need for a prescription imposes the need for consistency and quality of product, ensures a physician-diagnosed medical need for cannabis, and can enable the reimbursement of patient prescription costs in certain jurisdictions. The use of pharmacies for distribution eases the education of distribution partners, because pharmaceutical-grade cannabis will use the same distribution channels as other pharmaceutical products. In certain countries, such as Israel, Germany, the United Kingdom and Denmark, only pharmaceutical-grade cannabis is permitted to be sold solely for medical use and we believe that other countries will adopt similar pharmaceutical-grade regulatory parameters for medical-use cannabis.

Israel

Although our goal is to target the global pharmaceutical-grade cannabis market, Israel was our initial market. Israel’s pharmaceutical-grade cannabis market has grown over 84% during 2019 (from 32,000 patients as of January 2019, to over 59,000 as of January 2020) and consisted of more than 77,000 patients in November 2020.3 The Israeli pharmaceutical-grade cannabis market is expected to grow to 120,000 patients in 2021 and to 250,000 patients by 2025.4 We estimate that the Israeli pharmaceutical-grade cannabis market generated $214 million in sales in 2020 and will increase to $562 million in sales in 2024. The total accessible Israeli GMP Standards cannabis market is $2.5 billion by 2027, and is growing at a rate greater than 40% annually.5

In 2008, the Israeli Ministry of Health (“MOH”), launched a pilot program under which it granted licenses to three entities, including us, to produce and distribute cannabis for medical use, free of charge, to licensed patients for certain medical indications.

By the completion of the pilot program in 2010, the MOH had granted licenses to eight producers, including us, to produce and distribute cannabis for medical use to licensed patients for an approved list of medical conditions. Starting in 2010, licensed patients could obtain cannabis for medical use at a fixed monthly price per patient, regardless of the quantity of pharmaceutical-grade cannabis provided to each patient. To apply for a license, patients were required to obtain a diagnosis of an approved medical indication and receive a recommendation for a license from one of 36 certified and approved physicians. If the patient’s application was accepted, the patient received a six- to 12- month license to receive monthly doses of cannabis from a licensed producer that is assigned by the MOH. In 2013, the IMCA was established under the MOH to regulate the Israeli medical-use cannabis industry, including the oversight of the licensing regime and regulations.

In 2016, the IMCA published New Regulations (the “New Regulations”) that introduced strict pharmaceutical-grade standards for the production, manufacturing and distribution of cannabis for medical use pursuant to Israel Medical Cannabis-certified procedures: Israel Medical Cannabis-Good Agriculture Practices (“IMC-GAP standards”); Israel Medical Cannabis-Good Manufacturing Practice (“IMC-GMP standards”); Israel Medical Cannabis-Good Distribution Practice (“IMC-GDP standards”); Israel Medical Cannabis-Good Clinical Practice (“IMC-GCP standards”); and Israel Medical Cannabis-Good Security Practices (“IMC-GSP standards”). Starting in 2018, licensed operators, including us, were invited to participate in a pilot program to implement processes under these New Regulations.

3 Source: IMCA monthly publication: https://www.health.gov.il/Subjects/cannabis/Documents/licenses-status-november-2020.pdf 4 Source: https://www.bizportal.co.il/capitalmarket/news/article/786443 5 Source: https://www.bizportal.co.il/capitalmarket/news/article/786443786443 - 32 -

In April 2019, these regulations came into full effect, and all cannabis-based products must now be produced, manufactured and distributed in accordance with the new IMCA standards. In addition, under the New Regulations, patients no longer require a license from the IMCA. Instead, they may obtain cannabis-based products for medical use after obtaining a prescription from an IMCA-approved physician for an approved medical indication, and ordering their medication from any approved pharmacy at a price set by licensed producers. By the end of 2020, there were over 120 pharmacies certified under the new IMCA standards to prescribe and dispense medical cannabis to patients.6 To ease the transition to the New Regulations, patients who held a license under the prior regime initially received six monthly prescriptions. Going forward, however, these patients will be required to obtain a new prescription for cannabis or cannabis-products to treat a medical indication. IMCA-approved medical indications for treatment with medical-use cannabis include cancer, pain, nausea, seizures, muscle spasms, epilepsy, Tourette syndrome, multiple sclerosis (MS), amyotrophic lateral sclerosis (ALS), post-traumatic stress disorder (PTSD), autism, migraines, arthritis, Parkinson’s disease, residual limb pain, spinal cord injuries, HIV/AIDS, Crohn’s disease, colitis, inflammatory bowel disease and terminal illness.

In January 2019, the Israeli government approved the export of pharmaceutical-grade cannabis and cannabis products. As of the date of this prospectus, as a partial result of government instability, permanent approval and regulation of the export of pharmaceutical-grade cannabis and cannabis products were not yet enacted. Nevertheless, during the fourth quarter of 2020, the Israeli government, as part of a pilot project to issue export permits for licensed producers, granted us a temporary export permit. The pilot program (as well as our temporary export permit) was set to expire on December 31, 2020, but was subsequently extended to March 2021. Pursuant to these export licenses (granted under the noted pilot program) we will be allowed to export medical cannabis products as long as we have a sufficient inventory of the exported product to serve Israeli patients. We completed the first commercial export to the EU in December 2020 as part of our strategic partnership with Tilray. We anticipate that final and permanent export licenses will be provided later in 2021, but this process may be delayed as a result of the anticipated Israeli elections.

In addition, the IMCA published guidelines for the import of medical cannabis into Israel, these guidelines cover both raw material (oil or inflorescence) and final products. We were among the first companies to make use of the newly published guidelines, and in January 2020, we completed the first commercial import of raw material into Israel as part of our strategic partnership with Tilray. In October 2020, the IMCA amended the import guidelines and added a quality requirement for the cultivation of cannabis, post-harvest standards (EU-GMP or CUMCS), and pesticide tests.

As a result of the above factors, we believe that the Israeli medical cannabis market is poised for continued growth into the future.

6 Source: The IMCA publication for authorized physicians and pharmacists: https://www.health.gov.il/Subjects/cannabis/patients_and_physicians/Pages/licensed_pharmacies.aspx and https://www.health.gov.il/Subjects/cannabis/patients_and_physicians/Pages/certified_physicians.aspx. - 33 -

Notes: (1) Based on Q4 patient number and expected medical market growth rate. (2) Source: Cormack Securities and IMCA. European Union

With a population of more than 500 million (approximately 60 times the population of Israel) and the largest regional economy in the world, we expect the European Union to eventually become the largest medical-use cannabis market in the world. Growth in the use of cannabis for medical purposes in the European Union is expected to be driven by the availability of cannabis for medical use through government-subsidized health care systems. As of the end of 2018, 21 of the 28 members of the European Union have authorized medical products containing cannabinoids. Some of these countries allow the import of only small quantities of cannabis for patient use, while others, such as the Czech Republic, Italy and the Netherlands, have developed regulations governing the limited domestic production of cannabis for medical use. We expect the European market to grow as established medical programs are expanded, as adoption by physicians and patients increases and as more countries introduce programs allowing for the use of cannabis for medical purposes. Many European Union member states are signatories to the United Nations Single Convention on Narcotic Drugs of 1961 (the “Narcotics Convention”), and therefore the import and export of cannabis among those countries must comply with the terms of the Narcotics Convention, including restricting the import of listed narcotics to medical and research uses.

The European cannabis market is expected to grow to $3.8 billion in 2025, from its current size of under $500 million, with annual sales in the United Kingdom expected to grow to $600 million, in the Netherlands to $100 million and in Germany’s to $1.5 billion.7 We believe that the European regulations, favourable pricing model, our business model and the fact that we expect to open our first European pharmacy in the second quarter of 2021 places us in a great position to benefit from the future demand for cannabis in the European market.

Germany

We believe that Germany represents our largest market opportunity in the European Union in the near term. While the German market is still in its early stages, its population size and regulatory framework, which permits insurance companies to cover claims for pharmaceutical-grade cannabis used as a treatment for medical conditions, leads us to believe that Germany has substantial market potential. The medical-use cannabis market alone was €133 million (approximately $211 million) in 20198 and Prohibition Partners (a market intelligence firm) projects that 1 million patients will use cannabis for medical purposes by 2024 and that there will exist a €7.7 billion (approximately $8.63 billion) annual medical-use cannabis market in Germany based on a fully legal and regulated market by 2028.9 Arcview Research (another market intelligence firm) anticipates that the German cannabis market for medical purposes will generate US$1.5 billion annually in sales by 2024.10 It is anticipated that up to 1 million kilograms of pharmaceutical-grade cannabis per year will be required in the near future for the German market as it is expected that 1% of the population has a medical indication that is approved to receive cannabis. We believe that the high demand and short supply in Germany makes it an attractive market.

In March 2017, the German parliament legalized pharmaceutical-grade cannabis for medical use. The legislation created within the Federal Ministry of Health, or BfArM, a new subunit (Cannabisagentur) tasked with the regulation of domestic production of pharmaceutical-grade cannabis and cannabis products, which unit supplements the authority of the Federal Opium Authority (Bundesopiumstelle), which has jurisdiction over the approval of imports and trade of pharmaceutical products in general. Cannabis products that may gain approval from BfArM are limited to pharmaceutical-grade dried cannabis and cannabis extracts with one of three approved cannabinoid profiles. Subject to the legal requirements under the new regulations for the prescription of pharmaceutical-grade cannabis, any physician utilizing professional discretion may diagnose patients and prescribe pharmaceutical-grade cannabis;

7 Source: Arcview Market Research: 8th Edition. 8 Source: https://mjbizdaily.com/european-cannabis-market-worth-240-million-euros-in-2019/mjbizdailyeuropean-worth-240- million-euros-in-2019/ 9 Source: https://prohibitionpartners.com/2019/10/28/the-germany-cannabis-report-key-insights 10 Source: https://www.healtheuropa.eu/exploring-growth-in-the-european-medical-cannabis-market/100849/44 - 34 -

provided, however, that pharmaceutical-grade cannabis may be prescribed only when there is a legitimate diagnosis for a serious medical condition and the patient has exhausted other avenues of treatment leaving medical cannabis as a last resort. Patients can fill prescriptions at any of the approximately 19,750 pharmacies registered to distribute pharmaceutical-grade cannabis, and the cost of pharmaceutical-grade cannabis products are generally eligible for reimbursement by health insurers.

Currently, the German market is primarily supplied by three licensed producers, Aphria and Aurora Cannabis (in each case, through local subsidiaries) and domestic producer, Demecan Gmbh. We are of the view that all three suppliers are looking to 2021 to expand domestic output, but with surging demand, their expansion may not be sufficient to satisfy it. As a result, the limitations of production and supply have created a shortage in the German market which serves as an attractive opportunity for us.

Canada

The Canadian medical-use cannabis industry has experienced extensive growth since the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) were passed into law in June 2013 (the Regulations were subsequently replaced by the Cannabis Act). According to data published by Health Canada, as of September 2020, there were approximately 377,000 active client registrations for medical use under the program.11

Cannabis for medical use is distributed throughout Canada through licensed dispensaries or via online sales. Because Health Canada does not regulate cannabis standards to the same extent as other jurisdictions that have legalized cannabis for medical-use only, it has been demonstrated that cannabis-based products distributed in Canada often have inconsistent cannabinoid profiles and quality.

Currently, Health Canada permits the import of cannabis into Canada for research and development purposes only.

United States

Under U.S. federal law, the manufacture, distribution or dispensing of cannabis is illegal, as are activities that assist such conduct. The Controlled Substances Act (“CSA”) categorizes cannabis as a Schedule I drug with no medical use. The U.S. Drug Enforcement Agency and the U.S. Department of Justice enforce the CSA and may prosecute violators of these laws at both the domestic and international level. The broad reach of the CSA may further prevent other service providers, such as banks, insurance companies and lawyers, from engaging in business with cannabis-related firms where such services may be viewed by federal authorities as assisting the operationalization of a marijuana business. Although the CSA’s basic prohibition remains in force, the federal government has exercised discretion in the enforcement of federal drug laws, thereby creating a climate of legal uncertainty regarding the production and sale of medical-use cannabis.

Notwithstanding the market opportunity and trends in the United States, and despite legalization by certain state governments, we continue to believe that the current state of federal law creates significant uncertainty and potential risks associated with expanding our medical-use cannabis operations to the United States. Hence, while cannabis remains a Schedule I controlled substance under the CSA, we will not process or distribute our products, or conduct any of our operations, in the United States.

Rest of the World

While the European Union and Canada represent the largest near-term opportunities, many other jurisdictions around the world are also adopting regulations to allow the use of cannabis for medical purposes, including Argentina, Australia, Brazil, Chile, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Finland, Greece, Italy, Jamaica, Luxembourg, Macedonia, Malta, the Netherlands, New Zealand, Norway, Peru, Poland, Portugal, South Africa, Sri Lanka, Switzerland, Thailand, and Uruguay.

11 Source: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/medical-purpose.html - 35 -

Recreational Cannabis and CBD in Israel

Recreational Cannabis

During 2020, an inter-ministerial team for examining the law regarding the prohibition on recreational cannabis consumption in Israel was established. The team was created following the enactment of two bills which would allow for the recreational use of cannabis for adults and the general decriminalization of cannabis in Israel. The illegal Israeli cannabis market is estimated at approximately $1.7 billion in 2020.12

The noted team published a full report, containing a set of recommendations, in November 2020. The report recommended legalizing the recreational use of cannabis for adults over the age of 21 in Israel. Based on the recommendations contained in the report, Israel’s Justice Minister announced and approved a path forward towards the legalization of recreational cannabis for adults over the age of 21 in Israel.13

However, as a result of political uncertainty in Israel, in December 2020, the Israeli's government was dissolved which is expected to delay the legalization of recreational cannabis in Israel for adults over the age of 21. We estimate that the new government will continue on the noted legalization path and estimate that the recreational use of cannabis for adults over the age of 21 will be approved during in late 2021 or 2022. The Israeli recreational cannabis market has a potential total accessible market size of over $2 billion, with the highest reported global usage rate among adults at 27%.14

CBD

Cannabidiol (“CBD”) is a chemical compound extracted from the Cannabis sativa L plant, which is also known as hemp. It is a naturally occurring substance that is used for its health benefits in products like oils, edibles, topicals and cosmetics. Unlike THC, which is the major active ingredient in marijuana, CBD is not psychoactive. The global CBD oil and CBD consumer health market size was valued at USD 2.8 billion in 2019 and is expected to grow and become a USD 30 billion market by 2025.15 The demand for CBD for medical and wellness purposes is high due to its healing properties, which we believe is a key factor driving the growth of the market. Moreover, growing product adoption and utilization owing to government legalization of CBD is a major factor which we anticipate will drive the demand for CBD-infused products.

On December 8, 2020, Israel’s Minister of Health singed a new regulation that removed CBD from the Israeli DDO. For the removal to be completed, the regulation must go before the Knesset’s Committee on Health, Welfare and Labour for a vote and ratification. As the Knesset was dissolved on December 23, 2020, the regulation did not go before the committee.16 However, we believe that the majority of Israel’s currently elected government is in favour of the regulation and the removal of CBD from the DDO. Further, according to a report by Deloitte, the Israeli CBD market is expected have a size of US$300-450 million within five years of CBD being removed from the Israeli DDO.17

The two primary markets for CBD products in 2020 were the United States and Europe.18

12 Source: UNODC, The Israeli Cannabis Magazine, Public Disclosure. 13 Source: https://www.gov.il/he/Departments/publications/reports/canabis-report 14 Source: MJBiz, UNODC, The Israeli Cannabis Magazine. 15 Source: Grand View Research: Cannabidiol Market Size, Share & Trends Analysis Report By Source Type (Hemp, Marijuana), By Distribution Channel (B2B, B2C), By End Use, By Region, And Segment Forecasts, 2019 - 2025. 16 Source: https://www.i24news.tv/en/news/israel/1598532786-israel-health-minister-issues-sweeping-new-cannabis-reforms 17 Source: https://www.calcalist.co.il/local/articles/0,7340,L-3848472,00.html 18 Source: Statista - Global market share of hemp-derived CBD in 2018, by country. - 36 -

The 2018 Farm Bill legalized the cultivation of hemp and its extracts in the US and created a new industry. Sales of CBD products in the US were over US$4 billion in 2019, which was a 562% increase over 2018. 19 By 2025, estimates are that the total CBD market in the United States could reach USD 24.4 billion.20

Demand for CBD in the European market is dominated by Germany and the United Kingdom, with Switzerland and Austria not far behind. These countries have taken relatively liberal approaches to CBD, with products distributed through a wide range of mainstream retail outlets, including Boots, Tesco, Rossman and more. In 2019, CBD sales in Europe reached US$405 million, growing 26% over 2018.21 By 2025, estimates are that the total European CBD market could reach US$1.6 billion.22

Competition

The medical-use cannabis industry is characterized by intense competition and an increasing focus on quality and standards. While we believe that we hold many competitive advantages within the pharmaceutical-grade cannabis market, we face competition from many different sources, which include other companies that produce and distribute cannabis for medical use, as well as major pharmaceutical, specialty pharmaceutical and biotechnology companies. We anticipate intensifying competition in the medical-use cannabis industry as new jurisdictions allow the production and distribution of cannabis products and new therapies are approved and advanced technologies become available.

Within the pharmaceutical-grade cannabis industry, we currently compete directly with manufacturers in Israel, including Breath Of Life Pharma, Ltd. and IM Cannabis Corp., and internationally with local licensed producers such as Bedrocan International B.V. and Aurora Cannabis Inc. In Canada, we currently compete with licensed producers which decide to market products in the Canadian medical-use cannabis market. In the future, we expect to compete with licensed producers which choose to distribute pharmaceutical-grade cannabis products in fully regulated jurisdictions. Any product that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

THE BUSINESS OF INTERCURE

19 Source: The Brightfield Group – US CBD Market Report 2019, From Farm to AisleAisle. 20 Source: The Brightfield Group – US CBD Market Report 2019, From Farm to AisleAisle. 21 Source: The Brightfield Group – European CBD Market Report April 2020. 22 Source: The Brightfield Group – European CBD Market Report April 2020. - 37 -

Cannolam’s operations are focused on the establishing and operating dedicated pharmacies for the distribution of pharmaceutical-grade cannabis under the brand name “Givol”, including “Cookies”-branded location. In addition, Cannolam is looking to establish a distribution network for recreational cannabis and cannabis products throughout Israel, primarily through licensing and distribution agreements, to become effective once the recreational use of cannabis for adults over the age of 21 is legalized in Israel.

Canndoc CBD is the entity that Intercure intends to use for the purposes of operating in the CBD industry once CBD is removed from the Israeli DDO.

Unless otherwise specified, references in this section to “we”, “our” and “us” refer to the business of Intercure and its subsidiaries.

History

We (more specifically through Canndoc and its founder, Mr. Avner Barak, who is Canndoc’s President) are a pioneer in the production (including the breeding, cultivating and processing), manufacturing and distribution of pharmaceutical-grade cannabis and cannabis-based products for medical use. For more than 13 years, we have been a leader in the licensed production and distribution of cannabis and cannabis-based products throughout Israel, one of the first countries with a governmentally-sanctioned regime for the production, manufacturing and distribution of cannabis for medical use. Our goal is to be a global leader in the production and distribution of high quality pharmaceutical-grade cannabis to patients in all territories that permit and regulate the distribution of cannabis for medical use, including Israel, the European Union and Canada.

We were an early leader in the global medical-use cannabis market and we were one of the first licensed producers of cannabis for medical use in Israel, where medical use of cannabis has been permitted and regulated since 2008. Our pharmaceutical-grade cannabis products are manufactured using processes that are certified and in compliance with the IMCA, standards, including IMC-GMP standards, which are substantially similar to the Good Manufacturing Practice of the European Union (“ EU-GMP”) standards. GMP certification is an internationally recognized standard that is the primary quality standard that pharmaceutical companies must meet in their production processes. Leveraging our more than 13 years of experience, we have developed production methods for consistent batches with well-defined cannabinoid profiles by following strict protocols, utilizing proprietary cannabis genetics and leveraging our scalable climatized greenhouse technology. All of our products are analyzed by IMCA-certified laboratories using established testing procedures that ensure standardized cannabinoid compound ratios and potency, or cannabinoid profiles.

We believe that our future growth is dependent upon our ability to further develop and commercialize our extensive know-how regarding the production of high-quality pharmaceutical-grade cannabis and our success in implementing our plans to increase our production capabilities and to expand our global distribution network, enabling us to distribute our products in Israel, the European Union and Canada.

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In Israel, we distribute our products through licensed retail pharmacy locations, where patients may fill their prescriptions on site or have our products delivered directly to their residence. To diversify and expand our global production and distribution capabilities to meet current and future demand in our target markets, we have entered into joint ventures and distribution agreements in the European Union and Canada with local licensed producers and distributors that have significant distribution networks. We have partnered with a Danish licensed producer which owns and operates a pharmaceutical production and/or manufacturing facility. We have also engaged a separate German pharmaceutical distributor. We have also entered into a joint venture agreement with a licensed EU-GMP pharmaceutical manufacturer and distributor that has a license to import cannabis into the United Kingdom for medicinal purposes. In Canada, our partner has an established indoor production and manufacturing facility and capabilities to distribute our products. We plan to have our products distributed globally under the “CANNDOC” brand and produced by us or through our partnerships and manufactured under GMP standards. As of the date of this prospectus, our products have not yet been distributed through our partnerships. Our ability to do so is impacted by various regulatory matters, as regulatory permits and/or licenses are currently required for both the import and export of cannabis products in the jurisdictions where we operate. As such, the regulatory regime present in these jurisdictions has a direct impact on our business and our ability to grow it.

Snapshot

Our business can be summarized in the following chart:

Current Products

See “Our Products”

Primary Two facilities in Israel: Cultivation Facilities • Kibbutz Nir-Oz (i.e. the Southern Kibbutz) o A total gross area of 1.7 million square feet o As of the date of this prospectus, this facility is operating in its first phase of development which uses 300,000 square feet of the available space and produces 7,000 kilograms of cannabis annually (with the 2021 production plan target set at 3.5 metric tons). o Once the facility reaches full operating capacity, it will be able to produce 88 tons of pharmaceutical-grade cannabis per year. • Beit HaEmek Kibbutz (i.e. the Northern Kibbutz) o This site currently occupies approximately 55,000 square feet with the capacity to produce up to 3,000 kilograms of pharmaceutical-grade cannabis per year. - 39 -

o We have the option to expand our production area at this facility to a total of approximately 160,000 square feet, which would increase our total production capacity to up to 10,000 kilograms of pharmaceutical- grade cannabis per year. See “Facilities”

Cultivation Site Southern Kibbutz Northern Kibbutz Agreements Name of Partner Kibbutz Nir Oz Beit HaEmek Kibbutz Intercure’s % in the 74% 70% Venture Signing Date 4.11.2019 5.21.2015 Gross Area 1,700,000 Sq feet 55,000 sq feet + option for (including operating area) additional 160,000 sq feet Term 10 years 5 years Extension Period 10 years 3 option for 5 year each Licenses Southern Kibbutz Northern Kibbutz License Type Nursery + Cultivation Nursery + Cultivation (collectively and including (collectively and including all industry standards all industry standards permits, the “Southern permits, the “Northern Kibbutz License”) Kibbutz License”) Licensed Entity Canndoc Nir-Oz Canndoc Ltd. Agriculture Cooperative Organization Ltd. Quantity Nursery License: 750 Nursery License: 500 (Seeds), 2,500 (Mother (Seeds), 2,500 (Mother Plants), 25,000 (Cutting) Plants), 30,000 (Cutting) Cultivation License: 30,000 Cultivation License: 7,000 (Plants in Growth), 30,000 (Plants in Growth), 12,000 (Flowering Plants) (Flowering Plants) Expiration Date December 23, 2021 September 7, 2023 Quality Standard IMC-GAP IMC-GAP Distribution We distribute our products in Israel via three key customers • SLE • Novolog • Super-Pharm See “Sales and Distribution”

Regulatory The competent regulatory authority in Israel in all matters concerning the oversight, control Requirements and regulation of cannabis for medical production, use and research is the IMCA. The IMCA was established by the Israeli government under decision No. 3609, which also established an inter-ministerial safety committee, composed of representatives of government ministries, government authorities and other government bodies, for intergovernmental cooperation regarding the regulation of cannabis. The IMCA examines medical recommendations for the use of cannabis for medical purposes and in accordance with established procedures. The IMCA is also authorized to examine applications and issue permits to hold, use and research cannabis. The license we hold from the IMCA is fundamental to our ability to operate.

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See “Applicable Laws and Regulations”, “Risk Factors” and “Material Contracts”

Our Strengths

We believe our key competitive strengths include the following:

Strategic Partnerships. We (as well as Cannolam) have entered into long-term exclusive strategic partnerships with leading companies. We have exclusive long-term partnerships with Tilray, Aphria, Organigram, Charlotte's Web and Cookies. These partnerships provide us with product sources and access to our partner’s facilities. This allows us to increase our global footprint and provide access to increased raw material if we need it to meet demand. Together with our local and EU production and distributions channels, we are able to create a dynamic international supply chain for our GMP-branded products.

Expansion into the CBD market. Our strategic partnership with the number one global leader in hemp extracts, Charlotte's Web, was the first partnership we undertook in the CBD space. This agreement includes long-term exclusive distribution rights of Charlotte’s Web's products in Israel and further distribution rights in the European market. This strategic partnership incorporates research and development, new product development in Israel, supply of raw material for Israeli industrialists and manufacturing in Israel and Europe. The noted partnership is subject to the receipt of the required regulatory approvals and the removal of CBD from the DDO.

We have developed rigorous, cultivation and harvest protocols to ensure consistency, quality and efficiency as we increase the scale of our operations globally. We pride ourselves on consistently delivering high-quality products with precise chemical compositions using scalable and efficient production techniques. We have leveraged our extensive production experience and proven protocols while expanding our production capabilities at our sites in Israel. We have entered into joint ventures with local licensed producers in both the European Union and Canada. Although producing GMP-certified products generally requires additional costs, we have developed production techniques that enable us to maintain a low cost structure as we further scale our operations. We currently utilize climatized greenhouses instead of more costly indoor facilities in order to produce GMP-certifiable products at a lower cost.

products. As of the date of this prospectus, our products have not been distributed through these partnerships. While these partnerships depend on future favourable amendments to import and export laws with respect to cannabis, we believe that we are well positioned well to quickly monetize these partnerships in the event that the cannabis import and export regulatory framework is revised in a manner favorable to us.

Our Strategies

Our goal is to be a vertically integrated global leader in the production and distribution of high quality pharmaceutical- grade cannabis-based products to patients in all territories that permit and regulate the distribution of cannabis for medical use. To achieve this goal, we plan to implement the following strategies:

Focus only on high quality cannabis products. We focus solely on high quality pharmaceutical-grade cannabis for the treatment of medical conditions. Given our sole focus, we have accumulated more years of experience than most of our competitors in producing consistent pharmaceutical-grade cannabis under the highest quality standards. We believe that we have a head start to becoming a dominant player in this industry on a global level and will be competitive in all markets, including those with the strictest regulatory standards. In addition, subject to applicable local laws, we believe that our expertise and distribution capabilities have positioned us well for dominating the recreational cannabis and CBD market in Israel once, and if, Israeli regulations permit the sale of recreational cannabis and CBD products.

relevant jurisdiction of distribution. We believe this strategy will instill physician and patient confidence in us, leading to a greater adoption of our products.

Optimize our supply by diversifying production capabilities and maintaining inventory to meet demand. We are continuing to expand our production capabilities in Israel. To ensure that we have a sufficient supply of product available to enter the European Union market, including the German market, in the near term, we have also set up a joint venture with one licensed producer that has pharmaceutical production and/or manufacturing facilities in Denmark. We have also entered into a joint venture with a local licensed producer in Canada in order to supply the Canadian medical use market, which does not currently allow for the import of cannabis products for commercial purposes. Although our products are not currently produced in any European Union countries or in Canada, we plan to implement a worldwide footprint to optimize our management of supply based on cost of production and to ensure that we have a consistent supply for the markets that we are targeting.

Maximize operational efficiency through vertical integration. We made a strategic decision to outsource manufacturing and distribution operations to IMC-GMP and IMC-GDP certified third parties in 2016, when new Israeli regulations significantly increased the costs of these functions. Beginning in 2020 with the acquisition of Cannolam, we expanded our business model to include pharmacies. We expect to have six operational pharmacies by the end of 2021. As we scale up our operations and expand into larger markets outside of Israel, we plan to once again become a vertically integrated company in order to control the entire value-chain, from our genetics to distribution to pharmacies of our branded products. We believe that our prior experience operating throughout the entire value-chain will enable us to achieve our goal of maximizing operational efficiency while maintaining our high quality.

Future Growth

Financial Metrics

Q4 2020 (Estimated) 2021 (Projection) Gross Margin 46% 53% EBITDA Margin 29% 38%

EBITDA Margin is a non-IFRS measure. See “Non-IFRS Measures”.

15% market share and the current product prices, but assumes the completion of three pharmacy purchases in Q2 or Q3 of 2021 (thus growing from one to six within pharmacies). Going forward, we assumed that market share and revenue would also increase due to Intercure expanding its pharmacy retail locations from two to six in the first half of 2021. Gross margins are expected to improve in the pro forma period due to the gradual shift from imported bulk wholesale to internal cultivation, along with the retail sales of its own branded products. Operating expenses are expected to increase accordingly as Intercure focuses on expanding its footprint, brands and products, but we believe economies of scale across cultivation, manufacturing and retail will drive EBITDA margins higher. In addition, for avoidance of doubt, the projections set out herein are also subject to the assumptions and qualifications set out under the headings “Caution Regarding Forward-Looking Statements”, “Note Regarding Financial Outlook and Future- Oriented Financial Information” and “Risk Factors”.

Notes: (1) Pro forma for recent Ashdod pharmacy acquisition. (2) Revenue, gross profit, gross margin and EBITDA margin reflect consolidated financials, adjusted EBITDA and cash flow metrics reflect attributable financials net of minority interest. (3) Amounts represent only the medical market (4) Exchange rate used is 1.00 NIS to $0.31 EBITDA, Adjusted EBITDA and EBITDA Margin are a non-IFRS measure. See “Non-IFRS Measures”.

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Notes: (1) Pro forma for recent Ashdod pharmacy acquisition. (2) Excludes intercompany sales (3) Metrics reflect consolidated financial statements (4) Amounts represent only the medical market (5) Exchange rate used is 1.00 NIS to $0.31 Pharmacy Strategy

Notes: (1) Amounts based on the number of two of the biggest pharmacies in Israel. - 45 -

“RR” or run rate revenue is a non-IFRS measure. See “Non-IFRS Measures”.

Our Products

Our product portfolio consists of differentiated pharmaceutical-grade cannabis product brands. We develop our product brands to treat a wide variety of medical conditions and optimize results across a diverse population of patients. We believe patients choose our products because we are known for producing pure, precise and predictable pharmaceutical-grade products.

We believe that cannabinoids, terpenes and other bioactive compounds create beneficial therapeutic results when they work in synergy, an effect known as the “entourage effect.” We do not create our cannabinoid profiles by combining isolated cannabinoid compounds from various sources. Instead, we utilize breeding and cultivation techniques to create stable and consistent levels of target cannabinoid profiles within each plant.

Our current portfolio of products is characterized by well-defined and reproducible cannabinoid profiles, formulated for stability, which are currently available in dried inflorescences or liquid oil form. Each of our products is derived from cannabis that is bred and cultivated in accordance with applicable GAP standards and manufactured under applicable GMP standards. As a result, our branded market share is 15% in Israel and is consistently growing.23

Cannabinoid Profiles

Our products are differentiated by profiles that reflect specified ratios and concentrations of the two principal cannabinoids in pharmaceutical-grade cannabis: CBD and THC. There are currently more than 100 identified cannabinoids, and we measure and analyze their concentrations in our products. We plan to measure and analyze any new cannabinoids that are identified in the future.

We take a scientific approach to our product development. Cannabis strains, selected for their biochemical composition, are systematically bred, cultivated and processed to produce a specific profile. Our products are tested using established laboratory testing procedures that ensure standardized cannabinoid ratios and potency.

As the landscape of the medical-use cannabis industry continues to evolve with the rapid pace of research and discovery, we continue to experiment with developing new and unique ratios of cannabinoids and other bioactive compounds for use in our products. We believe that our extensive genetic bank will give us an advantage in developing new products with optimal cannabinoid profiles.

Delivery Formats

We offer products in established delivery formats that facilitate the absorption of active compounds in a patient’s body.

Our current portfolio of cannabis-based products for distribution in Israel includes the following delivery formats:

• Dried cannabis inflorescences, sold in vacuum-sealed pouches where the overall weight of cannabis (net) in each package is 10 grams.

• Cannabis extract mixed with oil, sold in bottles where the overall volume of product is 10 ml.

We plan to evaluate other markets, including Canada, and develop products using delivery formats that address patient needs and preferences and comply with applicable regulatory requirements. With the development of scientific

23 Source: Based on the size of the medical cannabis market published by MOH and management estimates. - 46 -

research and regulatory momentum, we may develop products in the future that use other delivery formats, such as capsules or patches. We plan to continue to develop formulations and delivery methods to achieve targeted delivery and sustained release.

We invested in launching and creating demand for our product brands, including by co-branding certain of our products with our exclusive partners. Our packaging displays ratios of specific cannabinoid compounds and the required disclosures for each relevant jurisdiction of distribution.

Below are pictures of the packaging for our branded pharmaceutical-grade products that are distributed in Israel. Our packaging for products to be sold in Germany and other jurisdictions will be similar, but will reflect the applicable regulatory requirements in those territories.

Our Operations

With over 13 years of operations, we have gained significant experience and know-how throughout the entire value- chain of producing and distributing cannabis and cannabis-based products for medical use. We strive to ensure that the materials and processes that go into the production and manufacturing of our products comply with the highest standards.

For a more detailed description of our operations, please see “Partnerships”.

Facilities

Southern Israel Site

Through our partnership with Kibbutz Nir-Oz, we are establishing a large-scale production facility covering a total gross area of 1.7 million square feet in southern Israel, which will also utilize climatized greenhouses and operate in tandem with our facility in northern Israel. As of the date of this prospectus, this facility is operating in its first phase of development which uses 300,000 square feet of the available space and produces 7,000 kilograms of cannabis annually (with the 2021 production plan target set at 3.5 metric tons). Once the facility reaches full operating capacity, it will be able to produce 88 tons of pharmaceutical-grade cannabis per year. Our facility and the production processes implemented there are certified under the IMC-GAP standards as well as the IMC-GSP standards, which contain strict detailed protocols for security at the site. We hold licenses for nursery and cultivation issued by the IMCA that is set to expire at the end of 2021 with respect to this facility. We intend to continue to develop the facility based on demand for our products. We also intend to obtain any regulatory approvals we may require so that this facility can be fully operational and produce 88 metric tons of pharmaceutical-grade cannabis per year.

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Northern Israel Site

Through our partnership with Beit HaEmek Kibbutz, an Israeli collective agricultural community (a “kibbutz”), we own and operate our primary production facility, located in northern Israel, utilizing climatized greenhouses. This site currently occupies approximately 55,000 square feet with the capacity to produce up to 3,000 kilograms of pharmaceutical-grade cannabis per year. Our facility and the production processes implemented there are certified under the IMC-GAP standards as well as the IMC-GSP standards, which require strict detailed protocols for security at the facility. We hold licenses for nursery and cultivation issued by the IMCA that is set to expire in September 2023 with respect to this facility. We have the option to expand our production area at this facility to a total of approximately 160,000 square feet, which would increase our total production capacity to up to 10,000 kilograms of pharmaceutical- grade cannabis per year.

Head Office (Israel)

We have office space located in central Israel that houses our management, financial and administrative functions. Part of the office is leased by companies which are related to Mr. Alex Rabinovich, our majority shareholder, director and CEO. These leases were approved by the Audit Committee and the Board. The amounts payable under these leases are immaterial relative to our business.

Denmark

In May 2020, we entered into an EU-GMP distribution agreement with a Danish partner for the production of up to 11.7 tonnes of cannabis per year for a period of 3 years. As part of this agreement, we will manufacture our products in a facility located in Denmark. This manufacturing facility is approved by the EU-GMP standard and has all the licenses and permits required for the cultivation, production, distribution and marketing of cannabis. The manufacturer will be responsible for the entire growth and production process of the products, as well as the logistical process of transporting and packaging the products in accordance with all applicable legal requirements. The partner will be entitled to a portion of the profits generated as a result of the sales made through our distribution channel. This facility is operational and we are currently in the process of obtaining approval for importing products from Denmark to Germany with this partner. As of the date of this prospectus, no sale of products has commenced and this partnership does not impact our financial statements in any way.

Canada

In May 2019, we entered into a partnership with a Canadian company that is in the advanced stages of building an indoor complex for the production and distribution of cannabis products for medical use in Canada. We established a joint venture with the Canadian partner, which pursuant to the joint venture agreement, will entitle us to 51% of the profits generated from the sale of our products. The production and distribution of the products will be done under the "CANNDOC" brand while the marketing of the products will be done by the partner. While this facility is operational for cultivation, it has not yet received all of the licenses and permits required for the sale of products. As of the date of this prospectus, no sale of products has commenced and this partnership does not impact our financial statements in any way.

Summary of Operations

As of the date of this prospectus, our production capacity, assuming that the facilities operate at their maximum capacity, and all regulatory approvals are received, produces over 100 tons of GMP-certified pharmaceutical-grade cannabis. In addition, through strategic partnerships with leading license producers, we may have access to additional high quality medical cannabis on demand.

Breeding

Our primary goal is to consistently produce, under the strictest standards, the highest-quality inflorescences from the cannabis plant, which we use as the raw material for our pharmaceutical-grade cannabis-based products. We focus on breeding genetic profiles that maximize production yields and maintain stable and consistent cannabinoid profiles.

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We engage in the human-directed evolution of cannabis populations through the selective breeding and nurturing of various species of the cannabis plant. To achieve this, we leverage our extensive patient use and experience database to select and breed specific genetic profiles with the goal of isolating unique traits that may lead to improved patient outcomes.

Over the course of more than 13 years and numerous plant generations, we have bred a wide assortment of cannabis strains covering a variety of cannabinoid profiles. We have developed a proprietary genetic bank, covering dozens of unique cannabinoid profiles, from which we extract growth batches for our current breeding facility. Our breeding is conducted in incubation rooms that are separately housed and therefore isolated from the rest of our cannabis production facility.

We are in the process of applying for protected breeding rights in Israel and seek to apply for protective rights in any jurisdiction in which such rights may be registered. See “Intellectual Property, Patents and Trademarks.”

Cultivation and Processing

In order to maintain a high degree of consistency across our production batches, we carefully optimize all elements of the cultivation process, including the light spectrum, temperature, humidity, radiation, irrigation, air circulation and soil-less substance in which our plants are grown. Cultivation is not conducted in outdoor areas or in the open soil. At our cultivation facilities, we nurture and cultivate production batches as clusters of single-genus cannabis inflorescences that are genetically identical, cultivated under the same protocols and harvested at the same time. The cannabis batches are isolated in pots and are tested by licensed third-party laboratories to ensure their quality and consistency.

Currently, there are three methods for cultivating cannabis: outdoors, in greenhouses and indoors. Cultivation in an outdoor environment, including cultivation in a typical greenhouse, introduces variables that may affect the quality and consistency of the resulting product. For this reason, outdoor and traditional greenhouse growing techniques do not meet the standards required for pharmaceutical-grade cannabis products. Consequently, these methods are not applicable to our target industry. Indoor cultivation may occur in a controlled environment that enables the production of pharmaceutical-grade cannabis in compliance with applicable standards.

Through years of research and development, we have developed a unique climatized greenhouse approach incorporating the best of modern cultivation techniques and processes that meet the IMC-GAP standards while taking advantage of the cost efficiencies associated with utilizing the natural environment. Our climatized greenhouse technology is an improvement on the traditional greenhouse that enables compliance with the requirements for the production of pharmaceutical-grade cannabis. The climatized greenhouse technology enables us to fully control all aspects of the climate and other conditions affecting the cultivation of our cannabis crops. A key element of optimizing production yields while maintaining a standardized outcome is precision-based crop maintenance, which requires consistent inputs of irrigation and fertilization while controlling for diseases and pests. We control the first two inputs mainly through a centralized irrigation control center that utilizes modern sensors to monitor and regulate the daily quantity of water and fertilizer administered to each production batch. Our climatized greenhouses cost less, both in terms of costs for construction and operating expenses, and require less time to implement than wholly-indoor facilities, enabling us to swiftly scale up our crop size. For these reasons, our climatized greenhouses provide a cost efficient cultivation method while still enabling us to produce pharmaceutical-grade cannabis products that comply with GMP standards and this is our preferred cultivation method where it makes business sense.

We produce and package bulk product in our facilities, by harvesting the bloomed flower, trimming excess leaves, drying and curing inflorescences, and packaging the processed inflorescences into bulk quantities.

In addition, since we adhere to the IMC-GAP and IMC-GSP standards, it has established a compliance regime to meet its regulatory requirements. A quality assurance manager must sign off on each product batch that is released from our cultivating facilities which subsequently undergoes a physical inspection by the head of quality assurance. Any changes in the quality assurance process or to the cultivation facility must be authorized by the head of quality assurance and documented. The facilities are also subject to seven inspections per year from a third party inspector and four inspections per year by the head of quality assurance. Lastly, the cultivation sites are also subject to yearly inspections for GACP compliance by a third party for the EU-GMP certificate.

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Manufacturing

Prior to 2016, we operated throughout the entire value-chain to produce our products for medical use. When new Israeli regulations, which increased manufacturing costs, were adopted in 2016, we made a business decision to outsource the extraction and packaging services of our final product to manufacturers that had obtained certification, including GMP certification, under the new Israeli regulations. We currently use a GMP-certified manufacturer in Israel to produce our products and we are exploring our options to diversify our manufacturing through our global partnerships. We plan to always manufacture our products under conditions that meet the applicable GMP standards, whether in our own facilities or in third-party facilities across all geographies. We continue to explore the costs and benefits of our contract manufacturing relationships against the costs and benefits of conducting those activities in house.

Exclusive Partnerships

We have entered into the following partnerships, all of which provides us with exclusive relationships to distribute the noted products within certain geographical areas. While the partnership are at various stages in their development, we have yet to fully operationalize any of them and currently only operate in Israel (although Apria, Organigram and Tilray are our key suppliers and we have a vast variety of customers (licensed pharmacies) which include Super Pharm, although we do not depend on a single specific customers. Our products are distributed via Novolog and SLA, licensed distributors in accordance with the New Regulations. Michael Auerbach introduced Tilray to Intercure, but all of Intercure’s relationships with the noted entities are at arm’s-length and except as noted herein, none of these entities or their officers and directors are related to us or our management team. Management believes that these existing partnerships will allow Intercure to be well positioned following the resolution of certain regulatory matters and the partnerships becoming fully operational, but there is no assurance that this will take place, see “The Business of Intercure – Applicable Laws and Regulations” and “Risk Factors”.

Tilray

Tilray (NASDAQ: TLRY) is a global pioneer in the research, cultivation, production, and distribution of cannabis and cannabinoids, currently serving patients and consumers in 16 countries spanning five continents.

In December 2019, we established a strategic collaboration with Tilray for the purpose of providing us with access to existing and potential markets in Tilray’s operating territories. The collaboration between us and Tilray consists of a set of agreements with Tilray Portugal Unipessoal Ltd., a wholly-owned subsidiary of Tilray, pursuant to which, Tilray will import GMP-quality medical cannabis products from us (the “Tilray Agreements”). Tilray’s facility in Portugal has an annual maximum production capacity of 25 metric tons of cannabis.24

Pursuant to the Tilray Agreements, during a 12-month period that ended on December 31, 2020, we have an option to purchase from Tilray’s production facility in Portugal, and imported into Israel, up to 2,500 kilograms of packed dried inflorescence (GMP-quality medical cannabis) based upon agreed prices and quality standards. We plan to manufacture and transform these imported materials to Canndoc's GMP-branded products. Final products will be distributed by Canndoc’s distribution channels to all pharmacies in Israel. In January 2020, we successfully completed the first ever commercial import of medical cannabis into Israel and have subsequently successfully completed several commercial shipments into Israel while launching the "CanndocDiamonds" family of products.

Further, pursuant to the Tilray Agreements, we may sell to Tilray, and export out of Israel, up to 5,000 kilograms of inflorescence cannabis, which will be distributed by Tilray under a co-brand and based upon agreed prices and quality standards for a 12-month period that ended on December 31st 2020. The Tilray Agreements contain a provision which requires our products to be in compliance with the EU-GMP Standard requirements and are conditioned upon our ability to obtain a permit from the state of Israel to export the inflorescence cannabis out of Israel. In December 2020, we completed the first commercial export of our products, which consisted of several dozen kilograms, to the European Union as part of the Tilray Agreements.

24 Source: ttps://mjbizdaily.com/canadas-tilray-build-marijuana-production-arm-portugal-serve-eu/ - 50 -

As of the date of the prospectus, we agreed with Tilray that we are entitled us to additional shipments of cannabis products, subject to both parties obtaining the required permits which are expected to be received by the end of the second quarter of 2021. Together with Tilray, we are exploring several more potential shipments.

The Tilray Agreements provide us with a seven-and-a-half year exclusivity period over all of the final Tilray-branded products sold in Israel.

Organigram

Organigram (NASDAQ: OGI) (TSX: OGI), is a leading licensed producer of cannabis.

In June 2020, we entered into a contractual relationship with Organigram for the purpose of collaborating to develop, import and export medical cannabis products in the state of Israel and across Europe (the “Organigram Agreement”). Organigram’s facility located in New Brunswick has a potential annual capacity of 70 tons.

The Organigram Agreement specifies that, subject to obtaining the required permits, we will import from Organigram 3,000 kilograms of medical cannabis products from Organigram's advanced indoor facility in Canada (“Indoor Products”) within a period of 18 months (the “Organigram Initial Period”). In accordance with the Organigram Agreement, we will produce and market the medical cannabis products imported from Organigram in pharmacies throughout Israel and Europe. We will be provided with the option to import from Organigram an additional 3,000 kilograms per year of medical cannabis products for a period of two years from the end of the Organigram Initial Period, under the same terms and conditions as those in place during the Organigram Initial Period. These products will be marketed under our “Canndoc Indoor” brand and we, and Organigram, will examine the possibility of selling these products under a joint brand, in compliance with and subject to the IMCA's instructions. We will then manufacture and transform the imported product into Canndoc's GMP-branded product. Final products will be distributed by Canndoc’s distribution channels to all pharmacies in Israel. In August 2020, we successfully imported our first shipment of the noted products from Organigram into Israel and successfully launched the "Canndoc Indoor" family of products.

The Organigram Agreement provides us with an aggregate of up to a seven-and-a-half year exclusivity period (in addition to certain other rights and subject to certain conditions) over all of the final Organigram-branded products sold in Israel.

Aphria

Aphria (NASDAQ: APHA) (TSX: APHA) is one of the largest leading worldwide cannabis production companies, with its “Diamond Facility” in Leamington, Ontario being one of the biggest and most advanced cannabis facilities in the world, and having an annual production capacity of 140 metric tons.

In August 2020, we entered into an agreement with Aphria (the “Aphria Agreement”) for the import of bulk cannabis products from Aphria’s facility in Canada into Israel. Pursuant to the Aphria Agreement, we will purchase from Aphria’s production facility in Canada, and import into Israel, up to 3,000 kilograms of “bulk” quality medical cannabis for a period of two years (“Aphria Initial Period”). We have the option to import up to 6,000 kilograms of additional product from Aphria for two additional periods of two years each. This option begins at the time on expiry of the Aphria Initial Period and under the same terms and conditions as during the Aphria Initial Period. We will then manufacture and transform the imported product from into Canndoc's GMP-branded product. Final products will be distributed by Canndoc’s distribution channels to all pharmacies in Israel. In November 2020, we successfully imported our first shipment of the noted products from Aphria into Israel and successfully launched the "Canndoc Stars" family of products.

The Aphria Agreement provides us with an aggregate of up to a seven-and-a-half year exclusivity period (in addition to certain other rights and subject to certain conditions) over all of the final Aphria-branded products sold in Israel.

Charlotte’s Web

Charlotte's Web (TSX: CWEB) (OTCQX: CWBHF) is the owner of one of the largest worldwide CBD brand (with over 2.3 million pounds of cannabis produced in 2019). - 51 -

In December 2020, we entered into a collaboration with Charlotte's Web, under which we will be the sole partner of Charlotte's Web in Israel, and through which its products will be marketed in Israel under a joint brand for the Israeli market, subject to certain conditions, including certain regulatory matters within central European countries and England (the “Charlotte’s Web Agreement”). The arrangement is subject to the receipt of the required regulatory agreements.

We will be responsible for obtaining the regulatory approvals required in order to register the purchased products and their importation and will take appropriate marketing and sales actions. Together with Charlotte’s Web, we will explore opportunities for clinical trials, product development and Israeli product manufacturing.

The Charlotte’s Web Agreement is for a period of five years (with a one year extension option) from the date that CBD is removed from the Israeli DDO (which has yet to occur).

Fotmer

Fotmer is a corporation established in Uruguay, that cultivates and produces medical cannabis at an internationally high level. In December 2020, we entered into an agreement with Fotmer, under which we will import from Fotmer approximately 3,000 kilograms of quality medical cannabis products, each year for a period of four years (the “Fotmer Agreement”).

Pursuant to the Fotmer Agreement, we have agreed to pay Fotmer an initial amount of US$650,000 as a down payment for the first shipment of medical cannabis products, which will be classified as a loan, bearing an annual interest rate of 5.51% and secured by Fotmer’s Canadian parent company, until the export and import permits for the first shipment of products are obtained.

Subject to the terms set out therein, the Fotmer Agreement provides us with a seven-and-a-half year exclusivity period over all of the final Fotmer-branded products sold in Israel.

Sales and Distribution

Israel

Under current regulations, patients fill prescriptions directly from a registered pharmacy. Our products meet all of the IMCA standard and are permitted to be sold within all registered pharmacies across Israel that are otherwise permitted to dispense medical cannabis to patients. We sell our products through pharmaceutical distributors and licensed retail pharmacy locations where patients can fill their prescriptions on-site or have our products delivered directly to their residence. Under the old regulations, the IMCA instituted a fixed price for the monthly supply of cannabis products, regardless of the dosage or form of use. Under the current regulations, the price of cannabis products is not fixed and will be determined primarily by market demand.

We have developed wholesale supply relationships with government and academic research institutions and private businesses throughout Israel and these relationships require minimal selling, administrative and fulfillment costs. We believe there is potential for the wholesale of finished, packaged products to other licensed producers, and we intend to pursue this sales channel as a part of our growth strategy.

SLE

In September 2019, we entered into a distribution agreement with SLE, a subsidiary of Teva Group Pharmaceutical Industries Ltd., a leading Israeli company in the health services field (the “SLE Agreement”).

Pursuant to the SLE Agreement, SLE will provide us with logistics, storage, collection and distribution services for our medical cannabis products throughout Israel for a term of three years, with two optional extensions of two years each. SLE holds an IMC-GDP distribution license and possesses an advanced logistics facility.

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Novolog

In December 2020, we entered into a distribution agreement with Novolog, a leading Israeli company in the logistic health services field .

Pursuant to the noted agreement, Novolog will provide us with logistics, storage, collection and distribution services for our medical cannabis products throughout Israel for a term of three years, with two optional extensions of two years each. Novolog holds an IMC-GDP distribution license and possesses an advanced logistics facility.

Super-Pharm

In March 2020, we entered into a binding preliminary distribution agreement with Super-Pharm, the largest chain of pharmacies in Israel (which operates approximately 260 pharmacies) (the “Super Pharm Agreement”). Super Pharm currently operates 60 pharmacies that sell cannabis for medical purposes (the “Super Pharm Pharmacies”). Pursuant to the Super Pharm Agreement, Super Pharm agreed to purchase from us, and we agreed to sell to Super Pharm, 10,000 kilograms of our medical cannabis products for a period of 3 years. The Super Pharm Agreement requires our products to be in compliance with the IMC-GMP Standards.

The parties to the Super Pharm Agreement have covenanted to negotiate in good faith and enter into a detailed agreement within 90 days from the date of the Super Pharm Agreement. The parties, by mutual agreement have agreed to extend the said period to March 31, 2021 and negotiations of the detailed agreement remain ongoing.

Pursuant to the Super Pharm Agreement, Super Pharm will be responsible for distributing the final products to each individual Super Pharm pharmacy, while we will provide professional training and clinical knowledge about our products to Super Pharm and Super Pharm Pharmacies over the term of the agreement.

Case Study – Tel Aviv Pharmacy

One of our pharmacies, located at 288 Hyarkon Street in Tel Aviv (which is our “flagship” pharmacy, with the longest track record), is approximately 3,500 square feet in size, derives 95% of its gross sales from the sale of medical cannabis and sells over 100 kilograms of medical cannabis monthly. This pharmacy’s upper floor has a dedicated clinic for medical cannabis treatment, consulting and education operated by a not-for-profit organisation, in collaboration with Cannolam. Our projected revenue growth for the noted location is as follows:

Notes: (1) Based on pro forma, full-year figures. “CAGR” is a non-IFRS measure. See “Non-IFRS Measures”. - 53 -

Our other pharmacies may experience a different revenue growth rate from the above (Q4 2020 revenue for the Tel Aviv, Ashdod and Herzilia pharmacies was approximate 2 million NIS, 1.7 million NIS and 0.3 million NIS respectively). Our assumptions are based on a patient growth rate of 4% per month (starting at 80,000 in December 2020, growing to 120,000 in December 2021 and 180,000 in December 2022). In addition, for avoidance of doubt, the projections set out herein are also subject to the assumptions and qualifications set out under the headings “Caution Regarding Forward-Looking Statements”, “Note Regarding Financial Outlook and Future-Oriented Financial Information” and “Risk Factors”.

Europe

For the distribution of our pharmaceutical-grade cannabis products in Germany, we have entered into an import and wholesale distribution agreement with a pharmaceutical distributor. The import of our products into the European Union is subject to our local distributor obtaining the applicable import licenses under EU-GMP standards,

We have also entered into a joint venture agreement with a licensed EU-GMP pharmaceutical distributor that has a license to import cannabis into the United Kingdom for medicinal purposes.

Canada

As part of our partnership with our Canadian partner, we will distribute our products in the Canadian market under our brand via our joint venture with a domestic cultivator and producer with a distribution network of pain treatment centers across Canada. In addition, upon receipt of the required permits and licenses, we anticipate that our products will be distributed in Canada via our partner’s e-commerce platform. While this facility is operational, as of the date of this prospectus, it has yet to receive all of its required approvals and licenses to permit the sale of the produced products.

The Rest of the World

Over the years, we have been building, and continue to build, an international distribution network, with the goal of identifying and partnering with established pharmaceutical distributors. We plan to always distribute our products under conditions that meet the highest standards, whether by ourselves or through a third party. We continue to explore the costs and benefits of our distribution partnerships against the costs and benefits of conducting those activities in house.

Cannolam

In May 2020, our Board approved Intercure entering into an arrangement agreement, pursuant to which, we purchased 50.1% of the shares of Cannolam, a private Israeli company, that operates in the field of medical cannabis through the operation of the “Givol” pharmacy chain in Israel. The “Givol” pharmacy chain is the first private pharmacy chain in Israel, established for the specific purpose of serving medical cannabis patients, and currently has licensed locations to sell medical cannabis products in Tel Aviv, Haifa25 and Ashdod26. It also has locations currently under construction in Jerusalem, Herzliya27 and Be’er Sheva.

In consideration for Intercure’s acquisition of 50.1% of Cannolam’s shares, Intercure (i) issued to Cannolam’s shareholders 1,788,962 Intercure Shares (valued at approximately 7.8 million NIS, priced at 4.35 NIS per share as at the date of the agreement, with a fair market value of 6.9 NIS as of the closing of the acquisition), in exchange for 21.9% of shares of Cannolam; and (ii) granted rights for agricultural products cultivated in Canndoc's facilities

25 Note: Our partner, the owner of an operating pharmacy with a license to sell medical cannabis, has entered into an agreement with Cannolam, pursuant to which, we are entitled to 90% of the net profits generated in the pharmacy from the sale of medical cannabis, in consideration for consulting services and the licensing of the “Givol” trademark to the pharmacy. 26 Note: This pharmacy was acquired in January 2021. 27 Note: This pharmacy was acquired in January 2021 and while it is operational, it is pending the receipt of the required licenses to distribute medical cannabis. - 54 -

(existing or future), subject to an investment of no less than 10.2 million NIS, in exchange for 28.2% of shares of Cannolam.

In addition, Cannolam owns the exclusive rights to manufacture, import, distribute and use the trademarks of leading international cannabis and lifestyle brands in Israel. More specifically, Cannolam has exclusive rights in relation to the following brands:

(a) Cookies

Cookies is a leading American cannabis brand with a line of premium cannabis products and dedicated stores selling cannabis products for medical use and, in recent years, as a result of changes in regulations in some states in the United States, Cookies has also expanded to the production and marketing of cannabis products for recreational use. Cookies is active in the states of California, Colorado, Maryland, Illinois, Oregon, Arizona, Nevada, Washington, Michigan, Oklahoma and Florida. It also operates in Canada, in both the medical cannabis market and the recreational cannabis market. The branded product line for medical needs includes inflorescences, extracts, edible products, evaporators, and CBD products based on unique and reputable cannabis strains, marketed in the brand's flagship stores and many dozens of dedicated stores in accordance with the relevant country's medical cannabis regulations. In countries where cannabis use is permitted for recreational purposes, Cookies has a wide range of cannabis products marketed recreational use. Cookies currently operates 18 retail locations in the United States and one medical shop location in Tel Aviv.

For more details, see the website at: cookies.co

(b) Mr. Nice

Mr. Nice is an English brand of CBD, CBG, THC and “lifestyle” products based on the life story of Howard Marks.

For more information, see the website at: mrnice.green

The Oxford Medical Cannabis Company (the producer of OXON Pharma) operates in the field of research and development of cannabinoid and phyto-cannabinoid-based formulations, in addition to other related fields.

For more details see the website: oxonpharma.com

Research and Development

We believe that innovation is a key component of our competitiveness and growth in the medium and long-term and is driven by market research and analysis of potential new products and the development of new technologies. We engage in the research of agricultural techniques that utilize climatic advantages and our agrotech capabilities to improve the yield of cannabis plants in their production of various cannabinoids. Our research and development programs have also involved the development of high-quality protocols, elite genetics with improved disease and stress resistance, compound fractional distillation and separation and advanced formulation methods.

Since 2014, we have collaborated with various world-renowned research institutions, such as Technion – Israel Institute of Technology, Volcani Center (the research arm of the Israeli Ministry of Agriculture) and other universities and institutions accredited by the Israeli Council for Higher Education. As a result of these collaborations, we have enhanced our production capabilities, improved and optimized our genetics, and developed additional cannabinoid profiles. Our research and development operations also include collaborations with a renowned governmental institute as well as various research entities, researchers, start-up companies, mature companies and commercial entities holding licenses from the IMCA.

Clinical Trials

We have received IMCA feasibility approval to initiate nine clinical trials and have commenced one phase 3 clinical trial. We will be the sponsor of nine of these clinical trials and will be the sole supplier of pharmaceutical-grade - 55 -

cannabis for all ten of the clinical trials. We initiated a phase 3 clinical trial in a leading Israeli medical center to study our product’s influence on cognitive and adjacent capabilities on children who are on the autistic spectrum.

The table below provides additional details regarding our and our partners’ currently planned clinical trials:

Our Planned Clinical Trials Phase of Number of Development Indication Patients Primary Endpoint(s) Secondary Endpoint(s) 2 Adult Epilepsy 52 • Change in median • Changes in seizure monthly seizure severity frequency over study • Change in speed of period compared to 2- post-ictal recovery month baseline period • Changes in seizure • Treatment-emergent characteristics adverse events and (focal/generalized) serious adverse events • Changes in quality of (SAEs) during treatment life based on QoL31 • Changes in sleep quality based on the Pittsburgh sleep questionnaire 2 CINV related to 72 • SAEs during treatment • Changes in quality of Breast Cancer life based on QoL-BC Treatment • Changes in blood tests (protein, leukocytes) • Number of CINV symptoms in the active-treatment arm compared to placebo evaluated using weekly symptom diaries and incidence of treatment-emergent AEs, overall and by CTCAE grade 2 Parkinson’s 60 • SAEs during treatment • Changes in PD motor Disease • Change in The symptoms as assessed Parkinson’s Disease by changes in the Questionnaire MDS-UPDRS • Changes in QoL based on Non Motor PD questionnaire • Improvement in muscle cramps 2 Diabetic 44 • Neuropathic Pain • To assess the safety Neuropathy Diagnostic and tolerability of Questionnaire score cannabis in diabetic (scale 4-10) subjects with neuropathic pain • To assess the Quality of Life change by SF- 36

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Our Planned Clinical Trials Phase of Number of Development Indication Patients Primary Endpoint(s) Secondary Endpoint(s) • To assess changes in fasting glucose and insulin dose 2 Fibromyalgia 62 • Safety and tolerability of • To determine the the product based on improvement in FMS AEs during treatment Widespread Pain • To determine the effect Index and Symptom of the product on Severity Score. Fibromyalgia Impact • To determine the Questionnaire effect of the product • To determine the effect on Medical Outcome of the product on Scale SF-36 Physician Global Impression of Change 2 Rheumatoid 64 • Safety and tolerability of • Mean change from Arthritis the product based on baseline over time of Adverse Events during Global Visual treatment Analogue Scale (VAS) • To determine the effect • Change from Baseline of the product on ACR20 in VAS of the Physician Assessment of Arthritis • Change in inflammatory markers – CRP and ESR • Determine the effect the change from baseline in SF-36 2 Post-traumatic 50 • Safety rate of AEs • Improvement in PTSD Stress Disorder • Improvement in Checklist for DSM-5 Insomnia Severity Index • Determine the latency Score to persistent sleep and • Improvement in total sleep hours based Pittsburgh sleep quality on actigraph index-addendum (PSQI- recordings A) score • Improvement in quality of life measured by SF-36 • Improvement of general quality of life, measured by SF-36 • Improvement in Physician Overall Impression of Change 2 Lumbar 50 • Safety and tolerability of • To define the Radiculopathy the product based on advantage of CD-008 Adverse Events during sublingual drops + treatment SOC versus SOC

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Our Planned Clinical Trials Phase of Number of Development Indication Patients Primary Endpoint(s) Secondary Endpoint(s) • To evaluate the pain- alone on Lumbar relieving effect of CD- radiculopathy 008 sublingual drops, in addition to standard of care, on Lumbar radiculopathy 2 Radicular Pain 36 • Safety of the product • To evaluate Pharmacokinetics (drug’s absorption, distribution, metabolism, and excretion continues) of cannabis oils in Radicular Pain patients • To determine Pharmacodynamics (early estimates of activity and potential efficacy) of different cannabis oils in Radicular Pain patients by measurement of pain

Current Clinical Trial Phase of Number of Development Indication Patients Primary Endpoint(s) Secondary Endpoint(s) 3 Pediatric/Young 75 • Characterize the effects • Identify side effects Adult Autism of medicinal cannabis in and reasons for care different THC to CBD failure ratios on associated • Examine if CBD-rich morbidity on the autistic cannabis is efficient in spectrum treating sleeping • Examine the influence of problems and reducing cannabis treatment on motoric restlessness cognitive and adjustive and behavioral issues capabilities in children with • Test the levels of THC autism and CBD levels in • Test change in children treated with hormonal levels and cannabis biochemical indices before and during the treatment

Note: QoL31 = Quality of Life Scale-31, a clinical standard in mental health; QOL-BC = Quality of Life Instrument - Breast Cancer, a clinical standard measured in breast cancer patients; CTCAE = Common Terminology Criteria for Adverse Events; MDS-UPDRS = Movement Disorder Society - Unified Parkinson’s Disease Rating Scale; QoL = Quality of Life; PD = Parkinson’s Disease; SF-36 = 36-Item Short Form Health Survey; FMS = Fibromyalgia;

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ACR20 = American College of Rheumatology’s composite score of rheumatologic improvement; CRP = C reactive protein; ESR = Erythrocyte Sedimentation Rate; DSM-5 = Diagnostic and Statistical Manual of Mental Disorders

Our ability to sell our products in any of our target territories is not dependent on the outcome of these trials; however, without clinical trial results we are limited in the claims that we may make with regard to the efficacy of our products. We hope that the results from these clinical trials will support the effectiveness of our GMP pharmaceutical-grade cannabis for the tested medical indications. The results of any clinical trial could affect our ability to market our products and may result in less acceptance or greater regulation of our products.

We will be able to use the data collected from the clinical trials for any commercial use and marketing purposes as agreed between us and our research partners and noted in the agreements, in each case, subject to applicable laws.

Assaf Harofeh

In November 2019, we entered into an agreement with the R&D Fund of Shamir (Assaf Harofeh) Medical Center, a lead research facility, for the purposes of examining the effect of our products for medical uses on approximately 75 pediatric autism examinees (the “Autism Research”). The Autism Research will be conducted at Assaf Harofeh Hospital over a period of three years.

Partnerships

Our production system (wholly owned or through partnerships) currently consists of two active facilities in Israel and three facilities abroad (one of which is active and operates in accordance with the EU-GMP standard). We have access to production facilities which currently have a combined capacity to produce over 100,000 kilograms of high-quality medical cannabis per year.

Israel

We have established two partnerships with kibbutzim in Israel for the purpose of breeding, cultivation and harvesting of pharmaceutical-grade cannabis. Our leases and partnerships in Israel are subject to certain risks relating to land uses, see “Risk Factors”.

The Northern Kibbutz

As noted above, we have rights to our production facility in northern Israel through a joint venture with Beit HaEmek Kibbutz, a kibbutz located in the northern region of Israel (the” Northern Kibbutz”). Our relationship with the Northern Kibbutz is governed by a partnership agreement (the “Northern Kibbutz Agreement”, establishing the “Northern Kibbutz Partnership”), entered into in May 2015. We hold 70% of the voting rights and rights to profits and losses of this partnership and the Northern Kibbutz holds the remaining 30% of such rights. The operation of the venture is done by an unregistered corporation according to the Northern Kibbutz Agreement. The Parties entered into an amendment agreement, pursuant to which and subject to the IMCA approval and the approval of the Israeli tax authorities, the operations of the Northern Kibbutz will be transferred to an “Agricultural Cooperative Organization” owned by the parties as mentioned above (70% Canndoc and remaining 30% of the Kibbutz). As of the date of this prospectus, the application for such an amendment is pending IMCA approval. During this time period and regardless of the outcome of the noted approvals, the parties agreed that the operations will continue as usual.

Under the terms of the Northern Kibbutz Agreement, the Northern Kibbutz will make the facility available for use by the partnership. The Northern Kibbutz has rights to lease the site, which it holds pursuant to a lease, dated April 26, 1990, between the Northern Kibbutz and the Israel Land Administration (the “Land Administration”). The initial term of the lease is forty-nine (49) years, ending on September 30, 2038 and the term is automatically renewed for an additional forty-nine (49) years subject to the terms of the lease. The Land Administration may cancel the lease with regard to areas of the site where protected natural resources are found. The Land Administration also has the right to pass, or allow another to pass, through the site, in the site or over the site, water, drainage, sewage or gas pipes, electric and telephone poles, electric and phone cables, or similar rights of way. The Northern Kibbutz has the right to make a claim for damages that occur as a result of the granting of such rights of way.

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The Northern Kibbutz Agreement contains customary representations and warranties, ownership, confidentiality, non- compete, indemnification and insurance provisions. The Northern Kibbutz Agreement has an initial term of five years, with the addition of three extensions spanning five years each, which are automatically renewed, subject to compliance by the parties with the terms and conditions of the Northern Kibbutz Agreement. The Northern Kibbutz is entitled to terminate the Northern Kibbutz Agreement for any reason whatsoever, by giving an advance notice of the earlier of 18 months, or until such time where we find an alternate growing location and obtain the necessary approval from the appropriate regulatory authority to operate at such a location. We are entitled to terminate the Northern Kibbutz Agreement for any reason whatsoever, by giving an advance notice of three months. If we terminate the Northern Kibbutz Agreement, absent good cause, the Northern Kibbutz will be entitled to compensation in the amount of NIS 200,000. The Northern Kibbutz will not be entitled to retain any inventory of pharmaceutical-grade cannabis and/or products, nor any documents.

The Southern Kibbutz

As noted above, we have also entered into an agreement with Kibbutz Nir-Oz, a kibbutz located in the southern region of Israel (the “Southern Kibbutz”), to establish a large-scale production facility in southern Israel, which will also utilize climatized greenhouses and operate in tandem with our facility in northern Israel. Our relationship with the Southern Kibbutz is governed by a partnership agreement (the “Southern Kibbutz Agreement”, establishing the “Southern Kibbutz Partnership”), entered into in April 2019. We hold 74% of the voting rights and rights to profits and losses of this partnership and the Southern Kibbutz holds the remaining 26% of such rights.

Under the terms of the Southern Kibbutz Agreement, the Southern Kibbutz has agreed to make the site available for use by the Southern Kibbutz Partnership during the term of the Southern Kibbutz Agreement. The Southern Kibbutz has rights to lease the site, which it holds pursuant to a lease, dated June 22, 2016, between the Southern Kibbutz and the Land Administration.

The Southern Kibbutz Agreement contains customary representations and warranties, ownership, confidentiality, non- compete, indemnification and insurance provisions. The Southern Kibbutz Agreement requires the consent of the Southern Kibbutz for certain decisions, including approval of (v) the sale of the entire assets of the Southern Kibbutz Partnership or a material part thereof and/or the transfer of a material business operation of the Southern Kibbutz Partnership to any other person and/or corporation; (w) dilution of rights and/or holdings of the Southern Kibbutz in the Southern Kibbutz Partnership and/or any other action that might affect the rights of the Southern Kibbutz; (x) change in the business of the Southern Kibbutz Partnership, including the place of its business, entry into a sphere of activity that is not part of the business of the Southern Kibbutz Partnership or termination of an existing business operation of the Southern Kibbutz Partnership, and (y) transactions between the Southern Kibbutz Partnership and related parties. The Southern Kibbutz Agreement has an initial term of ten years, with an option to extend the term for an additional ten years. This extension option is automatically renewed, subject to compliance by the parties with the terms and conditions of the Southern Kibbutz Agreement. Each party to the Southern Kibbutz Agreement is entitled to terminate the Southern Kibbutz Agreement only in the event of an uncured breach, insolvency of the other party or force majeure event. Upon expiration of the term, the Southern Kibbutz will retain all fixtures and we shall not be entitled to any reimbursement for any investment or appreciation attributed to the facility or its land.

Under the terms of each of the Israeli Partnerships, we have agreed to provide growing materials and equipment for the production of pharmaceutical-grade cannabis. We maintain ownership of the genetic bank and the climatized greenhouses used on the respective properties. We own the equipment used during the cultivation process, including equipment for lighting, temperature, humidity, radiation, and irrigation control, extraction facilities, and other equipment necessary for complying with the IMC-GAP standards. The operations of the partnership are carried out by our employees and we receive a fee from the partnership for the use of our employees.

The Israeli Partnerships have no right in any of our other activities, including the processing of cannabis or any collaborations between us and our other partners within or outside of Israel. The profits of each partnership are divided between us and our respective Israeli partner according to our and their respective percentage holdings in the partnership.

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(a) Regulatory developments

The facilities located in the Southern Kibbutz are one of the largest medical cannabis production sites in Israel and in the world, covering a total area of 17 million square feet, of which 300,000 square feet are operation and produce up to 10,000 kilograms of pharmaceutical-grade cannabis per year. Full operations in the Southern Kibbutz will allow us to produce 88 tons of pharmaceutical-grade cannabis per year. The development of the southern site is carried out in a modular manner in accordance with the regulatory developments concerning the export of medical cannabis from Israel.

Further, in December 2020, we received a permanent license from the IMCA for our facilities located in the Southern Kibbutz for the handling and possession of dangerous drugs under Sections 6 and 7 of the Israeli DDO. The license permits us to breed and cultivate cannabis plants and process inflorescences and plants under IMC-GAP-quality conditions, subject to customary limitations.

Denmark

As noted above, in May, 2020, we entered into a strategic supply agreement (the “EU Agreement”) with a company incorporated in Denmark (the “EU Partner”). According to the agreement, the EU Partner will supply an aggregate of 11,700 kilograms of quality EU-GMP-standard medical cannabis products to us for a period of 3 years. The EU Agreement provides that the EU Partner, who is the owner of an advanced cultivation and manufacturing facility in a European country that is approved by the EU-GMP-standard and holds all the licenses and permits required for cultivating, manufacturing, distributing and marketing the products sold to us, will be responsible for the entire cultivation and production process and for the logistical process of transporting and packaging the sold products according to our requirements. The EU Partner will be entitled to a share of the profits from sales of the products distributed through our distribution network. This facility is operational and as of the date of this prospectus, we are in the process of importing products from Denmark to Germany pursuant to the EU Agreement. Notwithstanding the importing and exporting of the products, the sale of the products pursuant to the EU Agreement has not commenced as of the date of this prospectus and this activity does not have a material impact on our finances.

Germany

As noted above, in June, 2019, we entered into a non-exclusive distribution agreement with a licensed distributor in Germany, for the purpose of distributing our pharmaceutical-grade products within Germany (the “German Distribution Agreement”). The German Distribution Agreement contains customary obligations, intellectual property, confidentiality and indemnification provisions. The German Distribution Agreement has an initial term of 36 months, with an option to extend the term by mutual written consent of the parties. Each party to the German Distribution Agreement is entitled to terminate the German Distribution Agreement in the event of an uncured material breach of the agreement, the insolvency of the other party or a change of control event.

United Kingdom

In May 2020, we entered into a joint venture (the “UK JV Agreement”, establishing the “UK Joint Venture”) with a UK company (the “UK Partner”). The UK Partner owns a manufacturing plant operating system under the EU- GMP-standard and possesses all the licenses and permits required for the importation and exportation of medical cannabis products to England, Wales, Scotland, Northern Ireland and Ireland. We own 51% of the UK Joint Venture and the UK Partner owns the other 49%.

According to the UK JV Agreement, subject to the receipt of all required permits and approvals, we will sell to the UK Partner, and the UK Partner will purchase from us, all medical cannabis products we produce in Israel and/or any other territory where we operate. According to the UK JV Agreement, the UK Partner will be responsible for the packaging of our exported products in accordance with local regulations, as well as the overall distribution system. Since the required permits and approvals were not yet obtained, no revenue was generated under the UK Joint Venture and no material expenses were incurred to date.

Furthermore, pursuant to the UK JV Agreement, we will appoint a majority of the directors to the board of directors of the UK Joint Venture. The UK Partner will be responsible for providing an EU-GMP certified facility, including all equipment and other infrastructure, for the operations of the joint venture. Our UK Partner will support all of the - 61 -

joint venture’s local needs, including without limitation, assisting in maintaining all required legal certificates for the joint venture’s full operation in England, Wales, Scotland, Northern Ireland and Ireland, including licenses for the import of pharmaceutical-grade cannabis products into the noted territories, with such licenses to be held by the joint venture.

Pursuant to the UK JV Agreement, we will serve as the joint venture’s professional partner and sell to the joint venture our pharmaceutical-grade cannabis products. Furthermore, we will provide the joint venture with access to our patient experience database and assist with professional know-how and personnel.

Pursuant to the UK JV Agreement, the UK Partner is prohibited from distributing the cannabis products of other Israeli companies and we are prohibited from distributing our products in England, Wales, Scotland, Northern Ireland and Ireland, other than through the UK Partner.

Canada

As noted above, we have entered into a joint venture with a Canadian partner for the purpose of producing, manufacturing and distributing our pharmaceutical-grade products in Canada for medical use. The Canadian partner’s facility is operational but has not received all of the permits and licenses required for the sale of the products. The Canadian partner will supply personnel that will service the operations of the joint venture. Pursuant to our joint venture agreement with the Canadian partner, we have granted the joint venture a license to our intellectual property, including rights to use our “CANNDOC” brand. We are assisting the joint venture with logistical procedures within the production and manufacturing facility, and we are training our partner’s employees on our breeding and cultivation practices. We are entitled to 51% of the profits, losses, votes and expenses of the joint venture.

Other Partners

In addition to the above, we entered into strategic and exclusive agreements with international leading companies and brands such as Tilray, Organigram, Aphria, Fotmer and Charlotte's Web. See “Cultivation and Processing” – “Exclusive Partnerships”.

Additional Investments in the Biomed field

We have invested in companies in the biomed field. As of the date hereof, we hold approximately 9.33% of the issued and paid-up capital of Regenera Pharma Ltd., a company which is under liquidation and 0.72% of the issued and paid- up capital of NovellusDX Ltd. Please see “Legal Proceedings” for a description of certain lawsuits that pertain to our interest in Regenera Pharma Ltd.

Intellectual Property, Patents and Trademarks

We have submitted trademark applications for our brand and logo in Israel, Canada, the United States and member states of the European Union. These applications are currently pending.

We are also in the process of applying for protected breeding rights in Israel, and intend to apply for protective breeding rights in any jurisdiction in which such rights may be registered, under the International Convention for the Protection of New Varieties of Plants (the “Plant Convention”), or any other applicable rules and regulations that provide legal protection, similar to the protection afforded to the owners of technological inventions, to the proprietary rights of breeders in the new plant varieties they breed.

The Israeli Plant Breeders’ Rights Law 5733-1973, which is based to a large extent on the Plant Convention is regulated by the Israeli Registrar of Plant Breeders’ Rights, in accordance with the decision of the Israeli Plant Breeders’ Rights Council. Under the Israeli Plant Breeders’ Rights Law 5733-1973, a breeder is entitled to exclusive rights for registered new plant varieties for a period of 20 to 25 years, depending on the type of plant, and during this period the plant may not be used without the breeder’s permission, subject to a limited number of exceptions. After registration in Israel, a breeder is able to distribute plant species in other jurisdictions that are members of the Plant Convention, while protecting their rights.

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Employees

Our employees are classified as either production workers or administrative workers. As of December 31, 2020 we employ 21 production workers and 19 administrative employees. During the 2019 peak months of harvesting, we employed a total of 53 production workers. During 2018, we employed an average of 18 production workers in any given month.

We pay substantial attention to the ongoing training of our employees, which we believe plays a significant role in strengthening the leadership and efficiency of our company. Our training focuses on strengthening technical knowledge, building efficiency and improve other aspects of professional development. Our training programs also support the various certifications that we are required to maintain, such as IMC-GAP and IMC-GSP.

Seasonality

We cultivate our cannabis mostly in climatized greenhouses suitable for the production of pharmaceutical-grade cannabis. Using the experience accumulated throughout approximately 13 years of cannabis production, we have learned to neutralize the possible effects of seasonality on our operations. We currently optimize the number of production cycles per year, according to a production plan that considers various parameters such as weather changes, costs, and the availability of suitable professional manpower. Our crop yields are optimal if cultivated from early spring to late autumn and harvested from late spring to early winter. By cultivating within climatized greenhouses, we are able to produce pharmaceutical-grade cannabis throughout the entire year over five to six full 15-week cycles.

Applicable Laws and Regulations

Israel

The competent regulatory authority in Israel in all matters concerning the oversight, control and regulation of cannabis for medical production, use and research is the IMCA. The IMCA was established by the Israeli government under decision No. 3609, which also established an inter-ministerial safety committee, composed of representatives of government ministries, government authorities and other government bodies, for intergovernmental cooperation regarding the regulation of cannabis. The IMCA examines medical recommendations for the use of cannabis for medical purposes and in accordance with established procedures. The IMCA is also authorized to examine applications and issue permits to hold, use and research cannabis.

Except as disclosed under “Legal Proceedings”, the LP is not aware of any alleged non-compliance by Intercure of Israeli cannabis laws or any notices of violation received by Intercure with respect to its compliance with cannabis legislation.

Regulations Governing the Use of Cannabis for Medical Purposes

Under the Israeli DDO, cannabis is defined as a “dangerous drug” and the use of cannabis is prohibited unless a license is duly issued by the IMCA or a competent government agency.

Pursuant to the Israeli DDO, the use of cannabis was allowed for patients and for medical purposes, in respect of certain medical conditions, under a special approval of the MOH.

In June 2016, the Israeli government published Resolution No. 1587, which established a new regulatory framework for the “medicalization” of cannabis. Pursuant to Resolution No. 1587, the IMCA adopted regulations expanding the number of qualifying medical conditions for treatment with medical-use cannabis to include such conditions as cancer, pain, nausea, seizures, muscle spasms, epilepsy, Tourette syndrome, multiple sclerosis (MS), amyotrophic lateral sclerosis (ALS), post-traumatic stress disorder (PTSD), autism, migraines, arthritis, Parkinson’s disease, residual limb pain, spinal cord injuries, HIV/AIDS, Crohn’s disease, colitis, inflammatory bowel disease and terminal illnesses.

Regulations Governing the Production, Manufacturing and Distribution of Cannabis for Medical Purposes

In March 2017, the MOH announced the New Regulations, which set out the standards suitable for each link in the chain of production and distribution of medical cannabis-based products. The goal of the New Regulations is to - 63 -

achieve the standardization, reproducibility and uniformity in product quality that is similar to those standards for existing conventional drugs.

Under the New Regulations, market participants are required to apply for various licenses for the production, manufacturing and distribution of medical cannabis-based products. Each license establishes that the licensee adheres to certain protocols and standards regarding the quality and standardization of practices for (1) propagation and breeding, (2) cultivation, (3) extraction, formulation and packaging, (4) storage and delivery and (5) pharmacies. In addition, the New Regulation requires that the whole operation be secured under appropriate conditions, in accordance with the IMC-GSP standard.

Licenses are initially granted on a provisional basis, subject to the development and completion of a facility with adequate protocols and systems to meet the standards required by the license. Applicants are not officially permitted to breed, cultivate, manufacture or distribute cannabis or cannabis products until the nursery, cultivation and manufacturing facilities are constructed and pass inspection by the IMCA. After the facilities pass inspection, the IMCA will issue the final cannabis licenses for each operation. The license is renewable subject to the limitations and terms and conditions of the IMCA, and licenses are subject to annual reviews of the licensees conduct and compliance with applicable laws and standards.

The production processes of cannabis plants used for the production of raw materials, the manufacturing and packaging processes and the procedures of distribution thereof, must all be carried out under the strict control and supervision and in accordance with the IMCA standards. Therefore, throughout the entire process, including the breeding phase, the production of the finished product and the distribution of the finished product through a pharmacy, each link in the chain is obliged to strictly maintain optimal and homogenous environmental conditions, and to strictly maintain defined and homogenous working procedures that are based on these standards. Regular and periodic analytical examinations shall be conducted throughout the entire chain of production, pursuant to the requirements, in order to ensure and to document that the plant complies with the analytical standards and the level of quality required during each of the phase of the chain of production.

Pharmacy Regulations

As part of the New regulation, pharmacy owners who wish to sell medical cannabis are required to apply for a dedicated license granted by the IMCA to sell, and store cannabis. Pharmacies are also subjected to regulations of several other governmental bodies including the MOH, the local municipality, and the district pharmacists.

Pharmacies must also obtain a business license. Granted by the MOH and the local municipality, business license to operate a pharmacy in Israel requires approval from several authorities including, the fire department, the police, and several other departments in the local municipality. The pharmacy is also required to comply with the MOH and district pharmacists' requirements which includes different security measures, certain safety protocols, and compliance with the requirements for storage of narcotics (including cannabis).

In addition, pharmacies require a GDP license to sell medical cannabis. Granted by the IMCA, after obtaining the final business licenses, the license to sell medical cannabis is subjected to compliance with GDP and GSP standards of the IMCA which includes among others, full compliance with the GSP protocols which are dedicated security measures for storage (which is subject to certain capacity limitations). Under the GDP, only certified cannabis pharmacists are allowed to sell cannabis and advise patients.

Lastly, pursuant to applicable Israeli regulations, Intercure is prohibited from paying commissions or incentive fees, directly or indirectly, to pharmacists or doctors and to the knowledge of the LP, Intercure has been complying with these requirements.

Medical cannabis transportation regulations

The transportation of medical cannabis is also subjected to the GDP and GSP standards and requires a transport license from the IMCA. Certain security measures are applied to the transportation of medical cannabis which vary in accordance with the quantities shipped and where the product is shipped to. For example, shipping cannabis from manufacturers to wholesalers requires armed vehicles and with security personnel while home deliveries require lighter security measures as long as the quantity handles is less than one kilogram. - 64 -

Export & Import of Pharmaceutical-Grade Cannabis

The State of Israel is bound by the Narcotics Convention, which governs the import and export of cannabis between countries that are a party to the Narcotics Convention. The Narcotics Convention is an international treaty to prohibit the production and supply of specific drugs (nominally narcotic drugs and drugs with similar effects) except under license for specific purposes, such as medical treatment and research. The Commission on Narcotic Drugs and the World Health Organization were empowered to add, remove, and transfer drugs among the Narcotics Convention’s four schedules of controlled substances. The International Narcotics Control Board was authorized to administer controls on drug production, international trade, and dispensation. The United Nations Office on Drugs and Crime was delegated the Board’s day-to-day work of monitoring compliance in each country and working with national authorities to ensure compliance with the Narcotics Convention. The Narcotics Convention has 186 state parties, including all the countries in which we operate and plan to operate.

From an export perspective, in January 2019, the Israeli government approved the export of pharmaceutical-grade cannabis and cannabis-based products. As of the date of this prospectus, we believe that as a partial result of government instability, permanent approval and regulation of the export of pharmaceutical-grade cannabis and cannabis-based products has not yet been enacted. Nevertheless, during the fourth quarter of 2020, the Israeli government, as part of a pilot project to issue export permits for licensed producers, granted us a temporary export permit. The pilot program (as well as our temporary export permit) was set to expire on December 31, 2020, but was subsequently extended to March 2021.

From an import perspective, in January 2020, due to a shortage in the Israeli market of pharmaceutical-grade cannabis, the Israeli MOH and the IMCA expedited the process of approving import licenses of such cannabis, and for the first time ever, pharmaceutical-grade cannabis and cannabis-based products were imported into Israel. In October, 2020 the IMCA published a directive that included updated qualifications for a licensee to receive an import license and the guidelines under which such import may take place.

The European Union

On February 13, 2019 the Members of the European Parliament adopted a resolution on the use of cannabis for medicinal purposes (“Resolution 2018/2775(RSP)”). Resolution 2018/2775(RSP) called for a legal definition of “medical cannabis” in order to clearly distinguish between cannabis-based medicines approved by the European Medicines Agency or other regulatory agencies and cannabis for recreational or industrial use that is not regulated by the same standards. Resolution 2018/2775(RSP) also called for increased research into the possible uses of THC, CBD and other cannabinoids for medical treatment, including their effects on the human body, and promotion of equal access to cannabis-based medicines by ensuring that health insurance schemes cover effective cannabis-based medication.

There is no formal EU definition of “medical cannabis.” Medical cannabis can be described as whole-plant cannabis- derived products (generally cannabis flower or oils) that are licensed by member state health systems for prescription by a physician. As recognized by the European Monitoring Centre for Drugs and Drug Addiction, medical cannabis refers to a wide variety of preparations and products that may contain different active ingredients and use different routes of administration.

From a legal and regulatory perspective, there are two categories of medical cannabis products:

• Cannabis-derived medicinal products - Cannabis derived medicinal products are products which have been granted a marketing authorization from a regulatory authority (the European Medicines Agency at the EU level or competent national authorities at EU member state level), after going through extensive clinical trials to test the products’ safety and effectiveness. These products are regulated as (cannabis-derived) “medicinal products” in accordance with the harmonized EU regulatory system set forth by EU Directive 2001/83/EC. To date, several cannabinoid-containing medicinal products have been authorized for marketing in the EU and certain EU member states, have authorized for marketing in their states plant-based products including, among others, Sativex® (nabiximols) and Epidyolex® (CBD), and synthetic products Marinol® (dronabinol) and Cesamet® (nabilone).

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• Cannabis preparations for medical use – Cannabis preparations for medical use consist of products which may be authorized through national distribution and use authorizations or licenses in certain EU member states. This group of products includes, among others, raw cannabis (such as the flowering tops, resin, and oils extracted from the plant). Alternatively, raw cannabis can be transformed by a pharmacist into a magistral preparation in accordance with a medical prescription, or the raw cannabis may already have been transformed by the manufacturer into standardized cannabis preparations. These cannabis preparations can vary greatly in composition, depending for example on the strain of cannabis, the growing conditions and how the preparations are stored.

Since the EU is not a party to the international conventions related to the control of drugs, the determination as to whether to implement the requirements of said conventions is made by the individual EU member states. The regulation of medical cannabis falls largely within the competence of the EU member states, which may decide to permit the medical use of cannabis preparations (without requiring a marketing authorization in accordance with EU Directive 2001/83/EC) under specific conditions. Pursuant to Article 5(1) of EU Directive 2001/83/EC (which relates to so-called “named patient use” of medicinal products), the use of medical cannabis can only be authorized by member states upon medical prescription and when there is a medical need for the patient.

While each country in the European Union has its own laws and regulations, there are many commonalities in the development of the medical-use cannabis markets in the EU. For example, in order to ensure the quality and safety of products for patients, many European Union countries only permit the import and sale of cannabis and cannabis-based products for medical use when the manufacturer can demonstrate a certification of compliance, issued by a competent member state authority, with the EU-GMP standards. Under the EU-GMP system, a competent authority of any European Union member state may conduct an inspection at a drug-manufacturing site, and, if the competent authority is satisfied that the EU-GMP standards are met, issue a certificate of EU-GMP compliance to the manufacturer for specified elements of the manufacturing process being carried out at that site. Each country in the European Union will generally recognize an EU-GMP certificate issued by any competent authority within the European Union as evidence of compliance with EU-GMP standards. Certificates of compliance issued by a competent authority in another country outside of the European Union, e.g. certificates based on the GMP guidelines of the World Health Organization (WHO), will also be recognized if that country has a mutual recognition agreement with the European Union.

Many European Union member states are signatories to the Narcotics Convention. Consequently, the import and export of cannabis among those countries must comply with the terms of the Narcotics Convention.

Regulation regarding CBD

On November 19, 2020, the European Union’s highest court, the Court of Justice of the European Union, ruled that cannabidiol (CBD) is not a narcotic drug (See Case C-663/18). The court conceded that while restrictions on the free movement of goods can be justified on the basis of a “public interest” objective, such as the “protection of public health”, such restrictions should be appropriate and should not go beyond what is necessary in order for the EU member state to obtain that objective. On the facts of Case C-663/18, the court implied that the restrictions in place to restrict the movement of CBD products were not found to be justified. This was due to the fact that the nation with the CBD restrictions in place did not restrict the import of synthetic CBD, which has the same properties as the CBD at issue. The lack of such a restriction on the movement of synthetic CBD suggested to the court that the impugned legislation was not appropriately designed to attain the objective it set out (that is, the objective of protecting public health).

Nevertheless, to date, the status of CBD, which can be included in different types of regulated products (e.g. cosmetics, food, etc.), remains unclear in the European Union. For example, with respect to cosmetic products, while the European Cosmetic Ingredient database highlights the cosmetic functions of CBD (i.e., its antioxidant, anti-seborrheic, skin conditioning and skin protecting properties), it also considers that its use in cosmetic products may be prohibited if it is prepared as an extract or tincture of cannabis in accordance with the Narcotics Convention. As the Narcotics Convention uses a narrow definition of cannabis limited to “the flowering or fruiting tops of the cannabis plant” and excludes the seeds and leaves of the plant, from an EU perspective, CBD may be used in cosmetics when it is obtained from the seeds and leaves (only) of cannabis plants. EU member state regulations on controlled substances may differ in their treatment of CBD products.

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Germany

The Act on the Amendment of Narcotic Drugs and Other Regulations (Gesetz zur Änderung betäubungsmittelrechtlicher und anderer Vorschriften) which came into force on March 10, 2017, introduced an exception to allow the prescription and sale of cannabis for medical purposes. Prior to March 2017, the import of cannabis was not permitted, and pharmacies could request medical cannabis from abroad for specific patients only in exceptional circumstances, subject to a special case-by-case approval issued by BfArM. Since March 2017, cannabis cultivated for medical purposes outside Germany can be imported and marketed in Germany by private companies provided those companies have obtained relevant licenses that are in line with the Narcotics Convention.

Germany permits the import of cannabis plants and plant parts for medicinal purposes under state control subject to the requirements under the Narcotics Convention and the Good Agricultural and Collection Practice, an annex to the EU-GMP standards.

German law does not place quantitative restrictions on imports, but requires importers, exporters, traders and others who put cannabis products on the German market to apply for a license under the Federal Narcotics Act (Betäubungsmittelgesetz), (“BtMG”). In other words, any person who wishes to cultivate, produce or trade in narcotic drugs, or without engaging in their trade, to import, export, supply, sell, otherwise place them on the market, or acquire narcotic drugs, requires a license issued by the Federal Opium Authority (Bundesopiumstelle). Permissions under such a license may be restricted, without limitation, in relation to:

(a) the kind of narcotic drugs and of the trade in narcotic drugs;

(b) the annual quantity and the stock of narcotic drugs; and

In addition to a narcotics trade license, each import or export of narcotic drugs with a starting or end point in Germany must be authorized by BfArM. Importers and exporters, in each case, are required to submit an application for import/export authorization to BfArM. Applications for import permits must include the specifics of the contemplated shipment. Import permits are issued on a shipment-specific basis and generally have a three-month validity period. The import permit, once granted, will specify, among other details, for each shipment:

(a) the importer;

(b) the exporter;

(i) the central pharmaceutical number (if available);

(ii) the number of package units;

(iii) the number of dosage units; and

(iv) the name of the narcotic and concentration of active substances.

Medicinal cannabis imported under the Narcotics Convention, subject to a license under the BtMG, may be placed on the market only by a registered pharmacist and only in the form of dried cannabis inflorescences or cannabis extracts in a quantity that is approved for individual prescription. BfArM has approved three cannabinoid profiles for medicinal use in Germany. Besides dried cannabis flowers and cannabis extracts, the ready-to-use drugs Sativex® and Canemes® as well as the drug prepared on prescription dronabinol are permitted in the German market.

Medical cannabis falls under the definition of a medicinal product, as defined in the German Medicines Act, and requires a Wholesale Trading License if a commercial entity engages in wholesale of medical cannabis. Wholesale trading is defined broadly and includes any professional or commercial activity involving the procuring, storing,

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supplying or exporting of medicinal products, with the exception of the dispensing of medicinal products to consumers.

Government Regulations – Clinical Trials

In order to conduct clinical testing on humans in Israel, special authorization must first be obtained from the ethics committee and general manager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human Subjects), 5740-1980, as amended from time to time, and other applicable legislation. These regulations also require authorization from the MOH, except in certain circumstances, and in the case of genetic trials, special fertility trials and similar trials, an additional authorization of the overseeing institutional ethics committee. The institutional ethics committee must, among other things, evaluate the anticipated benefits that are likely to be derived from the project to determine if it justifies the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists for the rights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical testing. Since, at this time, we expect all of the clinical trials involving our pharmaceutical-grade cannabis products to be conducted in Israel, we and our partners will be required to obtain authorizations from the ethics committee and general manager of each institution in which we and our partners intend to conduct our clinical trials, and in most cases, from the MOH.

Initial clinical trials (Phase 1 studies) assess how to safely administer and dose a drug with a small number of healthy volunteers. If those trials are successful, Phase 2 studies are conducted to explore the effectiveness of the drug for a particular medical indication over a range of doses and to determine the short-term side effects of such drug use. These studies typically involve a few hundred subjects. If Phase 2 studies are successful, pivotal Phase 3 studies are then designed to build on the information learned in the earlier studies, and to further study safety and assess the efficacy of the investigational drug for a particular medical indication in a defined patient population. Phase 3 studies can also provide additional safety data, including information regarding the long-term effects of the drug in certain patient groups and the efficacy of different doses of the drug. These later trials can sometimes involve the enrollment of several thousand subjects to provide the needed information about the investigational drug’s safety and efficacy.

The MOH has approved the use of pharmaceutical-grade cannabis as a treatment for certain symptoms and indications, subject to filing an application with the MOH and the IMCA by the patients and a subsequent receipt of approval. Clinical trials that study pharmaceutical-grade cannabis for these purposes do not require preclinical studies or Phase 1 trials as a condition for the approval of Phase 2 trials. However, we remain obligated under the MOH guidelines to notify the MOH if a study results in a Serious Adverse Event in connection with the use of the study drug. A “Serious Adverse Event” is defined as a reversible or an irreversible event for which any of the following is true: (i) caused death, life-threatening effects, persistent or significant disability or incapacity; (ii) caused severe or prolonged morbidity; required hospitalization or prolonged the duration of hospitalization; (iii) caused a congenital defect or harmed pregnancy as a result of treatment with the product during pregnancy; or (iv) other medically/clinically significant events, which may endanger a patient or require medical intervention to prevent the situations listed in (i) through (iii).

Legal Proceedings

From time to time we may be subject to legal proceedings and claims in the ordinary course of business.

We are currently a party to a number of lawsuits in Israel, summaries of all our ongoing material lawsuits are provided below.

Class Action - T.Z. 35676-08-19

In August 2019, a motion was filed for approval of a class action that was filed against 17 companies operating in the field of medical cannabis, including Intercure. In the motion, the court was asked to certify the class as “Any person to whom any of the respondents provided cannabis products whose concentrations of active substances were not accurately marked as customary in the pharmaceutical field, from December 1, 2015 until the date of approval of this claim”.

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The applicant's allege that the defendants did not accurately label the concentration of active ingredients in their products. The damages claimed are 685,740,000 NIS for the entire class, or 15,585 NIS per member of the class (with the class being comprised of 44,000 consumers).

The defendants’ have taken the position that the class should not be certified as the threshold conditions for certification were not met as a result of the lack of any reasonable possibility that the alleged claim will succeed at trial. A prehearing on the matter has been set for July 2021.

Supreme Court of Justice 2335/19

In March 2019, an organized group of patients filed a petition with the Israeli supreme court and against the MOH and the Agriculture department. The petition asks the Israeli supreme court to (1) require the MOH to immediately suspend the implementation of the new regulation that disproportionally harms medical cannabis patients; (2) order a declaration that the MOH’s implementation of the new regulation, as currently drafted, would constitute a violation of the constitutional rights of the medical cannabis patients; (3) require the MOH to amend the flaws of the new regulation, prior to their becoming effective; and (4) order the MOH to establish new regulations regarding labeling and the use of pesticides.

In October 2019, all the parties that were a part of the medical cannabis production chain, including Canndoc, were added as respondents and received notice of the decision regarding the petition that was filed against the MOH and the Agriculture department.

The decision has extended the validity of patient licenses until the earlier of either March 31, 2020 or 10 days after the date the MOH comes to a conclusion regarding the price control of medical cannabis products.

In December 2020, the Court issued a decision, pursuant to which, the MOH is required to file supplemental submissions regarding the prices of medical cannabis products. These submissions are due by March 24, 2021. The impact of these proceedings may be materially adverse to Intercure’s operations should any of our licenses be amended or revoked.

Class Action 56441-05-20 (Tel Aviv District) Shenhav Industries Ltd. V. Intercure Ltd.

In May 2020, an application to approve a class action lawsuit against Intercure and its officers was filed. The main claim of the applicant was that Intercure violated its obligations regarding reports to the public, in according with the Israeli securities law and its regulations, regarding material events and developments with material implications for the value of its holding in Regina Pharma Ltd. The plaintiff alleges that the non-disclosure of the information amounts to a breach of the duty of disclosure by Intercure and its officers. According to the application, the shareholders of Intercure were misled and the suffered personal damages in the amount 88 million NIS.

Intercure’s position is that the disclosure made about Regina Pharma Ltd. did not breach Israeli securities laws for a number of reasons, including the fact that it was made when the company had sufficient information to ensure that the disclosure is appropriate. In January 2021, a preliminary hearing was held in which the court proposed the parties turn to an expert who would examine the issue of the claim to damages. The proceeding is ongoing.

Procedure No.: Civil lawsuit (Shalom Kafar-saba) 18673-12-20, Natalie Buskila v. Canndoc.

A lawsuit was filed on December 8, 2020 against Canndoc, claiming damages of 2,271,310 NIS. The plaintiff claims that Canndoc fundamentally breached a cooperation agreement between the parties. The allegations are that Canndoc was to purchase from the plaintiff goods weighing 386.5kg, the value of which according to the agreement was approximately 2,241,700 NIS (including VAT). The plaintiff also requested additional remedies for alleged breach of Canndoc's contractual obligation to provide the plaintiff with seedlings. Canndoc’s position is that the agreement was breached by the plaintiff who did not comply with Canndoc's guidelines, as required by the agreement, and therefore the product was deficient.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF INTERCURE

The following sets forth a summary of Intercure’s selected historical consolidated financial data as of the dates and for the periods indicated below. The amounts are presented in thousands of NIS. The information herein should be read in conjunction with the Intercure Financial Statements included in Appendix B of this prospectus. The historical financial information for the years ended December 30, 2019 and 2018 is summarized below and is derived from the Intercure Financial Statements that were prepared in accordance with IFRS and the provisions of Israeli Securities Regulations – see “Risk Factors”. Historical financial and operating information may not be indicative of future performance, and certain financial information presented below includes non-IFRS financial measures that Intercure believes to be important in evaluating the underlying operating performance of the business and to better compare results from operations on a relative basis from period to period. See “Non-IFRS Measures”, “Caution Regarding Forward-Looking Statements”, and” Management’s Discussion and Analysis of Intercure”.

For the 9-month period ended on September 30 Historical 2020(1) 2019(2) 2019(2) 2018(2) 2017 Revenues ...... 37,941 7,098 8,926 - - Gross profit before effect of fair value ...... 17,085 1,028 1,470 - - Gross profit after effect of fair value ...... 18,359 522 1,479 - - Research and development expenses ...... 1,234 1,258 1,710 - - General and administrative expenses ...... 5,793 7,877 12,073 1,981 1,168 Marketing and selling expenses ...... 5,376 2,485 2,693 - - Impairment losses and (gains) on financial assets through profit or loss ...... 39,845 (31,344) (20,996) 487 3,033 Share-based payment expenses ...... 8,333 65,877 68,036 7,829 7 Other expenses (income), net ...... 3,632 (58,930) (58,962) 324 (26) Share of results of associates ...... - 340 - 1 - Consolidated operating profit (loss) ...... (45,854) 12,959 (3,451) (10,622) (4,182) Comprehensive income (loss) ...... (46,268) 10,749 (5,893) (12,798) (5,521)

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For the 9-month period ended on September 30 Historical 2020(1) 2019(2) 2019(2) 2018(2) 2017 Interest / Financing cost ...... 137 2,883 3,151 2,176 1,339 Tax expenses (income) ...... 277 (673) (673) - - Depreciation and amortization ...... 2,182 329 829 10 4 EBITDA ...... (43,672) 13,288 (2,586) (10,612) (4,178) Non-controlling interest(4) ...... (185) - - - - Share-based payment expenses ...... 8,333 65,877 68,036 7,829 7 Other expense (income), net ...... 3,632 (58,930) (58,962) 324 (26) Impairment losses and (gains) on financial assets through profit or loss ...... 39,845 (31,344) (20,996) 487 3,033 Fair value adjustment to inventory ...... (1,274) 506 (9) - - Adjusted EBITDA ...... 6,679 (10,603) (14,517) (1,972) (1,164) Basic earnings (loss) per share ...... (0.42) 0.11 (0.06) (0.16) (0.07) Diluted earnings per share ...... (0.42) 0.09 (0.06) (0.16) (0.07) ______(1) Cannolam operations consolidated for the first time on July 1st, 2020. (2) Canndoc operations consolidated for the first time on February 2019. (3) Prior to Canndoc's and Cannolam’s consolidation of financial results. (4) Refers to the non-controlling interest of 49.9% with respect to Cannolam.

FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE LP

The LP’s Financial Statements and the LP’s management’s discussion and analysis of its financial condition and results of operations (the “MD&A”) are included in Appendix A of this prospectus. The MD&A is designed to assist readers of the LP Financial Statements understand the LP’s operations and business environment. The MD&A should be read in conjunction with the LP’s Financial Statements. Additional information related to the LP is available on - 71 -

SEDAR at www.sedar.com and such information is not incorporated by reference in this prospectus unless otherwise noted herein.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF INTERCURE

This “Management’s Discussion and Analysis” should be read in conjunction with the Intercure Financial Statements, which are included elsewhere in this prospectus. The financial information contained herein is taken or derived from the Intercure Financial Statements, unless otherwise indicated. The following discussion contains forward- looking statements. Actual results could differ materially from those that are discussed in these forward- looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus, particularly under “Risk Factors” and “Caution Regarding Forward Looking Statements”. In this MD&A, references to the “Intercure,” and “we,” “us,” and “our” are intended to refer to the business and operations of Intercure and its subsidiaries prior to the Closing, unless the context clearly indicates otherwise. The results of Canndoc are consolidated as of February 2019 and those of Cannolam as of July 2020.

Amounts are presented in thousands of NIS, except for data otherwise noted that may be presented in USD. The USD/NIS exchange rate used, unless noted otherwise, was 3.18 NIS for 1 USD.

Overview

We, through our wholly owned (100%) subsidiary Canndoc, are a pioneer in the medical cannabis industry. Throughout our 13 years of operating experience, we have developed advanced production systems, secured long- term exclusive strategic agreements with other global leaders in medical cannabis, compiled a database cataloguing the treatment of thousands of patients, sponsored an extensive set of clinical trials, established sales of our products in all cannabis-licensed pharmacies throughout Israel, and secured our position as thought leaders in the global cannabis industry.

Since our initial entry into Israel’s medical cannabis industry, we have provided our products directly to thousands of patients with a focus on quality, advanced service, and the accumulation of genetic and clinical knowledge. Following the acquisition of Canndoc in early 2019, we implemented a growth strategy to establish our leadership in Israel and the global medical cannabis industry, consistent with a growing trend toward pharmaceutical quality standards.

Since the beginning of 2020, we have focused on accelerating and growing our commercial activity in major markets around the world. As part of this strategy, we have entered into exclusive collaborations with some of the largest international cannabis companies in the world including Tilray, Organigram, Aphria and Charlotte's Web. These strategic agreements serve to advance our capabilities and emphasize our focus on delivering premium quality and branding to Israel and other target markets. We have expanded cooperation agreements for the production, marketing and distribution of our products in countries with supportive regulations such as Germany, the United Kingdom, Canada and more, all of which are pending the permanent approval of commercial cannabis exports from Israel.

Cannolam operates pharmacies in Tel Aviv, Haifa28 and Ashdod29, with other branches currently under construction in Jerusalem, Herzliya30 and Be’er Sheva and intends to expand with additional locations in 2021. In addition, Cannolam has exclusive rights to leading international cannabis brands such as Cookies and Mr. Nice.

In 2019, we invested significant resources to upgrade and expand its production systems and establish a global network of advanced production facilities that meet the quality requirements and strict standards across target markets. In

28 Note: Our partner, the owner of an operating pharmacy with a license to sell medical cannabis, has entered into an agreement with Cannolam, pursuant to which, we are entitled to 90% of the net profits generated in the pharmacy from the sale of medical cannabis, in consideration for consulting services and the licensing of the “Givol” trademark to the pharmacy. 29 Note: This pharmacy was acquired in January 2021. 30 Note: This pharmacy was acquired in January 2021 and is operational, but its ability to dispense medical cannabis is pending the approval of IMCA and other required regulatory approvals. - 72 -

December 2020, the Company was granted a permit by the MOH, as part of a cannabis-export pilot program,31 for the commercial export of its products to Tilray as part of a strategic partnership between the companies. The export permit was obtained after the Company secured an import permit from the Portuguese authorities, demonstrating its products complied with the requirements of European regulation in Portugal and the EU-GMP standard. The export request is a continuation of the developments that have taken place in Israel in recent months and the company's preparations for exporting its products.32

Our production system allows for a maximum production capacity of over 100 tons of high quality medical cannabis. This system enables us to be flexible and efficient, and to meet the standards required to execute commercial exports from Israel and to serve growing demand in Israel and around the world.

We believe in the uncompromising quality of our products and we are leading the trend towards the pharmaceutical standard in the medical cannabis industry, both through a high quality, advanced production system and through extensive research and development with 9 clinical studies approved by the MOH and one active phase 3 clinical trial. We have acquired a unique knowledge throughout our 13 years of experience operating in the cultivation, growth and genetics of cannabis strains. Combined with our analyses of patient use and experience data, we are uniquely positioned to enter into research collaboration agreements with leading organizations and companies. In addition, we have invested in a production system that adheres to the strictest regulatory and quality standards. In doing so, we achieve the highest standard of product quality for our patients and for commercial research collaborations. We believe this will enable us to enter into future partnerships and agreements with pharmaceutical companies.

We, through our wholly-owned subsidiary, Canndoc, and our 50.1% interest in Cannolam, operate primarily in the cannabis sector. In addition, we, as a result of our operations prior to its acquisition of Canndoc, have financial assets in the biomed sector that were made for investments purposes and do not represent a material focus of our current business. Our only reporting segment as of the date of this prospectus is the medical cannabis sector which generates 100% of our revenue.

Key Q3 2020 Financial Highlights

For Intercure (on a consolidated basis):

• Positive cash flow from operating activities for the three months ended September 30, 2020 of ~ 6.3 million NIS

• Cash and cash equivalents of ~48 million NIS compared to ~35 million NIS in Q3 2019, primarily due to a private placement and net cash provided by operating activities

For the cannabis operations specifically:

• Record revenue of ~38 million NIS (for the nine months ended September 30, 2020) compared to ~7 million NIS for the same period in 2019

• Record quarterly revenue of ~22 million NIS (for the three months ended September 30, 2020), which was eight times greater than Q3 of 2019 (~2.6 million NIS) and more than double the previous quarter (Q2 2020), primarily due to the initial consolidation of Cannolam’s results and the growing medical cannabis market, increasing the demand for our products

• Seventh consecutive quarter of gross profit growth, which was greater than 50% as a percentage of our revenue in Q3 2020

31 Note: during the fourth quarter of 2020, the Israeli government, as part of a pilot project to issue export permits for licensed producers, granted us a temporary export permit. The pilot program (as well as our temporary export permit) was set to expire on December 31, 2020, but was subsequently extended to March 2021. 32 Note: We received an export license in the fourth quarter of 2020, which was subsequently extended to March 2021. - 73 -

• Operating profit of ~6.1 million NIS (for the three months ended September 30, 2020) compared to ~(4.4) million NIS in Q3 2019, primarily due to revenue growth (as a result of an increase in market share), increase in gross profit margin, while keeping operating expenses relatively stable

• Adjusted EBITDA of ~7 million NIS (for the three months ended September 30, 2020) compared to ~(6) million NIS in Q3 2019 primarily due to revenue growth (as a result of an increase in market share), increase in gross profit margin, while keeping operating expenses relatively stable

Results of Operations for nine and three months ended on September 30, 2020 Compared with 2019

Financial data is expressed in thousands of NIS. The following table summarizes our historical consolidated statements of comprehensive income:

For the 9-month period For the 3-month period ended on September 30 ended on September 30 2020(1) 2019(2) 2020(1) 2019(2) Revenues ...... 37,941 7,098 22,497 2,598 Gross profit before effect of fair value ...... 17,085 1,028 10,755 (1,063) Gross profit after effect of fair value ...... 18,359 522 11,255 138 Research and development expenses ...... 1,234 1,258 448 993 General and administrative expenses...... 5,793 7,877 2,568 3,608 Marketing and selling expenses ...... 5,376 2,485 2,492 582 Impairment losses and (gains) on financial assets through profit or loss...... 39,845 (31,344) 541 58 Share-based payment expenses ...... 8,333 65,877 2,324 9,351 Other expenses (income), net ...... 3,632 (58,930) 505 (24) Share of results of associates ...... - 340 - - Consolidated operating profit (loss) ...... (45,854) 12,959 2,377 (14,430) Comprehensive income (loss) ...... (46,268) 10,749 1,919 (15,508) Interest / Financing cost ...... 137 2,883 181 1,079 Tax expenses (income) ...... 277 (673) 277 (1) Depreciation and amortization...... 2,182 329 1,379 163 EBITDA ...... (43,672) 13,288 3,756 (14,267) Non-controlling interest(3) ...... (185) - (185) - Share-based payment expenses ...... 8,333 65,877 2,324 9,351 Other expenses (income), net ...... 3,632 (58,930) 505 (24) Impairment losses and (gains) on financial assets through profit and loss ...... 39,845 (31,344) 541 58 Fair value adjustment to inventory ...... (1,274) 506 (500) (1,201) Adjusted EBITDA ...... 6,679 (10,603) 6,441 (6,083) Basic earnings (loss) per share ...... (0.42) 0.11 0.02 (0.13) Diluted earnings per share ...... (0.42) 0.09 0.01 (0.13) ______(1) Cannolam operations consolidated for the first time on July 1st, 2020. (2) Canndoc operations consolidated for the first time on February 2019. (3) Refers to the non-controlling interest of 49.9% with respect to Cannolam. - 74 -

Revenues – Revenue for the third quarter of 2020 was eight times greater compared to the corresponding period last year, and twice as much compared to the second quarter of 2020. The growth was primarily derived from (a) the initial consolidation of Cannolam’s results (which added approximately 3.95 million NIS); and (b) the growing medical cannabis market, increasing the demand for our products. During the period, Canndoc launched the Canndoc Indoor brand as part of its arrangement with Organigram which increased demand for our products. The growth during the period is in line with our strategy to increase our market share within the Israeli medical cannabis market.

Gross profit after effect of fair value - Continued improvement trend of gross profitability to a 50% level in the quarter, versus 5% in the corresponding period. The New Regulation (that become effective as of April 2019) changed the price model of the market and transformed it from a fix fee market to a free pricing market, thus allowing manufacturers like us to price the products. Under the fix free model there was a maximum price of 370 NIS per patient, regardless the amount purchased, and the average consumption per patient in Israel is 33 grams per month. Under the New Regulation, the fix price model was replaced by a free pricing market. As a result, we were able to price our products under the New Regulations higher due to our high quality products and our well-known brands. Prices went from 370 NIS per patient regardless the quantity consumed to a price of 260 NIS per product (10 gram per product).

Adjusted EBITDA - Significant improvement, an increase to 26% in the quarter and 16% cumulatively in the nine months versus loss in the corresponding periods primarily due to revenue growth (as a result of an increase in market share), increase in gross profit margin, while keeping operating expenses relatively stable.

Results of Operations for 2019 Compared with 2018

Financial data is expressed in thousands of NIS. The following table summarizes our historical consolidated statements of comprehensive income:

For the year ended on For the year ended on December 31, 2019(1)(2) December 31, 2018(3) Revenues ...... 8,926 - Gross profit before effect of fair value ...... 1,470 - Gross profit after effect of fair value ...... 1,479 - Research and development expenses ...... 1,710 - General and administrative expenses...... 12,073 1,981 Marketing and selling expenses ...... 2,693 - Impairment losses and (gains) on financial assets through (20,996) 487 profit or loss...... Share-based payment expenses ...... 68,036 7,829 Other expenses (income), net ...... (58,962) 324 Share of results of associates ...... 340 1 Consolidated operating profit (loss) ...... (3,415) (10,622) Comprehensive income (loss) ...... (5,893) (12,798) Interest / Financing cost ...... 3,151 2,176 Tax expenses (income) ...... (673) - Depreciation and amortization...... 829 10 EBITDA ...... (2,586) (10,612) Non-controlling interest ...... - - Share-based payment expenses ...... 68,036 7,829 Other expenses (income), net ...... (58,962) 324

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Impairment losses and (gains) on financial assets through (20,996) 487 profit or loss...... Fair value adjustment to inventory ...... (9) - Adjusted EBITDA ...... (14,517) (1,972) Basic earnings (loss) per share ...... (0.06) (0.16) Diluted earnings per share ...... (0.06) (0.16) ______(1) Canndoc operations consolidated for the first time on February 2019. (2) Prior to Cannolam’s consolidation of financial results (3) Prior to Canndoc's and Cannolam’s consolidation of financial results

Revenues – Substantial growth due to Canndoc’s income was consolidated with that of Intercure for the first time in February 2019. In addition to that, the New Regulations came into effect in April 2019. As mentioned above, the New Regulations led to significant change in our financial results given the changes to the pricing model. This is further explained in the Canndoc Annual Financial Statements.

Gross profit after effect of fair value - Substantial growth due to Canndoc’s income was consolidated with that of Intercure for the first time in February 2019. While the New Regulation led to a moderate increase in the cost of sales, the relationships between the cost and revenue weren't liner and the revenue was growing significantly faster than the costs. This is further explained in the Canndoc Annual Financial Statements.

General and Administrative – The material increase in expenses was primarily due to the consolidation of Canndoc’s expenses with those of Intercure for the first time in February 2018 and the overall increased activity in 2019.

Other revenue (expenses) – The increase was primarily due to the recognition of a profit in the amount of approximately 58.8 million NIS as a result of the fair value measurement of Intercure’s equity holdings (at a rate of 38%) in Canndoc., which holdings were held before the business combination.

Results of Operations for 2018 Compared with 2017

Financial data is expressed in thousands of NIS. The following table summarizes our historical consolidated statements of comprehensive income:

For the year ended on For the year ended on December 31, 2018 December 31, 2017 Revenues ...... - - Gross profit before effect of fair value ...... - - Gross profit after effect of fair value ...... - - Research and development expenses ...... - - General and administrative expenses...... 1,981 1,168 Marketing and selling expenses ...... - - Impairment losses and (gains) on financial assets through 487 3,033 profit or loss...... Share-based payment expenses ...... 7,829 7 Other expenses (income), net ...... 324 (26) Share of results of associates ...... 1 - Consolidated operating profit (loss) ...... (10,622) (4,182) Comprehensive income (loss) ...... (12,798) (5,521)

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Interest / Financing cost ...... 2,176 1,339 Tax expenses (income) ...... - - Depreciation and amortization...... 10 4 EBITDA ...... (10,612) (4,178) Non-controlling interest ...... - - Share-based payment expenses ...... 7,829 7 Other expenses (income), net ...... 324 (26) Impairment losses and (gains) on financial assets through 487 3,033 profit or loss...... Fair value adjustment to inventory ...... - - Adjusted EBITDA ...... (1,972) (1,164) Basic earnings (loss) per share ...... (0.16) (0.07) Diluted earnings per share ...... (0.16) (0.07)

Revenues – In both 2017 and 2018, our operations were focused on investing in Biomed companies. As a result, we held minor shares in Reganare and Novellus which were classified as investments in assets measured at fair value through profit or loss. At the end of 2018, Intercure entered into an agreement to purchase 38% of Canndoc’s issued and outstanding shares. As a result, during 2018 and 2017 there are no revenues recognized and no cost of sales.

General and Administrative – The primary reason for the increase in 2018 compared to 2017 was as a result of the professional service fees incurred as a result of the purchase of 38% of Canndoc's issued and outstanding shares.

Other revenue (expenses) – The primary reason for the increase in 2018 compared to 2017 was as a result of the professional service fees incurred as a result of the purchase of 38% of Canndoc's issued and outstanding shares.

Total Assets and Liabilities

As of September 30th As of December 31st

2020 2019 2019 2018 Total current assets ...... 80,305 47,036 42,208 4,958 Total non-current assets ...... 240,547 243,485 240,025 30,962 Current Liabilities ...... 35,167 18,225 22,633 16,258 Non-current Liabilities ...... 4,183 1,655 3,399 --- Total Current assets

Q3 2020 compared to Q3 2019

The increase was primarily due to an increase in Intercure’s activity (trade receivables, inventories and biologic assets) and a private placement of Intercure Shares to Alexander Rabinovich, our controlling shareholder and certain institutional investors of ~38 million NIS.

Fiscal 2019 compared to Fiscal 2018

The increase was primarily due to (1) a private placement of Intercure Shares of ~62 million NIS to four private investors, including Mr. Alexander Rabinoivch, Intercure’s controlling shareholder, director and CEO, which was completed in February 2019; and (2) consolidation of Canndoc’s assets to those of Intercure in February 2019.

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Total non-current assets

Q3 2020 compared to Q3 2019

The increase was primarily due to the consolidation of Cannolam’s non-current assets to those of Intercure in July 2020 (goodwill of approximately 22 million NIS) and capital investments in the Southern Kibbutz and Northern Kibbutz.

Fiscal 2019 compared to Fiscal 2018

The increase was primarily due to consolidation of Canndoc’s non-current assets to those of Intercure in February 2019 due to (goodwill of ~168 million NIS and plant, property, and equipment of ~32 million NIS).

Current Liabilities

Q3 2020 compared to Q3 2019

The increase was primarily due to an increase in the operations of Canndoc, partially as a result of the new IMCA regulations that became effective as of Q2 2019.

Fiscal 2019 compared to Fiscal 2018

The increase was primarily due to consolidation of Canndoc’s in February 2019.

Non-Current Liabilities

Q3 2020 compared to Q3 2019

The increase was primarily due to Intercure applying IFRS 16 to two additional lease agreements.

Fiscal 2019 compared to Fiscal 2018

The increase is due to an adopting a new IFRS Standards- IFRS 16 Leases in 2019.

Cash Flow

Intercure’s approach to liquidity is to always have sufficient liquidity to meet its liabilities as they come due. This is achieved by continuously monitoring cash flows and reviewing actual operating expenditures and revenue against budget.

For nine For nine For three For three months months months months Cash Flow ended on ended on ended on ended on September September September September 30, 2020(1) 30, 2019(2) 30, 2020(1) 30, 2019(2) Net cash provided by (used in) operating activities ... (1,579) (10,181) 6,325 (6,529) Net cash provided by financing activities ...... 38,272 63,726 27,282 416 Net cash provided by (used in) investing activities ...... (16,397) (20,284) 5,608 (9,194) Change in cash during the period ...... 20,296 33,261 39,215 (15,307) Exchange differences in respect of cash and cash 166 (1,204) (18) (310) equivalent balances ...... Cash and cash equivalents, beginning of year ...... 27,338 3,416 8,603 51,090 Cash and cash equivalents, end of year ...... 47,800 35,473 47,800 35,473

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______(1) Cannolam operations consolidated for the first time on July 1st, 2020. (2) Canndoc operations consolidated for the first time on February 2019.

Net cash flow used in operating activities – The changes in both periods were primarily due to a significant increase in Intercure’s inventory turnover and operations.

Net cash provided by financing activities – The changes in both periods were primarily due to the private placement of Intercure Shares that was completed in August 2020 in the amount of 38.1 million NIS.

Net cash used in investing activities - The changes for the nine month period ended September 30, 2020 were primarily due continued investment in fixed assets by expanding the production system (investments in the Southern Kibbutz).

Cash Flow For the year ended on For the year ended December 31, 2019(1) on December 31, 2018(2) Net cash used in operating activities ...... (11,569) (1,486) Net cash provided by financing activities ...... 63,234 10,614 Net cash used in investing activities ...... (26,087) (7,955) Change in cash during the period ...... 25,578 1,173 Exchange differences in respect of cash and cash (1,656) 13 equivalent balances ...... Cash and cash equivalents, beginning of year ...... 3,416 2,230 Cash and cash equivalents, end of year ...... 27,338 3,416 ______(1) Canndoc operations consolidated for the first time on February 2019. (2) Prior to Canndoc's operations consolidation.

Net cash flow used in operating activities – The increase in 2019 relative to 2018 was primarily due to the consolidation of Canndoc’s results with those of Intercure as a result of Canndoc’s acquisition by Intercure.

Net cash provided by financing activities – The increase in 2019 relative to 2018 was primarily due to a private placement that was completed in February 2019 in the amount of ~62 million NIS.

Net cash used in investing activities – The decrease in 2019 relative to 2018 was primarily as a result of the continued investment in fixed assets by expanding the production system (including investments in the Southern Kibbutz).

Cash Flow For the year ended on For the year ended December 31, 2018(1) on December 31, 2017(1) Net cash used in operating activities ...... (1,486) (966) Net cash provided by financing activities ...... 10,614 3,004 Net cash used in investing activities ...... (7,955) (2,373) Change in cash during the period ...... 1,173 (335) Exchange differences in respect of cash and cash 13 (96) equivalent balances ...... Cash and cash equivalents, beginning of year ...... 2,230 2,661 Cash and cash equivalents, end of year ...... 3,416 2,230

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______(1) Prior to Canndoc's operations consolidation. Net cash flow used in operating activities – The increase in 2018 relative to 2017 was primarily due to an increase in general and administrative expenses.

Net cash provided by financing activities – The increase in 2018 relative to 2017 was primarily due to a loan provided by Mr. Rabinovich, Intercure’s controlling shareholder, as part of the acquisition of Canndoc.

Net cash used in investing activities – The increase in 2018 relative to 2017 was primarily due to the first investment in Canndoc (whereby Intercure acquired 38% of its issued and outstanding shares) in September 2018 (prior to the full acquisition in February 2019).

Summary of Quarterly Results

Q3-2020 Q2-2020 Q1-2020 Q4-2019 Q3-2019 Q2-2019 Q1-2019 Revenue ...... 22,497 11,185 4,259 1,828 2,598 2,777 1,723 Net income ...... 1,919 (978) (47,209) (16,642) (15,508) (11,540) 37,797 EBITDA ...... 3,756 (434) (46,994) (15,874) (14,267) (10,199) 37,754 Adjusted EBITDA .... 6,441 1,582 (1,344) (3,914) (6,083) (2,262) (2,258) Basic earnings (loss) per share ...... 0.02 (0.01) (0.43) (0.15) (0.13) (0.11) 0.4 Diluted earnings per share ...... 0.01 (0.01) (0.43) (0.15) (0.13) (0.11) 0.36

Use of Proceeds

All proceeds obtained by Intercure from the private placements described were used to grow its operations and expand its cultivation sites.

Liquidity and Capital Resources

Intercure has been generating profits and has experienced positive cash flows, which are the expected to be the primary sources to fund its future operations. In addition, Intercure has cash reserves as a result of the completion of the noted private placements. Lastly, as a public company, Intercure may access the public and/or private markets to finance any additional needs it may have, including through the issuance of debt or equity securities.

Intercure does not expect to require any additional funding in the future as it projects a positive cash flow from operations. Future capital commitments for 2021 are a modest US$1.4 million.

Transactions with Related Parties

Loans from controlling shareholder

Line of Credit

On December 23, 2015, Intercure entered into an agreement with Mr. Alexander Rabinovich, its controlling shareholder director and CEO, pursuant to which Mr. Rabinovich undertook to provide, independently or through a company under his control, a total amount of US$1.25 million, as a loan or guarantee (the “Line of Credit”).

Intercure will be obligated to repay the Line of Credit on a date which will be agreed upon between the parties. The foregoing Line Of Credit was entered into under eligible transaction conditions - i.e., the amount of the loan / guarantee will not accrue interest.

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Canndoc

On June 24, 2018, Intercure reported an agreement for the acquisition of Canndoc. The acquisition was partially financed by a loan provided by Mr. Alexander Rabinovich, its controlling shareholder, director and CEO. The loan amount was 9 million NIS (the “Canndoc Loan”).

The cash component of the Loan bears annual interest that is calculated annually, at a rate equal to the minimum interest rate prescribed in section 3J of the Income Tax Ordinance (2.61% in 2018). The Canndoc Loan principal, plus interest, will be paid within one year after the date when the loan was made.

The Line of Credit and the Canndoc Loan maturity dates were extend several times as approved by the Audit Committee and Board, with the last extension extending both to October 2020. In October 2020, both the Line of Credit and the Canndoc Loan were fully repaid, in the amount of approximately 13.8 million NIS.

Loans from related party

Following Canndoc’s acquisition and the appointment of Mr. Avner Barak as a director of Intercure, a previous loan from Mr. Avner Barak to Canndoc in the amount of 0.72 million NIS was assumed by Intercure. The loan principal bears annual interest, calculated annually, according to the minimum interest rate prescribed in section 3J of the Income Tax Ordinance (2.61% in 2018). The loan will be repaid in equal monthly installments (principal and interest) in the amount of 15,000 NIS per installment. The balance of the loan as of September 30, 2020 was approximately 455,000 NIS.

Sublease agreement with companies related to a related party

Canndoc subleases part of its headquarter offices to three related companies to Intercure’s controlling shareholder, Mr. Alexander Rabinovich. The aggregate revenue generated by Intercure from those lease is approximately 16,000 NIS per month. The subleases are back-to-back in terms of Canndoc’s lease with the landlord relative to its leases with Mr. Rabinovich.

Critical Accounting Estimates

Please refer to note 3 of the Intercure Annual Financial Statements.

Outstanding Share Date

Intercure’s current outstanding shares capital can be summarized as follows:

Type Shares Options / Warrants Intercure Shares 120,088,900 Options (A) 8,570,000 Options (B) 8,113,788 ESOP (A) 5,338,184 Total 120,088,900 22,021,972 Options (A2) 1,000,000 ESOP (B) 4,303,356 Total 120,088,900 27,325,328 ______(1) Options (A) were issued to Alexander Rabinovich in September, 2018 and expire in three years from the date of issuance with an exercise price of 0.38 NIS per Intercure Share.

(2) Options (B) were issued to certain investors in July, 2020 and expire in August 2023 with an exercise price of 4.33 NIS per Intercure Share. - 81 -

(3) ESOP (A) were issued to our directors between September 2018 to January 2020 and expire in ten years from the date of issuance with an exercise price of 3.5 NIS per Intercure Share.

(4) Options (A2) are a conditional issuance to Alexander Rabinovich in September 2018, are conditional upon (a) a direct or indirect sale by Intercure to a third party outside Israel of all or substantially all of Intercure’s cannabis business at the time of sale directly; (b) a direct or indirect initial public offering on any non-Israeli stock exchange, of all or substantially all of Intercure’s cannabis business at the time of the offering; or (c) a direct or indirect merger of all or substantially all of Intercure’s cannabis business at the time of the merger with an entity whose securities are listed on a foreign stock exchange. The options will expire in September 2021 and have an exercise price of 0.38 NIS per Intercure Share. It is expected that the Qualifying Transaction will meet the vesting requirements of these options.

(5) ESOP (B) were issued to certain employees in February 2021 and expire in four years from the date of issuance with an exercise price of 4.13 NIS per Intercure Share.

Financial Instruments and Other Instruments

We do not have any financial instruments other than normal course accounts receivable and payables associated with our business activities.

Risk and Uncertainties

We are subject to foreign exchange and liquidity risks.

Foreign Exchange Risk. Our reporting and functional currency is the NIS, but some portion of our operational expenses are in U.S. dollars, Canadian dollars and Euros. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect us and our operations could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.

Liquidity risk. We monitor forecasts of our liquidity reserve (comprising cash and cash equivalents available-for- sale financial assets and short-term deposits). We generally carry this out based on our expected cash flows in accordance with practice and limits set by our management. We are in the process of expanding our operations and the expenses associated therewith and we are therefore exposed to liquidity risk.

Subsequent Events

1. On December 10th, 2020 we entered into a collaboration with Charlotte's Web, under which we will be the sole partner of Charlotte's Web in Israel, and through which its products will be marketed in Israel under a joint brand for the Israeli market, subject to certain conditions, including certain regulatory matters within central European countries and England. The arrangement is subject to the receipt of the required regulatory agreements. We will be Charlotte's Web exclusive partner is Israel and its products will be marketed in Israel under a joint brand for the Israeli market, subject to conditions, including regularization to central European countries and England. The two companies will also explore opportunities such as clinical trials, product development and manufacturing in Israel. The Charlotte’s Web Agreement is for a minimum cumulative period of six (6) years from the date of removal of the CBD component from the Israeli Dangerous Drugs Ordinance.

2. On December 16th, 2020 we received a permit from the Ministry of Health for the commercial export of our products to Tilray as part of the strategic cooperation between the companies. The export permit was obtained after obtaining an import permit from the Portuguese authorities and compliance of our products with the requirements of European regulation in Portugal including the EU-GMP standard. The export request is a continuation of the developments that have taken place in Israel in recent months and the company's preparations for exporting its products.

3. On December 17th 2020, Intercure entered into a strategic agreement with Fotmer Corporation S.A. Fottmer is a corporation established in Uruguay, cultivating and producing medical cannabis at an internationally high level. We entered into an agreement with Fotmer, under which we will import from Fotmer approximately 3,000 kilograms of quality medical cannabis products, each year for a period of four years. Pursuant to the Fotmer Agreement, we have agreed to pay Fotmer an initial amount of US$650,000 as a down payment for - 82 -

the first shipment of medical cannabis products, which will be classified as a loan, bearing an annual interest rate of 5.51% and secured by Fotmer’s Canadian parent company, until the export and import permits for the first shipment of products are obtained. The Fotmer Agreement provides us with an exclusivity and related rights for seven-and-a-half (7.5) years, in which Fotmer will not be allowed, directly or indirectly to market, sell, distribute or supply material for the production of final products or final products branded under Tilray brand in Israel, not through us.

4. On December 27, 2020 we obtained a permanent license from the IMCA for Phase A of our Southern Kibbutz which includes 300,000 square feet of operational space with the capacity to produce up to 7,000 kilograms of pharmaceutical-grade cannabis per year.

5. On January 7, 2021, we, via Cannolam, completed the purchase of 2 pharmacies in Ashdod and Herzliya.

6. On February 9, 2021, the LP, Intercure, Intercure Sub, the General Partner and the Subversive Sponsor, as representative of the Unitholders (in such capacity, the “Representative”), entered into an amended and restated definitive agreement (the “Arrangement Agreement”), pursuant to which Intercure Sub will acquire all of the outstanding Limited Partnership Units (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for Intercure issuing Intercure Shares to Unitholders by way of a plan of arrangement.

THE QUALIFYING TRANSACTION

Overview

On February 9, 2021, the LP, Intercure, Intercure Sub, the General Partner and the Subversive Sponsor, as representative of the Unitholders (in such capacity, the “Representative”), entered into an amended and restated definitive agreement (the “Arrangement Agreement”), pursuant to which Intercure Sub will acquire all of the outstanding Limited Partnership Units (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for Intercure issuing Intercure Shares to Unitholders by way of a plan of arrangement. On Closing, the Intercure Shares will continue to be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on Nasdaq and the TSX. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not accepted the Qualifying Transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus, neither the LP nor Intercure have applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

Arrangement Agreement

On February 9, 2021, the LP and the General Partner entered into the Arrangement Agreement with Intercure, the Intercure Sub and the Representative. The following summary is qualified in its entirety by reference to the provisions of the Arrangement Agreement, which contains a complete statement of the applicable provisions. A copy of the Arrangement Agreement will be filed on SEDAR at www.sedar.com. Unitholders are advised to review the Arrangement Agreement for a complete description of the applicable provisions. Initially capitalized terms used in this section but not defined have the meanings set out in the Arrangement Agreement.

Pursuant to the terms of the Arrangement Agreement, Intercure Sub will acquire all of the outstanding Limited Partnership Units (that have not otherwise been redeemed pursuant to the Redemption Right) in exchange for Intercure Shares by way of a plan of arrangement under the laws of the Province of British Columbia, and Intercure will acquire all of the common shares of the General Partner.

Aggregate Consideration and Treatment of Securities

Subject to the terms and conditions set forth in the Arrangement Agreement, at the effective time of the Arrangement: (a) each Subversive Limited Partnership Unit shall convert into a number of Intercure Shares equal to the quotient of (i) US$10.00 divided by (ii) the Intercure Share Value (the “Exchange Ratio”); (b) the LP will become a wholly- - 83 -

owned subsidiary of Intercure Sub; and (c) Intercure will purchase the one hundred (100) outstanding common shares of the General Partner for US$100.00. “Fully Diluted Intercure Shares” means the number of Intercure Shares issued or deemed to be issued, as applicable, and outstanding as of immediately prior to the Closing assuming the exercise or conversion, as applicable, of all outstanding Designated Intercure Convertible Securities. “Designated Intercure Convertible Securities” means a total of 13,388,800 Intercure options designated as vested ESOP-A, 8,570,000 Intercure options designated as Options-A1, and 1,000,000 Intercure options designated as Options-A2. The Designated Intercure Convertible Securities do not include approximately 13,936,528 options to purchase Intercure Shares, with an average weighted exercise price of US$1.31, expiring between September 2023 and January 2030. “Intercure Share Value” means the quotient of (i) US$300,000,000 divided by (ii) the Fully Diluted Intercure Shares.

Representations and Warranties

Intercure made customary representations and warranties with respect to itself and each of its subsidiaries, including Intercure Sub, related to due incorporation and qualification, capitalization, and authorization to enter into the Arrangement Agreement, and also made customary representations and warranties with respect to its business, certain material contracts, ownership of its assets and intellectual property, accuracy of its financial statements and information contained in the Information Circular, the Prospectus, the U.S. Registration Statement and the U.S. Resale Registration Statement, certain employee and environmental matters, compliance with applicable laws and the lack of any claims, actions or proceedings against Intercure or any of its Subsidiaries. In addition, the Arrangement Agreement contains customary representations and warranties made by each of the LP and the General Partner to Intercure, including representations and warranties related to due formation and qualification, capitalization, authorization to enter into the Arrangement Agreement and carry out the LP’s and the General Partner’s obligations thereunder. The LP also represented that the Arrangement and the transactions contemplated under the Arrangement Agreement will qualify as the “qualifying transaction” pursuant to the NEO Exchange Listing Manual. The representations and warranties are subject to exceptions set forth in the disclosure schedules, and may be subject to certain qualifications, limitations and exceptions agreed to by the parties.

Except for customary fundamental representations which survive indefinitely, none of the representations and warranties made by parties will survive the Effective Time, and no indemnification for breaches may be sought against the parties for any breaches or inaccuracies after the Effective Time of the plan arrangement, except as otherwise set forth in the Indemnification Agreement.

Pre-Closing Covenants

The Arrangement Agreement contains pre-closing covenants made by each party. Each party agrees that as soon as reasonably practical after the date of the Arrangement Agreement, (i) Intercure shall duly call and convene a meeting of its shareholders for purposes of approving, among other things, (A) the Arrangement Agreement and the transactions contemplated therein (including the issuance of Intercure Shares as part of the Arrangement), (B) a reverse split of the Intercure Shares intended to adjust the Intercure Share Value to US$10.00 per Intercure Share (the “Intercure Share Combination”), (C) an increase in the registered share capital of Intercure, (D) the listing of the Intercure Shares on Nasdaq and the TSX and (E) the appointment of new directors to the board of directors of Intercure in accordance with the Arrangement Agreement, (ii) the LP will consummate the Private Placement, (iii) Intercure will submit to the IMCA an application for the approval to add Michael Auerbach to its board of directors, (iv) the parties will implement the Plan of Arrangement, (v) the TASE and the Israeli Securities Authority, as applicable, shall approve for trading on TASE the Intercure Shares to be issued to Unitholders in the Arrangement immediately prior to the approval for trading of the Intercure Shares on the TSX and all requirements for obtaining “dual listing” status for trading of the Intercure Shares on both the TSX and the TASE shall be complied with (vi) Intercure will take all steps to list the Intercure Shares under Section 12(b) of the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Registration Statement”), and to register for the resale of the Intercure Shares issued to investors in the Private Placement under the U.S. Securities Act of 1933, as amended (the “U.S. Resale Registration Statement”), (vii) Intercure will obtain approval for the listing of Intercure Shares for trading on Nasdaq, and (viii) the LP shall obtain approval for the listing of the Limited Partnership Units for trading on the TSX.

Prior to closing, the parties agree to notify each other of certain events that would constitute (i) a material change, (ii) a breach of representations or warranties or (iii) any material fact which arises and would have been required to be stated in the Arrangement Agreement had the fact arisen on or prior to the date thereof. Each party agrees not to solicit any offers to purchase their respective shares or assets, or any portion above 5% thereof, or initiate, enter into

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or encourage such a transaction or a similar transaction to the Arrangement with any third parties. Each party agrees to cooperate with the other party and to take all commercially reasonable efforts to consummate the Arrangement and the other matters set forth in the Arrangement Agreement, including in connection with obtaining regulatory approvals or effecting necessary registrations or other filings requested by governmental authorities, and causing its shareholders to vote in favor of the Arrangement and the other matters set forth in the Arrangement Agreement that require shareholder approval.

Prior to the closing, Intercure covenants to conduct its business in the usual and ordinary course and maintain and preserve its business organization, assets, employees and advantageous business relationships. Intercure is restricted from, among other things, issuing equity (other than limited option grants), incurring certain levels of indebtedness, and selling or leasing material assets. Intercure also covenants to allow the LP reasonable access to its assets, books and records.

Prior to the closing, the LP covenants to conduct its business in the usual and ordinary course and maintain and preserve its business organization, assets, employees and advantageous business relationships. The LP is restricted from, among other actions, redeeming, repurchasing or reacquiring any outstanding Limited Partnership Units except as described in the final long-form prospectus of the LP dated December 23, 2019, issuing additional equity or rights to acquire equity, incurring certain levels of indebtedness and entering into any transaction or material contract (except in the case of the transactions contemplated by the Arrangement Agreement).

Conditions to Closing

The obligations of the parties to complete the Arrangement pursuant to the Plan of Arrangement are subject to the following closing conditions (each of which may be waived by the party who the condition is in favour of): (a) the requisite shareholder approvals of Intercure shall have been obtained, (b) the Intercure Share Consolidation shall have occurred, (c) the conditional approval of the NEO shall have been obtained by the LP to enable the Arrangement to qualify as the Qualifying Transaction, (d) a final receipt for the Prospectus shall have been issued by or on behalf of the OSC, (e) the Interim Order and the Final Order shall have each been obtained on terms consistent with the Arrangement Agreement, (f) the U.S. Registration Statement shall have become effective under the Securities Exchange Act and the Intercure Shares shall have been approved for listing on the Nasdaq, (g) approval for listing and trading of Subversive Limited Partnership Units on the TSX shall have been obtained, (h) Intercure Shares shall have been approved for, and shall have begun trading on the TSX so as to enable the “dual listing” regime to apply to the Intercure Shares, (i) ISA and TASE approval for listing and trading of Intercure Shares on the TSX under the “dual listing” regime shall have been obtained, (j) there shall have been no action taken under any applicable law or by any governmental authority and there shall not be in force any order or decree restraining or enjoining the consummation of the Business Combination and (k) all corporate and regulatory approvals shall have been obtained.

Additionally, (a) the obligations of Intercure to effect the Arrangement are subject to (i) the performance by the LP and the General Partner in all material respects of their obligations, (ii) all representations and warranties of the LP and the General Partner being true and correct in all respects as of the Closing, except where the failure to be true and correct has not had a material adverse effect (except in the case of fundamental representations and warranties of the LP, which shall be true and correct in all material respects), (iii) the Private Placement shall have raised at least US$25,000,000 in gross proceeds at a price per unit not less than US$10 per unit to the LP, (iv) the total available cash in the Escrow Account net of anticipated payments in respect of redemption plus amounts funded or committed pursuant to the Private Placement, shall be at least US$55,000,000 and shall be unrestricted (subject to completion of a Qualifying Transaction) and the LP shall not have incurred any liabilities or obligations that are payable in cash in connection with the transactions contemplated by the Arrangement Agreement (including all transaction costs of the LP, and all reasonable legal and accounting fees of Intercure) in excess of US$15,000,000 (subject to certain adjustments), and (v) the boards of directors of the General Partner and the officers and governing documents of the LP and the General Partner shall have been replaced and/or amended, as applicable, as requested by Intercure, and (b) the obligations of the LP to effect the Arrangement are subject to (i) no material adverse effect with respect to Intercure or the Intercure Subsidiaries having occurred since September 30, 2020, (ii) the performance by Intercure in all material respects of its obligations, (iii) Intercure shall have obtained certain third-party consents as set forth on a schedule to the Arrangement Agreement, (iv) all representations and warranties by Intercure being true and correct in all respects as of the Effective Date, except where the failure to be true and correct has not had a material adverse effect, (except in the case of fundamental representations and warranties of Intercure, which shall be true and correct in all material respects), (v) the applicable parties shall have entered into the Indemnification Agreement, (vi) the LP

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shall have received Support and Lock-Up Agreements duly executed by all Intercure directors and officers, (vii) all Intercure Shares required to be issued pursuant to and in accordance with the Arrangement Agreement and the Plan of Arrangement shall have been issued in accordance with the terms thereof, and (viii) the director and officer appointments of Intercure as set forth in the Arrangement Agreement shall have occurred. The Closing is not conditional on any maximum number of redemptions being exercised by holders of Class A Restricted Voting Units.

The Arrangement Agreement, and the associated transactions, may be terminated prior to closing by the mutual written consent of the parties. The Arrangement Agreement may also be terminated if the Arrangement has not occurred on or prior to the latest of (a) April 8, 2021, (b) the outside date for completion of the Qualifying Transaction, if extended by the LP beyond April 8, 2021, in accordance with applicable laws, which shall not be later than September 30, 2021 without the prior written consent of Intercure, and (c) such later date as may be mutually agreed between the parties in writing. The Arrangement Agreement may also be terminated by Intercure or the LP (i) if such other party breaches a representation, warranty or covenant such that a closing condition would not be satisfied (so long as such breach or failure to satisfy such condition is not the result of a breach of the Arrangement Agreement by such party seeking to terminate the Arrangement Agreement).

Indemnification Agreement

Simultaneous with the entry into the Arrangement Agreement, Intercure has entered into an Indemnification Agreement whereby it has agreed to indemnify and hold harmless the LP, the General Partner and each of their respective affiliates and the respective officers, directors, stockholders, employees and representatives of the LP, the General Partner and such Affiliates, from and against any matters arising out of any untrue statement of a material fact or omission of a material fact necessary to make the statements in the Information Circular or the Prospectus relating to Intercure or any Intercure Subsidiary, including the Intercure Financial Statements, or any other document publicly filed by or on behalf of Intercure or any Intercure Subsidiary in connection with the transactions contemplated by the Arrangement Agreement not misleading or, in the Information Circular or the Prospectus, or any other document publicly filed by or on behalf of Intercure or any Intercure Subsidiary in connection with the transactions contemplated by the Arrangement Agreement, as applicable, which would result in such document not containing the full, true and plain disclosure of all material facts relating to Intercure and the Intercure Subsidiaries or containing a misrepresentation, including the Intercure Financial Statements, as required by applicable securities laws. Furthermore, any achievement (but not the underlying facts or assumptions) of any projections or forecasts contained in the prospectus will not be within the scope of the indemnity described above.

Support and Lock-Up Agreements

Simultaneous with the entry into the Arrangement Agreement, Alexander Rabinovich has entered into shareholder support and lock-up agreements whereby such holders have agreed to support and approve the transactions contemplated by the Arrangement Agreement, and have agreed not to sell any Intercure Shares held by them for a period of six (6) months after the Closing, subject to certain customary exceptions.

Sponsor Lock-Up and Forfeiture Agreement

The Sponsor, Inception Sponsor and CG Investments Inc. IV will enter into a sponsor lock-up and forfeiture agreement pursuant to which they have agreed to subject all of their Proportionate Voting Units (including any Limited Partnership Units received upon conversion thereof) to transfer restrictions for a period of six (6) months after the Effective Time.

In the event that immediately prior to giving effect to the Qualifying Transaction, (i) the total available cash in the Escrow Account net of anticipated payments in respect of redemptions, plus (ii) amounts funded or committed pursuant to the Private Placement (collectively, the “Effective Date Cash Amount”), shall be less than US$200,000,000 (the “Prescribed Cash Amount”), then 36,414 of the Forfeitable Securities shall be subject to vesting for each whole amount of US$1,000,000 that the Effective Date Cash Amount is below the Prescribed Cash Amount (such Forfeitable Securities, the “Vesting Subject Securities”), provided that in no event shall more than 100% of the Forfeitable Securities become Vesting Subject Securities. The Vesting Subject Securities shall be allocated among the Sponsors as follows: 60% to Subversive Sponsor, 10% to Inception Sponsor and 30% to CG IV. “Forfeitable Securities” means 52,800 Proportionate Voting Units less the units transferred pursuant to the Sponsor Unit Transfer. - 86 -

The Vesting Subject Securities shall vest in the event that the weighted average price per share of the Intercure Shares on the Nasdaq for any five (5) consecutive trading days during the thirty (30) trading days after the Closing equals or exceeds the Target Price. “Target Price” means the price that is equal to US$13.00, assuming the completion of the Intercure Share Consolidation, and subject to appropriate adjustment in the event any other stock dividend, stock split, combination or similar recapitalization with respect to the Intercure Shares occurs at any time after the Intercure Share Consolidation.

In the event any of the Vesting Subject Securities have not vested in accordance with the prior paragraph, such Vesting Subject Securities shall be forfeited to Intercure (the “Share Forfeiture”).

Private Placement

On January 26, 2021, the LP announced a non-brokered private placement (the “Private Placement”) of 6.5 million Limited Partnership Units for an aggregate amount of US$65 million. The Limited Partnership Units will be issued pursuant to the terms of the applicable subscription agreements, and will be acquired by Intercure pursuant to the Plan of Arrangement, such that each subscriber will receive a number of Intercure Shares, that is based on the Exchange Ratio, in accordance with the Plan of Arrangement. The closing of the Private Placement is subject to a number of conditions precedent (each of which may be waived by the party who the condition is in favour of), including the LP receiving a receipt for the final non-offering prospectus being issued, Intercure receiving a conditional listing approval for the Intercure Shares from the Nasdaq and the TSX, and the satisfactions of the conditions to closing set out in the Arrangement Agreement.

Non-Redemption Agreements

Generally

Principal Steps of the Plan of Arrangement and Related Transactions

Pursuant to the Plan of Arrangement, the following steps shall occur in connection with and to effect the Qualifying Transaction:

the Plan of Arrangement (including, among other things, any amendments necessary to change the name of the LP to a name that does not include “Subversive”) or otherwise contemplated in the Agreement.

• any Restricted Voting Unit held by a Unitholder who duly exercised his, her or its redemption rights in accordance with the A&R LP Agreement in respect of such Unit shall be redeemed and cancelled in consideration for the Qualifying Transaction Redemption Price and such Restricted Voting Unit shall cease to be outstanding, and each such Unitholder shall cease to have any rights as a Unitholder in respect of such Unit other than the right to be paid the Qualifying Transaction Redemption Price for the Restricted Voting Unit so redeemed in accordance with the A&R LP Agreement and the Escrow Agreement.

• All Limited Partnership Unit issued and outstanding shall be transferred to Intercure Sub in consideration for Intercure Shares issued by Intercure based upon the Exchange Ratio.

• Intercure Sub shall issue additional common shares in its capital to Intercure in consideration for the issuance of the Intercure Shares pursuant to the preceding step.

• Intercure Sub shall acquire all of the issued and outstanding shares of the GP for $100.

• The LP shall be dissolved.

(collectively, the “Plan of Arrangement Steps”).

It is anticipated that upon completion of the Qualifying Transaction and based on assumed redemption levels of 0% and 50%:

• the current public Unitholders of the LP will have an ownership interest in Intercure of approximately 32.8% or 19.9%, respectively;

• the holders of Rights will have an ownership interest in Intercure of approximately 4.2% or 5.1%, respectively;

• the Founders, which includes the Sponsors, will have an ownership interest in Intercure of approximately 8.7% and 9.1%, respectively;33

• the current Intercure Shareholders will own an ownership interest in Intercure of approximately 43.7% and 53.0%, respectively; and

• the subscribers under the Private Placement will own approximately 10.4% and 12.6%, respectively.

33 Note: Assumes that no Share Forfeiture has taken place, but that the Sponsor Unit Transfer was consummated. - 88 -

The above percentages are calculated based on a number of additional assumptions, including the assumed redemption levels of the Restricted Voting Units of 0% and 50%, and the issuance of 6.5 million Limited Partnership Units pursuant to the Private Placement as well as the consequences of the Sponsor Unit Transfer. If the actual facts are different than these assumptions, the ownership percentages will be different.

Dissent Rights

The General Partner, pursuant to the Interim Order, has granted each Unitholder with dissent rights, using the same procedures as noted in Part 8, Division 2 of the Business Corporations Act (British Columbia). The management information circular that will be provided to the Unitholders in connection with the Unitholder Meeting will provide additional details regarding these rights and how they can be exercised by the Unitholders.

Redemption Rights

Pursuant to the A&R LP Agreement, holders of Restricted Voting Units have the right to redeem all or a portion of their Restricted Voting Units in connection with the Qualifying Transaction, provided that they deposit their Restricted Voting Units for redemption prior to the Redemption Election Deadline (the “Redemption Right”). Holders of Restricted Voting Units whose Restricted Voting Units are held through an intermediary may have earlier deadlines for depositing their Restricted Voting Units for redemption. If the deadline for depositing such units held through an intermediary is not met by a holder of Restricted Voting Units, such holder’s Restricted Voting Units may not be eligible for redemption.

Subject to applicable law, pursuant to the Plan of Arrangement, all Restricted Voting Units validly deposited for redemption shall be redeemed for the Qualifying Transaction Redemption Price per Restricted Voting Unit redeemed, payable in cash. Upon payment in cash of the Qualifying Transaction Redemption Price (which shall occur no later than 30 calendar days following completion of the Qualifying Transaction), the holders of the Restricted Voting Units so redeemed will have no further rights in respect of the Restricted Voting Units. For illustrative purposes, as of the date hereof, the estimated Qualifying Transaction Redemption Price is approximately US$10.04 per Restricted Voting Unit. Holders of Proportionate Voting Units and/or Class B Units do not have redemption rights with respect to their Proportionate Voting Units and/or Class B Units.

Notwithstanding any of the foregoing, no registered or beneficial holder of Restricted Voting Units (other than CDS) that, together with any affiliate thereof or any person acting jointly or in concert therewith, shall be entitled to require the LP to redeem Restricted Voting Units in excess of an aggregate of 15% of the Restricted Voting Units issued and outstanding (the “Redemption Limitation”). By its election to redeem, each registered holder of Restricted Voting Units (other than CDS) and each beneficial holder of Restricted Voting Units will be required to represent or will be deemed to have represented to the LP that, together with any affiliate of such holder and any other person with whom such holder is acting jointly or in concert, such holder is not redeeming Restricted Voting Units in excess of the Redemption Limitation.

Process for Redemption by Non-Registered Holders of Restricted Voting Units

A non-registered holder of Restricted Voting Units who desires to exercise its Redemption Right in connection with the Qualifying Transaction must do so by causing a participant (a “CDS Participant”) in the depository, trading, clearing and settlement systems administered by CDS to deliver to CDS (at its office in the City of Toronto) on behalf of the owner, a written notice (the “Redemption Notice”) of the owner’s intention to redeem Restricted Voting Units in connection with the Qualifying Transaction. A non-registered holder of Restricted Voting Units who desires to redeem Restricted Voting Units should ensure that the CDS Participant is provided with notice of his or her intention to exercise his or her redemption privilege sufficiently in advance of the notice date described above so as to permit the CDS Participant to deliver notice to CDS and so as to permit CDS to deliver notice to the Transfer Agent in advance of the required time. The form of Redemption Notice will be available from a CDS Participant or the Transfer Agent.

By causing a CDS Participant to deliver to CDS a notice of the owner’s intention to redeem Restricted Voting Units, an owner shall be deemed to have irrevocably surrendered his, her, or its Restricted Voting Units for redemption and appointed such CDS Participant to act as his, her, or its exclusive settlement agent with respect to the exercise of the

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Redemption Right and the receipt of payment in connection with the settlement of obligations arising from such exercise.

Any Redemption Notice delivered by a CDS Participant regarding an owner’s intent to redeem 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 Redemption Right to which it relates shall be considered for all purposes not to have been exercised. A failure by a CDS Participant to exercise the Redemption Right or to give effect to the settlement thereof in accordance with the owner’s instructions will not give rise to any obligations or liability on the part of the LP to the CDS Participant or to the owner.

If the deadline for depositing Restricted Voting Units held through an intermediary is not met by holder of Restricted Voting Units, such holder’s Restricted Voting Units may not be eligible for redemption. Such deadline may be earlier than the Redemption Election Deadline.

CAPITALIZATION AND USE OF PROCEEDS

The following table sets forth Intercure’s capitalization at September 30, 2020 and as adjusted to give effect to the Qualifying Transaction and the Private Placement, assuming redemptions of 0% and 50%:

As at September As at September As at September 30, 2020 after 30, 2020 after 30, 2020 giving effect to the giving effect to the prior to giving Qualifying Qualifying effect to Transaction and Transaction and the Qualifying Private Placement, Private Placement, Transaction and and assuming 0% and assuming Private Placement redemptions 50% redemptions ($US)(1) ($US) (1) ($US) (1)

Cash(2) ...... 14,340 290,339 177,839 Other current and non-current assets ...... 81,915 81,915 81,915 Total Assets ...... 96,255 372,254 259,915

Total Debt ...... 11,805 11,805 11,805

Equity ...... Total Equity ...... 84,450 360,449 247,949 Total Capitalization ...... 96,255 372,254 259,754 Diluted Shares Outstanding ...... 133,612,700 305,477,345 251,777,885

Notes: (1) All figures are in thousands of US dollars. All figures in NIS were converted in US$ using an exchange rate of US$0.30 per 1 NIS. Number of Diluted Shares Outstanding does not give effect to the Intercure Share Consolidation. (2) Cash balances after giving effect to the Qualifying Transaction include: (a) proceeds from the securities held in the Escrow Account, (b) proceeds from the Private Placement net of all fees and expenses, and (c) the existing cash balance prior to giving effect to the Qualifying Transaction, net of any redemptions, and estimated cash required for acquisitions, legal expenses and underwriters’ commission. The LP is not raising any funds in conjunction with this prospectus. Accordingly, there are no proceeds. Intercure anticipates having access to the following sources of funding in connection with the Qualifying Transaction:

Assuming 0% Assuming 50% Redemptions (US$) Redemptions (US$) Proceeds from IPO held in escrow ...... $225,999,320 $113,499,320 Proceeds from Private Placement ...... $65,000,000 $65,000,000 Cash on hand ...... $14,340,000 $14,340,000

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Assuming 0% Assuming 50% Redemptions (US$) Redemptions (US$) Total Sources ...... $305,339,320 $192,839,320

Intercure expects that the total available sources of funds for Intercure shall be used as follows:

Assuming 0% Assuming 50% Redemptions ($) Redemptions ($) Purchase price paid in cash ...... $0 $0 Estimated closing costs...... $15,000,000 $15,000,000 Remaining working capital(1)...... $290,339,320 $177,839,320 Total Uses ...... $305,339,320 $192,839,320

Notes: (1) Intercure expects to use its working capital to grow its operations (including its cultivation sites) as described in the prospectus. Specifically, over the next two years, Intercure expects to use approximately $13.2 million for expanding its cultivation site in the Southern Kibbutz (which is expected to take place in 2022 in anticipation of the legalization of recreational cannabis) and $1.4 million for expanding its pharmacy chain by renovating two pharmacies in Israel (which are expected to be completed in 2021). The remaining funds will be used to undertake any strategic acquisitions that Intercure may want to complete in the future, with no specific targets having been identified as of the date of this prospectus. Given that Intercure expects to be cashflow positive in 2021, it does not expect to use any of the proceeds from the Qualifying Transaction for its planned operations, including with respect to clinical trials). Intercure has negative cashflow from operations for the year ended December 31, 2019. A portion of the proceeds received by Intercure from the Qualifying Transaction are expected to be used to fund its operations. See “Risk Factors”.

PRIOR SALES

Except pursuant to the Private Placement, the LP has not issued any Units or securities convertible into Units during the 12-month period before the date of this prospectus other than pursuant to the IPO and the Private Placement. The LP’s currently issued and outstanding Restricted Voting Units and Rights are listed and posted for trading on the NEO and on the TSX and the under the symbol “SVX.U” and “SVX.RT.U”, respectively (and the Restricted Voting Units trade on the OTC market under the symbol “SBVRF”).

In August 2020, Intercure issued, pursuant to a private placement, Intercure Shares valued at 38.1 million NIS.

In September 2020, Intercure issued, pursuant to a private placement, as part of the acquisition of Cannolam, Intercure shares valued at 7.8 million NIS as of the date of the agreement (as at September 30, 2020, the fair value of the shares is 6.9 million NIS as at the closing of the acquisition).

CAPITAL STRUCTURE OF INTERCURE

The following is a summary of the material attributes and characteristics of the Intercure Shares. This summary is subject to, and qualified in its entirety by, reference to the terms of the Intercure Articles, which may be viewed under the LP’s and Intercure’s profile on SEDAR at www.sedar.com.

Overview

As of the date hereof, the authorized capital of Intercure consists of 200,000,000 ordinary shares (previously defined as the Intercure Shares), with a no par value, of which 120,088,900 are issued and outstanding. All of the Intercure Shares are validly issued, fully paid and non-assessable.

In connection with Closing, as a result of the matters addressed at the Intercure Shareholder Meeting, including the Intercure Share Consolidation, the authorized share capital of Intercure shall be increased to equal 100,000,000 Intercure Shares (on a post-Intercure Share Consolidation basis). After giving effect to the Plan of Arrangement (including the Qualifying Transaction) and assuming redemption levels of 0% and 50%, and no Share Forfeiture, - 91 -

Intercure’s capital is expected to consist of 305,477,345 and 251,777,885 Intercure Shares, respectively, on a pre- Intercure Share Consolidation basis.

The following is a summary of certain of the rights, privileges, restrictions and conditions attaching to the Intercure Shares.

Ordinary Shares (i.e. the Intercure Shares)

Holders of Intercure Shares are entitled to receive notice of and to attend any meeting of shareholders of Intercure and to one vote per Intercure Share at any such meetings, to receive dividends if, as and when declared by the Board, and to receive on a pro rata basis the remaining property and assets of Intercure upon its dissolution or winding-up.

Dividend Rights

Subject to the preferential rights (if any) of different types of shares that may exist in the future, holders of Intercure Shares are entitled to receive dividends out of the assets available for the payment or distribution of dividends at such times and in such amount and form as the Board may from time to time determine.

Liquidation Rights

In the event of the liquidation, dissolution or winding-up of Intercure or any other distribution of its assets among its shareholders for the purpose of winding-up its affairs, whether voluntarily or involuntarily, the holders of Intercure Shares will be entitled to receive all of Intercure’s assets remaining after payment of all debts and other liabilities on a pro rata basis and otherwise without preference or distinction among or between the Intercure Shares.

Pre-emptive and Redemption Rights

Holders of Intercure Shares will not have any pre-emptive or redemption rights.

Transfer of Shares

The Intercure Share are issued in registered form and may be freely transferred under the Intercure Articles, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade.

Ownership Restrictions

The Israeli DDO, and regulations promulgated thereunder as well as directives and guidelines issued from time to time by the IMCA (the “Israeli Cannabis Laws”), set out the framework for obtaining a license to conduct medical cannabis activities in Israel, which includes an assessment by the Israeli police as to the fitness of the applicant and making a recommendation to the IMCA or other relevant regulatory authority whether a license should be granted.

In the event of a corporate applicant, such as Intercure (or its subsidiaries), the assessment by the Israeli police extends to the interested parties of such applicant. An “interested party” for these purposes is defined as: (i) a Holder (as that term is defined below) of 5% or more of the issued share capital or voting power in a company, (ii) any person who has the right to designate one or more directors or to designate the chief executive officer of the company or (iii) any person who serves as a director or chief executive officer of the company.

Under the Israeli Cannabis Laws and the relevant terms of the IMCA licenses, each of the following actions requires the prior approval of the IMCA (the “Approval Requirement”): (i) a Holder (as that term is defined below) becoming an interested party or a person obtaining control of an interested party, or an effective interested party, in each case, whether by virtue of its shareholdings or by virtue of a shareholders agreement; (ii) any share issuances pursuant to which the recipient of the shares becomes an interested party and/or an effective interested party; and (iii) appointing a director or chief executive officer, or extending the terms of their appointment. In the event that prior approval from the IMCA is not obtained for any of the above, our IMCA licenses may be suspended or revoked. In addition, the terms of our current IMCA licenses provide that they will automatically lapse in the event of any changes to: (i) the ownership of the Intercure Shares by way of a share transfer exceeding 5% of Intercure’s share capital, in any manner - 92 -

whatsoever; and (ii) the identity of our authorized representatives as detailed in the IMCA license changes without authorization.

The Intercure Articles attempt to mitigate the risk of a contravention of the noted regulatory requirements by including provisions that limit the aggregate ownership or control or direction over ownership interests or voting rights of any Holder to no more than 4.99% of the issued and outstanding Intercure Shares (the “Applicable Limit”), unless such Holder has obtained prior approval from the IMCA. As discussed further below, to the extent a Holder acquires, becomes the Holder of or obtains control or direction over ordinary shares in excess of the Applicable Limit in breach of the Approval Requirement, such excess number of ordinary shares will automatically, upon the decision of the Board, be forfeited or become Dormant Shares (the consequences of which are explained below). The LP does not expect the Closing to cause any new holder of Intercure Shares to exceed the Applicable Limit.

Intercure has adopted internal procedures designed to monitor ownership, control or direction and voting power of Holders and to identify any Holder of the Intercure Shares in excess of the Applicable Limit. Following the end of each taxation year, every Holder holding a number of Ordinary Shares in excess of the Applicable Limit must provide Intercure with a written notice of such Holder’s name and address, the number of Intercure Shares held and a description of the manner in which such Intercure Shares are held.

There can be no assurance that the IMCA will consider the provisions contained in the Intercure Articles or these procedures as sufficient to avoid the automatic expiry of the IMCA licenses in the event that a Holder exceeds the Applicable Limit.

Solely for the purposes of the this section, a “Holder” means a person or group of persons acting together who, directly or indirectly, acquire, hold or maintain control or direction over Intercure Shares, and shall include, if the Holder is a corporation, its subsidiaries and affiliated companies, or, if the Holder is an individual, her or his immediate family members who reside together or whose livelihood is dependent on one another, and for greater certainty shall also include any person or group of persons that acquires control of any such Holder, all within the meaning of such terms as they are used in, and interpreted and applied under Companies Law.

Dormant Shares34

Dormant Shares shall not have attached to them any rights, privileges or benefits attached to the non-dormant Intercure Shares during the period they are dormant, including the right to vote, the right to receive dividends or the right to participate in the liquidation and distribution of our assets upon dissolution, and shall remain Dormant Shares until such time as either (a) Intercure, in its sole discretion, are satisfied that the Holder has received the required approval from the IMCA, and that no prejudice to Intercure, its IMCA licenses, or otherwise, will arise as a result of such Dormant Shares regaining all of the rights, privileges and benefits attached to Intercure Shares generally, or (b) such Dormant Shares have been transferred or sold by the Holder to a different Holder that does not exceed the Applicable Limit before and after such sale. Notwithstanding the foregoing, a Holder of Dormant Shares shall be entitled to sell any such Dormant Shares and retain the proceeds associated with such sale.

For greater certainty, if a Holder that exceeds the Applicable Limit is a group of persons acting together, the Intercure Shares held by each member of such group will automatically become Dormant Shares on a pro rata basis within the group.

IMCA Approval to Exceed the Applicable Limit

A holder of Dormant Shares may, at any time, apply to the IMCA or by notice to Intercure, require Intercure to make an application for approval from the IMCA on such person’s behalf in order to seek approval to permit such Holder to acquire or hold Intercure Shares in excess of the Applicable Limit. There is no assurance that the IMCA will provide such approval. As a condition precedent for such approval, pursuant to the Intercure Articles, the Holder will be required to execute an agreement with Intercure undertaking that such Holder will cooperate with Intercure in respect

34 Note: Dormant Shares for the purpose hereof shall be regarded as shares with no voting rights, but shall continue to be owned by the shareholder and may be sold or transferred. Once such transfer results in such Dormant Shares being held by a holder whose ownership of Intercure Shares does not exceed the Applicable Limit, such shares shall cease to be Dormant Shares. - 93 -

of any future IMCA license applications or renewals, including by providing any required or requested documentation or information in a timely manner.

The Intercure Articles further provide that if a Holder who has obtained approval from the IMCA ceases to continue to maintain the IMCA’s approval for any reason, including a failure to satisfy any conditions attached to any approval granted by the IMCA, then any of the Intercure Shares held by such Holder in excess of the Applicable Limit or in contravention of the IMCA approval shall immediately and upon a decision of the Board, are either forfeited or become Dormant Shares.

The procedures for seeking approval from the IMCA may include, among other things, police record checks and the submission of certain information to the IMCA and the Israeli police. Non-Israeli Holders may be subject to additional administrative and/or procedural requirements in obtaining the approval from the IMCA than would be required for Israeli Holders (such as the provision of certain declarations), and as a result the applications of non-Israeli Holders may be subject to longer processing times than those submitted by Israeli Holders.

DIVIDENDS

The LP has not paid any cash distributions on its Units to date and we do not intend to declare or pay any cash distributions prior to the completion of the Qualifying Transaction. The payment of cash dividends following the completion of the Qualifying Transaction will be dependent upon Intercure’s revenues and earnings, if any, capital requirements, general financial conditions and all requirements pursuant to the Companies Law and will be at the discretion of the Board at that time.

DESCRIPTION OF MATERIAL INDEBTEDNESS

Intercure does not have any material indebtedness. For a description of all indebtedness of Intercure, please see the Intercure Financial Statements.

ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER

Except as set out below, to the knowledge of the LP, on Closing, no securities of any class of securities of the LP will be held in escrow or subject to contractual restrictions on transfer.

In connection with the Arrangement Agreement, after Closing, the Intercure Shares held by the Sponsor (but not those transferred pursuant to the Sponsor Unit Transfer) are subject to a 6 month contractual lock-up and a potential Share Forfeiture.

PRINCIPAL UNITHOLDERS

The following table shows the names of the persons or companies who, immediately after Closing, will own of record, or who, to the knowledge of the LP, will own beneficially, directly or indirectly, more than 10% of any class or series of our voting securities.

Percentage of Percentage of Outstanding Securities Outstanding Securities of Class after the of Class after the Number of Securities Closing (Assuming 0% Closing (Assuming 50% Name Owned(1) Redemptions)(2) Redemptions)(2)

Alexander Rabinovich . 41,711,100 Intercure 13.7% 16.6% Shares

(1) Pre-Intercure Share Consolidation, does not include options. (2) Calculated on a non-fully diluted basis.

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DIRECTORS AND OFFICERS

Name, Address, Occupation and Security Holding

At Closing, the Board will consist of seven directors. The nominees for election by shareholders as directors will be determined by the Nominating and Corporate Governance Committee in accordance with the provisions of applicable corporate law and the charter of the Nominating and Corporate Governance Committee.

The following are the names and municipalities of residence of Intercure’s directors and executive officers, after giving effect to the Qualifying Transaction, corresponding start dates Intercure, and their principal occupations during the last five years:

(1) Each of the persons has held these positions for five years other than as described below. (2) Ehud Barak serves as a director of several other companies and Senior Fellow non-resident at the Belfer Center for Science and International Affairs at Harvard University. (3) Alexander Rabinovich served as CEO and director of a number of other private and public companies. (4) David Salton serves as independent director of ARAN Ltd. (TASE: 1085265) and Chief Executive Officer of Vilrility Medical. (5) Gideon Hirschfeld provides business development consulted to business development and consulting services for medium-sized businesses. (6) Alon Granot served as Canndoc’s Chief Executive Officer until December 2020 and Chief Financial Officer and Executive Vice President at Frutarom Industries Ltd. from 2001 – 2018. (7) Prior to joining Intercure, Amos Cohen was the CFO at Trendline Information and Communication Services Ltd., a TASE-listed company. (8) Prior to joining Canndoc, Rami Levy served as CEO in Plasgad Plastic Products ACS Ltd. (9) Prior to joining Canndoc, Moshe Gavrielov, served as VP of the European activity of Rhenium Oncotest Ltd. (10) Prior to establishing CannOlam operations, Asaf Ohayon was an advocate in the medical cannabis and the capital market industries. (11) Prior to establishing CannOlam operations, Ori was managing income-producing real estate properties.

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The following are brief biographies of the noted directors and officers.

Overview of the Directors and Officers

Ehud Barak

Ehud Barak has served on Intercure’s board of directors as Chairman since March 2019. Mr. Barak also currently serves on the board of three other Israeli companies: Carbyne Ltd., Guardicore Ltd. and Cypertoka Ltd. Mr. Barak served as the tenth Prime Minister of Israel from 1999 to 2001. Before being elected Prime Minister, Mr. Barak completed an illustrious 36-year career in the Isreali Defence Forces (the “IDF”), as the most decorated soldier in its history. Mr. Barak served in top positions in the IDF, including Head of Planning, Head of Military Intelligence, Commander of the Central Command and Deputy Chief of General Staff. As Chief of the General Staff of the IDF, he was involved in the negotiation and implementation of the 1994 peace treaty with Jordan. Mr. Barak has also served Israel as Minister of the Interior, Minister of Foreign Affairs and Defense Minister. Mr. Barak holds a B.S. degree in mathematics and physics from the Hebrew University in Jerusalem and received his M.S.C in economic engineering systems from Stanford University. Since September 2016, he has served as Senior Fellow non-resident at the Belfer Center for Science and International Affairs at Harvard University.

Alexander Rabinovich

Alexander Rabinovich has served on Intercure’s board of directors since October 2018 and is also the Chief Executive Officer of Intercure. He has significant public company experience with both Nasdaq and TASE listed companies. Mr. Rabinovich is currently the Chief Executive Officer and director of Intercure and G.F.C Green Fields Capital Ltd., a public company listed on the TASE, engaged in investments in renewable energies. Mr. Rabinovich also serves on the board of directors of XTL Biopharmaceuticals Ltd., a public company listed on the Nasdaq, and, until 2014, served on the board of directors of Pilat Media Global PLC, a public company listed on TASE and on the Alternative Investment Market of the London Stock Exchange. Mr. Rabinovich holds a B.A. degree in economics and accounting from the University of Haifa.

Alon Granot

Alon Granot has served on Intercure’s board of directors since November 2020 and Canndoc’s board of directors since February 2019. Mr. Granot saved as Canndoc’s Chief Executive Officer from September 2019 to December 2020. From 2001 to 2018, Mr. Granot served as Chief Financial Officer and Executive Vice President at Frutarom Industries Ltd., or Frutarom, where he led mergers and acquisitions, business development and overall financial management until Frutarom was acquired for approximately $7.1 billion in 2018. From 2008 to 2016, Mr. Granot served as an external director at Inter Industries Ltd., a company that is publicly traded on the TASE. He also served as director in the semiconductor division of Kulicke & Soffa Industries, Inc., a public company listed on Nasdaq, from 1998 to 2001. Mr. Granot holds a B.A. in economics and business administration from Haifa University and received an M.A. in economics and business administration from Technion-Israel Institute of Technology.

Amos Cohen

Amos Cohen has served as Intercure’s Chief Financial Officer since March 2020. Mr. Cohen has over 15 years of financial and business experience, including as the CFO of Trendline Information and Communication Services Ltd., a TASE-listed company. Mr. Cohen has also served as the VP of finance at Walla (a Bazek group entity, which is the biggest telecommunications company in Israel) and as a director of FP&A at Reshet, the largest TV channel is Israel. Mr. Cohen holds a B.A. in economics from Ben-Gurion University and received an M.A. in accounting from College of Management Academic Studies.

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David Salton

David Salton has served as an independent director of Intercure Ltd. Since December 2014. He has over twenty-five years of management experience related to investment banking, investment companies and funds, and start-up companies in the life science industry. In addition to Intercure, Mr. Salton serves as independent director of ARAN Ltd. (TASE: 1085265). Mr. Salton currently serves as the Chief Executive Officer of Vilrility Medical, a start up company, developing consumer medical device. Mr. Salton served as the Chief Executive Officer of DCL Technologies Ltd., an investment company (previously listed on TASE) and of Leumi Star Ltd., a public-non-listed venture fund. Mr. Salton also served as Chief Executive Officer of the following private companies: Dentack Implants Ltd. Dyn-Bioshaf Ltd.; Darely Pharmaceutical Ltd.; and DYN Diagnostics Holdings (2000) Ltd., and as board member of several publicly traded companies. Mr. Salton also served as the Deputy General Manager and Head of Investments Sector for Leumi Partners with $100 million under management and 25 portfolio companies in various sectors. Mr. Salton holds, B.Sc., Economics & Management degree from the Technion, Industrial Engineering faculty, Israel.

Lennie Grinbaum

Lennie Michelson Grinbaum has served on Intercure's board of directors as an External Director since September 2015. Ms Grinbaum has in depth experience in Contract Research Organisation as a contract specialist and has worked for a subsidiary of a major Israeli financial institution. Ms Grinbaum holds an LLB in Law and a BA in Business from The Interdisciplinary Center Herzliya as well as an MBA specializing in finance from Imperial College London.

Gideon Hirschfeld

Gideon Hirschfeld joined Intercure’s board of directors in 2018 as external director. Mr. Hirschfeld has extensive experience in business development for various corporation such as Israel Post. Prior to joining Intercure’s board, Gideon initiated joint ventures for technology-based products and services, mainly in the logistics and distribution fields. Mr. Hirschfeld has a proven track record in financial matters related to current operations and short and long- range financial plans. Mr. Hirschfeld holds an MBA degree and MA degree in education as well as 2 BA degrees in international relations and political science from the Hebrew University in Jerusalem.

Michael B. Auerbach

Mr. Auerbach is an entrepreneur, investor, business consultant, and private diplomat. He founded Subversive Capital LLC as a vehicle to invest in radical companies whose core missions subvert the status quo and require sophisticated government and regulatory strategies for success. Michael is an expert in the global cannabis industry and is a significant shareholder and board director of both Tilray, Inc. and Privateer Holdings, Inc. Mr. Auerbach has served as Senior Vice President of Albright Stonebridge Group LLC, a global strategy firm since 2012, and he also serves as a general partner of Subversive Capital, a venture capital firm and a private investment fund. From September 2009 to July 2012, he was Vice President, Social Risk Consulting at Control Risks Group Limited, a global risk consulting firm which acquired Social Risks, LLC, a consulting firm Mr. Auerbach founded in 2007. From 2005 to 2007, he was Associate Director for The Century Foundation, Inc., a progressive, non-partisan think tank. He began his career in technology in 1983 when he founded Panopticon Inc., a venture capital incubator concentrating on internet and mobile technology, and served as its Chief Executive Officer until January 2004. Mr. Auerbach also sits on the boards of Privateer Holdings, Inc., Tilray, Inc. and Duco Advisors, Inc. He also sits on the boards of Next for Autism and the KiDS Advisory Board of New York University’s Hassenfeld Children’s Hospital. He has an M.A. in International Relations from Columbia University and B.A. in Critical Theory from the New School.

Moshe Gavrielov

Moshe Gavrielov has served as Canndoc's Director and vice president of sales and marketing since January 2020. Mr. Gavrielov has nearly 20 of experience in the pharma sector, including 18-year career at Teva Pharmaceuticals in executive sales and marketing positions where he established distribution channels in emerging markets. Mr. Gavrielov holds a BSc in industrial engineer from the open University and MBA from Bar-Ilan University.

Rami Levy

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Rami Levy has serves as Canndoc's chief of operation since July 2019. Mr. Levy has more then 20 years of lead management and operational experience at Netafim, the largest Israeli aggrotech company, expanding global operations development to more than 190 territories. Mr. Levy holds a BSc in in industrial engineers and MBA from Ben Gurion University.

Asaf Ohayon

Adv. Asaf Ohayon is the co-founder of Cannolam and serves as Cannolam's Co-CEO. Mr. Ohayon holds a LLB and BA in business administration and law from the Interdisciplinary Center Herzliya.

Ori Mimon

Ori Mimon is the co-founder of Cannolam and serves as Cannolam's Co-CEO. Mr. Mimon holds BA in business administration from the Interdisciplinary Center Herzliya.

Other Reporting Issuer Experience

The following table sets out the directors of Intercure that are directors of other reporting issuers (or the equivalent) in Canada or a foreign jurisdiction, other than Intercure, as of the date of this prospectus:

Name Name of Reporting Issuer

Michael Auerbach TPCO Holding Corp.

Alexander Rabinovich G.F.C Green Fields Capital Ltd.

XTL Biopharmaceuticals Ltd.

David Salton ARAN Ltd.

Majority Voting Policy

Following Closing, subject to compliance with Companies Law, Intercure will, if required to comply with the TSX Company Manual, adopt a majority voting policy. To the extent the policy is adopted, shareholders will vote for the election of individual directors of Intercure at each annual meeting of shareholders, rather than for a fixed slate of directors. Further, to the extent the policy is adopted, in an uncontested election of directors at an applicable meeting of shareholders, the votes cast in favour of the election of a director nominee will be required to represent a majority of the votes cast for shares voted and withheld for the election of the director. If that is not the case, that director must tender his or her resignation to the Chair of the Board. To the extent the policy is adopted, the Corporate Governance and Nominating Committee will promptly consider such tendered resignation and recommend to the Board the action to be taken with respect to such tendered resignation, and the Board shall accept the resignation absent exceptional circumstances and it must promptly disclose its decision via press release.

Indemnification and Insurance

Intercure shall maintain a director and officer insurance policy to limit Intercure’s exposure to claims against, and to protect, its directors and officers. In addition, Intercure has entered into indemnification agreements with each of its directors and officers. The indemnification agreements generally require that Intercure indemnify and hold the indemnitees harmless to the greatest extent permitted by law for liabilities arising out of the indemnitees’ service to Intercure as directors and officers (including to the extent they are also director and officers to any of Intercure’s subsidiaries). However, the law in Israel is such that indemnification is provided only in circumstances that the indemnitees acted honestly and in good faith and in a manner the indemnitees reasonably believed to be in, or not opposed to, Intercure’s best interests and, with respect to criminal and administrative actions or proceedings that are enforced by monetary penalty, the indemnitees had no reasonable grounds to believe that his or her conduct was

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unlawful. The indemnification agreements also provide for the advancement of defence expenses to the indemnitees by Intercure.

Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the LP’s knowledge, none of Intercure’s directors and officers is, or within 10 years prior to the date hereof has been, a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued while the director or officer was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the director or officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Except as disclosed below, to the LP’s knowledge, none of Intercure’s directors and officers (i) is, or within 10 years prior to the date hereof has been, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to, or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (ii) has, within ten years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer.

David Salton was the CEO of Dentack Implants Ltd, a private Israeli company that underwent insolvency proceedings in January 2017. David was the CEO of the noted company as it underwent the proceedings and remained the CEO afterwards.

Michael Auerbach was a director of CybAero AB that on June 18, 2018, declared bankruptcy in the Linköpings tingsratt (district) Court. On February 15, 2018, CybAero AB’s shares were suspended for trading due to non- disclosure of inside information about the issuer.

None of Intercure’s directors and officers has been subject to (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to invest in Intercure.

To the LP’s knowledge, Intercure is not in breach of any of the TASE rules or policies.

ISRAELI CORPORATE LAW MATTERS

Election of Directors

The Intercure Articles provide that the Board must consist of not less than five but no more than 11 directors, including two external directors required to be appointed by Companies Law. The Intercure Articles provide that, other than the external directors, for whom special election requirements apply, and any directors appointed by the Board to fill vacancies, each of director will be appointed by a simple majority vote of the Intercure Shares, duly voted at a shareholders’ annual meeting for a term of office that will last until the next annual meeting at which point, a new director may be elected by the shareholders.

The Intercure Articles allow the Board to fill vacancies of any director who resigned, provided that no less than three quarters of the remaining directors vote in favor of such appointment. Such directors serve for a term of office equal to the remaining period of the term of office of the directors(s) whose office(s) have been vacated or in the case of new directors, to serve until the subsequent annual general meeting of shareholders.

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External directors are elected for an initial term of three years, may be elected for additional terms of three years, but not more than nine years in total. The external directors may be removed from office pursuant to the terms of Companies Law.

Moreover, pursuant to the Intercure Articles, a person may not be appointed or elected to the Board, nor may the term of appointment of any director be extended, without the prior approval from the IMCA or other relevant regulatory authority having been obtained.

Dividend and Liquidation Rights

Intercure may declare a dividend to be paid to the holders Intercure Shares on a pro rata basis. Under Companies Law, dividend distributions are determined by the Board and do not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. The Intercure Articles do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by the Board.

Pursuant to Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to our then last reviewed or audited financial statements, provided that the end of the period to which the financial statements relate is not more than six months prior to the date of the distribution, after the deduction of prior distribution to the extent not already made (and deducted). If Intercure does not meet such criteria, then Intercure may declare and pay dividends with court approval. In each case, Intercure is only permitted to distribute a dividend if the Board and the court, if applicable, determines that there is no reasonable concern that payment of the dividend will prevent Intercure from satisfying its existing and foreseeable obligations as they become due.

In the event of the liquidation of Intercure, after satisfaction of liabilities to creditors, Intercure’s assets will be distributed to the holders of the Intercure Shares on a pro rata basis. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Shareholder Meetings

Under Israeli law and pursuant to the Intercure Articles, Intercure is required to hold an annual general meeting of shareholders once every calendar year, which meeting must be held no later than 15 months after the date of the previous annual general meeting. The Board may call special general meetings whenever it sees fit, at such time and place, as it may determine. In addition, Companies Law provides that the Board is required to convene a special general meeting upon the written request of (i) any two or more of directors or one-quarter or more of the members the Board or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of the outstanding issued Intercure Share and 1% or more of the outstanding voting power or (b) 5% or more of the outstanding voting power.

Subject to the provisions of Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the Board, which may generally be between 28 and 40 days prior to the date of the meeting. Furthermore, Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of shareholders:

• Amendments to the Intercure Articles;

• Appointment or termination of Intercure’s auditors;

• Appointment of external directors;

• Approval of certain related party transactions;

• Increases or reductions of our authorized share capital;

• The dissolution of the company

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• A merger; and

• The exercise of the Board’s powers by a general meeting, if the Board is unable to exercise its powers and the exercise of any of its powers is required for proper management.

Pursuant to the Intercure Articles, Intercure is required to give notice to shareholders pursuant to Companies Law. The Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes certain matters, notice must be provided at least 35 days prior to the meeting. Pursuant to Companies Law and the Intercure Articles, shareholders are not permitted to take action by way of written consent in lieu of a meeting.

Quorum

Pursuant to both Israeli law and the Intercure Articles, holders of Intercure Shares have one vote for each Intercure Share held on all matters submitted to a vote before the shareholders at a general meeting. The quorum required for general meetings of shareholders is at least two shareholders present in person, by proxy or written ballot, who hold or represent between them at least 1/3 of our outstanding voting rights. A meeting adjourned for lack of a quorum shall be adjourned either to the same day the following week, at the same time and place, or to such day and at such time and place as the Board of the meeting determines. At the reconvened meeting, two shareholders who hold no less than 10% of the issued and outstanding Intercure Shares present in person or by proxy shall constitute quorum.

Voting

The Intercure Articles provide that all resolutions of shareholders require a simple majority vote, unless otherwise required by Companies Law or the Intercure Articles. Under Companies Law, the following transactions require specific internal approvals: (1) a transaction by a company with an officeholder thereof, or a transaction of a company with another person in which an officeholder of the company has a personal interest; provided however, that an officeholder of a parent company as well as a wholly-owned and controlled subsidiary thereof shall not be considered as having a personal interest in a transaction between the parent company and the subsidiary solely due to them being an officeholder of both of them; (2) the engagement by the company with an office holder, including a director, regarding terms of engagement and other roles; (3) an extraordinary transaction of a public company with a controlling shareholder, or an extraordinary transaction of a public company with another person in which the controlling shareholder has a personal interest, including a private placement that is an extraordinary transaction; (4) the direct or indirect engagement by a public company with a controlling shareholder, or their relatives (including through a company under their control), for services provided to the company or if the person is an officeholder or employee – as to the conditions of their office and employment; (5) a private placement issuing more than 20% of the voting rights in the company that as a result of which, (i) the holdings of a substantial shareholder of securities in the company will increase; (ii) a person will become a substantial shareholder of the Company after the issuance; or (iii) a person becoming controlling shareholder. Pursuant to the Intercure Articles, the alteration of the rights, privileges, preferences or obligations of any class of our shares requires a simple majority of the class so affected (or such other percentage of the relevant class that may be set forth in the governing documents relevant to such class), in addition to the ordinary majority vote of all classes of shares voting together as a single class at a shareholder meeting. An exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company, increasing its share capital, or changes to the company’s stated objectives, all of which requires the approval of holders of 75% of the voting rights represented at the meeting and voting on the resolution. Another exception to the simple majority voting requirement is an amendment to the Intercure Articles, which requires a special majority vote.

Access to corporate records

Pursuant to Companies Law, all shareholders generally have the right to review minutes of Intercure’s general meetings, Intercure’s shareholder register, including with respect to material shareholders, the Intercure Articles, Intercure’s financial statements and certain other public documents. Any shareholder who specifies the purpose of its request may request to review any document in Intercure’s possession that relates to any action or transaction with a related party which requires shareholder approval under Companies Law. Intercure may deny a request to review a document if it determines that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise impair its interests. - 101 -

Acquisitions under Israeli law

Full tender offer

A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstanding share capital or that of a certain class of shares is required by Companies Law to make a tender offer to all of the company’s shareholders or the shareholders who holds shares of the same class for the purchase of all of the issued and outstanding shares of the company or of the same class, as applicable.

If the shareholders who do not respond to or accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class of the shares, and more than 50% of the offerees that do not have a personal interest in the offer accept it, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.

Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether the shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition the Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court unless the acquirer stipulated that a shareholder that accepts the offer may not seek appraisal rights. If the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class, or the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.

In addition, a person is prohibited from purchasing additional shares (or additional shares of a specific class) if the person holds more than 90% of the issued and outstanding share capital in general or 90% of the issued and outstanding shares of a specific class.

Special tender offer

Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of at least 25% of the voting rights in the company. This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company.

These requirements do not apply if the acquisition (i) occurs in the context of a private placement, provided that the general meeting approved the acquisition as a private offering whose purpose is to give the acquirer at least 25% of the voting rights in the company if there is no person who holds at least 25% of the voting rights in the company, or as a private offering whose purpose is to give the acquirer 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights in the company, (ii) was from a shareholder holding at least 25% of the voting rights in the company and resulted in the acquirer becoming a holder of at least 25% of the voting rights in the company, or (iii) was from a holder of more than 45% of the voting rights in the company and resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company.

The special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the special tender offer is accepted by a majority of the votes of those offerees who gave notice of their position in respect of the offer, excluding the votes of a holder of control in the offeror, a person who has personal interest in acceptance of the special tender offer, holders of 25% or more of the voting rights in the company or anyone on their behalf, including their relatives and entities controlled by them.

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In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention. In addition, the board of directors must disclose any personal interest each member of the board of directors has in the offer or stems therefrom. An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders for damages resulting from his or her acts, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.

If a special tender offer was accepted by a majority of the shareholders who announced their stand on such offer, then shareholders who did not respond to the special tender offer or had objected to the offer may accept the offer within four days of the last day set for the acceptance of the offer.

In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity shall refrain from making a subsequent tender offer for the purchase of shares of the target company and cannot execute a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

Mergers

Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under Companies Law are met, a majority of each party’s shareholders and, in the case of the target company, a majority vote of each class of its shares, voted on the proposed merger at a shareholders meeting. The board of directors of a merging company is required pursuant to Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors has determined that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies.

For the purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. In addition, if the non- surviving entity of the merger has more than one class of shares, the merger must be approved by each class of shareholders. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. Pursuant to Companies Law, if a merger is with a company’s controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders.

Under Companies Law, each merging company must send a copy of the proposed merger plan to its secured creditors. Unsecured creditors are entitled to receive notice of the merger pursuant to regulations promulgated under Companies Law. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations the target company. The court may further give instructions to secure the rights of creditors.

In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies was obtained.

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Borrowing Powers

Pursuant to Companies Law and the Intercure Articles, the Board may exercise all powers to borrow money for company purposes, including the issuances of debentures or bonds guaranteed by all or part of Intercure’s current and future assets, including Intercure’s capital that was not issued at the time.

Changes in Capital

The Intercure Articles enable Intercure to increase or reduce its share capital. Any such changes is subject to Israeli law and must be approved by a resolution duly passed by Intercure’s shareholders at a general meeting.

DIRECTOR AND OFFICER COMPENSATION

Executive Officer Compensation

An issuer’s “named executive officers” (“NEOs”) are comprised of its Chief Executive Officer and Chief Financial Officer (or individuals who serve in similar capacities), and its three most highly compensated executive officers, other than the Chief Executive Officer and Chief Financial Officer, whose total compensation is, individually, more than $150,000. Following Closing, it is expected that the NEOs of Intercure will be the following:

Alexander Rabinovich, Director and Chief Executive Officer

Amos Cohen, Chief Financial Officer

Ehud Barak, Chairman of the Board

Rami Levy, Chief Operating Officer of Canndoc

Moshe Gabrilov, Chief Marketing Officer of Canndoc

Israeli Corporate Law Matters Impacting Executive Compensation

Under Companies Law, the compensation of external directors is set in the regulations thereto, and the compensation of directors of a public company requires the approval of the compensation committee, the subsequent approval of the board of directors and, unless exempted under regulations promulgated under Companies Law, the approval of the shareholders at a general meeting. If the compensation of directors is inconsistent with a company’s stated compensation policy, then, those provisions that must be included in the compensation policy according to Companies Law must have been considered by the compensation committee and board of directors, and shareholder approval will also be required, provided that:

• At least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or

• The total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company.

Companies Law also requires the approval of the compensation of a public company’s executive officers (other than the chief executive officer) in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation). However, if the shareholders of the company do not approve a compensation arrangement with an executive officer that is inconsistent with the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.

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Under Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee; (ii) the company’s board of directors, and (iii) the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide a detailed report for their decision. The approval of each of the compensation committee and the board of directors should be in accordance with the company’s stated compensation policy; however, in special circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained (by a special majority vote as discussed above with respect to the approval of director compensation). In addition, the compensation committee may waive the shareholder approval requirement with regards to the approval of the engagement terms of a candidate for the chief executive officer position, if they determine that the compensation arrangement is consistent with the company’s stated compensation policy, and that the chief executive officer did not have a prior business relationship with the company or a controlling shareholder of the company and that subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate.

Equity Incentive Plan

The purpose of the Equity Incentive Plan is to provide us with a share-related mechanism to attract, retain and motivate qualified directors, employees and consultants, to reward such of those non-employee directors, employees and consultants as may be granted securities under the Equity Incentive Plan by the Board from time to time for their contributions towards our long term goals and success and to enable and encourage such non-employee directors, employees and consultants to acquire Intercure Shares as long term investments and proprietary interests in Intercure. Please see “Equity Incentive Plan” for a summary of the material terms of the Equity Incentive Plan.

Termination and Change of Control Benefits

(1) For a summary of the termination benefits provided under the NEOs’ employment agreements, please refer to the “ Employment Agreements” section below.

Summary Compensation Table

The following table sets out information (in thousands of US dollars) concerning the expected compensation to be earned by, paid to, or awarded to the NEOs for the year ended December 31, 2021.

Non-Equity Incentive Plan Compensation Long- Share Option Annual Term Based Based Incentive Incentive All Other Total Name and Principal Salary Awards Awards Plans Plans Compensation Compensation Position Fiscal ($) ($) ($)(1) ($) ($) ($)(3) ($) Alexander Rabinovich 2021 56 - - - - - 56 Chief Executive Officer Amos Cohen 2021 254 - 67(1) 74 - - 395 Chief Financial Officer Ehud Barak 2021 120 - 825 - - - 945 Chairman of the Board Rami Levy 2021 254 94(1) 74 422 Chief Operating Officer (Canndoc) Moshe Gabrilov 2021 254 67(1) 74 395 Chief Marketing Officer (Canndoc)

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______Notes: (2) The options will be subject to the approval of the TASE. Employment Agreements

(a) Alexander Rabinovich, CEO and Director

Alexander is not entitled for any payment as a director in Intercure. As Intercure’s main shareholder Alexander's employment term were approved by the general assembly on February 7, 2019. Alexander's employment agreement provides for base salary, expenses return according to the Intercure's policy and is entitled to be included under the director & officer insurance and indemnification letter.

(b) Ehud Barak, Chairman of the Board

Ehud was appointed as Intercure’s Chairman of the Board in September, 2018 for an indefinite period. during which we may terminate the employment agreement, for any reason, by prior notice 60 days or for cause, on 3 days' prior notice. Ehud may terminate the employment agreement, for any reason, by giving 3 business days 'advance notice. In addition, Ehud or his survivors will be entitled to a payment of 3 months' salary, in the event of termination of employment due to death or incapacity for work.

Ehud is entitled for base salary for his employment for agreed 40 monthly hours, agreed amount of Intercure’s options and other social conditions, including provisions under the Pension and Study Fund Law.

Amos’s employment agreement provides for base salary, an annual performance bonus and benefits. Amos will participate in the Equity Incentive Plan. We may terminate the employment agreement, for any reason, by prior notice of 90 days.

Amos’s employment agreement also contains customary confidentiality and non-disparagement covenants and certain restrictive covenants that will continue to apply following the termination of his employment, including non- competition and non-solicitation provisions which are in effect during Amos’s employment and for the 6 months following the termination of his employment.

(d) Rami Levi, Chief Operating Officer, Canndoc

Rami’s employment agreement provides for base salary, an annual performance bonus and benefits. Rami will participate in the Equity Incentive Plan. We may terminate the employment agreement, for any reason, by prior notice of 90 days.

Rami’s employment agreement also contains customary confidentiality and non-disparagement covenants and certain restrictive covenants that will continue to apply following the termination of his employment, including non- competition and non-solicitation provisions which are in effect during Rami’s employment and for the 6 months following the termination of his employment.

(e) Moshe Gabrilov, Chief Marketing Officer, Canndoc

Moshe’s employment agreement provides for base salary, an annual performance bonus and benefits. Moshe will participate in the Equity Incentive Plan. We may terminate the employment agreement, for any reason, by prior notice of 90 days.

Moshe’s employment agreement also contains customary confidentiality and non-disparagement covenants and certain restrictive covenants that will continue to apply following the termination of his employment, including non- competition and non-solicitation provisions which are in effect during Moshe’s employment and for the 6 months following the termination of his employment.

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The table below shows (in thousands of US dollars) the incremental payments that would be made to our NEOs under the terms of their employment agreements upon the occurrence of certain events, if such events were to occur immediately following Closing.

Other Following Severance Payments Change of Name and Principal Position Event ($) ($) Total ($) Control Ehud Barak Termination without 20 - 20 - Chairman cause Alexander Rabinovich Termination without 5 - 5 - Chief Executive Officer cause Amos Cohen Termination without 63 - 63 - Chief Financial Officer cause Rami Levy Termination without 63 - 63 - Chief Operating Officer cause (Canndoc) Moshe Gabrilov Termination without 63 - 63 - Chief Marketing Officer cause (Canndoc)

Outstanding Option-Based Awards

The following table sets out information (in NIS, where applicable) concerning the option-based awards granted to our NEOs that will be outstanding on Closing:

Option-based Awards Number of Value of securities unexercised in- underlying Option Option the-money unexercised options exercise expiration options Name and Principal Position (#) price (NIS) date (NIS) Alexander Rabinovich - - - - Chief Executive Officer Amos Cohen 599,353(1) 4.13 Four years 214,000 Chief Financial Officer from grant date Ehud Barak 916,837 2.00 March 31, 3,567,000 Chairman 1,833,674 3.00 2023 6,989,000 1,833,673 4.00 6,866,000 Rami Levy 830,095(1) 4.13 Four years 299,600 Chief Operating Officer (Canndoc) from grant date Moshe Gabrilov 599,353(1) 4.13 Four years 214,000 Chief Marketing Officer (Canndoc) from grant date ______Notes: (1) Options will be subject to the approval of the TASE.

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Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets out, for each of our NEOs, the value of the option-based awards expected to vest in accordance with their terms during the year ended December 31, 2021. None of the NEOs hold any share-based awards.

Option-Based Awards – Value Expected to be Vested Name and Principal Position During the Year ($)(1) Alexander Rabinovich - Chief Executive Officer Amos Cohen 67,000(2) Chief Financial Officer Ehud Barak 825,000 Chairman Rami Levy 94,000(2) Chief Operating Officer (Canndoc) Moshe Gabrilov 67,000(2) Chief Marketing Officer (Canndoc) ______Note: (1) Reflects the grant date fair value of stock options (determined in accordance with the Black-Scholes valuation model). (2) Options will be subject to the approval of the TASE.

Director Compensation

Our objectives regarding director compensation are to follow best practices with respect to retainers and the format and weighting of the cash and equity components of compensation, having regard to the experience and expertise of our Board members and their contributions to the Board.

Under the Companies Law, external directors and non independent director, may be compensated only in accordance with the applicable regulations. These regulations permit the payment of cash compensation within a specified range, based on the size of the company, or cash or equity compensation that is consistent with the compensation paid to the other independent directors.

The total compensation for all non-executive directors will be comprised of a cash retainer, plus committee fees in accordance with the Companies Law. In addition to the cash retainer and committee fees, the two Israeli external directors and non independent director (as required by the Companies Law) will be paid meeting fees. We may also issue share options to our directors under our Equity Incentive Plan.

Subject to applicable law, it is expected that the directors will be reimbursed for the reasonable out-of-pocket expenses they incurred in serving as directors.

Following Closing, it is expected that the non-employee directors and committee members will be paid the following annual retainers:

Position Type of Fee Amount Per Year Member of the Board Cash Retainer US$28,000 ______Note: (1) Board members may be entitled to additional per-meeting compensation.

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Equity Incentive Plan

Intercure has an Equity Incentive Plan following Closing, pursuant to which, the aggregate number of Intercure Shares that may be issued under all awards under the Equity Incentive Plan is 6.5% of the fully-diluted Intercure Shares from time to time. The Equity Incentive Plan will be filed on SEDAR at www.sedar.com prior to the Qualifying Transaction being completed.

Summary of Equity Incentive Plan

The Equity Incentive Plan was originally adopted by the Board in March 2015 and is scheduled to expire in March 2025. The Equity Incentive Plan provides for the grant of options to Intercure’s directors, officers, employees, non- employee service providers and controlling shareholders (as defined the Israeli Income Tax Ordinance [New Version], 5721-1961). As of December 31, 2020, options to purchase 5,338,184 Intercure Shares were outstanding and up to 57,889,128 Intercure Shares are available for issuance. Of such outstanding options, options to purchase 3,902,202 Intercure Shares were vested as of December 31, 2020, with a weighted average exercise price of 3.891 NIS per share, and each will expire ten years from the date of grant. In addition, in January 2021, subject to obtaining the required TASE approval, the Board has approved the issuance of an additional 4,303,356 options to purchase Intercure Shares which are not reflected in the above amounts.

The Equity Incentive Plan provides for options to be granted at the determination of the Board (which is entitled to delegate its powers under the Equity Incentive Plan to the Compensation Committee), in each case, subject to applicable laws. Upon termination of employment without cause (as defined in the Equity Incentive Plan), in the event of death, retirement or disability, all unvested options will expire and all vested options at the time of termination will generally be exercisable for three months (which may be extended to up to 12 months in the governing option agreement) following such termination, subject to the terms of the Equity Incentive Plan and the governing option agreement. If Intercure terminates an optionee’s employment or engagement for cause (as defined in the Equity Incentive Plan) the optionee’s right to exercise all vested and unvested the options granted to him or her will expire immediately.

In the event that options allocated under the Equity Incentive Plan expire or otherwise terminate, such expired or terminated options can become available following Board approval under the Equity Incentive Plan.

Section 102 of the Israeli Tax Ordinance allows Intercure’s employees, directors and officers who are not controlling shareholders (as such term is defined in the Israeli Tax Ordinance) and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Intercure’s non-employee service providers and controlling shareholders may only be granted options under another section of the Israeli Tax Ordinance, which does not provide for similar tax benefits. Section 102 of the Israeli Tax Ordinance includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. The most favorable tax treatment for the grantees is under Section 102(b)(2) of the Israeli Tax Ordinance, the issuance to a trustee under the “capital gains track.” The Board selected the “capital gains track” for grants to Israeli employees under the Equity Incentive Plan. Under this track, Intercure is not allowed to deduct an expense with respect to the issuance of the options or shares.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

Except as described in this prospectus, none of the directors, executive officers, employees, former directors, former executive officers or former employees of Intercure or any of its subsidiaries, and none of their respective associates, is or has within 30 days before the date of this prospectus or at any time since the beginning of the most recently completed financial year been indebted to Intercure or any of its subsidiaries or another entity whose indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar agreement or understanding provided by Intercure or any of its subsidiaries.

CORPORATE GOVERNANCE AND BOARD COMMITTEES

Intercure recognizes that good corporate governance will play an important role in its overall success and in enhancing shareholder value. Accordingly, following Closing, Intercure intends to adopt certain corporate governance policies and practices. Unless otherwise indicated, the following disclosure is based on the present expectations of Intercure - 109 -

in respect of its corporate governance practices and the formal establishment of committees of the Board described below (without changes to the proposed composition) and the ratification and adoption of their respective proposed charters (without any material modifications) will occur following the Closing. However, such disclosure remains subject to revision prior or subsequent to the Closing. See “Notice to Readers” in this prospectus.

Board Practices

The Intercure Articles provide that Intercure may have between five and 11 directors, including directors who serve as external directors under Companies Law. At Closing, the Board will consist of at least five directors. Other than the external directors, the directors are elected by an ordinary resolution at the annual and/or special general meeting of our shareholders. Each director who is not an external director will hold office until the next annual general meeting of our shareholders, unless they are removed by a majority of the shares voted at a general meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and the Intercure Articles.

In addition, if a director’s office becomes vacant, the remaining serving directors may continue to act in any manner, provided that their number is of the minimal number specified in the Intercure Articles. If the number of serving directors is lower than such minimum number, then the Board may only act in an emergency or to fill the office of director which has become vacant pursuant to the Intercure Articles, or in order to call a general meeting of our shareholders for the purpose of electing directors to fill any of the vacancies. In addition, the directors may appoint additional director(s) to fill vacancies of any director who resigned, provided that three quarters of the remaining directors vote in favour of such appointment.

Pursuant to Companies Law and the Intercure Articles, a resolution proposed at any meeting of the Board at which a quorum is present is adopted if approved by a vote of a majority of the directors present and voting. A quorum of the Board requires at least a majority of the directors then in office who are lawfully entitled to participate in the meeting. If after half an hour, a quorum is not present, the meeting may be adjourned to a future date as decided by the chairman of the board, and in their absence, the directors present at the meeting, provided that all the directors will receive notice of the adjourned meeting at least 24 hours prior to its proposed time of commencement. The quorum for such adjourned meeting of the board shall be not less than 3 members of the board.

Under Companies Law, the chief executive officer of a public company or their relatives may not serve as the chairman of the Board unless approved by the holders of a majority of the shares of the company represented and voted at the meeting in person or by proxy or written ballot, for periods not exceeding 3 years each time, provided that:

• at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions); or

• the total number of shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted against the proposal does not exceed 2% of the aggregate voting rights in the company.

In addition, a person subordinated, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman of the board of directors may not be vested with authorities that are granted to those subordinated to the chief executive officer; and the chairman of the board of directors may not serve in any other position in the company or a controlled company, except as a director or chairman of a controlled company.

In addition, under Companies Law, the Board must determine a minimum of one director is are required to have financial and accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and financial statements. He or she must be able to thoroughly comprehend the financial statements of the listed company and initiate debate regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise, the board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. The Board has determined that Intercure requires at least one director with the requisite financial and accounting expertise pursuant to applicable Israeli regulations. The Board has determined that Mr. Rabinovich, Mr. Salton and Mr. Hirshfeld have the requisite financial and accounting expertise.

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External Directors

Under Companies Law, companies incorporated under the laws of the State of Israel that are “public companies” are required to appoint at least two external directors, subject to certain exceptions that are not currently available to Intercure. The appointment of external directors must be made by a general meeting of shareholders no later than three months following the company becoming a “public company”.

A person may not be appointed as an external director if the person is a relative of a controlling shareholder or if on the date of the person’s appointment or within the preceding two years the person or his or her relatives, partners, employers or anyone to whom that person is subordinate, whether directly or indirectly, or entities under the person’s control have or had any affiliation with any of the following, or an affiliated entity: (1) Intercure; (2) any person or entity controlling us on the date of such appointment; (3) any relative of a controlling shareholder; or (4) any entity controlled, on the date of such appointment or within the preceding two years, by Intercure or by a controlling shareholder. If there is no controlling shareholder or any shareholder holding 25% or more of voting rights in the company, a person may not be appointed as an external director if the person has any affiliation to the chairman of the board of directors, the chief executive officer (referred to in Companies Law as a general manager), any shareholder holding 5% or more of the company’s shares or voting rights or the senior financial officer as of the date of the person’s appointment.

The term “controlling shareholder” means a shareholder with the ability, together or with others, to direct the activities of the company, other than by virtue of being an office holder. Without limitation to the above, a shareholder is presumed to have “control” of the company and thus to be a controlling shareholder of the company if the shareholder holds 50% or more of the “means of control” of the company or has the power to prevent the making of business decisions in the corporation, excluding resolutions regarding issuance of control means or regarding sale or liquidation of the corporation's business. “means of control” is defined as (1) the right to vote at a general meeting of a company or a corresponding body of another corporation; or (2) the right to appoint directors of the corporation or its general manager, the right to participate in the profits of the corporation and the right to the company's asset upon dissolution. For the purpose of approving related-party transactions, the term also includes any shareholder that holds 25% or more of the voting rights of the company if the company has no shareholder that owns more than 50% of its voting rights. For the purpose of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.

The term affiliation includes:

• an employment relationship;

• a business or professional relationship maintained on a regular basis;

• control; and

• service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

The term “relative” is defined as a spouse, sibling, parent, grandparent, descendant, spouse’s descendant, sibling and parent and the spouse of each of the foregoing.

The term “office holder” is defined as a chief executive officer (referred to sometimes as the general manager), chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.

A person may not serve as an external director if that person is the controlling shareholder’s relative, or if that person’s relative, partner, employer, a person to whom such person is subordinate (directly or indirectly) or any entity under the person’s control, at the date of appointment or during the previous 2 years, has an affiliation with the company, the controlling shareholder of the company, or controlling shareholder’s relative, or to any affiliated entity, or if such person has a business or professional relationship with any entity that has an affiliation, even if such relationship is - 111 -

intermittent (excluding insignificant relationships). Additionally, any person who has received compensation other than compensation permitted under Companies Law may not serve as an external director

No person can serve as an external director if the person’s position or other affairs create, or may create, a conflict of interest with the person’s responsibilities as a director or may otherwise interfere with the person’s ability to serve as a director or if such a person is an employee of the Israeli Securities Authority or of an Israeli stock exchange. If at the time an external director is appointed all current members of the board of directors, who are not controlling shareholders or relatives of controlling shareholders, are of the same gender, then the external director to be appointed must be of the other gender.

According to regulations promulgated under Companies Law, at least one of the external directors is required to have “financial and accounting expertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed for additional terms unless: (1) such director has “accounting and financial expertise” or (2) he or she has “professional expertise,” and on the date of appointment for another term there is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is at least equal to the minimum number determined appropriate by the board of directors. Certain exemptions are granted to companies that are “dually listed”.

The regulations promulgated under Companies Law define an external director with requisite professional qualifications as a director who satisfies one of the following requirements: (1) the director holds an academic degree in either economics, business administration, accounting, law or public administration, (2) the director either holds an academic degree in any other field or has completed another form of higher education in the company’s primary field of business or in an area which is relevant to his or her office as an external director in the company, or (3) the director has at least five years of experience serving in any one of the following, or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a substantial scope of business, (b) a senior position in the company’s primary field of business or (c) a senior position in public administration.

Until the lapse of a two-year period from the date that an external director of a company ceases to act in such capacity, the company in which such external director served, and its controlling shareholder or any entity under control of such controlling shareholder may not, directly or indirectly, grant such former external director, or his or her spouse or child, any benefit, including by way of (i) the appointment of such former director or his or her spouse or his child as an officer in the company or in an entity controlled by the company’s controlling shareholder, (ii) the employment of such former director, and (iii) the engagement, directly or indirectly, of such former director as a provider of professional services for compensation, directly or indirectly, including via an entity under his or her control. With respect to a relative who is not a spouse or a child, such limitations only apply for one year from the date such external director ceased to be engaged in such capacity.

The provisions of Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:

• such majority includes at least a majority of the shares held by shareholders who are non-controlling shareholders and do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or

• the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the election of the external director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.

The initial term of an external director is three years. Thereafter, an external director may be re-elected by shareholders to serve in that capacity for up to two additional three-year terms, provided that:

• his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such re- - 112 -

election exceeds 2% of the aggregate voting rights in the company. In such event, the external director so reappointed may not be a “Related” or a “Competing Shareholder”, as defined below, or a relative of such shareholder, at the time of the appointment, and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’s reappointment to serve an additional term as external director. The term “Related” or “Competing Shareholder” means a shareholder proposing the reappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of the reappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a business relationship with the company or are competitors of the company;

• the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described above;

• his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above).

The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, may be extended indefinitely in increments of additional three-year terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution to the work of the board of directors and its committees, the re-election for such additional period(s) is beneficial to the company, and provided that the external director is re-elected subject to the same shareholder vote requirements as if elected for the first time (as described above).

External directors may be removed from office by a special general meeting of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage required for their election, after receiving the board of directors arguments for such removal, or by a court, in each case, only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If an external directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is required under the Companies Law to call a shareholders meeting as soon as practicable to appoint a replacement external director.

Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors.

External directors may be compensated only in accordance with regulations adopted under Companies Law.

Statement of Corporate Governance Practices

Intercure’s Canadian corporate governance disclosure obligations are set out in the Canadian Securities Administrators’ NI 52-110, National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58- 101”) and National Policy 58-201 – Corporate Governance Guidelines. These instruments set out a series of guidelines and requirements for effective corporate governance (collectively, the “Guidelines”). The Guidelines address matters such as the constitution and independence of corporate boards, the functions to be performed by boards and their committees and the effectiveness and education of Board members. NI 58-101 requires the disclosure by each listed corporation of its approach to corporate governance with reference to the Guidelines. Such Guidelines will be applicable to Intercure provided that they do not contravene Companies Law.

Set out below is a description of Intercure’s approach to corporate governance in relation to the Guidelines.

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Board Composition

Board of Directors

As of the Closing, it is expected that the Board will be comprised of seven directors:

Name Role Ehud Barak Chairman of the Board Chief Executive Officer, Alexander Rabinovich Director David Salton Director Lennie Grinbaum External Director Gideon Hirshfeld External Director Alon Granot Director Michael Auerbach Director

The primary function of the Board will be to supervise the management of the business and affairs of Intercure, including the responsibility for the strategic planning process, assessing the performance of and overseeing Intercure’s management, the issuance of securities, succession planning, ensuring effective and adequate communication with shareholders, other stakeholders and the public, oversight of Intercure’s internal control and management information systems, corporate governance, director compensation and assessment and approving material transactions and contracts. The Board will also be responsible for reviewing the succession plans for Intercure, including appointing, training and monitoring senior management to ensure that the Board and management have the appropriate skills and experience. The Board has appointed an Audit Committee, and expect to appoint a Compensation Committee and a Corporate Governance and Nominating Committee. See below under “Committees of the Board”. The Board has delegated to the applicable committee those duties and responsibilities set out in each committee’s charter.

The Board has a majority voting policy for the election of directors. For a description of the policy, see “Directors and Officers”.

Independence of the Board

NI 58-101 defines an “independent director” as a director who has no direct or indirect material relationship with Intercure. A “material relationship” is in turn defined as a relationship which could, in the view of the Board, be reasonably expected to interfere with such member’s independent judgment. In determining whether a particular director is an “independent director” or a “non-independent director”, the Board considers the factual circumstances of each director in the context of the Guidelines.

As of Closing, it is expected that the Board will be comprised of seven members, four of whom are “independent directors” within the meaning of NI 58-101. As of Closing, Michael Auerbach, Gideon Hirshfeld, David Salton and Lennie Grinbaum are considered independent for the purposes of NI 58-101.

Meeting in-camera

The Board and committees will meet without management and non-independent directors at meetings of the Board, if considered necessary. These discussions will generally form part of the committee chairs’ reports to the Board. The Chair will chair the meetings and encourage open and candid discussions among the independent directors by providing them with an opportunity to express their views on key topics before decisions are taken.

Succession planning

It is expected that the Corporate Governance and Nominating Committee will provide primary oversight of succession planning for senior management, the performance assessment of Intercure’s officers, and the Chief Executive Officer’s assessments of the other senior officers. From time to time, as appropriate, the Corporate Governance and Nominating

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Committee may conduct in-depth reviews of succession options relating to senior management positions and, when appropriate, may approve the rotation of senior officers into new roles to broaden their responsibilities and experiences and deepen the pool of internal candidates for senior management positions. The independent directors may participate in the assessment of the officers’ performance every year. The Board will approve all appointments of executive officers.

Charters and Position Descriptions

The Board will be responsible for the overall stewardship of Intercure. The Board will discharge this responsibility directly and through delegation of specific responsibilities to committees of the Board, the Chair, and officers of Intercure, all as more particularly described in the Board’s charter that will be adopted by the Board following Closing. The committee charter for the Audit Committee described below under “Committees of the Board-Audit Committee”. The charters of the Compensation Committee and the Corporate Governance and Nominating Committee, once adopted, will set out in writing the responsibilities of the committees vis-à-vis the Board and management of Intercure.

The Board also has, or will have, written position descriptions for the Executive Chairman, chairs of each of the committees of the Board and the Chief Executive Officer. Each position description will set out, without limitation, the requirements and responsibilities of each such position.

Diversity

Intercure recognizes the importance of diversity at the Board and executive officer levels and intends to engage in an ongoing discussion of the representation of women on the Board and in executive officer positions with the Intercure. Written policies and specific targets or quotas for gender or other diversity representation have not been adopted for the Board or for executive officer positions with Intercure due to the small size of these groups and the need to consider a balance of criteria in each individual appointment. It is important that each appointment to the Board and as an executive officer be made, and be perceived as being made, on the merits of the individual and the needs of Intercure at the relevant time. In addition, targets or quotas based on specific criteria could limit the Board’s ability to ensure that the overall composition of the Board and executive officers meets the needs of Intercure and its shareholders. Furthermore, as required by Companies Law, if at the time an external director is appointed all current members of the board of directors, who are not controlling shareholders or relatives of controlling shareholders, are of the same gender, then the external director to be appointed must be of the other gender. In addition, a director of a company shall not be appointed as an outside director of another company if at such time, a director of the other company is acting as an outside director of the first company.

Currently, as to gender, the Board has one woman director and no women executive officers.

Orientation and Continuing Education

It is expected that the Corporate Governance and Nominating Committee will oversee an appropriate orientation for new Board members in order to familiarize them with Intercure and its business (including Intercure’s reporting and organizational structure, strategic plans, significant financial, accounting and risk issues, compliance programs and policies, management and the external auditors), the role of the Board and its committees and the contribution that an individual director is expected to make to the Board, its committees (as applicable) and Intercure.

In addition, Board members are expected to keep themselves current with industry trends and developments and will be encouraged to communicate with Intercure’s officers and, where applicable, auditors, advisors and other consultants of Intercure. Board members have access to Intercure’s in-house and external legal counsel in the event that they raise any questions or matters relating to the Board members’ corporate and director responsibilities and to keep themselves current with changes in legislation. Board members have full access to Intercure’s records.

Nomination of Directors

It is expected that the Corporate Governance and Nominating Committee will be responsible for recommending to the Board candidates for election as directors and candidates for appointment to Board committees.

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Ethical Business Conduct

The Board expects to adopt a Code of Business Conduct and Ethics for Intercure’s directors, officers and employees following Closing, that will set out the Board’s expectations for the conduct of such persons in their dealings on behalf of Intercure.

Insider Trading Policy

The Board has adopted a customary policy relating to the trading in securities of Intercure by directors, executive officers, employees and other insiders of Intercure and its subsidiaries.

Committees of the Board

Audit Committee

The audit committee (the “Audit Committee”) currently consists of three (3) members, David Salton, Lennie Grinbaum and Gideon Hirschfeld, each of whom is and must at all times be financially literate within the meaning of NI 52-110. The relevant education and experience of each member of the Audit Committee is described as part of their respective biographies above under “Overview of the Directors and Officers”.

Israeli Law Matters Pertaining to Audit Committees

Under Companies Law, Intercure is required to appoint an Audit Committee. The Audit Committee must be comprised of at least three directors, including all of the external directors, one of whom must serve as chairman of the committee. Under Companies Law, the Audit Committee may not include the chairman of the Board, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director most of whose livelihood depends on a controlling shareholder.

In addition, under Companies Law, the Audit Committee must consist of a majority of unaffiliated directors. In general, an “unaffiliated director” under Companies Law is defined as either an external director or as a director who meets the following criteria:

• he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident (which does not apply to companies whose securities have been offered outside of Israel or are listed outside of Israel); and

• he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break of less than two years in service shall not be deemed to interrupt the continuation of the service.

Companies Law further requires that generally, any person who does not qualify to be a member of the Audit Committee may not attend the Audit Committee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject; provided, however, that an employee of the company who is not the controlling shareholder or a relative of a controlling shareholder may attend the discussions of the committee, provided that any resolutions approved at such meeting are voted on without his or her presence. A company’s legal advisor and company secretary who are not the controlling shareholder or a relative of a controlling shareholder may attend the meeting and voting sessions, if required by the committee.

The quorum required for the convening of meetings of the Audit Committee and for adopting resolutions by the Audit Committee is a majority of the members of the Audit Committee, provided such majority is comprised of a majority of independent directors, at least one of whom is an external director.

(a) Approval of transactions with related parties

Under Companies Law, the approval of the Audit Committee is required to effect specified actions and transactions with office holders and controlling shareholders and their relatives, or in which they have a personal interest. The - 116 -

Audit Committee may not approve an action or a transaction with a controlling shareholder or with an office holder unless at the time of approval the Audit Committee meets the composition requirements under Companies Law.

(b) Audit Committee role

The Board has adopted an Audit Committee charter setting forth the responsibilities of the audit committee consistent with the rules of the SEC and the Nasdaq Marketplace Rules, which include, among others:

• Retaining and terminating our independent auditors, subject to the ratification of the Board, and in the case of retention, to that of the shareholders;

• Pre-approving of audit and non-audit services and related fees and terms, to be provided by the independent auditors;

• Overseeing accounting and financial reporting processes and audits of financial statements, the effectiveness of internal control over financial reporting and making such reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act;

• Reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication or filing (or submission, as the case may be) to the SEC;

• Recommending to the Board the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;

• Reviewing with the general counsel and/or external counsel, as deem necessary, legal and regulatory matters that could have a material impact on the financial statements;

• Identifying irregularities in our business administration, inter alia, by consulting with the internal auditor or with the independent auditor, and suggesting corrective measures to the Board; and

• Reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services) between Intercure and its officers and directors, or affiliates of such officers or directors, or transactions that are not in the ordinary course of business and deciding whether to approve such acts and transactions if so required under Companies Law.

Under Companies Law, the Audit Committee is responsible for:

• Determining whether there are deficiencies or irregularities in the business management practices of the company, including in consultation with the internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;

• Determining the approval process for transactions with a controlling shareholder or in which a controlling shareholder has a personal interest;

• Determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under Companies Law);

• Where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to the board of directors and proposing amendments thereto;

• Examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;

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• Examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to the board of directors or shareholders, depending on which of them is considering the appointment of our auditor; and

• Establishing procedures for the handling of employees’ complaints as to the management of the business and the protection to be provided to such employees.

Audit Committee Charter

The Board has adopted a written charter for the Audit Committee (the “Charter of the Audit Committee”), which sets out the Audit Committee’s responsibility in reviewing and approving the financial statements of Intercure and public disclosure documents containing financial information and reporting on such review to the Board, ensuring that adequate procedures are in place for the reviewing of Intercure’s public disclosure documents that contain financial information, overseeing the work and reviewing the independence of the external auditors. The Charter of the Audit Committee complies with both the above Israeli legal requirements and Canadian legal requirements. The text of the Charter of the Audit Committee that has been adopted is attached as the “CHARTER OF THE AUDIT COMMITTEE OF Intercure” of this prospectus.

External Audit Service Fees

The fees billed to the LP by its auditor for the financial year ended December 31, 2019 were as follows:

Year Audit Fees Audit-Related Fees Tax Fees All Other Fees 2019 Nil Nil Nil Nil

Notes: (1) Audit‐related fees include fees paid to the LP’s auditors for statutory audits, attestation services, quarterly reviews and due diligence services. (2) Tax fees include fees paid for preparation of the LP’s annual tax return. The fees billed to Intercure by its auditor for the financial years ended December 31, 2019 and 2018 were as follows:

Year Audit Fees Audit-Related Fees Tax Fees All Other Fees 2019 160,000 NIS Nil Nil Nil 2018 200,000 NIS Nil Nil Nil

Compensation Committee

Following Closing, the Compensation Committee will be comprised of directors that are considered to be “independent” as defined in NI 58-101. A charter for the Compensation Committee will be adopted following Closing.

Israeli Law Matters Pertaining to Compensation Committees

Under Companies Law, the board of directors of a public company must appoint a compensation committee.

The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy and which we are required to adopt under Companies Law. That policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval, or a Special Approval for Compensation, requires that either:

• At least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such matter and who are present and voting (excluding abstentions) are voted in favor; or

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• The total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the matter and who vote against, does not exceed 2% of the company’s aggregate voting rights

The compensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee, and one of the external directors must serve as chairman of the committee. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to who may not be a member of the committee.

The Compensation Committee consists of three (3) members, David Salton, Lennie Grinbaum and Gideon Hirschfeld and assists the Board in determining compensation for Intercure’s directors and officers. The Board has determined that each member of our compensation committee is independent under the Nasdaq Marketplace Rules (and as defined in NI 58-101), including the additional independence requirements applicable to the members of a compensation committee.

In accordance with Companies Law, the roles of the compensation committee are, among others, as follows:

• Recommending to the board of directors with respect to the approval of the compensation policy for office holders and, once every three years regarding any extensions to a compensation policy that was adopted for a longer period of time;

• Reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any amendments or updates of the compensation plan;

• Resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and

• Exempting, under certain circumstances, a transaction with a candidate to the position of chief executive officer from the approval of the general meeting of our shareholders.

The Board has adopted a compensation committee charter setting forth the responsibilities of the committee consistent with the Nasdaq Marketplace Rules.

In general, under Companies Law, a public company must have a compensation policy approved by the board of directors after receiving and considering the recommendations of the compensation committee. In addition, the compensation policy must be approved at least once every three years, first, by the Board, upon recommendation of the Compensation Committee, and second, by a majority of the Intercure Shares present, in person or by proxy, and voted at a shareholders meeting, provided that either:

• Such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such compensation arrangement and who are present and voting (excluding abstentions); or

• The total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement, does not exceed 2% of the company’s aggregate voting rights.

Pursuant to Companies Law, under special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders on the condition that the compensation committee and then the board of directors decide, on the basis of detailed arguments and after discussing again the compensation policy, that approval of the compensation policy, despite the objection of the meeting of shareholders, is for the benefit of the company.

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain

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factors, including advancement of the company’s objectives, business plan and long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

• The education, skills, experience, expertise and accomplishments of the relevant office holder;

• The office holder’s position, responsibilities and prior compensation agreements with him or her;

• The ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost, the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in the company;

• If the terms of employment include variable components—the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and

• If the terms of employment include retirement grants—the term of employment or office of the office holder, the terms of his or her compensation during such period, the company’s performance during the such period, his or her individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.

The compensation policy must also include, among others:

• With regards to variable components:

• With the exception of office holders who report directly to the chief executive officer, determining the variable components on long-term performance basis and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder’s shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder contribution to the company; and

• The ratio between variable and fixed components, as well as the limit of the values of variable components at the time of their grant.

• A condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;

• The minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and

• A limit to retirement grants.

Intercure’s compensation policy is designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of its directors and executive officers with long-term performance and provide a risk management tool. To that end, a portion of an executive officer compensation package is targeted to reflect short and long-term goals, as well as the executive officer’s individual performance. On the other hand, Intercure’s compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.

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Corporate Governance and Nominating Committee

It is expected that the Corporate Governance and Nominating Committee will be formed following Closing and will be comprised of directors that are considered to be “independent” as defined in NI 58-101. A charter for the Corporate Governance and Nominating Committee will be adopted following Closing.

Certain Israeli Corporate Compliance Matters

Internal Auditor

Under Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the Audit Committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or chief executive officer of the company. As of the date of this prospectus, Intercure’s internal auditor is Mr. Yisrael Gewitz.

Fiduciary Duty Matters

Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company.

The duty of care of an office holder is based on the duty of care set forth in connection with the tort of negligence under the Israeli Torts Ordinance (New Version), 5728-1968. The duty of care requires an office holder to act with the degree of proficiency with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes, among others, a duty to use reasonable means, in light of the circumstances, to obtain:

• Information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

• All other important information pertaining to these actions.

The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes, among others, the duty to:

• Refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other duties or personal affairs;

• Refrain from any activity that is competitive with the business of the company;

• Refrain from exploiting any business opportunity of the company for the purpose of gaining a personal benefit for himself or herself or for others; and

• Disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

Intercure may approve an act specified above that would otherwise constitute a breach of the duty of loyalty of an office holder, provided, that the office holder acted in good faith, the act or its approval does not harm the company, and the office holder discloses his or her personal interest, including any related material information or document, a sufficient time before the approval of such act. Any such approval is subject to the terms of Companies Law, setting forth, among other things, the methods of obtaining such approval.

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Disclosure Matters

Disclosure of personal interests of an office holder and approval of acts and transactions

Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information or documents relating to any existing or proposed transaction with the company. An interested office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. An office holder is not obliged to make such disclosure if the personal interest of the office holder derives solely from the personal interest of his or her relative in a transaction that is not considered as an extraordinary transaction.

Under Companies Law, once an office holder has complied with the above disclosure requirements, a company may approve, in a manner stipulated in the Companies Law and subject to the conditions therein, a transaction between the company and the office holder or a third party in which the office holder has a personal interest, or approve an action by the office holder that would otherwise be deemed a breach of the duty of loyalty, however, a company may not approve a transaction or action that is not performed by the office holder in good faith or is not in the company’s interest.

Under Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder or a transaction with a third party in which the office holder has a personal interest and an action of an office holder that would otherwise be deemed a breach of the duty of loyalty, which is not an extraordinary transaction, requires approval of the board of directors. The Intercure Articles do not provide otherwise.

Under Companies Law, an extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s audit committee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requires approval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the chief executive officer (apart from a number of exceptions), then such arrangement is subject to a “Special Approval for Compensation”. Arrangements regarding the compensation, indemnification or insurance of a director or the chief executive officer of the company, require the approval of the compensation committee, board of directors and, subject to certain exceptions, shareholders by an ordinary majority, in that order, and in the case of the chief executive officer or under certain circumstances, a “Special Approval for Compensation”.

An office holder who has a personal interest in a matter that is considered at a meeting of the board of directors or the audit committee may generally not be present at the meeting or vote on the matter unless a majority of the directors or members of the audit committee have a personal interest in the matter, or unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present to present but not vote on the transaction that is subject to approval. If a majority of the directors have a personal interest in the matter, such matter also requires approval of the shareholders of the company.

Under Companies Law, the definition of a “personal interest” includes the personal interest of a person in an action or a transaction of a company, including the personal interest of such person’s relative or the interest of any corporation in which the person and/or such person’s relative is a director or chief executive officer, a 5% or more shareholder or holds 5% or more of the voting rights, or has the right to appoint at least one director or the chief executive officer, but excluding a personal interest stemming solely from the fact of holding shares in the company. A personal interest also includes (1) a personal interest of a person who votes according to a proxy of another person, including in the event that the other person has no personal interest, and (2) a personal interest of a person who gave the proxy to another person to vote on his or her behalf, regardless of whether the proxy holder has discretion how to vote on the matter.

Under Companies Law, an “extraordinary transaction” is defined as any of the following:

• A transaction other than in the ordinary course of business;

• A transaction that is not on market terms; or

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• A transaction that may have a material impact on the company’s profitability, assets or liabilities.

Disclosure of personal interests of a controlling shareholder and approval of transactions

Under Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. Unless exempted under Companies Law, extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, which includes transactions for the provision of services by a controlling shareholder or his or her relative, whether directly or indirectly, including through a company controlled by such controlling shareholder, and if such controlling shareholder or relative thereof is an office holder in the company, any transactions regarding his or her terms of office, require the approval of the audit committee, the board of directors and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’ meeting. In addition, the shareholder approval must fulfill one of the following requirements, which we refer to as a Special Majority:

• At least a majority of the shares held by shareholders who do not have a personal interest in the transaction are voted in favor of approving the transaction, excluding abstentions; or

• The shares voted by shareholders who do not have a personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.

In addition, an extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest, and an engagement of the company, directly or indirectly, with a controlling shareholder or a controlling shareholder’s relative (including through a corporation controlled by a controlling shareholder), regarding the company’s receipt of services from the controlling shareholder, and if such controlling shareholder is also an office holder or employee of the company, regarding his or her terms of employment, in each case with a term of more than three years requires the abovementioned approval every three years, however, transactions not involving the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances. In addition, transactions with a controlling shareholder or a controlling shareholder’s relative who serves as an officer in a company, directly or indirectly (including through a corporation under his control), involving the receipt of services by a company or their compensation can have a term of five years from the company’s initial public offering under certain circumstances.

Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require the approval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with the company’s stated compensation policy.

Pursuant to regulations promulgated under Companies Law, certain transactions and arrangements with a controlling shareholder or his or her relative, or with directors or office holders, which would otherwise require approval of a company’s shareholders, may be exempt from shareholder approval under certain conditions.

Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.

Duties of shareholders

Under Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, including, among other things, when voting at general meetings of shareholders on the following matters:

• An amendment to the articles of association;

• An increase in the company’s authorized share capital;

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• A merger; and

• The approval of related party transactions and acts of office holders that require shareholder approval.

A shareholder also has a general duty to refrain from discriminating against other shareholders.

The remedies generally available upon a breach of contract will also apply to a breach of the above mentioned shareholder duties, and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder.

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or any other power with respect to the company, has a duty to act with fairness towards the company. Companies Law does not describe the substance of this duty, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.

Approval of private placements

Under Companies Law and the regulations promulgated thereunder, a private placement that involves a controlling shareholder, a material private placement, an extra-ordinary private placement, and/or TASE registration of securities does not require approval at a general meeting of the shareholders of a company; provided however, that in special circumstances, such as a private placement completed intended to obviate the need to control a special tender offer, or a private placement which qualifies as a related party transaction, approval at a general meeting of the shareholders of a company is required.

Exculpation, Insurance and Indemnification of Office Holders

Under Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. A company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of the duty of care but only if a provision authorizing such exculpation is included in its articles of association. The Intercure Articles include such a provision. An Israeli company may not exculpate a director from liability arising out of a breach of the duty of care with respect to a dividend or distribution to shareholders.

Under Companies Law and Israeli securities law, a company may indemnify an office holder in respect of the following liabilities, payments and expenses incurred for acts performed as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:

• A monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such undertaking must be limited to certain events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the foreseen events and amount or criteria;

• Reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder as (1) a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; or (2) in connection with a monetary sanction;

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• A monetary liability imposed on him or her in favor of an injured party at an Administrative Procedure (as defined below) in certain circumstances;

• Expenses incurred by an office holder in connection with an Administrative Procedure under the Israeli securities law, including reasonable litigation expenses and reasonable attorneys’ fees; and

• Reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent.

An “Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to Israeli securities law.

Under Companies Law and Israeli securities law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

• A breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;

• A breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

• A monetary liability imposed on the office holder in favor of a third party;

• A monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant certain Israeli securities law; and

• Expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

Under Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

• A breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

• A breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

• An act or omission committed with intent to derive illegal personal benefit; or

• A fine or forfeit levied against the office holder.

Under Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

The Intercure Articles permit Intercure to exculpate, indemnify and insure our office holders as permitted under Companies Law. Intercure’s office holders are currently covered by a directors and officers’ liability insurance policy.

Intercure has entered into agreements with each of its directors and executive officers exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of the duty of care, and - 125 -

undertaking to indemnify them to the fullest extent permitted by law. The maximum amount set forth in such agreements is (1) with respect to indemnification in connection with a public offering of our securities, the gross proceeds raised by us and/or any selling shareholder in such public offering, and (2) with respect to all other permitted indemnification, the lower of (i) an amount equal to 25% of Intercure’s equity on a consolidated basis, based on our most recent financial statements made publicly available before the date on which the indemnity payment is made and (ii) $20 million.

REGULATORY APPROVALS

The completion of the Qualifying Transaction is conditional upon, among other things, acceptance by the NEO and the TSX of the Qualifying Transaction, and the conditional approval of the Nasdaq, the TSX and the TASE to list Intercure Shares. In addition, the Qualifying Transaction is conditional on the overall approval by the Israeli Securities Authority. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not accepted the Qualifying Transaction and neither the TSX or the Nasdaq have approved the listing of any Intercure Shares and there is no assurance that they will. In addition, IMCA’s approval will be required to the extent the Qualifying Transaction results in any new shareholders of Intercure holding more than 4.99% of the issued and outstanding Intercure Shares at Closing.

RISK FACTORS

Unitholders should be aware that there are various known and unknown risk factors in connection with the Qualifying Transaction and Intercure generally. Unitholders should carefully consider the risks identified in this prospectus under the heading “Caution Regarding Forward-Looking Statements” and “Risk Factors” before deciding whether or not to exercise any Redemption Right they may have with respect to their Units.

Risk Factors Related to the Pharmaceutical-Grade Cannabis Business and the Medical-Use Cannabis Industry

The medical-use cannabis industry in Israel and other countries is highly regulated and new laws or regulations or changes to existing laws or regulations or changes in their enforcement or application could materially and adversely affect our business.

The successful execution of our pharmaceutical-grade cannabis business objectives is contingent upon our compliance with all applicable laws and regulatory requirements in Israel and other jurisdictions, including our ability to obtain all required regulatory approvals for our production and distribution activities involving our pharmaceutical-grade cannabis and cannabis-based products.

The administration, application and enforcement of the regime established by the IMCA or the administration, application and enforcement of the laws of other countries by the appropriate regulators in those countries, on us and our business may significantly delay or impact our ability to participate in the Israeli medical-use cannabis market or medical-use cannabis markets outside of Israel, and to produce and/or distribute pharmaceutical-grade cannabis and cannabis-based products for medical use.

Further, the medical-use cannabis industry is a relatively new industry globally and regulation of cannabis for medical use is likely to evolve significantly. The regulatory authorities in the countries in which we operate through our joint ventures, or to which we may export our pharmaceutical-grade cannabis or cannabis-based products, and those in which we plan to operate in in the future, may change the administration, interpretation or application of applicable regulations or their compliance or enforcement procedures at any time. Any such changes could require us to revise our business operations, including our compliance procedures or planned procedures, requiring us to incur increased costs and expend additional resources. There is no assurance that we will be able to comply or continue to comply with the laws and regulations of all of the jurisdictions in which we currently operate or plan to have operations in in the future.

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We are, and will continue to be, dependent upon regulatory approvals and licenses for our ability to produce, import and distribute our pharmaceutical-grade cannabis products, and these regulatory approvals are subject to ongoing compliance requirements, reporting obligations and fixed terms requiring renewal.

Our ability to produce, import and distribute our pharmaceutical-grade cannabis products for medical use in Israel is dependent on licenses and certifications issued by the IMCA to us. We or our business partners hold the following licenses related to the breeding, cultivation, manufacturing, distribution and security of pharmaceutical-grade cannabis in Israel: Israel Medical Cannabis—Good Agriculture Practices (“IMC-GAP”); Israel Medical Cannabis—Good Manufacturing Practices (“IMC-GMP”); Israel Medical Cannabis—Good Distribution Practices, (“IMC-GDP”); and Israel Medical Cannabis—Good Security Practices (“IMC-GSP”).

We hold licenses to breed and cultivate pharmaceutical-grade cannabis in Israel. In addition, in our primary facilities in the Southern and Northern Kibbutz, the production processes implemented are certified under the IMC-GAP and IMC-GSP standards. In addition, inspectors routinely assess our facilities for compliance with applicable regulatory requirements. For example, our facility in northern Israel is subject to at least one inspection each calendar quarter.

In January 2019, the Israeli government approved the export of pharmaceutical-grade cannabis and cannabis products. We anticipate that exports will begin once guidelines and processes are finalized by the relevant Israeli government agencies later this year, although the finalization process may take longer than anticipated. We may be required to obtain and maintain certain permits, licenses or other approvals from regulatory agencies in Israel in order to export our products out of Israel. In addition, the import of our pharmaceutical-grade cannabis products into other jurisdictions, such as Germany, the United Kingdom and other European Union member states, is subject to the regulatory requirements of each respective jurisdiction. In addition, the export and import of pharmaceutical-grade cannabis is subject to United Nations treaties establishing country-by-country quotas and our export and import permits are subject to these quotas which could limit the amount of pharmaceutical-grade cannabis we can export to any particular country.

We have recently entered into agreements with licensed producers with pharmaceutical production and/or manufacturing facilities in Denmark and a pharmaceutical distributor in Germany. As part of these agreements, we will establish separate joint ventures for the production and manufacturing of our pharmaceutical-grade cannabis products for distribution throughout the European Union, subject to compliance with regulatory requirements for marketing products in the European Union market under the Good Manufacturing Practices of the European Union, (“EU-GMP”) standards. Our joint venture partner in Denmark holds an official license, granted by the Danish Medicines Agency for the production of cannabis and is in the final stages of the establishment of an indoor production and manufacturing facility, which we intend to have certified under the EU-GMP standards. Our second joint venture partner in Denmark holds an official license, granted by the Danish Medicines Agency for the production of cannabis.

We have also established a joint venture with our partner in Canada, held 51-49 by us, for the production and distribution of pharmaceutical-grade cannabis-based products for medical use in Canada and, after receiving EU-GMP certification, the European Union.

The continuation or expansion of our international operations depends on our ability to renew or secure permits, licenses or other approvals. In the event that we, or our partners, are found not to be in compliance with any applicable authorities, regulations, or conditions, we and our partners’ existing licenses and any new licenses that we may obtain may be revoked or restricted. Should we fail to qualify for licenses or certifications under any of these authorities, should we fail to comply with any applicable regulatory requirements or with conditions set out under our licenses, should our licenses not be renewed when required, or be renewed on different terms, or should our licenses be revoked, we may be unable to execute our business plan. This would have a broad impact on us and could have a material adverse effect on our businesses, financial condition, results of operations and prospects and, as a result, investors could lose all or most of their investment. In addition, any such action could also cause us significant reputational harm, which, in turn, could seriously harm us.

In addition, if we fail to comply with applicable regulatory requirements, we may be subject to enforcement proceedings in any jurisdiction in which we conduct our business, which may result in damage awards, a suspension of our existing approvals, a withdrawal of our existing approvals, the denial of the renewal of our existing licenses or any future approvals, recalls of our products, product seizures, the imposition of future operating restrictions on our business or operations or the imposition of civil or criminal fines or penalties against us, our officers and directors and

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other parties. These enforcement actions could divert management’s attention and resources away from our business operations and delay or entirely prevent us from continuing our business as planned.

Furthermore, our strategic partnerships with leading brands (Tilray, Organigram, Aphria, Fotmer) depends on our ability to obtain the required import/export permits of cannabis and cannabis-based products into Israel and/or other countries. Any regulatory decision to postpone such permits may negatively impact our ability to operate our partnerships effectively and profitably.

Furthermore, our pharmacy operations (via Cannolam) are operating in accordance to the IMCA regulations as of the date of this prospectus, which limits a patients’ ability to fill their prescriptions to only those authorized pharmacies. Any changes to this regulation that will revoke and/or change the place of issuance and sales of the medical cannabis products, can impact our pharmacy operations and expansion plans for the future.

Our operations at the Northern Kibbutz Facility and the Southern Kibbutz Facility involve a partnership with two kibbutz entities that have provided their lease to the land as part of the partnership. These leases to the land are subject to regulatory approval.

In both our Northern Kibbutz Facility and Southern Kibbutz Facility, our partners are Kibbutz entities which were granted a lease for their land by the Land Administration. The leases authorize use of the land for agriculture purposes. In order to verify that the Kibbutz does not use the land for other purposes, every partnerships needs to be approved in advance and pursuant to Agricultural Settlement Law, must obtain an excessive use permit.

We hold such excessive use permits for both facilities, with the one applicable to the Northern Kibbutz Facility valid until 2027 and the one applicable to the Southern Kibbutz Facility valid until 2025. We do not currently believe that those permits will not be renewed when they expire. However, the renewal of these permits is subject to approval, which may or may not be granted and may be subject to additional restrictions, in each case, potentially impacting our ability to operate the facilities profitably.

Research on the effects of cannabis has been limited and future clinical trials may be expensive, time consuming, uncertain, susceptible to change, delay or termination, and may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy and dosing of cannabis.

Research regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or specific cannabinoids such as cannabidiol, or CBD, and tetrahydrocannabinol, or THC, remains in relatively early stages and there have been only a few clinical trials that have been conducted on these topics. Clinical trials are expensive, time consuming and difficult to design and implement. The results of preclinical testing and clinical trials are uncertain, and a product can fail at any stage of clinical development. Even if the results of our clinical trials are favorable, clinical trials for a number of our products may be ongoing for several years and may take significantly longer to complete. Moreover, the research process can take many years, and may include post-marketing studies and surveillance, which could result in substantial additional expense.

We have not completed any clinical trials using cannabis or cannabis-based products to date. The results contained in the articles, reports and studies referenced in this prospectus are not necessarily predictive of future results. Future research and clinical trials may draw opposing conclusions or may reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to the use of cannabis as a treatment for a medical indication. This could result in restrictions on the distribution of our products, the loss of regulatory approval for an approved medical indication, or an adverse effect on the social acceptance of cannabis for medical use or the demand for our pharmaceutical-grade cannabis products.

The medical-use cannabis industry and market may not continue to exist or develop as we anticipate and we may ultimately be unable to succeed in this industry and markett. and market as well as our ability to attract and retain patients. Demand for pharmaceutical-grade cannabis and cannabis-based products is dependent on a number of social, political and economic factors that are beyond our control. Our projections on the number of people who have the potential to benefit from treatment with pharmaceutical-grade cannabis or cannabis-based products are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, and market research, - 128 -

and may prove to be incorrect. There is no assurance that an increase in existing demand will occur, that we will benefit from any such increased demand, or that our business will remain profitable even in the event of such an increase in demand.

In addition to being subject to the general business risks applicable to a business involving an agricultural product and a regulated medical product, we need to continue to build brand awareness within the medical-use cannabis industry and make significant investments in our business strategy and production capacity. These investments include introducing new pharmaceutical-grade cannabis and cannabis-based products into the markets in which we operate, adopting quality assurance protocols and procedures, building our international presence and undertaking regulatory compliance efforts. These activities may not promote our pharmaceutical-grade cannabis and cannabis-based products as effectively as intended, or at all, and we expect that our competitors will undertake similar investments to compete with us for market share.

Competitive conditions, physician preferences, patient requirements and spending patterns in the medical-use cannabis industry and market are relatively unknown and may have be uniquely impacted by circumstances unlike those in other existing industries and markets. Our target patient population may be smaller than expected, may not be otherwise amenable to treatment with our products, or may become increasingly difficult to identify and access. Further, we may not be successful in our efforts to attract and retain patients, develop new pharmaceutical-grade cannabis and cannabis-based products, produce and distribute these products to the markets in which we operate or to which we export in time to be effectively commercialized. In order to be successful in these activities, we may be required to expend significantly more resources than we currently anticipate, which could adversely affect our business, financial condition, results of operations and prospects.

We compete for market share with companies that may have longer operating histories, more financial resources, and greater manufacturing and marketing experience than us.

We face competition from many different sources, including companies that produce and distribute cannabis for medical use, as well as major pharmaceutical, specialty pharmaceutical and biotechnology companies. We anticipate intensifying competition in the medical-use cannabis industry as new jurisdictions allow for the production and distribution of cannabis products, new therapies are approved and advanced technologies become available.

We currently compete directly with other licensed producers of pharmaceutical-grade cannabis and cannabis-based products in Israel. In the future, we expect to compete with licensed producers who choose to distribute pharmaceutical-grade cannabis products in fully regulated jurisdictions, such as European Union member states. In Canada, we plan to compete with licensed producers who decide to market their products in the medical-use market. Many of our competitors have substantially greater financial, technical and human resources than us. Competitors may also have more experience developing, obtaining regulatory approval for, and marketing products or treatments in the markets where we operate or where we are planning to operate. These factors could give our competitors an advantage in their ability to recruit and retain qualified personnel, produce products that meet regulatory standards, and commercialize their products.

It is possible that the medical-use cannabis industry will undergo consolidation, creating larger companies with financial resources, production, manufacturing, distribution and commercialization capabilities and product offerings that are greater than ours. As a result of any of these factors, we may be unsuccessful in conducting our business as we currently envision, or at all.

The legal and illegal use of cannabis for non-medical purposes may have a significant negative effect on the medical-use cannabis industry and our pharmaceutical-grade cannabis business.

The jurisdictions in which we plan to operate may legalize the production, manufacturing, distribution and purchase of cannabis for non-medical use. As a result, individuals who currently rely upon the medical-use cannabis market to supply pharmaceutical-grade cannabis and cannabis-based products for their medical treatment may instead seek cannabis and cannabis-based products through alternative-use cannabis markets. In addition, many regulatory regimes permit patients to produce a limited amount of cannabis for their own medical purposes or to designate a person to produce a limited amount of cannabis on their behalf for such purposes. Widespread use of these markets or methods for obtaining cannabis or cannabis-based products could reduce the current or future consumer demand for our pharmaceutical-grade cannabis and cannabis-based products. - 129 -

We also compete with unlicensed and unregulated cannabis market participants, including individuals or groups that are able to produce cannabis without a license, illegal dispensaries and black market participants selling cannabis and cannabis-based products. These competitors may be able to offer products with higher concentrations of certain cannabinoids than we are authorized to produce and may sell and use delivery methods, including edibles, concentrates and extract vaporizers, that we are currently prohibited from offering in the medical-use cannabis market. The competition presented by these unregulated participants, the willingness of patients to purchase unregulated products in lieu of purchasing from licensed producers for any reason, or any inability of law enforcement authorities to enforce existing laws prohibiting the unlicensed production and distribution of cannabis and cannabis-based products, could adversely affect our market share, result in increased competition through the black market for cannabis or have an adverse impact on the public perception of the medical-use cannabis industry and licensed cannabis producers and distributors. As a result of the alternative avenues available for the production and sale of cannabis, we may incur reduced sales and revenue.

We are exposed to risks related to the laws of various countries as a result of our international operations.

We currently plan to expand our operations across multiple countries. As a result, we will be exposed to political, economic, legal and other risks and uncertainties associated with operating in or exporting to various jurisdictions. These risks and uncertainties include, but are not limited to, changes in the laws, regulations and policies governing the production, sale and use of pharmaceutical-grade cannabis and cannabis-based products, political instability, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation and changing political conditions and governmental regulations relating to foreign investment and the medical-use cannabis industry more generally.

Any changes to the laws, regulations and policies, general economic policies, or political attitude related to the advertising, production, sale and use of cannabis and cannabis-based products for medical use may adversely affect the operations or profitability of our international operations. Specifically, our operations may be affected to varying degrees by government regulations with respect to, but not limited to, restrictions on advertising, production, price controls, export controls, controls on currency remittance, increased income taxes, restrictions on foreign investment, land and water use restrictions and government policies rewarding contracts to local competitors or requiring domestic producers or vendors to purchase supplies from a particular jurisdiction. Failure to comply strictly with applicable laws, regulations and local practices could result in additional taxes, costs, civil or criminal fines or penalties or other expenses being levied on our international operations, as well as other potential adverse consequences such as the loss of necessary permits or governmental approvals.

Furthermore, although we plan to facilitate the export of our pharmaceutical-grade cannabis-based products to countries in the European Union, there is no assurance that these countries will authorize the import of our pharmaceutical-grade cannabis and cannabis-based products, or that Israel or any location from which we produce our products will authorize or continue to authorize such exports. Each country in the European Union (or elsewhere) may impose restrictions or limitations on imports that require the use of, or confer significant advantages upon, producers within that particular country. As a result, we may be required to establish production facilities in those countries in the European Union in which we wish to distribute our pharmaceutical-grade cannabis and cannabis-based products in order to take advantage of any legislation that favors producers located in these countries. As a result, we may be required to utilize less efficient production methods and expend significantly more resources than we currently anticipate..

Our business is subject to, or may become subject to, a variety of U.S. and foreign laws relating to the production and distribution of cannabis, many of which are unsettled and still developing, and which could subject us to claims or otherwise harm our business.

We are subject to, or may become subject to, a variety of laws in the United States, Israel and elsewhere. In the United States, despite cannabis having been legalized at the state level for medical use in many states and for adult use in a number of states, cannabis continues to be categorized as a Schedule I controlled substance under the CSA and subject to the Controlled Substances Import and Export Act, (“CSIEA”). We may engage in activities in the United States involving certain corporate and administrative matters, including accounting, legal and creative activities, as well as the offer and sale of our securities and the anticipated listing of our securities on the Nasdaq. We do not produce, manufacture or distribute any cannabis or cannabis-based products in the United States. Therefore, we do not believe that, as a result of our engaging in any of the aforementioned activities, we would be subject to the CSA or CSIEA.

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Nonetheless, violations of any U.S. federal laws and regulations, such as the CSA and the CSIEA, could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by either the U.S. federal government or private citizens or criminal charges, including, but not limited to, the disgorgement of profits, cessation of business activities or divestiture.

We are subject to, or may become subject to, a variety of laws and regulations in the United States, Israel and elsewhere that prohibit money laundering, including the Money Laundering Control Act (United States), as amended, and the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by governmental authorities in the United States, Israel or any other jurisdiction in which we have business operations or to which we export. Although we believe that none of our activities implicate any applicable money laundering statutes, in the event that any of our business activities, any dividends or distributions therefrom, or any profits or revenue accruing thereby are found to be in violation of money laundering statutes, such transactions may be viewed as proceeds of crime under one or more of the statutes described above or any other applicable legislation, and any persons, including such U.S.-based investors, found to be aiding and abetting us in such violations could be subject to liability. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction and involve significant costs and expenses, including legal fees. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures.

We, or the medical-use cannabis industry more generally, may receive unfavorable publicity or become subject to negative patient, physician or investor perception.

We believe that the medical-use cannabis industry is highly dependent upon positive patient, physician or investor perception regarding the benefits, safety, efficacy and quality of the cannabis distributed to patients for medical use. Perception of the medical-use cannabis industry and pharmaceutical-grade cannabis cannabis-based products may be significantly influenced by scientific research or findings, regulatory investigations, litigation, political statements, media attention and other publicity (whether or not accurate or with merit) both in Israel and in other countries relating to the use of cannabis or cannabis-based products for medical purposes, including unexpected safety or efficacy concerns arising with respect to pharmaceutical-grade cannabis cannabis-based products or the activities of medical- use cannabis industry participants.

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-use cannabis market or any particular pharmaceutical-grade cannabis or cannabis-based product or will be consistent with prior publicity. Adverse future scientific research reports, findings and regulatory proceedings that are, or litigation, media attention or other publicity that is, perceived as less favorable than, or that questions, earlier research reports, findings or publicity (whether or not accurate or with merit) could result in a significant reduction in the demand for our pharmaceutical-grade cannabis- based products or cannabis for medical use more generally. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis for medical purposes, or our current or future products specifically, or associating the use of cannabis with illness or other negative effects or events, could adversely affect us. This adverse publicity could arise even if the adverse effects associated with cannabis or cannabis-based products resulted from products that are not derived from pharmaceutical-grade cannabis or a patients’ failure to use such products legally, appropriately or as directed.

We are subject to risks inherent to an agricultural business, which include but are not limited to the risk of crop failure.

We currently breed, cultivate and process pharmaceutical-grade cannabis for medical use at our facility in northern Israel, which to date has been the only active site for our operations. Our business is subject to the risks inherent to the agricultural business, including the risks of crop failure presented by weather, insects, plant diseases and similar agricultural factors. There can be no assurance that natural elements, such as insects and plant diseases, will not interrupt our production activities or have an adverse effect on our business. If such disruption of operations at our northern Israel facility should occur, it could significantly interfere with our ability to continue our development and production activities.

Additionally, our products have a limited shelf storage life. Our bulk pharmaceutical-grade cannabis products have a shelf life of approximately six to 12 months, and our pharmaceutical-grade cannabis oil products have a shelf life of

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approximately two to three years. Supply chain disruptions or limited sales may lead to product spoilage or could impair our ability to meet future demand, which may cause harm to the reputation of our brand and our business.

General Business Risks and Risks Related to Our Financial Condition and Operations

We have a limited operating history upon which investors can evaluate our future prospects.

We have a limited operating history upon which investors may evaluate the future prospects of our business plan. Our business and prospects must be considered in light of the potential risks, problems, delays, uncertainties and complications encountered in connection with the development of a relatively new business and the creation of a new industry. The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products, or that although functional and scalable, our products will not be economical to commercialize; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors commercialize a superior or equivalent product; that we are not able to upgrade and develop new technologies or enhanced products; or the failure to receive necessary regulatory clearances for our operations and products. To successfully introduce and distribute products at a profit, we must establish brand name recognition and competitive advantages for our products. There can be no assurance that we can successfully address these challenges. If we are unsuccessful, we and our business, financial condition and operating results could be materially and adversely affected.

Our current and future expense levels are based largely on estimates of planned operations and future revenues. It is difficult to accurately forecast future revenues because the medical-use cannabis market has not been fully developed, and we can give no assurance that our products will continue to fuel revenue growth. If our forecasts prove incorrect, our business, operating results and financial condition will be materially and adversely affected. Moreover, we may be unable to adjust our spending in a timely manner to compensate for any unanticipated reduction in the revenue we expect to generate from our products. Consequently, any failure to generate revenues may immediately and adversely affect our business, financial condition and operating results.

We have had negative cash flow from operating activities for the year ended December 31, 2019

Intercure had negative cash flow from operating activities for the year ended December 31, 2019. There is no assurance that any of Intercure’s operations will generate earnings, operate profitably or provide a return on investment in the future. Accordingly, Intercure may be required to obtain additional financing in order to meet its future cash commitments.

We may be adversely impacted by the failure of any of our joint ventures or by our failure, or the failure of our joint venture partners, to fulfill obligations to the joint venture.

We are a party to several joint ventures, and may in the future enter into new joint ventures. We currently depend on our joint ventures to produce, manufacture and distribute our products outside of Israel. Our joint ventures face all of the inherent risks associated with production, manufacturing, distribution and operations. In addition, we face the risk that either we, or our joint venture partners, will not meet our obligations under the joint venture agreements. If one of our joint venture partners fails to fulfill its obligations due to strategic business interests, financial conditions or any other reason, we may be required to spend additional resources, or we may not be able to continue such operations, in which case we may suffer losses. Such expenses or losses may be significant and may have an adverse effect on our financial position or results of operations.

Our investments in our current or future joint ventures may be adversely affected by our lack of sole decision- making authority and disputes between us and our joint venture partners.

Under the terms of our joint venture agreements, we are not in a position to exercise sole decision-making authority regarding the joint venture. Our joint venture partners may have different economic or other business interests or goals that are inconsistent with our business interests and goals, and may take actions contrary to our policies or objectives, which may result in poor or delayed business decisions. The dissolution of a joint venture could lead to uncertainties, disputes or other issues with respect to each of the joint venture partners’ rights.

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If we are not able to comply with all safety, health and environmental regulations applicable to our operations and the medical-use cannabis industry, we may be held liable for any breaches of those regulations.

Safety, health and environmental laws and regulations affect nearly all aspects of our operations, including product development, working conditions, waste disposal, emission controls, the maintenance of air and water quality standards and land reclamation, and, with respect to environmental laws and regulations, impose limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Continuing to meet the standards for pharmaceutical-grade cannabis and cannabis-based products requires satisfying additional standards for the conduct of our operations and subjects us or our partners to ongoing compliance inspections in respect of these standards. Compliance with safety, health and environmental laws and regulations can require significant expenditures, and any failure to comply with such safety, health and environmental laws and regulations may result in the imposition of fines and penalties, the temporary or permanent suspension of operations, the imposition of clean-up costs resulting from contaminated properties, the imposition of damages and the loss of or refusal of governmental authorities to issue permits or licenses to us or our partners or to certify us or our partners compliance with applicable standards, including the IMC-GAP, IMC-GMP, IMC-GDP or IMC-GSP standards in Israel. Exposure to these liabilities may arise in connection with our existing operations, our historical operations and operations that may in the future be closed or sold to third parties. We could also be held liable for worker exposure to hazardous substances and for accidents causing injury or death. There can be no assurance that we will at all times be in compliance with all safety, health and environmental laws and regulations notwithstanding our attempts to comply with such laws and regulations.

Changes in any applicable safety, health and environmental laws or regulations may impose 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 and employees. We are not able to determine the specific impact that any future changes in safety, health or environmental laws or regulations may have on our industry, operations and/or activities and our resulting financial position; however, we anticipate that capital expenditures and operating expenses will increase in the future as a result of the implementation of new and increasingly stringent safety, health and environmental laws and regulations. Further changes in safety, health and environmental laws and regulations, new information on existing safety, health and environmental conditions or other events, including legal proceedings based upon such conditions or an inability to obtain necessary permits in relation thereto, may require increased compliance expenditures by us.

We may not be able to transport our pharmaceutical-grade cannabis-based products using methods that are safe, efficient and that comply with applicable regulations.

We depend on fast and efficient third-party transportation services to distribute our pharmaceutical-grade cannabis and cannabis-based products. Any prolonged disruption of third-party transportation services could have a material adverse effect on our sales volumes or our patients’ satisfaction with our products. Rising costs associated with third- party transportation services used by us to transport our products may also adversely impact our profitability, and more generally our business, financial condition and results of operations.

Further, the transportation of our products is subject to strict security standards. As a result, we anticipate that as we expand our global distribution, we may be subject to the increase in costs associated with meeting these standards. A breach of security during transport or delivery could result in the loss of high-value products and forfeiture of import and export approvals, since such approvals are specific to each shipment. Any failure to take the steps necessary to ensure the safekeeping of our pharmaceutical-grade cannabis-based products could also have an impact on our ability to continue operating under our existing licenses, to renew or receive amendments to our existing licenses or to receive new licenses.

Our pharmaceutical-grade cannabis-based products may be subject to recalls for a variety of reasons, which could require us to expend significant management and capital resources.

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, adulteration, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. Although we have detailed procedures in place for testing our finished pharmaceutical-grade cannabis-based 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, whether frivolous or otherwise. If any of the cannabis-based products produced

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by us 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. As a result of any such 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 or damage our reputation and goodwill or that of our products or our brand.

Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties and other expenses. Any product recall affecting the medical-use cannabis industry more broadly, whether or not involving us, could also lead consumers to lose confidence in the safety and quality of pharmaceutical-grade cannabis and cannabis-based products generally, including products sold by us.

We may be subject to product liability claims or regulatory action if our products are alleged to have caused significant loss or injury. This risk is exacerbated by the fact that cannabis use may increase the risk of serious adverse side effects.

We face the risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused loss or injury. We may be subject to these types of claims due to allegations that our products caused or contributed to injury or illness, failed to include adequate instructions for use or failed to include adequate warnings concerning possible side effects or interactions with other substances. This risk is exacerbated by the fact that cannabis use may increase the risk of developing schizophrenia and other psychoses, symptoms for individuals with bipolar disorder, and other side effects. Previously unknown adverse reactions resulting from human consumption of cannabis-based products alone or in combination with other medications or substances could also occur. In addition, the manufacture and sale of cannabis-based products, like the manufacture and sale of any product, involves a risk of injury to patients due to tampering by unauthorized third parties or product contamination.

We may in the future have to recall certain of our pharmaceutical-grade cannabis or cannabis-based products as a result of potential contamination or quality assurance concerns. A product liability claim or regulatory action against us could result in increased costs and could adversely affect our reputation and goodwill with our patients and consumers generally. There can be no assurance that we will be able to 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. Our inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could result in us becoming subject to significant liabilities that are uninsured and could also adversely affect our commercial arrangements with third parties.

Significant interruptions in our access to certain key inputs such as raw materials, electricity, water and other utilities may impair our cultivation of pharmaceutical-grade cannabis.

Our business is dependent on a number of key inputs and their related costs, including raw materials, supplies and equipment related to our operations, as well as electricity, water and other utilities. Any significant interruption, price increase or negative change in the availability or economics of the supply chain for key inputs and, in particular, rising or volatile energy costs could curtail or preclude our ability to continue production. In addition, our operations would be significantly affected by any such prolonged interruption.

Our ability to compete and produce pharmaceutical-grade cannabis is dependent on us having access, at a reasonable cost and in a timely manner, to skilled labor, equipment, parts and components. No assurances can be given that we will be successful in maintaining our required supply of labor, equipment, parts and components.

We may be unable to attract or retain key personnel with sufficient experience in the cannabis industry, and we may be unable to attract, develop and retain additional employees required for our development and future success.

Our success is largely dependent on the performance of our management team and certain key employees and our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. The loss of the services of any of our key personnel, including Alexander Rabinovich, our Chief Executive Officer and director, and Ehud Barak, our Chairman, or an inability to attract other suitably qualified persons when needed, could prevent us from executing on

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our business plan and strategy, and we may be unable to find adequate replacements on a timely basis, or at all. We do not currently maintain key-person insurance on the lives of any of our key personnel.

We may become subject to liability arising from any fraudulent or illegal activity by our employees, contractors, consultants and others.

We are exposed to the risk that our employees, independent contractors, consultants, and business partners may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional undertakings of unauthorized activities, or reckless or negligent undertakings of authorized activities, in each case on our behalf or in our service that violate: (i) government regulations, including, in Israel, the IMCA regulations; (ii) manufacturing standards; (iii) healthcare laws and regulations; (iv) laws that require the true, complete and accurate reporting of financial information or data; (v) U.S. federal laws banning the possession, sale or importation of cannabis into the United States and prohibiting the financing of activities outside the United States that are unlawful under Israeli or other foreign laws or (vi) the terms of our agreements with insurers. In particular, we could be exposed to class action and other litigation, increased regulatory inspections and related sanctions, the loss of current compliance certifications for our products, including, in Israel, IMC-GAP, IMC-GMP, IMC-GDP or IMC-GSP certifications, or the inability to obtain future certifications, lost sales and revenue or reputational damage as a result of prohibited activities that are being undertaken in the production or manufacturing processes of our products without our knowledge or permission and contrary to our internal policies, procedures and operating requirements.

We cannot always identify or prevent misconduct by our employees or other third parties, including service providers and business partners, and the precautions taken by us to detect and prevent this activity may not be effective in controlling unknown, unanticipated or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from such misconduct. 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 or administrative penalties, damages, monetary fines and contractual damages, reputational harm, diminished profits and future earnings or curtailment of our operations.

We may experience breaches of security at our facilities or losses as a result of, but not limited to, theft.

Because of the nature of, the limited legal channels of distribution for, and the volume of inventory of our products in our facilities, we are subject to the risk of theft of our product as well as other security breaches.

In this regard, in December 2020, there was an attempt in our Southern Kibbutz facility. The security systems at the facility worked well and prevented the incident, in addition, nearby forces of the army and the Israeli police arrived at the scene immediately after the incident began. No damage was caused to the facility and nothing was stolen from it.

A security breach at one of our facilities could result in a significant loss of available product, expose us to additional liability under applicable regulations and to potentially costly litigation or increase our expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition and results of operations.

We engage with third parties that provide us services as part of the production process, some of whom are our competitors, and as a result of our commercial relationship with them, we may disclose information that may be contrary to Antitrust Laws.

We rely on third parties to provide us with certain necessary services for the production of our branded products. Some of those parties, are also our competitors with respect to several aspects of our business. We are sensitive to this issue and have internal policies and procedures that are designed to prevent the sharing of competitive information and our agreements with our competitors make as much clear. However, despite our best efforts to safeguard this information, should we inadvertently disclose competitive information, we may be found to be in violation of the Israeli antitrust law, and could be subject to sanctions and civil or criminal penalties, which will have a negative financial impact on Intercure and harm our reputation.

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If we sustain cyber-attacks or other privacy or data security incidents that result in security breaches that disrupt our operations or result in the unintended dissemination of protected personal information or proprietary or confidential information, or if we are found by regulators to be non-compliant with statutory requirements for the protection and/or storage of personal data, we could suffer a loss of revenue, increased costs, exposure to significant liability, reputational harm and other serious negative consequences.

We routinely process, store and transmit large amounts of data in our operations, including protected personal information as well as proprietary or confidential information relating to our business and third parties. We have programs in place to detect, contain and respond to data security incidents and provide employee awareness training around phishing, malware and other cyber risks to protect, to the greatest extent possible, against cyber risks and security breaches. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. Experienced computer programmers and hackers may be able to penetrate our layered security controls and misappropriate or compromise our protected personal information or proprietary or confidential information or that of third parties, create system disruptions or cause system shutdowns. They also may be able to develop and deploy viruses, worms and other malicious software programs that attack our systems or otherwise exploit any security vulnerabilities. Hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Our facilities may also be vulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities, misplaced or lost data; human errors, or other similar events that could negatively affect our systems and our customer’s data.

There are a number of laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of such protected information. In particular, the privacy rules in Israel, and similar laws in other applicable jurisdictions, protect medical records and other personal health information by limiting the use and disclosure of such health information to the minimum level reasonably necessary to accomplish the intended purpose. We collect and store personal information about our patients and are responsible for protecting that information from privacy breaches. A privacy breach may occur through a procedural or process failure, a technology malfunction or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing risk whether perpetrated through employee collusion or negligence or through deliberate cyber-attack. The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be material. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of services and the loss of existing or potential customers. In addition, breaches of our security measures and the unauthorized dissemination of sensitive personal information, proprietary information or confidential information about us or our customers or other third-parties, could expose our customers’ private information and our customers to the risk of financial or medical identity theft, or expose us or other third-parties to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage to our brand and reputation, or otherwise harm our business.

We are further required to comply with requirements with respect to the storage, protection and access to personal data on our systems, as well as with respect to the registration of our databases containing personal information. Non- compliance with such requirements could result in sanctions, litigation and potential liability for us, damage to our brand and reputation, or otherwise harm our business.

We plan to rely on third parties to conduct certain elements of our production and distribution and to perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be successful in commercializing our products.

We plan to rely upon third-party vendors for our ongoing services including the manufacturing of our products. We also plan to rely on third-party distributors, including pharmaceutical distributors and other courier services, and may in the future rely on other third parties, to distribute our products. These vendors will not be our employees and we will control only certain aspects of their activities. However, we may be responsible for ensuring that their services are performed in accordance with the applicable protocol, or in accordance with legal, regulatory and scientific standards, including, for manufacturers, the relevant GMP standards. Our reliance on these vendors may not relieve us of our responsibilities under applicable regulations, and if our vendors fail to meet these standards, we may suffer adverse consequences, including liability resulting from litigation, damage to our brand and reputation, or other harms to our business.

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Further, our vendors may fail to devote sufficient resources to the provision of services to us, including the manufacturing and distribution of our products, and the performance of such services may be delayed or interrupted. Failure to meet projected deadlines may delay or diminish the sale of our products. Damage to our products, such as product spoilage, could expose us to potential product liability, damage our reputation and the reputation of our brand or otherwise harm our business.

If any of our relationships with these third-party vendors terminate, we may not be able to enter into arrangements with alternative vendors or do so on commercially reasonable terms. Replacing or adding additional vendors involves additional cost and requires management time and focus. In addition, during the transition period when a new vendor commences work, delays may occur. Such delays can materially impact our ability to meet our desired development timelines. Though we carefully manage our relationships with our vendors, we may encounter similar challenges or delays in the future, which could have a material adverse impact on our business, financial condition and prospects. If these third-party service providers do not successfully perform their contractual duties, or if their performance is substandard, we may not be able to successfully commercialize our products and our revenue from product sales could be negatively impacted.

We may be unable to sustain our revenue growth and development.

Our revenue has grown in recent years. Our ability to sustain this growth will depend on a number of factors, many of which are beyond our control, including, but not limited to, the availability of sufficient capital on suitable terms, changes in laws and regulations respecting the production and distribution of our pharmaceutical-grade cannabis- based products, competition, the size of alternative markets, including the black market and the legal adult-use markets, and our ability to produce sufficient volumes of our pharmaceutical-grade cannabis-based products to meet patient demand. In addition, we are subject to a variety of business risks generally associated with developing companies. Future development and expansion could place significant strain on our management personnel and will likely require us to recruit additional management personnel, and there is no assurance that we will be able to do so.

We may be unable to expand our operations quickly enough to meet demand or manage our operations beyond their current scale.

There can be no assurance that we will be able to manage effectively our expanding operations, which may include increasing our production capabilities, adding manufacturing capabilities, adding distribution channels and entering into joint ventures or partnerships. We may be unable to sustain or accelerate our growth or such growth, if achieved, may not result in profitable operations. We may be unable to attract and retain the management personnel necessary for continued growth or we may not be successful in our strategic investments in joint ventures or acquisitions.

We may not be able to secure adequate or reliable sources of the funding required to operate our business or increase our production to meet patient demand for our products.

The continued development of our business will require additional financing following the closing of this offering, and there is no assurance that we will obtain the financing necessary to be able to achieve our business objectives. Our ability to obtain additional financing will depend on investor demand, our performance and reputation, market conditions and other factors. Our inability to raise such capital could result in the delay or indefinite postponement of our current business objectives or in our inability to continue to carry on our business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable to us.

In addition, from time to time, we may enter into transactions to acquire assets or the capital stock or other equity interests of other entities. Our continued growth may be financed, wholly or partially, with debt, which may increase our debt levels above industry standards. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Debt financings may also contain provisions that, if breached, may entitle lenders or their agents to accelerate repayment of loans, and there is no assurance that we would be able to repay such loans in such an event or prevent the enforcement of security granted pursuant to any such debt financing.

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We will incur increased costs as a result of operating as a public company listed on a Canadian and/or U.S. securities exchange and our management will be required to devote substantial time to new compliance initiatives.

As a public company that will be listed on a U.S. and Canadian securities exchange in connection with the Closing, particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 (the “Sarbanes- Oxley Act”), and rules implemented by the SEC and the Nasdaq, impose various requirements on public companies, including requirements to file annual reports with respect to our business and financial condition and operations and establish and maintain effective disclosure and financial controls and corporate governance practices. Our management and other personnel have limited experience operating as a public company, which may result in operational inefficiencies or errors, or a failure to improve or maintain effective internal controls over financial reporting (“ICFR”) and disclosure controls and procedures (“DCP”) necessary to ensure the timely and accurate reporting of operational and financial results. Our existing management team will need to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional personnel to assist us with complying with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly.

Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”)we will be required to furnish a report by our management on our ICFR, which, after we are no longer an emerging growth company, must be accompanied by an attestation report on ICFR issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will document and evaluate our ICFR, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our ICFR, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for ICFR. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our ICFR is effective as required by Section 404. This could result in a determination that there are one or more material weaknesses in our ICFR, which could cause an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities required by public company more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases a lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and a corresponding increase in the costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and may divert management’s time and attention from revenue generating activities to compliance-ensuring activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

We also expect that being listed on a U.S. and Canadian securities exchange and complying with applicable rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain or maintain the same or similar coverage that is currently in place. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors.

As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

We are a “foreign private issuer” and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under regulations promulgated under the Companies Law, as an Israeli public

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company listed overseas we will be required to disclose the compensation of our five most highly compensated office holders on an individual basis (rather than on an aggregate basis), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions and short-swing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections available to investors in comparison to those applicable to a U.S. domestic reporting companies.

In addition, as a “foreign private issuer,” we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of the Nasdaq for domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to, among other things, board of directors independence requirements, director nomination procedures, and compensation committee matters. In addition, we will follow our home country law instead of the listing rules of the Nasdaq that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of our company, certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and certain acquisitions of the stock or assets of another company. We may in the future elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq may provide less protection to investors than what would otherwise be accorded to investors under the listing rules of the Nasdaq applicable to domestic U.S. issuers.

We would lose our foreign private issuer status if (i) a majority of our shares come to be owned by U.S. residents and (ii) a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet the additional requirements necessary to avoid the loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher than what we would otherwise incur as a foreign private issuer.

We may not be able to successfully identify and execute strategic alliances or other relationships with third parties or to successfully manage the impacts of acquisitions, dispositions or relationships on our operations.

We currently have, and may expand the scope of, and may in the future enter into, strategic alliances with third parties that we believe will complement or augment our existing business. Our ability to complete further such strategic alliances is dependent upon, and may be limited by, among other things, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance our business and may involve risks that could adversely affect us, including the investment of significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of debt, costs and contingent liabilities, and there can be no assurance that these future strategic alliances will achieve, or that our existing strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future strategic alliances on satisfactory terms, or at all.

Although we do not currently plan to engage in other material strategic transactions, such as acquisitions, we may from time to time consider such transactions. Material strategic transactions involve a number of risks, including: (i) the potential disruption of our ongoing business; (ii) the distraction of management away from the ongoing oversight of our existing business activities; (iii) incurring additional indebtedness; (iv) the anticipated benefits and cost savings of those transactions not being realized fully, or at all, or taking longer to realize than anticipated; (v) an increase in the scope and complexity of our operations, and (vi) the loss or reduction of control over certain of our assets. A strategic transaction may result in a significant change in the nature of our business, operations and strategy, and we may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into our operations.

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International expansion of our business exposes us to the business, regulatory, political, operational, financial, economic and other potential risks associated with doing business outside of Israel.

Other than our headquarters, production facilities and other operations located in Israel, we currently have limited international operations, but our business strategy incorporates potentially significant international expansion. We plan to enter into both strategic relationships, such as joint ventures for the production and distribution of our products and third-party distribution arrangements, and to conduct general business activities outside of Israel. Conducting business internationally involves a number of risks, including but not limited to:

• failure by us to obtain the regulatory approvals for the use of our products in various countries;

• multiple, conflicting and changing laws and regulations affecting the medical-use cannabis industry, such as governmental approvals, permits, and licenses, export and import restrictions, tax laws, privacy regulations, employment laws and other regulatory requirements;

• limits in our ability to penetrate international markets;

• difficulties in staffing and managing international operations;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;

• complexities and difficulties in obtaining protection and enforcing our intellectual property and risks associated with potential infringement of relevant third-party patent or other intellectual property rights;

• natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions;

• certain expenses including, among others, expenses for travel, translation and insurance; and

• regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the books and records provisions or anti-bribery provisions or the U.S. Foreign Corrupt Practices Act, or within the purview of other similar laws.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

Tax and accounting requirements may change in ways that are unforeseen to us and we may face difficulty or be unable to implement or comply with any such changes.

We are subject to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on our financial results, the manner in which we conduct our business or the marketability of any of our products. We currently have international operations and plan to expand such operations in the future. These operations, and any expansion thereto, will require us to comply with the tax laws and regulations of multiple jurisdictions, which may vary substantially. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially subject us to penalties and fees in the future if we were to fail to comply.

A breakdown in our information technology systems could result in a significant disruption to our business.

Our operations are highly dependent on our information technology systems. If we were to suffer a breakdown in our systems, storage, distribution or tracing, we could experience significant disruptions affecting all our areas of activity, including our research, accounting and billing processes and potentially our production processes. We may also suffer from a partial loss of information or data due to such disruption.

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We face operational risk.

Operational risk is the risk that a direct or indirect loss may result from an inadequate or failed technology, from a human process or from external events. The impact of this loss may be financial loss, loss of reputation or legal and regulatory proceedings. Management endeavors to minimize losses in this area by ensuring that effective infrastructure and controls exist. These controls are constantly reviewed and if deemed necessary improvements are implemented.

Our performance will be subject to fluctuations in foreign exchange rates.

As foreign exchange rates fluctuate our financial results may be impacted as a material amount of our revenue is generated in NIS. As such, should the value of the NIS decrease, our results, when measured in US Dollars or Canadian Dollars will decrease.

We are subject to privacy and information security risks.

There are a number of laws protecting the confidentiality of certain patient health information and other personal information, including patient records, and restricting the use and disclosure of that protected information. In particular, the Israeli privacy protection law and, once applicable, the privacy rules under the Personal Information Protection and Electronics Documents Act (Canada)(“PIPEDA”), or the European Unions’ General Data Protection Regulation (“GDPR”), and similar laws in other jurisdictions, protect medical records and other personal health information by limiting their use and disclosure to the minimum level reasonably necessary to accomplish the intended purpose. We collect and store personal information about our Israeli patient and are responsible for protecting that information from privacy breaches. As of the date of this prospectus, we have two (2) registered databases pursuant to Israeli privacy protection laws, one for Canndoc's patient and one for Cannolam patients. A privacy breach may occur through a procedural or process failure, an IT malfunction or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing risk whether perpetrated through employee collusion, negligence or through a deliberate cyber-attack. If we are found to be in violation of the privacy or security rules under the Israeli privacy protection law or other laws protecting the confidentiality of patient health information, including as a result of data theft and privacy breaches, we could be subject to sanctions and civil or criminal penalties, which could have a negative financial impact and harm our reputation.

We will be subject to financial reporting and other public company requirements. Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting, which could harm our business and cause a decline in the price of our securities.

We will be subject to reporting and other obligations under applicable Canadian securities laws and rules of the TSX and any other stock exchange on which Intercure’s securities are then-listed, including National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”). These reporting and other obligations will place significant demands on our management, administrative, operational and accounting resources. If the we are unable to accomplish any such necessary objectives in a timely and effective manner, our ability to comply with our financial reporting obligations and other rules applicable to reporting issuers could be impaired. Moreover, any failure to maintain effective internal controls could cause us to fail to satisfy our reporting obligations or result in material misstatements in our financial statements.

We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization will be detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by the collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely affected which could also cause investors to lose confidence in our reported financial information, which could result in a reduction in the trading price of the Intercure Shares. - 141 -

The market price for Intercure Shares may be volatile and could decline in value.

The market price of Intercure Shares could be subject to significant fluctuations after Closing. Some of the factors that may cause the market price of Intercure Shares to fluctuate include:

• volatility in the market price and trading volume of comparable companies;

• actual or anticipated changes or fluctuations in operating results or in the expectations of market analysts;

• adverse market reactions to any indebtedness we may incur or securities we may issue in the future;

• short sales, hedging and other derivative transactions in Intercure Shares;

• litigation or regulatory action against us;

• investors’ general perception of us and the public’s reaction to our press releases, and other public announcements and our filings with Canadian securities regulators, including the filing of our financial statements;

• publication of research reports or news stories about us, our competitors or our industry;

• positive or negative recommendations or withdrawal of research coverage by securities analysts;

• changes in general political, economic, industry and market conditions and trends;

• sales of Intercure Shares by existing shareholders;

• recruitment or departure of key personnel;

• significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; and

• the other risk factors described in this section of this prospectus.

Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses to us. As well, certain institutional investors may base their investment decisions on consideration of our environmental, governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to satisfy such criteria, may result in limited or no investment in Intercure Shares by those institutions, which could materially adversely affect the trading price of the Intercure Shares. 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 for a protracted period of time, our operations and the trading price of the Intercure Shares may be materially adversely effected.

In addition, broad market and industry factors may harm the market price of Intercure Shares. Hence, the price of Intercure Shares could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of Intercure Shares regardless of our operating performance. In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If we become was involved in any similar litigation, we could incur substantial costs, its management’s attention and resources could be diverted and it could harm our business, operating results and financial condition.

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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the us or our business, the Intercure Shares trading price and volume could decline.

The trading market for Intercure Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If no securities or industry analysts commence covering our company, the trading price for Intercure Shares would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover our company downgrade the Intercure Shares or publish inaccurate or unfavorable research about the our business, the Intercure Shares trading price may decline. If one or more of these analysts cease coverage of our company or fails to publish reports on our company regularly, demand for Intercure Shares could decrease, which could cause the Intercure Share trading price and volume to decline.

Our equity compensation plan may adversely impact our financial results.

The Equity Incentive Plan permits the grant of options. Under applicable accounting standards, we may be required to record a liability and a related expense in our financial statements for potential future cash settlements of equity compensation awards. The recording of this liability could have an adverse impact on and create volatility in our financial results and, in turn, could adversely impact the trading price of Intercure Shares.

We may be subject to legal proceedings from time to time.

Legal proceedings may arise from time to time in the course of our business. All industries are subject to legal claims, with and without merit. Such legal claims may be brought against Intercure or one or more of its subsidiaries in the future from time to time. Defense and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, such processes could take away from management time and effort and the resolution of any particular legal proceeding to which we may become subject could have a material adverse effect on our financial position and results of operations.

Certain events or developments in the Regulated Cannabis industry more generally and social media may impact our reputation.

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. Cannabis has often been associated with various other narcotics, violence and criminal activities, the risk of which is that our business might attract negative publicity. There is also risk that the action(s) of other participants, companies and service providers in the cannabis industry may negatively affect the reputation of the industry as a whole and thereby negatively impact our reputation.

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 in regards to issuers and their activities, whether true or not and the cannabis industry in general, whether true or not. Negative posts or comments about us on any social network could damage our reputation. In addition, employees or others might disclose non-public sensitive information related to our business through external media channels. The continuing evolution of social media will present us with new challenges and risks.

We does not ultimately have direct control over how we specifically, or the cannabis industry generally, is 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 business strategy and realize on our growth prospects.

Risks Factors Related to Intellectual Property

We may be subject to risks related to the protection and enforcement of intellectual property rights, and may become subject to allegations that we or our joint venture partners are in violation of the intellectual property rights of third parties.

We rely upon a combination of trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and products. We are also in the process of applying for protected breeding rights in Israel and seek to apply for protective rights in any jurisdiction in which such rights may be registered. Our success - 143 -

depends in large part on our ability to obtain and maintain intellectual property protection with respect to our proprietary technologies and products.

We may in the future seek to protect our proprietary position by filing patent applications in Israel and in other countries, with respect to our novel technologies and products, which are important to our business. Patent prosecution is expensive and time consuming. We may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development activities before it is too late to obtain patent protection for them.

In addition to the protection afforded by any patents that may be granted in the future, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product development and production processes that involve proprietary know-how, information or technology that is not covered by patents. We cannot assure investors that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

If we cannot obtain and maintain effective protections for our intellectual property rights, we may not be able to compete effectively, and our business and results of operations could be harmed. Misappropriation or unauthorized disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property rights are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret or intellectual property right. Any of the foregoing could significantly harm our business, results of operations and prospects.

Our reliance on third parties requires us to share our trade secrets and other intellectual property, which increases the possibility that a competitor will discover them or that our trade secrets or other intellectual property will be misappropriated or disclosed.

We seek to protect our proprietary technologies and processes, in part, by entering into confidentiality agreements with our employees, consultants, contractors and partners. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining the physical security of our premises and physical and electronic security of our information technology systems.

Despite our efforts to protect our trade secrets, our competitors or other third parties may discover our trade secrets, either through breach of confidentiality agreements, independent development or the publication of information including our trade secrets by third parties. A competitor’s or other third party’s discovery of our trade secrets would impair our competitive position and could have an adverse impact on our business, financial condition, results of operations and prospects.

Further, although we expect all of our employees, consultants and other third parties who may be involved in the development of intellectual property for us to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology enter into confidentiality agreements with us, we cannot provide any assurance that we have entered into such agreements with all applicable third parties or that all such agreements have been duly executed. Even if we have entered into such agreements, we cannot assure investors that our counterparties will comply with the terms of such agreements or that the assignment of intellectual property rights under such agreements is self-executing. We may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel. This could inflict significant harm to our business, results of operations and financial prospects.

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Intellectual property rights of third parties could adversely affect our ability to commercialize our products, and we might be required to litigate or obtain licenses from third parties in order to develop or market our products. Such litigation or licenses could be costly or not available on commercially reasonable terms.

It is inherently difficult to conclusively assess our freedom to operate without infringing or otherwise violating on third party rights. Third party intellectual property rights may cover our products or elements thereof, our production, processes, or our trademark and brand. In such cases, we may not be in a position to develop or commercialize our products unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending applications for rights that, if approved, could be alleged to be infringed by our products, processes or trademarks, and, as a result, third party intellectual property right holders may bring infringement claims against us. We cannot guarantee that we will be able to successfully defend, settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing of our products.

If such an infringement claim is be brought and is successful, we may be required to pay substantial damages, including treble damages and attorneys’ fees if we are found to have willfully infringed, we may be forced to cease the development and commercialization of and otherwise abandon our products, redesign our products so that we no longer infringe the third party intellectual property rights (which may not be commercially feasible), or we may need to seek a license from any holders of such intellectual property rights. No assurances can be given that a license will be available on commercially reasonable terms, if at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby providing our competitors and other third parties access to the same technologies licensed to us. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business and otherwise significantly harm our business, results of operations and prospects.

We may not realize the full benefit of preclinical studies or clinical trials using our GMP-certified products for various indications.

We are currently providing our products for use in one active preclinical study and one active clinical study, and in the future we plan to participate in preclinical studies and clinical trials. However, we are not the sponsor of these two active studies and our role in these studies is limited to providing the pharmaceutical-grade product and supplying information derived from our database. Any intellectual property generated during these studies will not belong to us and, other than receiving access to the results of such studies, we do not have any proprietary rights in such studies.

We may not be a sponsor of future studies or trials, and, as such, may not have full control over the design, conduct and terms of such studies or trials. Further, we may only act as the provider of pharmaceutical-grade cannabis for studies and trials that are designed and initiated by independent investigators within hospitals or other healthcare institutions. In such cases, we may not be able to acquire rights to all or any of the intellectual property generated by the studies or trials. For example, ownership of intellectual property that does not relate directly to the pharmaceutical- grade cannabis provided by us is often retained by the institution. As such, we are vulnerable to any dispute among the investigator, the institution and us with respect to classification and therefore ownership of any particular piece of intellectual property generated during the study or trial. Such a dispute may affect our ability to make full use of intellectual property generated by a preclinical study or clinical trial.

Where intellectual property generated by a study or trial is owned by the institution, we may be granted a right of first negotiation to obtain an exclusive license to such intellectual property. If we exercise such a right, there is a risk that the parties will fail to come to an agreement on the license, in which case such intellectual property may be licensed to other parties or commercialized by the institution.

We may not own intellectual property developed under joint venture arrangements.

Intellectual property generated, or that will be generated, under research and development activities conducted under certain of our joint venture arrangements may be owned by the joint venture entity and not by us. We may not able to acquire exclusive rights to all such intellectual property, and we may be subject to disputes with our joint venture

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partners with respect to the ownership, use and exploitation of such intellectual property rights. Such disputes may lead to a breakdown of our relationship with our joint venture partner and termination of the joint venture.

Risk Factors Related to the Incorporation and Operations in Israel

Potential political, economic and military instability in the State of Israel, where our senior management, our head executive office and production facilities are located, may adversely affect our results of operations.

Intercure’s head executive office, production facilities, and research and development facilities, are located in Israel. All of our executive officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries.

Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Our facilities in Israel, including our production facilities, are within the range of the missiles and rockets that have been fired at Israeli cities and towns, including from Gaza sporadically since 2006, with escalations in violence during which there were a substantially larger number of rocket and missile attacks aimed at Israel. Such violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Civil unrest and political turbulence has occurred in some countries in the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. This instability and any outside intervention may lead to a deterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential to cause additional conflicts in the region. In addition, there are concerns that Iran, which has previously threatened to attack Israel, may step up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.

Our insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations. Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business.

Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.

Many Israeli citizens, including some of our executive officers, are obligated to perform up to 36 days, and in some cases longer periods, of military reserve duty annually until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict or emergency situation, could be called to immediate active duty for extended periods of time. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of our employees, which could materially adversely affect our business. Additionally, the absence of a significant number of the employees of our Israeli suppliers and third-party subcontractors related to military service or the absence for extended periods of one or more of their key employees for military service may disrupt their operations which may subsequently disrupt our operations.

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The rights and responsibilities of a shareholder of Intercure will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of Canadian corporations.

Since Intercure is incorporated under Israeli law, the rights and responsibilities of its shareholders are governed by our amended and restated articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of Canadian-based corporations.

In particular, a shareholder of an Israeli company, such as Intercure, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us and other shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder of ours or other power towards us has a duty to act in fairness towards us with regard to such vote or appointment.

Provisions of Israeli law may delay, prevent or otherwise impede a merger with us, or an acquisition of us, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

Companies Law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions.

Additionally, if any of our shareholders acquires, holds, has control of or direction over 5% or more of our outstanding shares or a person obtains control of a 5% or more holder of our ordinary shares, without procuring prior approval from the IMCA or other relevant regulatory authority, the licenses issued to us by the IMCA to conduct our cannabis- related activities in Israel may be suspended or revoked. Under the Intercure Articles, if any person acquires, holds, or has control of or direction over more than 4.99% of the Intercure Shares at any time without receiving prior approval from the IMCA or other relevant regulatory authority, the Excess Shares held by that person will automatically become dormant shares and will carry no rights, including the right to vote, to receive dividends and to participate in the liquidation and distribution of our assets upon dissolution. In addition, the IMCA or other relevant regulatory authority must approve the identity of our directors and chief executive officer prior to their taking office, and any extensions to their respective terms of appointment.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to Intercure shareholders, especially those of our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition of the shares has occurred. In order to benefit from the tax deferral, a pre-ruling from the Israel Tax Authority might may be required.

These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

We may not be able to enforce covenants not to compete under applicable laws, and therefore we may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective of their agreements with us, which in turn could impact our future profitability.

We generally enter into non-competition agreements with our employees and key consultants. These agreements prohibit our employees and key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from - 147 -

benefitting from the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee during the scope of his or her employment with a company and as a result thereof are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no agreement between an employer and an employee with respect to the employee’s right to receive compensation for such “service inventions,” the Israeli Compensation and Royalties Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her service inventions and the scope and conditions for such remuneration. Although our employees have agreed to assign to us service invention rights, as a result of uncertainty under Israeli law with respect to the efficacy of waivers of service invention rights, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

The Intercure Annual Financial Statements and the Canndoc Annual Financial Statements were prepared in accordance with the accounting and audit rules applicable to Israeli public companies and not Canadian reporting issuers

The Intercure Annual Financial Statements and the Canndoc Annual Financial Statements were each audited in accordance with the Generally Accepted Auditing Standards in Israel. These audit standards are different relative to the International Standards on Auditing (“ISA”) which may result in different information contained therein relative to the information that would have been presented if those financial statements were audited pursuant to the ISA. The auditor independence requirements may also be different as between the two regimes.

Because a certain portion of our expenses is incurred in currencies other than the Canadian dollar, our results of operations may be harmed by currency fluctuations and inflation.

Our reporting and functional currency is the NIS, but some portion of our operational expenses are in U.S. dollars, Euros and Canadian dollars. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect us from adverse effects.

Our operations may be affected by negative labor conditions in Israel.

The threat of strikes and work-stoppages occur relatively frequently in Israel. If Israeli trade unions threaten strikes or work-stoppages and such strikes or work-stoppages occur, those may, if prolonged, have a material adverse effect on the Israeli economy and on our business, including our ability to deliver our products and to receive raw materials from our suppliers in a timely manner.

Risk Factors Related to the Qualifying Transaction

Since the LP’s Founders will lose their investment in the LP if the Qualifying Transaction is not completed, a conflict of interest may arise in determining whether the Qualifying Transaction targets is appropriate.

The Founders, certain of which are directors and/or officers of the General Partner, are not entitled to redeem their Proportionate Voting Units in connection with the Qualifying Transaction or entitled to access to the escrow account in respect thereof upon the LP’s Winding-Up. As a result, the Founders may have interests in the Qualifying Transaction that may be different from, or in addition to, the interests of Unitholders generally.

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Completion of the Qualifying Transaction is subject to a number of conditions precedent and required approvals.

Some of the conditions precedent that are required in order to complete the Qualifying Transaction are outside the LPs control, including, without limitation, the approval of NEO and the TSX and listing on the Nasdaq, the Intercure Shareholder Approval and the Unitholder approval of the Arrangement Resolution at the Unitholder Meeting. There can be no certainty, nor can the LP provide any assurance, that all conditions precedent to the Qualifying Transaction will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived. If certain approvals and consents are not received prior to the Closing, or if certain conditions are not satisfied, the LP and/or Intercure may decide to proceed nonetheless, or may either delay or amend the implementation of all or part of the Qualifying Transaction, including possibly delaying the completion of the Qualifying Transaction in order to allow sufficient time to complete or satisfy such matters. If the Qualifying Transaction is delayed or not completed, the market price of the Limited Partnership Units of the LP may be materially adversely affected.

The Qualifying Transaction may be terminated in certain circumstances.

The LP and Intercure have the right to terminate the Arrangement Agreement in certain circumstances and not complete the Qualifying Transaction. Specifically, among other conditions, either of the LP or Intercure has the right to terminate the Arrangement Agreement if the Closing shall not have occurred by September 30, 2021.

There are certain costs related to the Qualifying Transaction that must be paid even if the Qualifying Transaction is not completed.

There are certain costs related to the Qualifying Transaction, such as those for legal and accounting advisory services and for producing this prospectus that must be paid even if the Qualifying Transaction is not completed. There are also opportunity costs associated with the diversion of management attention away from the conduct of business in the ordinary course. These costs may have an adverse impact on the LP’s financial position.

There can be no assurance of adequate recovery by the LP from Intercure for any breach of the representations, warranties and covenants of Intercure under the applicable Definitive Agreement.

The representations and warranties provided by Intercure pursuant to the Arrangement Agreement are customary for transactions of their nature; however, there can be no assurance of adequate recovery by the LP from Intercure for any breach of the representations, warranties and covenants of Intercure under the Arrangement Agreement.

Subsequent to the completion of the Qualifying Transaction, Intercure may be required to take write-downs or write- offs, restructuring and impairment or other charges that could have a significant negative effect on the financial condition, results of operations and Intercure Share price, which could cause investors to lose some or all of their investment.

Although the LP conducted due diligence with respect to Intercure, the LP cannot assure that this diligence revealed all material issues that may be present within Intercure and its subsidiaries, that it would be possible to uncover all material issues through a customary amount of due diligence or that factors outside of either party’s control will not later arise. As a result, Intercure may be forced to later write down or write-off assets, restructure its operations or incur impairment or other charges that could result in losses. Even if due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the LP’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on Intercure’s liquidity, the fact that charges of this nature are reported could contribute to negative market perceptions. In addition, charges of this nature may cause Intercure to be unable to obtain future financing on favorable terms or at all.

There can be no assurance that the Qualifying Transaction will be accepted by the NEO and the TSX, or if approved, that Intercure will be able to comply with the continued listing standards of the TSX or the Nasdaq.

The completion of the Qualifying Transaction is conditional upon, among other things, acceptance by the NEO and the TSX of the Qualifying Transaction, and the conditional approval of the Nasdaq, the TSX and the TASE to list the Intercure Shares, and the overall approval of the Israeli Securities Authority. The NEO has provided their acceptance of the Qualifying Transaction, subject to the TSX approving it. The TSX has not approved the Qualifying Transaction - 149 -

and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will. As of the date of this prospectus, Intercure has not applied to list the Intercure Shares on the TSX or the Nasdaq. The LP intends to delist its securities from the NEO, the TSX and the OTC market concurrently with, or shortly after Closing and Intercure does not currently intend to apply to have its securities listed on the NEO or the OTC market after Closing.

If the benefits of the Qualifying Transaction do not meet the expectations of investors or securities analysts, the market price of the LP’s securities may decline.

If the benefits of the Qualifying Transaction do not meet the expectations of investors or securities analysts, the market price of the LP’s securities prior to the Closing may decline. The market values of securities at the time of the Qualifying Transaction may vary significantly from their prices on the date the Arrangement Agreement was executed.

In addition, following the Qualifying Transaction, fluctuations in the price of the Intercure Shares could contribute to the loss of all or part of investor’s investments. Any of the factors listed below could have a material adverse effect on investments in the Intercure Shares, and they may trade at prices significantly below the price paid for them.

• failure to achieve the results in Intercure’s financial outlook;

• actual or anticipated fluctuations in Intercure’s quarterly financial results or the quarterly financial results of companies perceived to be similar;

• changes in the market’s expectations about operating results;

• success of competitors;

• Intercure’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

• operating and stock price performance of other companies that investors deem comparable to Intercure;

• changes in laws and regulations affecting the business;

• commencement of, or involvement in, litigation involving Intercure or any of its subsidiaries;

• changes in Intercure’s capital structure, such as future issuances of securities or the incurrence of additional debt;

• any major change in the Board or management; and

• sales of substantial amounts of the Intercure Shares held by Intercure’s directors, executive officers or significant shareholders or the perception that such sales could occur.

In such circumstances, the trading price may not recover and may experience a further decline.

In addition, broad market and industry factors may materially harm the market price of the Intercure Shares irrespective of operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Intercure Shares, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies or entities which investors perceive to be similar to Intercure could depress the unit price regardless of Intercure’s business, prospects, financial conditions or results of operations. A decline in the market price of the Intercure Shares also could adversely affect its ability to issue additional securities and to obtain additional financing in the future.

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All of Intercure’s directors and officers will live outside of Canada and all of Intercure’s assets will be located outside of Canada; therefore investors may not be able to enforce applicable securities laws or their other legal rights.

All of Intercure’s directors and officers reside outside of Canada and all of Intercure’s assets are located outside of Canada. As a result, it may be difficult, or in some cases not possible, for investors in Canada to enforce their legal rights, to effect service of process upon all of Intercure’s directors or officers or to enforce judgments of Canadian courts predicated upon civil liabilities and criminal penalties on the General Partner’s directors and officers under Canadian laws. See “Enforcement of Judgements Against Foreign Persons”.

The approval of the Arrangement Resolution by the Unitholders at the Unitholder Meeting may not be obtained.

The LP must obtain the required approval of the Unitholders for the Arrangement Resolution for the Arrangement to proceed and the Qualifying Transaction to consummate. Failure to obtain the required approval may result in a negative impact on the price of the LP’s securities.

The Intercure Shareholder Approval may not be obtained.

As part of the Qualified Transaction we will need to obtain the Intercure Shareholder Approval. We believe that the Qualified Transaction is in our shareholders’ benefit, nevertheless, we do not have full certainty that our shareholders will approve it at the meeting. If we cannot obtain the shareholder approval we will not be able to complete the Qualified Transaction.

The LP may not be able to consummate the Qualifying Transaction within the Permitted Timeline, in which case the LP would redeem its Restricted Voting Units and the Rights would expire without any value.

The LP must complete the Qualifying Transaction within the Permitted Timeline. Therefore, there is a risk that the LP will be unable to complete a qualifying transaction should the Qualifying Transaction not be consummated. Unless the LP extends the Permitted Timeline, if a qualifying transaction has not been completed by April 8, 2021, the LP will be required to redeem 100% of the outstanding Restricted Voting Units, as described herein.

If the LP is unable to complete its qualifying transaction, the Rights will expire without any value and holders will not have any access to, or benefit from, the proceeds in the escrow account.

The contractual right of action in connection with the Qualifying Transaction could expose the LP to one or more actions for rescission or damages.

The contractual right of action provided in connection with the Qualifying Transaction (see “Contractual and Statutory Rights − Purchasers of Restricted Voting Units”) could expose the LP and/or Intercure to one or more actions for rescission or damages, and costs, following the Qualifying Transaction if this prospectus contains or is alleged to contain a misrepresentation. In addition, as the LP will indemnify the other parties granting such rights, it could suffer additional expenses. The LP may seek to mitigate its exposure through insurance. These contractual rights could potentially have a material adverse effect on the LP and Intercure.

Risk Factors Related to the COVID-19 Pandemic

The outbreak of the novel coronavirus, or COVID-19, which has been declared by the WHO to be a “pandemic”, has resulted, and other infectious diseases could result, in a widespread health crisis that has and could continue to adversely affect the economies and financial markets worldwide, which may materially and adversely affect our business. COVID-19 has severely restricted the level of economic activity around the world and in all countries in which we or our affiliates operate. A public health epidemic, including COVID-19, or the fear of a potential pandemic, poses the risk that we or our employees, distributors, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time.

The governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes. Temporary closures of businesses have been ordered and numerous other - 151 -

businesses have temporarily closed voluntarily. Such actions are creating disruption in global supply chains, increasing rates of unemployment and adversely impacting many industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

The effect of COVID-19 could include closures of our facilities or the facilities of our suppliers and other vendors in our supply chain and other preventive and protective measures in our supply chain. If the pandemic persists, closures or other restrictions on the conduct of business operations of our third-party manufacturers, suppliers or vendors could disrupt our supply chain. In addition, there have been and could be further disruptions to our planned expansion of certain product line and production processes.

As a result of COVID-19, we have implemented remote work policies for certain employees and the effects of our remote work policies may negatively impact our future performance. As of the date of this prospectus, we haven't experienced and/ or are not experiencing a change in the increasing trend of demand for medical cannabis products and market growth and we continue to operate and sell on an ongoing and continuous basis. We are prepared with a stock of the raw materials required for continued ongoing operations at the growth facility, decentralized manpower planning and preparation with a manpower reserve in case of infection of one of our employees, infrastructure for remote connection of employees and the company center continues to continuously provide service to patients, with full and strict implementation Of the requirements of the Ministry of Health for the manner of work and the area of activity.

CERTAIN ISRAELI INCOME TAX CONSIDERATIONS

The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our ordinary shares. Investors should consult their own tax advisors for advise with respect to the tax consequences to them of the acquisition, holding and disposition of Intercure Shares based on their own particular circumstances, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israel, or other taxing jurisdiction.

Certain Considerations

The following is a brief summary of the material Israeli income tax laws applicable to Intercure. This section also contains a brief discussion of some of the material Israeli tax consequences concerning the ownership and disposition of Intercure Shares that may be acquired in connection with the Qualifying Transaction. This summary does not discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to those types of investors that are subject to special treatment under Israeli law. Examples of these types of investors include residents of Israel, traders in securities, and persons that own, directly or indirectly, 10% or more of our outstanding voting capital. These types of investors are subject to special tax regimes that are not discussed in this prospectus. Parts of this discussion will be based on tax legislation that has not been subject to judicial or administrative interpretation, and we cannot provide any assurance that the relevant tax authorities or courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date hereof and does not take into account possible future amendments to Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which could affect the tax consequences described below.

Investors are urged to consult their own tax advisor with respect to Israeli and other tax consequences of the purchase, ownership and disposition of our ordinary shares, including, in particular, the effect of any non-Israeli, state or local taxes.

General Corporate Tax Structure in Israel

Israeli resident companies, such as Intercure, are generally subject to corporate tax at a rate of 23% on their taxable income, as of January 1, 2018 (previously, in 2017 the rate of taxation for Israeli resident companies was 24%). However, the effective tax rate payable by a company that derives income from a Preferred Enterprise or a Technology Enterprise, as discussed below, may be considerably lower. - 152 -

Capital gains derived by an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a company will be considered an “Israeli resident” if it meets one of the following criteria: (i) the company was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.

Law for the Encouragement of Industry (Taxes), 5729-1969

The Law for the Encouragement of Industry (Taxes), 5729-1969 (the “Industry Encouragement Law”), provides several tax benefits for industrial companies (“Industrial Company” or “Industrial Companies”). To obtain the tax benefits available to Industrial Companies, a company must: be an Israeli resident-company; have been incorporated in Israel; and must derive at least 90% of their income, other than income from certain government loans, in any tax year from an Industrial Enterprise (“Industrial Enterprise”) owned and located in Israel. An Industrial Enterprise is defined as an enterprise whose principal activity in a given tax year is industrial production. Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.

The following tax benefits, among others, are available to Industrial Companies:

• amortization over an eight year period of the cost of purchasing a patent, rights to use a patent and rights to know-how, which are used for the development or advancement of the company, commencing in the year in which such rights were first exercised;

• under limited conditions, an election to file consolidated tax returns with related Industrial Companies; and

• deductions of expenses related to a public offering in equal amounts over a three-year period commencing from the year of the offering.

We believe that we currently qualify as an Industrial Company as defined by the Industry Encouragement Law. However, there can be no assurance that we will continue to qualify as an Industrial Company in the future or that the benefits described above will be available to us.

Law for the Encouragement of Capital Investments, 5719-1959

The Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”) provides certain incentives for capital investments in production facilities (or other eligible assets) by an Industrial Enterprise.

The Investment Law was significantly amended effective as of April 1, 2005, further amended as of January 1, 2011 (the “2011 Amendment”), and, as of January 1, 2017 (the “2017 Amendment”). The 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. The 2017 Amendment also introduces new benefits for Technology Enterprises, alongside existing tax benefits.

Generally, the Investment Law provides either tax benefits or government grants for eligible companies whose main activity is industrial production exported out of Israel.

Tax benefits Under the 2011 Amendment

The 2011 Amendment cancelled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a Preferred Company (“Preferred Company”) through its Preferred Enterprise (“Preferred Enterprise”) (as such terms are defined in the Investment Law).

A Preferred Company is a company that is incorporated in Israel; is not wholly-owned by a governmental entity; and that has, among other things, a Preferred Enterprise. Pursuant to the Investment Law, a Preferred Company must meet certain conditions, such as the requirement that the company be controlled and managed from Israel and the requirement that the company file Israeli tax returns.

In 2021, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to income attributable to - 153 -

its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, known as Development Zone “A” (“Development Zone ‘A’”) in which case the rate was reduced to 7.5%.

We are currently not entitled to tax benefits for a Preferred Enterprise.

Tax benefits Under the 2017 Amendment

The 2017 Amendment, effective as of January 1, 2017, provides tax benefits for two types of Technology Enterprises (“Technology Enterprise”) as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.

The 2017 Amendment provides that a Preferred Company satisfying certain conditions will qualify as a Preferred Technology Enterprise (“Preferred Technology Enterprise”) and may thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as Preferred Technology Income (“Preferred Technology Income”) as defined in the Investment Law, or 7.5% for a Preferred Technology Enterprise located in Development Zone “A”.

In addition, a Preferred Technology Enterprise may enjoy a reduced corporate tax rate of 12% on capital gains derived from the sale of certain Benefitted Intangible Assets (“Benefitted Intangible Assets”) to a related foreign company, if the Benefitted Intangible Assets were acquired from a foreign company, on or after January 1, 2017 for at least NIS 200 million, and the sale received prior approval from the National Authority for Technological Innovation (“NATI”).

The 2017 Amendment further provides that a Preferred Company satisfying certain conditions will qualify as a Special Preferred Technology Enterprise (“Special Preferred Technology Enterprise”) and may thereby enjoy a reduced corporate tax rate of 6% on Preferred Technology Income regardless of the company’s geographic location in Israel. In addition, a Special Preferred Technology Enterprise may enjoy a reduced corporate tax rate of 6% on capital gains derived from the sale of certain Benefitted Intangible Assets to a related foreign company, if the Benefitted Intangible Assets were either developed by an Israeli company, or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from NATI. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least 10 years, subject to the approvals set out in the Investment Law.

As of December 31, 2020, we decided not to adopt the application of the 2017 Amendment. There can be no assurance that we will qualify as a Preferred Technology Enterprise or Special Preferred Technology Enterprise or that the benefits described above will be available to us in the future.

Israeli Resident Shareholders

Taxation of Israeli Individual Shareholders on Receipt of Dividends

Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on ordinary shares, which are not attributable to a Preferred Enterprise or a Technology Enterprise, at a rate of 25%. However, if the recipient of such a dividend is a Substantial Shareholder at the time of distribution or at any time during the preceding 12-month period, they will be subject to Israeli income tax for such dividends at a rate of 30%.

Dividends paid out of income attributed to a Preferred Enterprise are generally subject to tax at a rate of 20%.

Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are subject to a withholding tax, at source, at a rate of 20%.

A Substantial Shareholder (“Substantial Shareholder”) is defined as a person who holds, directly or indirectly, alone or together with others, at least 10% of any of the means of control (“means of control”) of a corporation. Means of control include the right to, among other things, vote in a general meeting of shareholders, receive profits, nominate a director or other officer, and receive assets upon liquidation.

Payers of dividends on ordinary shares, including the Israeli stockbrokers or the financial institutions through which the shares are held, are generally required, subject to reduced tax rates and the demonstration of a shareholder of his, her or its foreign residency, to withhold tax upon the distribution of a dividend at a rate of 25% or 30% if the recipient - 154 -

is a Substantial Shareholder. In case the shares are registered with a nominee company, they will be subject to a 25% withholding tax, irrespective of whether the recipient is a Substantial Shareholder.

Taxation of Israeli Resident Companies on the Payment of Dividends

Israeli resident companies are generally exempt from Israeli tax with respect to dividends paid to them on the ordinary shares held by them in other Israeli companies, and no tax is required to be withheld by the companies on such distribution. However, if the dividends received by the Israeli resident company are subsequently distributed to individuals or non-Israeli residents (individuals and corporations), a withholding tax would apply on distribution of the dividends to such individuals or non-Israeli residents.

Capital Gains—General

Capital gains tax is imposed on the sale of capital assets by an Israeli resident and on the sale of such assets by non- Israeli residents if those assets are either: (i) located in Israel, (ii) shares or rights to shares in Israeli resident companies, or (iii) shares in non-Israeli resident companies the main value of which represent, directly or indirectly, rights to assets located in Israel, unless a specific exemption is available under Israeli tax law or unless a treaty between Israel and the country of the non-resident provides otherwise. The Israeli Tax Ordinance ( the “Israeli Tax Ordinance”) distinguishes between a real capital gain (“real capital gain”) and am inflationary surplus (“inflationary surplus”). A real capital gain is the excess of the total capital gain over the inflationary surplus. Investors should consult with their own tax advisors to determine the appropriate method they should use to determine the inflationary surplus. An inflationary surplus is not subject to tax in Israel.

Capital Gains Taxes Applicable to Israeli Resident Shareholders

The tax rate applicable to real capital gains derived by an Israeli resident individual from the sale of shares that were purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, individuals who were a Substantial Shareholders at the time of sale, a Substantial Shareholder at any time during the preceding 12-month period preceding the sale, or who claim a deduction for interest and expenses in connection with the purchase and holding of such shares, the tax rate applicable to their real capital gain will be 30%. Real capital gains derived by corporations will generally be subject to the regular corporate tax rate (23% in 2020 and thereafter).

Individual and corporate shareholders dealing in securities are taxed at the tax rate applicable to business income (which is 23% for corporations in 2020 and thereafter) and, for individuals, at a marginal tax rate of up to 47% in 2020, plus an additional surtax of 3%, if applicable, as described below.

On the sale of securities traded on a stock exchange, a detailed return, including a calculation of the tax due, must be filed and an advanced payment must be made on the 31st of January and July of every tax year in respect of the sale of any securities made within the previous six months. However, if all taxes due were withheld at the source according to the provisions of the Israeli Tax Ordinance and regulations promulgated thereunder, the aforementioned returns are not required to be filed and no advance payment must be made.

Non-Israeli Resident Shareholders

Taxation of Non-Israeli Shareholders on Receipt of Dividends

Non-Israeli residents are generally subject to Israeli income tax on dividends paid on ordinary shares, which are not attributed to a Preferred Enterprise or a Technology Enterprise, at a rate of 25% (or 30% if the non- Israeli resident is a Substantial Shareholder at the time he or she receives the dividend or on any date in the 12 months preceding such date) or such lower rate as may be provided by an applicable tax treaty (subject to receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). Dividends paid out of income attributed to a Preferred Enterprise or a Technology Enterprise are generally subject to tax at a rate of 20% or such lower rate as may be provided by an applicable tax treaty (subject to receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate).

her or its foreign residency, to withhold tax, upon the distribution of a dividend, at a rate of 25% or 30% if the recipient is a Substantial Shareholder. In case the shares are registered with a nominee company, a 25% withholding will be undertaken, irrespective of whether the recipient is a Substantial Shareholder. Dividends distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are subject to withholding tax at the source at a rate of 20% or such lower rate as may be provided by an applicable tax treaty (subject to receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). In the event that at least 90% of a company’s shares are held by foreign companies, and other conditions are met, such dividends will be subject to a withholding tax at a rate of 4%.

Under the Convention Between the Government of Canada and the Government of the State of Israel with Respect to Taxes on Income, as amended (the “Canada Israel Tax Treaty”), Israeli withholding tax on dividends paid to an individual Canadian resident for the purposes of the treaty, may not, in general, exceed 15%, without any conditions. If the beneficial owner of the dividend is a corporation which holds directly at least 25% of the capital of the company paying the dividends, the Israeli tax withheld may not exceed 5%.

Dividends payable by Israeli companies that are beneficially owned by an entity that was created and operated in Canada exclusively to administer or provide benefits under one or more recognized pension plans shall be exempt from tax in Israel if:

• the organization is the beneficial owner of the shares on which the dividends are paid, holds those shares as an investment and is either generally exempt from tax in Canada or its income is not subject to tax in the Canada;

• the organization does not hold directly or indirectly more than 10% of the capital or 10% of the voting power of the company paying the dividends; and

• each recognized pension plan provides benefits primarily to individuals who are residents of Canada.

A non-Israeli resident who has dividend income derived from, or accrued, in Israel, from which the full amount of tax was withheld at source, is generally exempt from filing an Israeli tax return in respect of such income; provided that (i) such income was not derived from a business conducted in Israel by the taxpayer, and (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed.

We have never declared or paid cash dividends to holders of our ordinary shares, and we do not anticipate or intend to distribute cash or other dividends in the foreseeable future. We can provide no assurance that, in the event that we do declare a dividend, we will designate the profits that are being distributed in a way that will reduce a shareholders’ tax liability.

Capital Gains Taxes Applicable to Non-Israeli Shareholders

Non-Israeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that such shareholders did not acquire their shares prior to January 1, 2009 or acquired their shares after the shares were listed on a recognized stock exchange for trade, and such gains were not derived from a permanent establishment of such shareholders in Israel.

However, non-Israeli corporations will not be entitled to the foregoing exemptions if an Israeli resident alone, or together with other Israeli residents, is the beneficiary of, or is entitled to, directly or indirectly, 25% or more of the revenues or profits of the non-Israeli corporation. In addition, the foregoing exemption would not be available to a person whose gains from selling or otherwise disposing of shares are deemed to be business income.

In addition, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Canada-Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a Canadian resident (for the purposes of the Canada-Israel Tax Treaty) holding the ordinary shares as a capital asset entitles the Shareholder to claim benefits under the Canada- Israel Tax Treaty. A Canadian resident under the Canada-Israel Treaty is exempt from Israeli capital gains tax on a sale of our shares.

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Regardless of whether shareholders may be liable for Israeli income tax on the sale of our ordinary shares, the payment of the consideration may be subject to withholding of Israeli tax at source. Shareholders, including non-Israeli resident shareholders, may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.

In transactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require shareholders who are not liable for Israeli tax to declare so in forms specified by the Israel Tax Authority or to obtain a specific exemption from the Israel Tax Authority to confirm their status as a non-Israeli resident, and, in the absence of such declarations or exemptions, they may require the purchaser of the shares to withhold taxes at source in accordance with applicable law.

Surtax

Individuals who are subject to taxation in Israel are also subject to an additional tax on annual income exceeding a certain threshold (the threshold for 2021 was NIS 647,640), which amount is adjusted based on the Israeli consumer price index, at the rate of 3%, including, but not limited to, dividends, interest and capital gain.

Estate and Gift Tax

Israeli laws presently does not impose estate or gift taxes.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations under the Income Tax Act (Canada) and the regulations thereunder, as amended (the “Tax Act”) generally applicable to a beneficial owner (other than a Founder or a Sponsor) of Intercure Shares following the Qualifying Transaction who, at all relevant times, for the purposes of the Tax Act, (i) is, or is deemed to be, resident in Canada for the purposes of the Tax Act and any applicable income tax treaty or convention, (ii) deals at arm’s length with and is not affiliated with Intercure, and (iii) holds the Intercure Shares as capital property (a “Holder”), all within the meaning of the Tax Act. An Intercure Share will generally be considered to be capital property to a Holder unless either (i) the Holder holds the Intercure Share in the course of carrying on a business of buying and selling securities or (ii) the Holder has acquired the Intercure Share in a transaction or transactions considered to be an adventure or concern in the nature of trade. Intercure Shares will not be “Canadian securities” for purposes of the election under subsection 39(4) of the Tax Act to have all “Canadian securities” owned by certain Holders (as defined below) deemed to be capital property.

This summary does not apply to a Holder: (i) that is a “financial institution” for purposes of the mark to market rules in the Tax Act; (ii) that is a “specified financial institution” as defined in the Tax Act; (iii) that reports its “Canadian tax results” within the meaning of the Tax Act in a currency other than Canadian currency; (iv) an interest in which is a “tax shelter investment” for the purposes of the Tax Act; (v) who has entered or will enter into a “dividend rental arrangement”, “synthetic disposition arrangement” or “derivative forward agreement” as those terms are defined in the Tax Act with respect to the Intercure Shares; (vi) that is a partnership; or (vii) in respect of whom Intercure is or will become a “foreign affiliate” for the purposes of the Tax Act. Such Holders should consult their own tax advisors.

This summary is based on the facts set out in this prospectus, the current provisions of the Tax Act in force as of the date hereof, and counsel’s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) made publicly available prior to the date hereof, all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”). No assurances can be given that the Proposed Amendments will be enacted or will be enacted as proposed. Other than the Proposed Amendments, this summary does not take into account or anticipate any changes in law or the administrative policies or assessing practices of the CRA, whether by judicial, legislative, governmental or administrative decision or action, nor does it take into account provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those discussed herein.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder and no representations with respect to the income tax consequences to any particular Holder are made. This summary is not exhaustive of all Canadian federal income tax considerations

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and Holders are urged to consult their own tax advisors concerning the tax consequences to them of the acquisition, holding and disposition of Intercure Shares based on their own particular circumstances.

Currency Conversion

In general, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of Intercure Shares must be converted into Canadian dollars based on the applicable exchange rate quoted by the Bank of Canada for the relevant day or such other rate of exchange that is acceptable to the Minister of National Revenue. Certain Holders of Intercure Shares may, as a consequence, realize capital gains or capital losses by virtue of changes in the value of the U.S. dollar (or other foreign currencies) relative to the Canadian dollar.

Dividends on Intercure Shares

Dividends received or deemed to be received on an Intercure Share by a Holder, including amounts deducted for Israeli withholding tax, will be included in computing such Holder’s income for the taxation year. Dividends received on an Intercure Share by a Holder who is an individual will not be subject to the gross-up and dividend tax credit rules normally applicable under the Tax Act to taxable dividends received from taxable Canadian corporations. A Holder that is a corporation will not be entitled to deduct the amount of such dividends in computing its taxable income for that taxation year.

To the extent that Israeli withholding tax is payable by a Holder in respect of any dividends received on Intercure Shares, the Holder may be eligible for a foreign tax credit against the Holder’s federal income taxes or a deduction in computing such Holder’s income under the Tax Act to the extent and under the circumstances described in the Tax Act. Holders should consult their own tax advisors regarding the availability of a foreign tax credit or deduction, having regard to their particular circumstances.

Dispositions of Intercure Shares

Upon a disposition, or a deemed disposition, of an Intercure Share, a Holder will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the Intercure Share, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the Intercure Share to the Holder immediately before the disposition or deemed disposition. For this purpose, the adjusted cost base to a Holder of an Intercure Share will be determined at any particular time by averaging the cost of such share with the adjusted cost base of all other Intercure Shares owned by the Holder as capital property at that time. The Holder’s cost of Intercure Shares for the purposes of the Tax Act generally will include all amounts paid or payable by the Holder for the Intercure Shares, subject to certain adjustments under the Tax Act. Such capital gain (or capital loss) will be subject to the treatment described below under “Taxation of Capital Gains and Capital Losses”.

Taxation of Capital Gains and Capital Losses

A Holder will be required to include in computing its income for the taxation year of disposition one-half of the amount of any capital gain (a “taxable capital gain”) realized in such taxation year. Subject to and in accordance with the provisions of the Tax Act, a Holder will be required to deduct one-half of the amount of any capital loss realized in a particular taxation year (an “allowable capital loss”) against taxable capital gains realized in the taxation year. Allowable capital losses in excess of taxable capital gains for a taxation year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such taxation years, to the extent and under the circumstances specified in the Tax Act.

Refundable Tax

A Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay a refundable tax on its “aggregate investment income” (as defined in the Tax Act) for the year, including taxable capital gains and certain dividends.

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Alternative Minimum Tax

In general terms, a Holder who is an individual (other than certain trusts) may be liable for alternative minimum tax under the Tax Act, including as a result of realizing a capital gain on the disposition of Intercure Shares. Holders that are individuals should consult their own tax advisors in this regard.

Foreign Property Information Reporting

A Holder that is a “specified Canadian entity” (as defined in the Tax Act) for a taxation year or a fiscal period and whose total “cost amount” (as defined in the Tax Act) of “specified foreign property” (as defined in the Tax Act), including the Intercure Shares, at any time in the year or fiscal period exceeds C$100,000 will be required to file an information return with the CRA for the taxation year or fiscal period disclosing certain prescribed information in respect of such property. Subject to certain exceptions, a taxpayer resident in Canada, other than a corporation or trust exempt from tax under Part I of the Tax Act, will be a “specified Canadian entity”, as will certain partnerships. The Intercure Shares will be “specified foreign property” to a Holder. Penalties may apply where a Holder fails to file the required information return in respect of such Holder’s “specified foreign property” on a timely basis in accordance with the Tax Act. The reporting rules in the Tax Act relating to “specified foreign property” are complex and this summary does not purport to address all circumstances in which reporting may be required by a Holder. Holders should consult their own tax advisors regarding the reporting rules contained in the Tax Act.

Offshore Investment Fund Property Rules

Pursuant to the offshore investment fund property rules in the Tax Act (the “OIFP Rules”), if in a particular year a Holder holds or has an interest in Intercure Shares, and the Intercure Shares may reasonably be considered to derive their value, directly or indirectly, primarily from portfolio investments in (i) shares of the capital stock of one or more corporations, (ii) indebtedness or annuities, (iii) interests in one or more corporations, trusts, partnerships, organizations, funds or entities, (iv) commodities, (v) real estate, (vi) Canadian or foreign resource properties, (vii) currency of a country other than Canada, (viii) rights or options to acquire or dispose of any of the foregoing, or (ix) any combination of the foregoing (collectively, “Investment Assets”), and one of the main reasons for holding an interest in the Intercure Shares is to reduce or defer the Canadian tax liability that would have applied to the income, profits and gains generated by the portfolio investments if such income, profits and gains had been earned directly by the holder, the Holder will generally be required to include in computing income for the year an amount equal to the amount, if any, by which (i) an imputed return for the taxation year computed on a monthly basis and calculated as the product obtained when the Holder’s “designated cost” (within the meaning of the Tax Act) of the Intercure Shares at the end of the month, is multiplied by one-twelfth of the total of (A) the applicable prescribed rate for the period that includes such month, and (B) two percent, exceeds (ii) the Holder’s income for the year (other than a capital gain) in respect of the Intercure Shares determined without reference to these rules.

The CRA has taken the position that the term “portfolio investment” should be given a broad interpretation. While it should be unlikely that the value of the Intercure Shares should be regarded as being derived primarily from portfolio investments in Investment Assets, there is a possibility that the CRA may take a different view. Even if the value of the Intercure Shares may reasonably be considered to be derived, directly or indirectly, primarily from portfolio investments in Investment Assets, these rules will apply to a Holder only if it is reasonable to conclude that one of the main reasons for the Holder acquiring, holding or having the Intercure Shares was to derive a benefit from Investment Assets in such a manner that the taxes, if any, on the income, profits and gains from such Investment Assets for any particular year are significantly less than the tax that would have been applicable under Part I of the Tax Act if the income, profits and gains had been earned directly by the Holder.

The OIFP Rules are complex and their application depends, to a large extent, on the reasons for a Holder acquiring or holding the Intercure Shares. Holders are urged to consult their own tax advisors regarding the application and consequences of the OIFP Rules in their own particular circumstances.

ELIGIBILITY FOR INVESTMENT

Based on the current provisions of the Tax Act in force as of the date hereof and the Proposed Amendments, the Intercure Shares will be qualified investments upon the Closing for a trust governed by an RRSP, RRIF, DPSP, RESP,

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RDSP or TFSA provided that at such time the Intercure Shares are listed on a designated stock exchange for the purposes of the Tax Act (which currently includes the TASE, the TSX and the Nasdaq).

Notwithstanding the foregoing, the holder of a TFSA or an RDSP, the annuitant under an RRSP or RRIF, or the subscriber of an RESP will be subject to a penalty tax in respect of Intercure Shares held in the TFSA, RDSP, RRSP, RRIF or RESP if such Intercure Shares are prohibited investments for the TFSA, RDSP, RRSP, RRIF, or RESP. A Intercure Share will generally be a “prohibited investment” for a TFSA, RDSP, RRSP, RRIF, or RESP if the holder of the TFSA or RDSP, the annuitant under the RRSP or RRIF, or the subscriber of the RESP does not deal at arm’s length with Intercure for the purposes of the Tax Act, or the holder, annuitant or subscriber has a “significant interest” (as defined in subsection 207.01(4) the Tax Act) in Intercure. Holders of a TFSA or an RDSP, annuitants under an RRSP or RRIF, and subscribers of an RESP should consult their own tax advisors as to whether the Intercure Shares will be a prohibited investment in their particular circumstances.

PROMOTERS

Our Sponsors are each considered a promoter of the LP within the meaning of applicable securities legislation.

As of the date hereof, our Sponsors own, of record and beneficially, approximately 54,962 Proportionate Voting Units and 524,500 Class B Units (comprising approximately 5,245 Proportionate Voting Units and 524,500 Rights), representing 21% of our issued and outstanding units (including all Restricted Voting Units and Proportionate Voting Units on an as-converted basis to Restricted Voting Units). As of the date hereof, our Sponsors do not own any Class A Restricted Voting Units.

LEGAL PROCEEDINGS

Please see “The Business of Intercure-Legal Proceedings” for a summary of the material ongoing legal proceedings involving Intercure and its subsidiaries. The LP and its subsidiaries are not currently subject to any legal proceedings.

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Except as described in this prospectus, none of the proposed directors or executive officers of the General Partner, or any person or company that is expected to beneficially own, or control or direct more than 10% of any class or series of shares of the LP, or any associate or affiliate of any of the foregoing persons, has or has had any material interest in any past transaction within the three years before the date of the prospectus, or any proposed transaction, that has materially affected or would materially affect the LP or any of its expected subsidiaries.

AUDITORS, TRANSFER AGENT AND ESCROW AGENT

Our auditors are Deloitte LLP, Chartered Professional Accountants, Licensed Public Accountants, having an address of Bay Adelaide East, Suite 200, 8 Adelaide West, Toronto, Ontario, M5H 0A9. Deloitte LLP is independent of the LP within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario.

Upon the completion of the Qualifying Transaction, Deloitte LLP will resign as auditor of the LP.

Upon the completion of the Qualifying Transaction, Brightman Almagor Zohar & Co. will resign as auditor of each of Intercure and Canndoc.

Somekh Chaikin (member firm of KPMG International), having an address of 17 Ha'arba'a Street, Tel Aviv, Israel will be the auditor of Intercure. Somekh Chaikin is independent of Intercure within the meaning of the Public Company Accounting Oversight Board (PCAOB).

Olympia Trust Company, at its principal offices in Calgary, Alberta is the transfer agent and registrar for our Limited Partnership Units and is the Rights Agent for our Rights under the Rights Agreement.

Olympia Trust Company, at its principal offices in Calgary, Alberta is the Escrow Agent.

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EXPERTS

The matters referred to under “Certain Canadian Federal Income Tax Considerations” will be passed upon on behalf of the LP by Goodmans LLP.

The matters referred to under “Certain Israeli Income Tax Considerations” will be passed upon on behalf of the LP by Bracha & Co.

As of the date of this prospectus, the partners and associates of Goodmans LLP and Bracha & Co, beneficially owned, directly or indirectly, less than 1% of the outstanding securities of the LP.

MATERIAL CONTRACTS

Other than contracts entered into in the ordinary course of business, as of Closing, the following are the only material contracts which the LP and/or Intercure has entered into or will enter into:

(a) the Arrangement Agreement;

(b) the A&R LP Agreement and the LPA Amendment;

(d) Northern Kibbutz License;

(e) Southern Kibbutz License; and

(f) the Rights Agreement.

Copies of these agreements will be available for inspection at our offices, during ordinary business hours and will be available on SEDAR at www.sedar.com.

ENFORCEMENT OF JUDGEMENTS AGAINST FOREIGN PERSONS

Each of the directors and officers of Intercure, the General Partner as well as Subversive Sponsor and Inception Sponsor, reside or is otherwise organized outside of Canada. Each of the directors and officers of the General Partner has appointed GODA Incorporators, Inc., located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7 as their agent for service of process. Investors are advised that it may not be possible to enforce judgments obtained in Canada against any person that resides or is otherwise organized outside of Canada even if the party has appointed an agent for service of process.

We have been informed by our legal counsel, Doron Tikotzky Kantor Gutman, Nass & Amit Gross, that it may be difficult to assert Canadian securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of Canadian securities laws reasoning that Israel is not the most appropriate forum to hear such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not Canadian law is applicable to the claim. If Canadian law is found to be applicable, the content of applicable Canadian law must be proved as a fact by expert witnesses which can be a time-consuming and costly process. Certain matters of procedure may also be governed by Israeli law.

Subject to certain time limitations and legal procedures, Israeli courts may enforce a Canadian judgment in a civil matter which, subject to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non- civil matter, provided that:

• The judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;

- 161 - • The obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and

• The judgment is executory in the state in which it was given.

Even if these conditions are met, an Israeli court will not declare a foreign civil judgment enforceable if:

• The judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);

• The enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel;

• The judgment was obtained by fraud;

• The opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;

• The judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;

• The judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or

• At the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel.

If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. Under existing Israeli law, a foreign judgment payable in foreign currency may be paid in Israeli currency at the rate of exchange in force on the date of the payment. Current Israeli exchange control regulations also permit a judgment debtor to make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.

EXEMPTIONS

The LP has applied for exemptive relief from the Ontario Securities Commission (the “OSC”) as contemplated by Part 19 of NI 41-101 from the requirement in Item 32 of Form 41-101F1 to include historical financial statements for the business in respect of Cannolam (for the year ended December 31, 2019 and the stub period from October 2018 to December, 2018), the Ashdod pharmacy (for the years ended December 31, 2017, 2018 and 2019), the Herzliya pharmacy (for the years ended December 31, 2017, 2018 and 2019) and Canndoc (for the stub period between January 2019 and February 10, 2019) (in the case of Cannolam and Canndoc, the “Non-Significant Acquisitions” and in the case of the two pharmacies, the “Pharmacy Acquisitions”), which Intercure acquired in July of 2020 (in the case of Cannolam) and January 2021 (in the case of the Pharmacy Acquisitions).

The treatment of the aforementioned businesses as forming part of the primary business of Intercure would require the LP to include in this prospectus historical financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) for the pre-acquisition period for the businesses. In the application, the LP made, among others, the following submissions:

(a) The Non-Significant Acquisitions are not, and the periods for which financial statements for the Non-Significant Acquisitions that are not included in the prospectus are not, individually or in the aggregate, significant or otherwise material having regard to the overall size and value of the Qualifying Transaction. Therefore, the LP believes that the pre-acquisition historical financial

- 162 - statements with respect to the foregoing businesses that are not included in the prospectus would not provide meaningful or useful disclosure to potential investors.

(b) It would not be possible to produce audited financial statements for the Pharmacy Acquisitions and such statements would not provide any meaningful additional disclosure about Intercure and its primary business because the business of the noted pharmacies was not focused on cannabis operations as it will be once integrated into Intercure’s operations, making the historical financial information of when the businesses were non-cannabis pharmacies largely immaterial to investors.

(c) Based upon the foregoing, the LP submits that it does not believe that the financial statements in respect of which the relief was requested are necessary for the prospectus to contain full, true and plain disclosure.

CONTRACTUAL AND STATUTORY RIGHTS

Purchasers of Restricted Voting Units

Original purchasers of Restricted Voting Units from the Underwriters under the IPO who continue to hold those securities up to the Redemption Deadline will have a contractual right of action for rescission or damages against the LP and Intercure (as well as a contractual right of action for damages alone against (a) the directors of the General Partner as of the Redemption Election Deadline, and (b) every person or company who signs this prospectus, which for greater certainty, includes the Sponsors signing as promoters of the LP (collectively, the “signatories”)).

In the event that the Qualifying Transaction is completed and if this prospectus or any amendment hereto contains a misrepresentation (as defined in the Securities Act)), provided that the exercise of either such remedy occurs not later than (a) in the case of an action for rescission, 180 days after the Redemption Election Deadline, or (b) in the case of an action for damages, the earlier of (i) 180 days after the plaintiff first had knowledge of the facts giving rise to the cause of action, or (ii) three years after the Redemption Election Deadline, a purchaser who purchased Restricted Voting Units in connection with the IPO shall, in respect of any Intercure Shares held upon Closing, be entitled to, in addition to any other remedy available at the time to such holder, (i) as against the LP and Intercure, in the case of rescission, the amount paid for the Restricted Voting Units upon surrender of such securities; and (ii) as against the LP, Intercure, the directors of the General Partner, and the signatories, in the case of a damages election, their proven damages.

In addition, the following additional provisions apply to actions against the directors of the General Partner and the signatories: (a) each has a due diligence defence and the other defences and rights contemplated in section 130 of the Securities Act and at law; and (b) each is entitled to be indemnified by the LP and Intercure to the maximum extent permitted by law.

This contractual right of action for rescission or damages will, subject to the foregoing, be consistent with the statutory right of rescission or damages described under section 130 of the Securities Act. In no case shall the amount recoverable exceed the original purchase price of the Restricted Voting Units. In addition, for non-residents of Canada, the contractual right shall be subject to the same interpretational or constitutional defences, if any, as would apply to a claim against a resident Canadian issuer under section 130 of the Securities Act, and, as a result, the argument that non-residents are not entitled to take advantage of the contractual right shall not be precluded.

The directors of the GP as at the date of the final prospectus (or any amendment), namely: Michael B. Auerbach, Richard Acosta, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Leland Hensch and Anne Sullivan, will, subject to the terms thereof, be potentially liable for misrepresentations in this final prospectus (as it may be amended) under Part XXIII.1 of the Securities Act (Ontario) and the “Contractual Right of Action” described above. Directors of Intercure will not be subject to such liability as such.

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C CERTIFICATE OF SUBVERSIVE REAL ESTATE ACQUISITION REIT LP AND PROMOTERS

Dated: March 12, 2021

This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities previously issued by the LP as required by the securities legislation of each of the provinces and territories of Canada (other than Quebec).

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

BY: (SIGNED) “MICHAEL B. AUERBACH” BY: (SIGNED) “LELAND HENSCH” CHIEF EXECUTIVE OFFICER OF THE GENERAL CHIEF FINANCIAL OFFICER OF THE GENERAL PARTNER PARTNER

By its General Partner

SUBVERSIVE REAL ESTATE ACQUISITION REIT (GP) INC.

BY: (SIGNED) “MICHAEL B. AUERBACH” BY: (SIGNED) “LELAND HENSCH” CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER

ON BEHALF OF THE BOARD OF DIRECTORS OF THE GENERAL PARTNER

BY: (SIGNED) “RICHARD ACOSTA” BY: (SIGNED) “SCOTT BAKER” DIRECTOR DIRECTOR

SUBVERSIVE REAL ESTATE SPONSOR LLC, AS PROMOTER

BY: (SIGNED) “MICHAEL B. AUERBACH” MANAGING MEMBER

INCEPTION ALTANOVA SPONSOR, LLC, AS PROMOTER

BY: (SIGNED) “RICHARD ACOSTA” MANAGING MEMBER

CG INVESTMENTS INC. IV, AS PROMOTER

BY: (SIGNED) “PATRICK BURKE” DIRECTOR

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A APPENDIX A LP FINANCIAL STATEMENTS

The unaudited interim financial statements of the LP as of September 30, 2020 ...... A-2 The management’s discussion and analysis of the LP for the three and nine months period ended September 30, 2020 ...... A-18 The audited annual financial statements of the LP as of December 31, 2019 and for the period from November 12, 2019, together with the notes thereto and the auditors’ report thereon ...... A-29 The management’s discussion and analysis of the LP as of December 31, 2019 and for the period from inception on November 12, 2019 to December 31, 2019 ...... A-40

A-1 SUBVERSIVE REAL ESTATE ACQUISITION REIT LP UNAUDITED INTERIM FINANCIAL STATEMENTS

AS AT SEPTEMBER 30, 2020 (Expressed in U.S. Dollars)

A-2 NOTICE TO READER

These unaudited condensed interim September 30, 2020 financial statements have been restated from the financial statements filed by the REIT LP on November 13, 2020. The restatement has been described in Note 14 in these unaudited interim financial statements. The notice of no auditor review has also been removed.

(signed) “Michael Auerbach” (signed) “Leland Hensch” Michael Auerbach Leland Hensch Chief Executive Officer Chief Financial Officer

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A-7 1. CORPORATE INFORMATION

Subversive Real Estate Acquisition REIT LP (the “REIT LP”, “we”, “our” or “us”) is a limited partnership formed under the laws of the Province of Ontario for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP, which we refer to as the “Qualifying Transaction”. Subversive Real Estate Sponsor LLC (“Subversive Sponsor”), Inception Altanova Sponsor, LLC and CG Investments Inc. IV are sponsors of the REIT LP (collectively, the “Sponsors”). The amended and restated limited partnership agreement (the “A&R LPA”) of the REIT LP is filed on SEDAR at www.sedar.com.

The REIT LP was established under the Limited Partnership Act (Ontario) on November 12, 2019. The REIT LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada.

The September 30, 2020 financial statements were originally authorized for issuance by the Board of Directors of the General Partner of the REIT LP on November 13, 2020 and restated and amended for issuance on February 8, 2021.

2. SIGNIFICANT EVENTS

Due to its negative working capital position, the REIT LP’s ability to continue as a going concern is dependent upon the continued support of its Sponsors, and/or upon the completion of the Qualifying Transaction or on the approval of an extension of the permitted timeline should the Qualifying Transaction not be completed. There can also be no assurance that we will be successful in completing our Qualifying Transaction. In the event a Qualifying Transaction does not occur the escrowed cash will be returned to Class A restricted voting unit holders and the Sponsors will have no recourse against the escrowed cash.

These uncertainties may cast significant doubt upon the REIT LP’s ability to continue as a going concern and the ultimate appropriateness of using accounting principles applicable to a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the REIT LP be unable to continue as a going concern. If the REIT LP is not able to continue as a going concern, the REIT LP may be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these financial statements. These differences may be material.

On November 12, 2019, the REIT LP issued the general partner interest to Subversive Real Estate Acquisition REIT (GP) Inc. (the “General Partner”), the REIT LP’s General Partner, in exchange for proceeds of U.S.$10.00. The General Partner is responsible for the management and control of the REIT LP in accordance with the A&R LPA. On November 12, 2019, the REIT LP issued one proportionate voting unit (“Proportionate Voting Unit”) to Subversive Sponsor. On December 31, 2019, the REIT LP issued 58,820 Proportionate Voting Units of the REIT LP to the Founders (“Founders’ Proportionate Voting Units”) at approximately U.S.$0.425 per Proportionate Voting Unit for aggregate proceeds of U.S.$25,000. Our Sponsors and the General Partners’ directors and officers, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott

A-8 Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart, comprise our Founders.

On January 8, 2020, the REIT LP closed its initial public offering (the “Offering”) of 20,000,000 Class A Restricted Voting units (the “Class A Restricted Voting Units”) at U.S.$10.00 per Class A Restricted Voting Unit, for gross proceeds of U.S.$200,000,000. Each Class A Restricted Voting Unit consists of one restricted voting unit of the REIT LP (each, a “Restricted Voting Unit”) and one right of the REIT LP (each, a “Right”). Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of the Qualifying Transaction (the “Closing”). Each Right represents the entitlement to automatically receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Qualifying Transaction). The REIT LP’s Class A Restricted Voting Units commenced trading on the Neo Exchange Inc. (the “Exchange”) under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units separated into Restricted Voting Units and Rights on February 18, 2020, and trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

In connection with the Offering, the REIT LP granted the underwriters a non-transferable option to purchase up to an additional 3,000,000 Class A Restricted Voting Units, at a price of U.S.$10.00 per Class A Restricted Voting Unit, to cover over-allotments, if any, and for market stabilization purposes. The underwriters partially exercised the over-allotment option to acquire 2,500,000 Class A Restricted Voting Units and the over-allotment closed on January 23, 2020. Due to the partial exercise of the over-allotment option, an aggregate of 1,259 Proportionate Voting Units were relinquished without compensation by the Sponsors on January 23, 2020. As a result, following the exercise of the over-allotment option and relinquishment of the 1,259 Proportionate Voting Units, the Founders own an aggregate of 57,561 Proportionate Voting Units (excluding Proportionate Voting Units underlying the Class B Units).

Concurrent with the closing of the Offering, the Sponsors purchased an aggregate of 512,000 class B Units (“Class B Units”) at an offering price of U.S.$10.00 per Class B Unit, for gross proceeds of U.S.$5,120,000. Each Class B Unit consists of 1/100 of a Proportionate Voting Unit and one Right. In connection with the partial exercise of the over-allotment, the Sponsors purchased an aggregate of 12,500 additional Class B Units, for additional gross proceeds of U.S.$125,000.

The proceeds of U.S.$225,000,000 from the Offering were placed in an escrow account (the “Escrow Account”) with Olympia Trust Company (“Olympia”), pursuant to an escrow agreement between the REIT LP and Olympia (the “Escrow Agreement”) and will be released upon consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement.

On October 7, 2020 the REIT LP announced that it had entered into binding agreements to acquire real properties in the amount of approximately US$97.4 million and originate or acquire US$85.4 million of first lien mortgages..

On November 26, 2020, the REIT LP announced hat it has determined not to proceed with its previously announced qualifying transaction and that it was exploring an alternative qualifying transaction. The REIT LP also announced that Michael Auerbach and Leland Hensch will become

A-9 the Chief Executive Officer and Chief Financial Officer, respectively, of the general partner of the REIT LP (the “General Partner”), effective immediately.

On January 4, 2021, the REIT LP announced that it executed a confidential definitive agreement in connection with a potential transaction, which would, if consummated, qualify as the REIT LP’s qualifying transaction. Accordingly, the REIT LP is permitted until April 8, 2021 (15 months following the closing of its initial public offering) to conclude its qualifying transaction.

On January 26, 2021, the REIT LP announced the details of the previously announced entry into a definitive agreement in connection with a potential transaction which would, if consummated, qualify as the REIT LP’s qualifying transaction. Pursuant to the qualifying transaction, the REIT LP will combine with Intercure Ltd. (“Intercure”) (dba Canndoc) (TASE: INCR), Israel’s leading cannabis company. Canndoc, a wholly owned subsidiary of Intercure, is Israel’s largest licensed cannabis producer and one of the first to offer Good Manufacturing Practices (GMP) certified and pharmaceutical-grade medical cannabis products in pharmacies across Israel.

Concurrently, the REIT LP also announced a US$65 million private placement, pursuant to which, in connection with the closing of the Qualifying Transaction, it will issue 6.5 million units at a price per unit of US$10.00 (the “Private Placement”).

Under the terms of the Qualifying Transaction, Intercure is valued at US$300 million pre- Qualifying Transaction and Private Placement.

Both the Qualifying Transaction and Private Placement are subject to a number of closing conditions, including obtaining shareholder approval from Intercure’s shareholders and listing approval from the NASDAQ.

3. BASIS OF PREPARATION

(a) Basis of preparation

These unaudited interim financial statements of the REIT LP as at September 30, 2020 and for the period from January 1, 2020 through September 30, are prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” and in accordance International Financial Reporting Standards. The REIT LP was established on November 12, 2019 and accordingly no comparatives have been provided for the income statements and cash flows.

(b) Basis of measurement

The unaudited interim financial statements of the Company have been prepared on a historical cost basis. The REIT LP’s functional and presentation currency is the U.S. dollar.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant assumptions were used in determining the fair value of Rights attached to the Class A Restricted Voting Units at inception.

A-10 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Financial instruments

Financial assets and liabilities are recognized when the REIT LP becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or are assigned, and the REIT LP has transferred substantially all risks and rewards of ownership in respect of the asset. Financial liabilities are derecognized when the related obligation is discharged, cancelled or when it expires.

Management determines the classification of financial instruments at initial recognition with reflection of the business model and cash flow characteristics of the financial instruments. Financial assets are classified at fair value through profit or loss (‘‘FVTPL’’) or at amortized cost. Financial liabilities are classified at amortized cost.

Financial instruments classified as FVTPL are carried at fair value in the statement of financial position and any gains or losses are recorded in net income in the period in which they arise. There were no items classified as FVTPL. Financial instruments classified at amortized cost include securities held in escrow. The Class A Restricted Voting Units subject to redemption have been classified as liabilities for accounting purposes and are recorded at amortized cost.

(b) Impairment of financial asset at amortized cost

At each financial statement reporting date, the REIT LP assesses whether there is objective evidence that a recorded financial asset is impaired. Impairment exists if one or more events have occurred after the initial recognition of the asset and those events have objectively given rise to an expected negative impact on the estimated future cash flows of the financial asset that can be reliably estimated. The REIT LP recognizes impairment if the expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of this difference is recognized as the impaired amount and is recorded as profit or loss. An impairment of a financial asset carried at amortized cost is reversed in subsequent periods if the amount of the loss decreased and the decrease can be related objectively to an event occurring after the impairment was recognized.

Pursuant to the Limited Partnership Agreement (“the Partnership”), all of the investment income, expense and realized capital gains and losses of the Partnership are allocated to the limited partners and the General Partner. These financial statements do not provide for income taxes as the limited partners and the General Partner are taxed individually on their share of the Partnership’s income.

(d) Per unit information

Basic income or loss per Class B Unit is calculated by dividing the net income or loss by the weighted average number of Class B Units, Proportionate Voting Units and General Partnership Unit outstanding during the period. The calculation excludes the effect of Class A Restricted Voting Units, as the Class A Restricted Voting Units have been classified in these financial statements as financial liabilities.

A-11 5. RESTRICTED CASH HELD IN ESCROW

The following cash balances were held in escrow at Olympia trust company as at September 30, 2020:

AS AT AS AT SEPTEMBER 30, 2020 DECEMBER 31, 2019 Bank of Montreal GIC - USD due 15-Jun-2021 $ 25,030,781 $ - BNS Corp USD Investment Savings Account $ 77,958,715 $ - NB GIC - USD due 15-Jun-2021 $ 19,502,858 $ - NBC NBI Altamir CP Account $ 9,978,590 $ - RBC Bank BDN - USD due 01-Oct-2020 $ 78,509,902 $ - REN USD High Interest Savings Account $ 15,016,053 $ - Cash (in Escrow) $ 2,421 $ - $ 225,999,320 $ - These balances are valued at amortized cost which approximates fair value due to the short-term nature of the items.

6. CLASS A RESTRICTED VOTING UNITS SUBJECT TO REDEMPTION

(a) Authorization

The REIT LP is authorized to issue an unlimited number of Class A Restricted Voting Units. The holders of Class A Restricted Voting Units have no pre-emptive rights or other subscription rights and there are no sinking fund provisions applicable to these units.

(b) Voting Rights

The holders of the Class A Restricted Voting Units are entitled to vote on and receive notice of meetings on all matters requiring unitholder approval (including any proposed extension to the permitted timeline and approval of the Qualifying Transaction if otherwise required under applicable law) other than the election and/or removal of directors of the General Partner and auditors of the REIT LP prior to Closing. Prior to the Qualifying Transaction, holders of the Class A Restricted Voting Units are not entitled to vote at (or receive notice of or meeting materials in connection with) meetings held only to consider the election and/or removal of directors and auditors.

Only holders of Class A Restricted Voting Units are entitled to have their units redeemed and receive the escrow proceeds (net of applicable taxes and other permitted deductions) in the event the Qualifying Transaction does not occur within the permitted timeline, in the event of the Qualifying Transaction, and in the event of an extension to the permitted timeline. The Rights which were issued with the Class A Restricted Voting units have no redemption rights.

(d) Classification

The REIT LP has classified its Class A Restricted Voting Units as financial liabilities within the unaudited balance sheet. The REIT LP recorded a discount to the $225,000,000 of gross proceeds from the Offering in the amount of $19,988,541, representing the fair value of the Rights, and

A-12 $2,946,522, representing the transaction costs associated with the Class A Restricted Voting Units. The fair value of the Rights was arrived at by dividing the $225,000,000 of Class A Restricted Voting Unit gross proceeds by the fully diluted unit value of the REIT LP and dividing the quotient by eight. The difference between the estimated fair value of the Rights and the Class A Restricted Voting Unit value at the time of the Offering is allocated to the Class A Restricted Voting Unit liability within the unaudited balance sheet. The aggregate discount of $22,935,063 is being amortized over 12 months using the effective interest rate method. For the period from January 1, 2020 through September 30, 2020, the REIT LP recorded $16,333,657 of amortization of the issue costs in connection with the Rights. Interest earned on the escrow funds of $1,004,609 has been credited to the Class A Restricted Voting Units.

7. UNITHOLDERS’ EQUITY

The REIT LP is authorized to issue an unlimited number of Class B Units. The holders of Class B Units have no pre-emptive rights or other subscription rights and there are no sinking fund provisions applicable to these units.

(a) Voting Rights

The holders of the Class B Units are entitled to vote at all meetings of unitholders and on all matters requiring a unitholder vote, with the exception of an extension of the permitted timeline, which will only be voted upon by holders of Class A Restricted Voting Units.

(b) Redemption Rights

Holders of Class B Units, being the Founders, do not have access to, and cannot benefit from, any proceeds held in the escrow account, and as such, do not have any redemption rights with respect to their Class B Units. The Founders (including the Sponsors) will, however, be entitled to such redemption rights using proceeds from the escrow account with respect to any Class A Restricted Voting Units they may acquire pursuant to or following the Offering.

8. TRANSACTION COSTS

Transaction costs are directly related to the Offering and consist mainly of legal, accounting, printing, filing and underwriting costs. Transaction costs incurred from November 12, 2019 (date of formation) through September 30, 2020 were allocated between Unitholders’ Equity and units subject to redemption on the following basis:

Class A Class A Class B Total Restricted Rights Units Voting Units Professional fees (legal, $ 847,411 $ 82,622 $ 21,784 $ 951,817 accounting, etc.) Underwriters’ commission $ 1,765,836 $ 172,168 - $1,938,005 Listing $ 155,996 $ 15,460 - $ 171,455

A-13 Class A Class A Class B Total Restricted Rights Units Voting Units Other $ 177,279 $ 17,285 $ 4,557 $ 199,121 Total $ 2,946,522 $ 287,535 $ 26,341 $3,260,398

The Underwriters are entitled to an underwriting commission equal up to $12,375,000 or 5.5% of the gross proceeds of the Class A Restricted Voting Units issued under the Offering. The REIT LP paid $1,938,005 to the Underwriters at the closing of the Offering, of which $1,413,750 was used to settle CG Investment Inc. IV’s Class B Unit sponsors share purchase obligation. The balance of the underwriting commission of $10,436,995, or 4.6% of the gross proceeds (the “Deferred Amount”) of the Class A Restricted Voting Units, has been deferred and will only be paid upon successful completion of the Qualifying Transaction as follows: (A) as to 3.6% of the gross proceeds to the Underwriters; and (B) as to 1.0% of the gross proceeds, released only at the General Partner’s sole discretion, in whole or in part, as it sees fit, for payment to parties of the General Partner’s choosing and may be paid to the Underwriters. If the Qualifying Transaction is not consummated within the permitted timeline, no Deferred Amount shall be payable. Due to its association with an uncertain future Qualifying Transaction, the contingent liability of deferred underwriting commission balance has not been recorded in the Interim Financial Statements. Transaction costs were prorated between Class A Restricted Voting Units, Class A Rights and Class B Units by the amount of proceeds received.

9. FINANCIAL INSTRUMENTS

All financial instruments for which fair value is recognized or disclosed are categorized within a fair value hierarchy, described as follows:

Level 1 − Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities

Level 2 − Valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived from or corroborated by observable market data by correlation or other means

Level 3 − valuation techniques with significant unobservable market inputs.

The cash and securities held in escrow are measured using level 1 inputs.

A-14 10. FINANCIAL RISK MANAGEMENT

(a) Market risk

Market risk is the risk that a material loss arises from fluctuations in a financial instrument’s fair value. For purposes of this disclosure, the REIT LP segregates market risk into two categories: fair value risk and interest rate risk.

(b) Fair value risk

Fair value risk is the potential for loss from an adverse movement in market prices. The REIT LP has minimal fair value risk as the only financial instruments carried at fair value are cash and cash and securities held in escrow.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in interest rates. The REIT LP’s exposure to interest rate risk is nominal.

11. CAPITAL MANAGEMENT

The REIT LP defines the capital that it manages as its Class A Restricted Voting Units and its Unitholders’ Equity.

The REIT LP’s primary objective in managing capital is to ensure capital preservation in order to benefit from acquisition opportunities as they arise. To the extent that the REIT LP requires additional funding for general ongoing expenses or in connection with the Qualifying Transaction, the REIT LP may seek funding by way of unsecured loans from the Sponsors and/or its affiliates, which loans would bear interest at no more than the U.S. dollar prime rate plus 1.0%. The lender under the loans would not have recourse against the funds held in the escrow account, and thus the loans will not reduce the value thereof. Such loans will collectively be subject to a maximum aggregate principal amount equal to 10% of the escrowed funds and may only be repayable in cash no earlier than the Closing. Such loans may only be convertible into units and/or Rights in connection with the Closing. The REIT LP may also seek to raise additional funds through a rights offering in respect of units available to our unitholders, in accordance with the requirements of applicable securities legislation and the Exchange’s rules, and subject to the consent of the Underwriters, subject to the conditions outlined further in the Prospectus.

A-15 12. GENERAL AND ADMINISTRATIVE EXPENSES

The REIT LP had the following general and administrative expenses for the period from January 1, 2020 through September 30, 2020:

Fees connected to qualifying transaction $ 3,528,279 Regulatory 17,039 Administrative 217,697 Total $ 3,763,015

13. RELATED PARTY TRANSACTIONS

On March 12, 2020 the REIT LP formally engaged Atlas Management, LLC (“Atlas”) as an independent contractor for the provision of consulting services (the “Services”). Such Services include assistance with the identification and evaluation of real estate assets as potential acquisition targets for the Qualifying Transaction; and the negotiation, execution and closing of such acquisitions, together with such ancillary services as may reasonably be requested from time to time by the REIT LP. Atlas has agreed to make its Management Team available to perform the Services. Its Management Team includes Richard Acosta, Michael Miller, Eric Clarke, Dylan Marcoot and Dylan Hart, all of whom are Founders of the REIT LP. The term of the REIT LP’s engagement with Atlas will continue until the REIT LP successfully closes the Qualifying Transaction, or if no such transaction takes place on or prior to such time, at the end of any period (including any extensions) permitted for the REIT LP to complete the Qualifying Transaction. During the term, the REIT LP shall pay a consulting fee of $62,500 per month (inclusive of applicable taxes) to Atlas.

The REIT LP has executed an administrative services agreement with Subversive Sponsor, which will make available to the REIT LP administrative support and certain related services as may be required by the REIT LP, including the utilization of office space and utilities. Pursuant to the agreement, in exchange for the administrative services the REIT LP shall pay to Subversive Sponsor a payment of $10,000 per month. For the period from July 1, 2020 to September 30, 2020, the REIT LP did not make any payments to Subversive Sponsor. The REIT LP did accrue for the obligation, recording $30,000 of administrative fees, which such amount is included in General & Administrative expenses in the REIT LP’s statement of income and in Accrued Expenses in the REIT LP’s balance sheet and further broken down in footnote 12.

14. RESTATEMENT OF THE SEPTEMEBER 30, 2020 FINANCIAL STATEMENTS

The REIT LP has restated the unaudited condensed interim financial statements that was filed on November 13, 2020 to reflect the following adjustments:

Certain prepaid expenses relating to the acquisition of real properties announced in the October 7, 2020 binding agreements which was to be the Qualifying Acquisition of the REIT LP have been expensed due to the decision to not proceed with this transaction. Additional expenses incurred relating to this transaction have also been expensed. As a result of these adjustments general and

A-16 administrative expenses have increased by $2.7 million and prepaid expenses have reduced by $1 million and accrued expenses have increased by $1.6 million as compared to the September 30, 2020 financial statements filed on November 13, 2020.

These refiled financial statement show the December 31, 2019 comparative balance sheet instead of the June 30, 2020 numbers on the unaudited balance sheet as at September 30, 2020.

The notes to the unaudited financial statements (Note 2) include additional disclosures on transactions and announcements that were made by the REIT LP since November 13, 2020.

Note 2 to the financial statements includes a description on the material uncertainty to continue as a going concern relating the REIT LP’s negative working capital position and dependence on the Sponsors for continued support.

A-17 SUBVERSIVE REAL ESTATE ACQUISITION REIT LP Revised Management’s Discussion and Analysis

For the three and nine months ended September 30, 2020 (Expressed in U.S. dollars)

Management’s Discussion & Analysis

The following discussion of performance, financial condition and future prospects of Subversive Real Estate Acquisition REIT LP (the “REIT LP”, “we”, “our” or “us”) should be read in conjunction with the unaudited interim financial statements (“Interim Financial Statements”) for the three and nine months ended September 30, 2020 and the accompanying notes thereto.

This Management’s Discussion and Analysis (“MD&A”) was originally prepared with an effective date of November 13, 2020 and amended and restated on February 8, 2021. The Interim Financial Statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) and with interpretation of the International Financial Reporting Interpretations Committee (“IFRIC”). The REIT LP’s financial information is expressed in United States dollars unless otherwise specified. In addition to reviewing this MD&A, readers are encouraged to read our public filings available on the REIT LP’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Cautionary Statement Regarding Forward-Looking Statements

This document may contain “forward-looking statements” (as defined under applicable securities laws). These forward-looking statements relate to future events or future performance including with respect to our objectives and priorities for fiscal year 2020 and beyond, and strategies or further actions with respect to the REIT LP, the REIT LP’s Qualifying Transaction (as defined below) and the REIT LP’s business operations, financial performance and condition.

Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “target”, “intend”, “could” or the negative of these terms or other comparable terminology. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and many factors could cause actual events or results to differ materially from the results discussed in the forward- looking statements. In evaluating forward-looking statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions, including factors related to the COVID-19 pandemic and the risks and uncertainties discussed in the section entitled “Risk Factors” in our Annual Information Form dated February 12, 2020 (“AIF”).

The forward-looking statements contained in this MD&A are presented for the purpose of assisting investors in understanding business and strategic priorities and objectives of the REIT LP as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this MD&A are not guarantees of future performance and, while forward-looking

A-18 statements are based on certain assumptions that we consider reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by us. Readers are cautioned to consider these and other factors carefully when making decisions with respect to the REIT LP and not place undue reliance on forward looking statements. Circumstances affecting us may change rapidly. Except as may be expressly required by applicable law, the REIT LP does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

Nature of Activities

The REIT LP is a limited partnership formed under the Limited Partnerships Act (Ontario) for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP (a “Qualifying Transaction”). The REIT LP is a special purpose acquisition corporation (“SPAC”) for purposes of the rules of the Neo Exchange Inc. (the “Exchange”). The REIT LP was established on November 12, 2019. The REIT LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada.

Although the REIT LP intends to focus on target real estate businesses and/or assets that are involved in the cannabis industry and/or related sectors, it may also pursue potential acquisition opportunities involving non cannabis-related real estate businesses and/or assets in a variety of geographic regions and may acquire other classes of real estate businesses and/or assets and/or non-real estate businesses or assets for purposes of completing its Qualifying Transaction. The REIT LP is targeting a Qualifying Transaction that will aggregate a portfolio of properties with an estimated aggregate enterprise value of approximately US$200 million.

Subversive Real Estate Acquisition REIT (GP) Inc. is the general partner of the REIT LP (the “General Partner”). The General Partner was incorporated under the laws of British Columbia on November 5, 2019. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3. The amended & restated limited partnership agreement (the “A&R LP Agreement”) of the REIT LP provides for the management and control of the REIT LP by the General Partner. A copy of the A&R LP Agreement is available on the REIT LP’s profile on SEDAR at www.sedar.com.

Significant Events

The REIT LP is in a negative working capital position. Accordingly, the REIT LP’s ability to continue as a going concern is dependent upon the continued support of its Sponsors (as defined herein), and/or upon the completion of the Qualifying Transaction or on the approval of an extension of the permitted timeline should the Qualifying Transaction not be completed. There can also be no assurance that we will be successful in completing our Qualifying Transaction. In the event a Qualifying Transaction does not occur, the escrowed cash will be returned to Class A restricted voting unit holders and the Sponsors will have no recourse against the escrowed cash.

These uncertainties cast significant doubt upon the REIT LP’s ability to continue as a going concern and the ultimate appropriateness of using accounting principles applicable to a going

A-19 concern for the REIT LP. The unaudited financial statements for the three and nine months ended September 30, 2020 do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the REIT LP be unable to continue as a going concern. If the REIT LP is unable to continue as a going concern, the REIT LP may be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the unaudited financial statements, which could be material.

Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of a Qualifying Transaction (the “Closing”). Each Right represents the entitlement to automatically receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Qualifying Transaction). The REIT LP’s Class A Restricted Voting Units commenced trading on the Exchange under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units separated into Restricted Voting Units and Rights on February 18, 2020, and trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

In connection with the Offering, the REIT LP granted Canaccord Genuity Corp. and Echelon Wealth Partners Inc. (the “Underwriters”), a 30-day non-transferable option to purchase up to an additional 3,000,000 Class A Restricted Voting Units, at a price of U.S.$10.00 per Class A Restricted Voting Unit, to cover over-allotments, if any, and for market stabilization purposes. The Underwriters partially exercised the over-allotment option to acquire 2,500,000 additional Class A Restricted Voting Units and the over-allotment closed on January 23, 2020. Due to the partial exercise of the over-allotment option, an aggregate of 1,259 Proportionate Voting Units were relinquished without compensation by CG Investments Inc. IV, Subversive Real Estate Sponsor LLC (the “Subversive Sponsor”) and Inception Altanova Sponsor, LLC (collectively, the “Sponsors”) on January 23, 2020. As a result, following the exercise of the over-allotment option and relinquishment of the 1,259 Proportionate Voting Units, our Sponsors, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart (collectively, the “Founders”) own an aggregate of 57,561 Proportionate Voting Units (excluding Proportionate Voting Units underlying the Class B Units (as defined herein)).

Concurrent with the closing of the Offering, the Sponsors purchased an aggregate of 512,000 class B units (“Class B Units”) at an offering price of U.S.$10.00 per Class B Unit, for gross proceeds of U.S.$5,120,000. Each Class B Unit consists of 1/100 of a Proportionate Voting Unit and one Right. In connection with the partial exercise of the over-allotment, the Sponsors purchased an aggregate of 12,500 additional Class B Units, for additional gross proceeds of U.S.$125,000.

A-20 consummation of the Qualifying Transaction in accordance with the terms and conditions of the Escrow Agreement.

On October 7, 2020 the REIT LP announced that it had entered into binding agreements as part of a Qualifying Transaction to acquire real properties in the amount of approximately US$97.4 million and originate or acquire US$85.4 million of first lien mortgages (collectively, the "Initial Portfolio Qualifying Transaction"), to become a leading real estate capital provider for prominent cannabis operators that own or are seeking industrial and retail real estate in high growth cannabis markets in the United States.

On October 19, 2020, the REIT LP announced that it had agreed to grant an aggregate of up to 24,116,750 million contingent rights (the “Contingent Rights”) to holders of Restricted Voting Units that are not redeemed in connection with the Initial Portfolio Qualifying Transaction and to holders of Restricted Voting Units that are issued in connection therewith, which Contingent Rights will be issued to holders of record on the day following the Closing.

On November 9, 2020, the REIT LP postponed the Closing of its Initial Portfolio Qualifying Transaction and withdrew the optional redemption event that it had extended to holders of Restricted Voting Units in connection therewith. Restricted Voting Units already deposited for redemption were returned to the holders thereof in accordance with the terms of the A&R LP Agreement.

On November 26, 2020, the REIT LP announced that it had determined not to proceed with the Initial Portfolio Qualifying Transaction and that it was exploring an alternative qualifying transaction. The REIT LP also announced that Michael Auerbach and Leland Hensch will become the Chief Executive Officer and Chief Financial Officer, respectively, of the General Partner, effective immediately.

On January 4, 2021, the REIT LP announced that it executed a confidential definitive agreement in connection with a potential transaction, which would, if consummated, qualify as the REIT LP’s Qualifying Transaction. Accordingly, the REIT LP is permitted until April 8, 2021 (15 months following the closing of its initial public offering) to conclude its Qualifying Transaction.

On January 26, 2021, the REIT LP announced the details of the previously announced entry into a definitive agreement in connection with a potential transaction which would, if consummated, qualify as the REIT LP’s Qualifying Transaction. Pursuant to the Qualifying Transaction, the REIT LP will combine with Intercure Ltd. (“Intercure”) (dba Canndoc) (TASE: INCR), Israel’s leading cannabis company. Canndoc, a wholly owned subsidiary of Intercure, is Israel’s largest licensed cannabis producer and one of the first to offer Good Manufacturing Practices (GMP) certified and pharmaceutical-grade medical cannabis products in pharmacies across Israel (the “Intercure Qualifying Transaction”).

Concurrently, the SPAC also announced a US$65 million private placement, pursuant to which, in connection with the closing of the Intercure Qualifying Transaction, it will issue 6.5 million units at a price per unit of US$10.00 (the “Private Placement”).

Under the terms of the Intercure Qualifying Transaction, Intercure is valued at US$300 million.

A-21

Both the Intercure Qualifying Transaction and Private Placement are subject to a number of closing conditions, including obtaining shareholder approval from Intercure’s shareholders and listing approval from the NASDAQ.

Further information on the Qualifying Transaction is contained in the REIT LP’s long form prospectus dated February 8, 2021, which is available on the REIT LP’s SEDAR profile at www.sedar.com.

Selected Quarterly Information

Below is selected information from the statement of income for the three and nine months ended September 30, 2020. The following should be read in conjunction with the Interim Financial Statements. There is no comparative interim period available as the REIT LP was formed on November 12, 2019.

Overall Performance and Results of Operations

The REIT LP has not conducted commercial operations as its focus is on the identification and evaluation of businesses or assets to acquire. Other than as otherwise disclosed in this MD&A, there were no notable events that occurred during the reporting period presented.

A-22 In the interim, we expect to generate small amounts of non-operating income in the form of interest income on cash and short-term investments, including restricted cash and short-term investments held in escrow. For the nine months ended September 30, 2020, the REIT LP earned interest income of $999,319 and reported a loss of $20,101,280 ($34.54 basic and diluted loss per unit). Excluding the $16,333,657 of non-cash amortization of issue costs on the Rights as of September 30, 2020, the basic and diluted loss per unit is equal $6.47.

Transaction costs are directly related to the Offering and consist mainly of legal, accounting, printing, filing and underwriting costs. Transaction costs incurred from November 12, 2019 (date of formation of the REIT LP) through September 30, 2020 were allocated between Unitholders’ Equity and units subject to redemption on the following basis:

Class A Class A Class B Total Restricted Rights Units Voting Units

Professional fees (legal, $ 847,411 $ 82,622 $ 21,784 $ 951,817 accounting, etc.)

Underwriters’ commission $ 1,765,836 $ 172,168 - $1,938,005

Listing $ 155,996 $ 15,460 - $ 171,455

Other $ 177,279 $ 17,285 $ 4,557 $ 199,121

Total $ 2,946,522 $ 287,535 $ 26,341 $3,260,398

The Underwriters are entitled to an underwriting commission of up to $12,375,000 or 5.5% of the gross proceeds of the Class A Restricted Voting Units issued under the Offering. The REIT LP paid $1,938,005 to the Underwriters in connection with the closing of the Offering, of which $1,413,750 was used to fund CG Investment Inc. IV’s Class B Unit sponsor share purchase obligation. The balance of the underwriting commission of $10,436,995, or 4.6% of the gross proceeds (the “Deferred Amount”) of the Class A Restricted Voting Units, has been deferred and will only be paid upon successful completion of the Qualifying Transaction as follows: (A) as to 3.6% of the gross proceeds, to the Underwriters; and (B) as to 1.0% of the gross proceeds, released only at the General Partner’s sole discretion, in whole or in part, as it sees fit, for payment to parties of the General Partner’s choosing and may be paid to the Underwriters. If the Qualifying Transaction is not consummated within the permitted timeline, no Deferred Amount shall be payable. Given completion of the Qualifying Transaction is uncertain, the contingent liability of deferred underwriting commission balance has not been recorded in the Interim Financial Statements. Transaction costs were pro-rated between the Class A Restricted Voting Units, Rights and Class B Units by the amount of proceeds received.

A-23 Working capital, which consists of current assets less current liabilities (excluding all proceeds held in escrow), is ($1,758,692) as at September 30, 2020.

Current liabilities as at September 30, 2020 total $2,134,359.

General and Administrative Expenses

The REIT LP’s general and administrative expenses consist of costs required to maintain its public company status in good standing, and expenses incurred to evaluate and identify companies, businesses, assets or properties for potential acquisition. The REIT LP had the following general and administrative expenses for the three and nine month periods ended September 30, 2020:

Fees connected to a Qualifying Transaction $ 3,528,279

Regulatory 17,039

Administrative 217,697

Total $ 3,763,015

Liquidity and Capital Resources

We intend to use substantially all of the funds held in the Escrow Account, including interest (which interest shall be net of taxes payable and certain expenses) to consummate the Qualifying Transaction. To the extent that, after redemptions, our units or debt is used, in whole or in part, as consideration to consummate a Qualifying Transaction, we may apply the cash balance that is not applied to the purchase price and released to us from the Escrow Account for general corporate purposes, including maintenance or expansion of operations of acquired businesses, payment of principal or interest due on indebtedness incurred in consummating the Qualifying Transaction, funding of subsequent acquisitions, payment of distributions, general ongoing expenses or payment of the deferred underwriting commissions.

A-24

As at September 30, 2020, the REIT LP had cash of US$316,800. The REIT LP will generate negative cash flow from operating activities in the future until a Qualifying Transaction is completed and commences revenue generation.

To the extent that the REIT LP requires funding for general ongoing expenses or in connection with sourcing a proposed Qualifying Transaction the REIT LP may obtain funding by way of unsecured loans from the Sponsors and/or their affiliates, which loans would, bear interest at no more than the prime rate plus 1.0%. The Sponsors would not have recourse under such loans against the Escrow Account, and thus the loans would not reduce the value of such Escrow Account.

Otherwise, and subject to any relief granted by the Exchange, the REIT LP may seek to raise additional funds through a rights offering as specified in the AIF in respect of units available to its unitholders, in accordance with the requirements of applicable securities legislation, and subject to placing the required funds raised in the Escrow Account in accordance with applicable Exchange rules.

Financial Instruments

The financial instruments of the REIT LP are mainly its Class A Restricted Voting Units subject to redemption and its accrued expenses. The REIT LP manages its risks relating to the Class A Units by investing the amounts payable on redemption in short term investments and maintaining these assets in an escrow account with Olympia as described in the significant events section. The amounts due to creditors for accrued expenses are unsecured and will have no recourse to the escrowed cash.

Proposed Transactions

As discussed above under “Significant Events”, On January 26, 2021, the REIT LP announced the details of the Intercure Qualifying Transaction. .Concurrently, the SPAC also announced the Private Placement.

A-25 Both the Intercure Qualifying Transaction and Private Placement are subject to a number of closing conditions, including obtaining shareholder approval from Intercure’s shareholders and listing approval from the NASDAQ.

Outstanding Units

As of the date of this MD&A, the REIT LP had 22,500,000 Class A Restricted Voting Units, 524,500 Class B Units and 57,562 Proportionate Voting Units and 1 General Partnership Unit issued and outstanding. In addition, the REIT LP had an aggregate of 23,024,500 Rights issued and outstanding.

Related Party Transactions

On March 12, 2020 the REIT LP formally engaged Atlas Management, LLC (“Atlas”) as an independent contractor for the provision of consulting services (the “Services”). Such Services include assistance with the identification and evaluation of real estate assets as potential acquisition targets for the Qualifying Transaction; and the negotiation, execution and closing of such acquisitions, together with such ancillary services as may reasonably be requested from time to time by the REIT LP. Atlas has agreed to make its “Management Team” available to perform the Services. Its Management Team includes Richard Acosta, Michael Miller, Eric Clarke, Dylan Marcoot and Dylan Hart, all of whom are Founders of the REIT LP. The term of the REIT LP’s engagement with Atlas will continue until the REIT LP successfully closes the Qualifying Transaction, or if the Qualifying Transaction does not take place on or prior to such time, at the end of any period (including any extensions) permitted for the REIT LP to complete the Qualifying Transaction. During the term, the REIT LP shall pay a consulting fee of $62,500 per month (inclusive of applicable taxes) to Atlas.

The REIT LP has executed an administrative services agreement with the Subversive Sponsor, which will make available to the REIT LP administrative support and certain related services as may be required by the REIT LP, including the utilization of office space and utilities. Pursuant to the agreement, in exchange for the administrative services the REIT LP shall pay to the Subversive Sponsor a payment of $10,000 per month. For the period from July 1, 2020 to September 30, 2020, the REIT LP did not make any payments to the Subversive Sponsor. The REIT LP did accrue for the obligation, recording $30,000 of administrative fees, which such amount is included in General & Administrative expenses in the REIT LP’s statement of income and in Accrued Expenses in the REIT LP’s balance sheet.

Off-Balance Sheet Transactions

The REIT LP has no off-balance sheet arrangements.

Significant Accounting Policies and Critical Accounting Estimates

For further information about the accounting policies used by the REIT LP, please refer to the Interim Financial Statements and notes thereto for the period ended September 30, 2020, which have been prepared in accordance with IFRS and with interpretation of the IFRIC. These financial statements meet the requirements of International Accounting Standard 34, “Interim Financial Reporting”.

A-26 The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant assumptions were used in determining the fair value of the Class A Restricted Voting Units and Class A Rights at inception.

Critical accounting estimates represent estimates made by management that are, by their very nature, uncertain. Management evaluates its estimates on an ongoing basis. Such estimates are based on assumptions that management believes are reasonable under the circumstances, and these estimates form the basis for making judgments about the carrying value of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A summary of the significant accounting policies used by management in the preparation of its financial information is provided in Note 4 to the Interim Financial Statements.

There were no changes made in our internal control over financial reporting that occurred during the period ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Future Accounting Changes

The REIT LP does not believe that any accounting standards that have been recently issued but which are not yet effective would have a material effect on the Financial Statements if such accounting standards were currently adopted.

Controls and Procedures

As of September 30, 2020, an evaluation was carried out, under the supervision of and with the participation of management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined under National Instrument 52-109. Based on that evaluation, the CEO and the CFO concluded that the design and operation of these disclosure controls and procedures were effective as of and during the quarter ended September 30, 2020.

Internal Control over Financial reporting

Management, including the CEO and the CFO, has designed internal control over financial reporting as defined under National Instrument 52-109 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Based on that evaluation, the CEO and the CFO concluded that the REIT LP’s internal control over financial reporting was designed and operating effectively as of and during the quarter ended September 30, 2020 and that there were no material weaknesses in our internal control over financial reporting.

Managing Risk

Except as otherwise disclosed in this MD&A and in the REIT LP’s financial statements for the quarter ended September 30, 2020, there have been no significant changes to the nature and scope of the risks faced by the REIT LP as described in the QT Prospectus, which is available on the

A-27 REIT LP’s SEDAR profile at www.sedar.com. These business risks should be considered by interested parties when evaluating the REIT LP’s performance and its outlook.

Contingency

Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self- imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility . It is uncertain what impact this volatility will have on the REIT LP’s securities held at fair value and short term investments. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of governmental and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact of such developments on the financial results and condition of the REIT LP in future periods.

A-28 Subversive Real Estate Acquisition REIT LP

Financial Statements

(Audited)

As at December 31, 2019 and for the period from inception on November 12, 2019 to December 31, 2019 (Expressed in United States dollars)

A-29 Deloitte LLP Bay Adelaide East 8 Adelaide Street West Suite 200 Toronto ON M5H 0A9 Canada

Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca

Independent Auditor’s Report

To the Partners of Subversive Real Estate Acquisition REIT LP.

Opinion We have audited the financial statements of Subversive Real Estate Acquisition REIT LP (the “REIT LP”) which comprise the balance sheet as at December 31, 2019, and the statements of income, equity and cash flows for the period from November 12, 2019 to December 31, 2019, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the REIT LP as at December 31, 2019, and its financial performance and its cash flows for the period from November 12, 2019 to December 31, 2019 in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the REIT LP in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the REIT LP’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the REIT LP or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the REIT LP’s financial reporting process.

A-30 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

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

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

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

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

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

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Mervyn Ramos.

Chartered Professional Accountants Licensed Public Accountants February 10, 2020

A-31 SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

BALANCE SHEET

(expressed in U.S. dollars)

As at December 31, 2019 U.S.$ ASSETS

Current

Cash 25,011 25,011

EQUITY

Capital [note 3] 25,011 25,011

The accompanying notes are an integral part of these financial statements

A-32 SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF INCOME

(expressed in U.S. dollars)

For the period from November 12, 2019 to December 31, 2019 U.S.$ REVENUE

Revenue -

EXPENSES

Expenses -

Income before income taxes -

Provision for income taxes -

Net income and comprehensive income for the period -

EARNINGS PER UNIT

Basic -

Diluted -

The accompanying notes are an integral part of these financial statements

A-33

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF EQUITY

For the period from November 12, 2019 to December 31, 2019 (expressed in U.S. dollars, except for number of units outstanding amounts)

Limited Partner Number of Units U.S.$

CAPITAL Outstanding, beginning of period - - Issuance of Proportionate Voting Unit [note 3] 1 1 Issuance of Founders Proportionate Voting Units [note 3] 58,820 25,000 Outstanding, end of period 58,821 25,001

General Partner Number of Units U.S.$

CAPITAL Outstanding, beginning of period - - Issuance of general partnership unit 1 10 Outstanding, end of period 1 10

The accompanying notes are an integral part of these financial statements

A-34

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP

STATEMENT OF CASH FLOW

(expressed in U.S. dollars)

For the period from November 12, 2019 to December 31, 2019 U.S.$ OPERATING ACTIVITIES

Net income for the period -

Cash provided by operating activities -

FINANCING ACTIVITIES

Issuance of Proportionate Voting Unit [note 3] 1

Issuance of General Partnership Unit 10

Issuance of Founders Proportionate Voting Units [note 3] 25,000

Cash provided by financing activities 25,011

Net increase in cash during the period 25,011

Cash, beginning of period -

Cash, end of period 25,011

The accompanying notes are an integral part of these financial statements

A-35

SUBVERSIVE REAL ESTATE ACQUISITION REIT LP NOTES TO THE FINANCIAL STATEMENTS

As at December 31, 2019 and for the period from November 12, 2019 (the date of formation) to December 31, 2019

1. CORPORATE INFORMATION

Subversive Real Estate Acquisition REIT LP (the “REIT LP”, “we”, “our” or “us”) is a newly established limited partnership formed under the laws of the Province of Ontario for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP, which we refer to as our “Qualifying Transaction”. Subversive Real Estate Sponsor LLC (“Subversive Sponsor”), Inception Altanova Sponsor, LLC and CG Investments Inc. IV are sponsors of the REIT LP (collectively, the “Sponsors”). The amended and restated limited partnership agreement (the “A&R LPA”) of the REIT LP is filed on SEDAR at www.sedar.com.

The financial statements were authorized for issuance by the Board of Directors of the general partner of the REIT LP on February 12, 2020.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements of the REIT LP as at December 31, 2019 and for the period from November 12, 2019 (the date of formation) to December 31, 2019 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The financial statements of the REIT LP have been prepared on a historical cost basis. The REIT LP’s functional and presentation currency is the U.S. dollar.

Cash

Cash is comprised of amounts held in trust.

Use of estimates

3. CAPITAL

A-36 The REIT LP is authorized to issue an unlimited number of proportionate voting units (“Proportionate Voting Unit”) and an unlimited number of restricted voting units (“Restricted Voting Units”). The Restricted Voting Units form part of the Class A Restricted Voting Units that were issued to the public as described in Note 4.

On November 12, 2019, the REIT LP issued the general partner interest to Subversive Real Estate Acquisition REIT (GP) Inc.(the “General Partner”), the REIT LP’s general partner, in exchange for proceeds of U.S.$10.00. The General Partner is responsible for the management and control of the REIT LP in accordance with the A&R LPA. On November 12, 2019, the REIT LP issued one proportionate voting unit to Subversive Sponsor. On December 31, 2019, the REIT LP issued 58,820 Proportionate Voting Unit of the REIT LP to the Founders (“Founders’ Proportionate Voting Units”) at approximately U.S.$0.425 per Proportionate Voting Unit for aggregate proceeds of U.S.$25,000. Our Sponsors and the General Partners’ directors and officers, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart, comprise our Founders.

The Proportionate Voting Units form part of the Class B Units. The Proportionate Voting Units, including fractions thereof, may at any time following the closing of the Qualifying Transaction, subject to the FPI Condition (as defined below), at the option of the holder, be converted into Limited Partnership Units at a ratio of 100 Limited Partnership Units per Proportionate Voting Unit with fractional Proportionate Voting Units convertible into Limited Partnership Units at the same ratio. Further, the General Partner’s board of directors may determine at any time following the closing of the Qualifying Transaction that it is no longer advisable to maintain the Proportionate Voting Units as a separate class of units and may cause all of the issued and outstanding Proportionate Voting Units to be converted into Limited Partnership Units at a ratio of 100 Limited Partnership Units per Proportionate Voting Unit with fractional Proportionate Voting Units convertible into Limited Partnership Units at the same ratio and the General Partner’s board of directors shall not be entitled to issue any more Proportionate Voting Units under the A&R LP Agreement thereafter.

The Proportionate Voting Units are not transferrable without approval of the General Partner’s board of directors, except to Permitted Holders, as defined in our initial public offering final prospectus dated December 23, 2019 (the “Prospectus”) filed on SEDAR at www.sedar.com and in compliance with U.S. securities laws.

The right of the Proportionate Voting Units to convert into Limited Partnership Units is subject to certain conditions in order to maintain the REIT LP’s status as a “foreign private issuer” under U.S. securities laws. Unless otherwise waived by the board of directors of the General Partner, the right to convert the Proportionate Voting Units is subject to the condition that the aggregate number of Limited Partnership Units and Proportionate Voting Units (calculated as a single class) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Securities Exchange Act of 1934, as amended) may not exceed forty percent (40%) of the aggregate number of Limited Partnership Units and Proportionate Voting Unit issued and outstanding after giving effect to such conversions (calculated as a single class) (the “FPI Condition”).

The Class B units consist of 1/100 of a Proportionate Voting Unit and one right of the REIT LP (each, a “Right”). The Class B units were subscribed by the Sponsors on closing of the public offering as described in Note 4. Each Right shall entitle the holder, upon the closing of our qualifying transaction, to receive one-eighth (1/8) of a Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the qualifying transaction).

4. SUBSEQUENT EVENTS

On January 8, 2020, the REIT LP closed its initial public offering (the “Offering”) of 20,000,000 Class A Restricted Voting units (the “Class A Restricted Voting Units”) at U.S.$10.00 per Class A Restricted Voting Unit, for gross proceeds of U.S.$200,000,000. Each Class A Restricted Voting Unit consists of one restricted voting unit of the REIT LP (each, a “Restricted Voting Unit”) and one Right. Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of a Qualifying Transaction. Each Right represents the entitlement to automatically receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Qualifying Transaction). The REIT LP’s Class A Restricted Voting Units commenced trading

A-37 on the Neo Exchange Inc. (“Exchange”) under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units will separate into Restricted Voting Units and Rights on February 18, 2020, being 40 days following the closing of the Offering, and will trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

In connection with the Offering, the REIT LP granted the underwriters a 30-day non-transferable option to purchase up to an additional 3,000,000 Class A Restricted Voting Units, at a price of U.S.$10.00 per Class A Restricted Voting Unit, to cover over-allotments, if any, and for market stabilization purposes. The underwriters partially exercised the over-allotment option and acquired 2,500,000 Class A Restricted Voting Units on January 23, 2020. Due to the partial exercise of the over-allotment option, an aggregate of 1,259 Proportionate Voting Units were relinquished without compensation by the Sponsors on January 23, 2020. As a result, following the exercise of the over-allotment option and relinquishment of the 1,259 Proportionate Voting Units, the Founders own an aggregate of 57,562 Proportionate Voting Units (excluding Proportionate Voting Units underlying the Class B Units).

Concurrent with closing of the Offering, the Sponsors purchased an aggregate of 512,000 class B units (“Class B Units”) at an offering price of U.S.$10.00 per Class B Unit, for gross proceeds of U.S.$5,120,000. In connection with the partial exercise of the over-allotment, the Sponsors purchased an aggregate of 12,500 additional Class B Units, for additional gross proceeds of U.S.$125,000.

The proceeds of U.S.$225,000,000 from the Offering and over-allotment are held by Olympia Trust Company, as escrow agent, in an escrow account at a Canadian chartered bank (the “Escrow Account”) or subsidiary thereof, in accordance with the escrow agreement. Subject to applicable law and payment of certain taxes, permitted redemptions and certain expenses, as further described herein, none of the funds held in the Escrow Account will be released to the REIT LP prior to the closing of a Qualifying Transaction. The escrowed funds will be held to enable the REIT LP to (i) satisfy redemptions made by holders of Restricted Voting Units (including in the event of a Qualifying Transaction or an extension to the Permitted Timeline (as defined in the Prospectus) or up to 15 months with unitholders approval from the holders of Restricted Voting Units and the General Partner’s board of directors, or in the event a Qualifying Transaction does not occur within the Permitted Timeline), (ii) fund a Qualifying Transaction with the net proceeds following payment of any such redemptions and deferred underwriting commissions, and/or (iii) pay taxes on amounts earned on the escrowed funds and certain permitted expenses. Such escrowed funds and all amounts earned, subject to such obligations and applicable law, will be assets of the REIT LP.

If we are unable to consummate a Qualifying Transaction within the Permitted Timeline of 12 months from the closing date of the Offering (the “Closing Date”) (or 15 months from the Closing Date if we have executed a definitive agreement for a Qualifying Transaction within 12 months from the Closing Date but have not completed the qualifying transaction within such 12-month period), we will be required to redeem each of the outstanding Restricted Voting Units, for an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account, including any interest and other amounts earned thereon, less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other amounts earned in the escrow account, and (ii) up to a maximum of U.S.$50,000 of interest and other amounts earned from the proceeds in the escrow account to pay actual and expected winding-up expenses and certain other related costs (as described in the Prospectus), each as reasonably determined by the General Partner. In such event, the Rights will expire and be worthless. The underwriters of the Offering will have no right to the deferred underwriting commission held in the escrow account in such circumstances.

Such Permitted Timeline, however, could be extended to up to 36 months with unitholder approval, by ordinary resolution of holders of Restricted Voting Units, with approval by the board of directors of the General Partner. If such approvals are obtained, holders of Restricted Voting Units, irrespective of whether such holders voted for or against, or did not vote on, the extension of the Permitted Timeline, would be permitted to deposit all or a portion of their units for redemption prior to the second business day before the meeting of the holders of Restricted Voting Units in respect of the extension. Upon the requisite approval of the extension of the Permitted Timeline, and subject to applicable law, we will be required to redeem such Restricted Voting Units so deposited at an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account at the time of the meeting in respect of the extension, including any interest and other amounts earned thereon, less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other

A-38 amounts earned in the escrow account; and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the General Partner. For greater certainty, such amount will not be reduced by the deferred underwriting commission per Restricted Voting Unit held in the escrow account.

For greater certainty, such amount will not be reduced by the deferred underwriting commission per Restricted Voting Unit held in escrow. If approval of the Qualifying Transaction by unitholders is otherwise required under applicable law, holders of Restricted Voting Units shall have the option to redeem their Restricted Voting Units irrespective of whether they vote for or against, or do not vote on, the Qualifying Transaction at any meeting of the REIT LP’s unitholders to be held, if required under applicable law, to vote on our Qualifying Transaction (a “Qualifying Transaction Meeting”), as further described in the Prospectus under “Qualifying Transaction – Redemption Rights” and “Description of Securities – Restricted Voting Units and Proportionate Voting Units”. Holders of Restricted Voting Units will be given not less than 21 days’ notice of the Qualifying Transaction Meeting (if such meeting is required under applicable law) and of the corresponding redemption deposit deadline if such Qualifying Transaction Meeting is required. Participants through CDS Clearing and Depositary Services Inc. (“CDS”) may have earlier deadlines for accepting deposits of Restricted Voting Units for redemption. If a CDS participant’s deadline is not met by a holder of Restricted Voting Units, such holder’s Restricted Voting Units may not be eligible for redemption.

Our Founders will not be entitled to redeem the Founders’ Proportionate Voting Units (as defined in the Prospectus) or Class B Units (including their underlying securities) in connection with a Qualifying Transaction or an extension to the Permitted Timeline or entitled to access the escrow account should a Qualifying Transaction not occur within the Permitted Timeline, as further described in the Prospectus. Our Founders (including our Sponsors) will, however, participate in any liquidation distribution with respect to any Restricted Voting Units they acquired in connection with the Offering through possible purchases on the secondary market.

Outstanding Units

As of the date of this report, the REIT LP had 22,500,000 Class A Restricted Voting Units, 524,500 Class B Units and 57,562 Proportionate Voting Units issued and outstanding. In addition, the REIT LP had an aggregate of 23,027,000 Rights issued and outstanding.

A-39 Subversive Real Estate Acquisition REIT LP

Management’s Discussion and Analysis

As at December 31, 2019 And for the period from inception on November 12, 2019 to December 31, 2019 (Expressed in U.S. dollars) Management’s Discussion & Analysis

The following discussion of performance, financial condition and future prospects of Subversive Real Estate Acquisition REIT LP (the “REIT LP”, “we”, “our” or “us”) should be read in conjunction with the audited financial statements (“Audited Financial Statements”) for the period from inception on November 12, 2019 to December 31, 2019 and the accompanying notes thereto.

This Management’s Discussion and Analysis (“MD&A”) has been prepared with an effective date of February 12, 2020. The Audited Financial Statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) and with interpretation of the International Financial Reporting Interpretations Committee (“IFRIC”). The REIT LP’s financial information is expressed in United States dollars unless otherwise specified. In addition to reviewing this MD&A, readers are encouraged to read our public information filings available on the REIT LP’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Cautionary Statement Regarding Forward-Looking Statements

This document may contain “forward-looking statements” (as defined under applicable securities laws). These forward-looking statements relate to future events or future performance including with respect to our objectives and priorities for fiscal year 2020 and beyond, and strategies or further actions with respect to the REIT LP, a Qualifying Transaction (as defined below) and the REIT LP’s business operations, financial performance and condition.

Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “target”, “intend”, “could” or the negative of these terms or other comparable terminology. By their very nature, forward- looking statements involve inherent risks and uncertainties, both general and specific, and many factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating forward-looking statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions and the risks and uncertainties discussed in the section entitled “Risk Factors” in our initial public offering prospectus dated December 23, 2019 (the “Prospectus”).

The forward-looking statements contained in this MD&A is presented for the purpose of assisting investors in understanding business and strategic priorities and objectives of the REIT LP as at the periods indicated and may not be appropriate for other purposes. Forward-looking statements contained in this MD&A are not guarantees of future performance and, while forward-looking statements are based on certain assumptions that we consider reasonable, actual events and results could differ materially from those expressed or implied by forward-looking statements made by us. Readers are cautioned to consider these and other factors carefully when making decisions with respect to the REIT LP and not place undue reliance on forward looking statements. Circumstances affecting us may change rapidly. Except as may be expressly required by applicable law, the REIT LP does not undertake any obligation to update publicly or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

A-40 Nature of Activities

The REIT LP is a newly established limited partnership formed under the Limited Partnerships Act (Ontario) for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP (a “Qualifying Transaction”). The REIT LP is a special purpose acquisition corporation (“SPAC”) for purposes of the rules of the Neo Exchange Inc. (the “NEO”). The REIT LP was established on November 12, 2019. The REIT LP’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7, Canada.

The REIT LP intends to focus its search for target real estate businesses and/or assets that are involved in the cannabis industry and/or related sectors; however, it is not limited to the acquisition of cannabis-related real estate businesses and/or assets or to a particular geographic region and may acquire other classes of real estate businesses and/or assets and/or non-real estate businesses or assets for purposes of completing its Qualifying Transaction. The REIT LP is targeting a Qualifying Transaction that will aggregate a portfolio of properties with an estimated aggregate enterprise value of between U.S.$200 million and U.S.$650 million.

Subversive Real Estate Acquisition REIT (GP) Inc. (the “General Partner”) is the general partner of the REIT LP. The General Partner was incorporated under the laws of British Columbia on November 5, 2019. The General Partner’s head office is located at 135 Grand Street, 2nd Floor, New York, New York 10013 and its registered office is located at 700 West Georgia Street, Suite 2500, Vancouver, British Columbia V7Y 1B3. The amended & restated limited partnership agreement (the “A&R LP Agreement”) of the REIT LP provides for the management and control of the REIT LP by the General Partner. A copy of the A&R LP Agreement can be obtained on SEDAR at www.sedar.com.

The REIT LP’s business activities are carried out in a single business segment.

Significant Events

On November 12, 2019, the REIT LP issued the general partner interest to the General Partner in exchange for proceeds of U.S.$10.00. On November 12, 2019, the REIT LP issued one proportionate voting unit (a “Proportionate Voting Unit”) to Subversive Real Estate Sponsor LLC (“Subversive Sponsor”) in exchange for proceeds of U.S.$1.00.

On December 31, 2019, Subversive Sponsor, a limited liability company incorporated under the laws of Delaware, Inception Altanova Sponsor, LLC, a limited liability company incorporated under the laws of Delaware (“Inception Sponsor”), CG Investments Inc. IV, a corporation incorporated under the laws of the province of Ontario (“CG IV” and together with Subversive Sponsor and Inception Sponsor, the “Sponsors”) and the General Partner’s directors and officers, Michael Auerbach, Leland Hensch, Richard Acosta, Omar Mangalji, Scott Baker, Octavio Boccalandro, Craig Hatkoff, Anne Sullivan, Eric Clarke, Michael Miller, Dylan Marcoot and Dylan Hart (collectively with the Sponsors, the “Founders”) purchased an aggregate of 58,820 Proportionate Voting Units of the REIT LP at approximately U.S.$0.425 per Proportionate Voting Unit, for total proceeds of U.S.$25,000.

Selected Annual Financial Information

The following table summarizes the relevant financial data for our business and should be read with the Audited Financial Statements. Only the following balance sheet information is presented, as the REIT LP has not had any significant operations to date. There is no comparative period available as the REIT LP was established on November 12, 2019.

Cash $25,011

Capital $25,011

A-41

Results of Operations

The REIT LP had no operations for the period November 12, 2019 to December 31, 2019.

The REIT LP has not conducted commercial operations from its formation on November 12, 2019 to December 31, 2019, except the receipt of the proceeds and the issuance of the securities noted above. Accordingly no statement of operations has been presented.

Liquidity and Capital Resources

On November 12, 2019, the REIT LP issued a general partner interest to the General Partner in exchange for proceeds of U.S.$10.00. On November 12, 2019, the REIT LP issued one Proportionate Voting Unit to Subversive Sponsor. On December 31, 2019, the REIT LP issued 58,820 Proportionate Voting Units of the REIT LP to the Founders at approximately U.S.$0.425 per Proportionate Voting Unit for aggregate proceeds of U.S.$25,000.

As at December 31, 2019, we had cash of U.S.$25,011 which is available to fund our working capital requirements, including any further transaction costs that may be incurred. We expect to generate negative cash flow from operating activities in the future until our Qualifying Transaction is completed and we commence revenue generation. Management seeks to ensure that our operational and administrative costs are minimal prior to the completion of a Qualifying Transaction, with a view to preserving the REIT LP’s working capital.

As the Offering (as defined below) has been closed, the REIT LP is confident that it will be able to finance its operations primarily through the issuance of class A restricted voting units and class B units. Please see “Subsequent Events” below.

To the extent that the REIT LP may require funding for general ongoing expenses or in connection with sourcing a proposed Qualifying Transaction that is over and above the funds raised prior to and concurrently with the Offering, the REIT LP may obtain such funding by way of unsecured loans from the Sponsors and/or their affiliates, which loans would, bear interest at no more than the prime rate plus 1%. The Sponsors would not have recourse under such loans against the Escrow Account (as defined below), and thus the loans would not reduce the value of such Escrow Account.

Otherwise, and subject to any relief granted by the NEO, the REIT LP may seek to raise additional funds through a rights offering in respect of units available to its unitholders, in accordance with the requirements of applicable securities legislation, and subject to placing the required funds raised in the Escrow Account in accordance with applicable NEO rules.

Proposed Transactions

Although the REIT LP has commenced the process of identifying potential acquisitions with a view of completing a Qualifying Transaction, the REIT LP has not entered into a definitive agreement with respect thereto.

Significant Accounting Policies and Critical Accounting Estimates

For further information about the accounting policies used by the REIT LP, please refer to the Audited Financial Statements and notes thereto for the period ended December 31, 2019, which have been prepared in accordance with IFRS and with interpretation of the IFRIC.

The preparation of Audited Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Audited Financial Statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Financial Instruments

A-42 Fair value of financial instruments

The REIT LP held cash in trust of $25,011 and the carrying amounts of this balance approximate the fair values due to the short-term nature of the instruments.

Off-Balance Sheet Transactions

The REIT LP has no off-balance sheet arrangements.

Related Party Transactions

There were no related party transactions during the period as the REIT LP was recently established.

Future Accounting Changes

There are no future accounting changes that are expected to impact the financial statements of the REIT LP.

Subsequent Events

On January 8, 2020, the REIT LP closed its initial public offering (the “Offering”) of 20,000,000 Class A Restricted Voting units (the “Class A Restricted Voting Units”) at U.S.$10.00 per Class A Restricted Voting Unit, for gross proceeds of U.S.$200,000,000. Each Class A Restricted Voting Unit consists of one restricted voting unit of the REIT LP (each, a “Restricted Voting Unit”) and one right of the REIT LP (each, a “Right”). Each Restricted Voting Unit, unless previously redeemed, will be automatically renamed “Limited Partnership Units” following the closing of a Qualifying Transaction. Each Right represents the entitlement to automatically receive, for no additional consideration, one-eighth (1/8) of one Restricted Voting Unit (which at such time will represent one-eighth (1/8) of a Limited Partnership Unit, subject to adjustment under the terms of the Qualifying Transaction). The REIT LP’s Class A Restricted Voting Units commented trading on the NEO under the symbol SVX.UN on January 8, 2020. The Class A Restricted Voting Units will separate into Restricted Voting Units and Rights on February 18, 2020, being 40 days following the closing of the Offering, and will trade under the symbols “SVX.U” and “SVX.RT.U”, respectively.

Concurrent with Closing, the Sponsors purchased an aggregate of 512,000 class B units (“Class B Units”) at an offering price of U.S.$10.00 per Class B Unit, for gross proceeds of U.S.$5,120,000. Each Class B Unit consists of 1/100 of a Proportionate Voting Unit and one Right. In connection with the partial exercise of the over-allotment, the Sponsors purchased an aggregate of 12,500 additional Class B Units, for additional gross proceeds of U.S.$125,000.

A-43 earned on the escrowed funds and certain permitted expenses. Such escrowed funds and all amounts earned, subject to such obligations and applicable law, will be assets of the REIT LP.

Consummation of the Qualifying Transaction will require approval by a majority of the General Partner’s directors unrelated to the Qualifying Transaction. In connection with seeking to complete a Qualifying Transaction, we will provide holders of our Restricted Voting Units with the opportunity to redeem all or a portion of their Restricted Voting Units, provided that they deposit their units for redemption prior to the deadline specified by the REIT LP, following public disclosure of the details of the Qualifying Transaction and prior to the closing of the Qualifying Transaction, of which prior notice had been provided to the holders of the Restricted Voting Units by any means permitted by the Exchange, not less than 21 days nor more than 60 days in advance of such deadline, in each case, with effect, subject to applicable law, immediately prior to the closing of our Qualifying Transaction, for an amount per unit, payable in cash, equal to the pro-rata portion (per Restricted Voting Unit) of: (A) the escrowed funds available in the escrow account at the time immediately prior to the redemption deposit deadline, including interest and other amounts earned thereon; less (B) an amount equal to the total of (i) any applicable taxes payable by the REIT LP on such interest and other amounts earned in the escrow account, and (ii) actual and expected expenses directly related to the redemption, each as reasonably determined by the General Partner, subject to the limitations described in the Prospectus. For greater certainty, such amount will not be reduced by the deferred underwriting commission per Restricted Voting Unit held in escrow. If approval of the Qualifying Transaction by unitholders is otherwise required under applicable law, holders of Restricted Voting Units shall have the option to redeem their Restricted Voting Units irrespective of whether they vote for or against, or do not vote on, the Qualifying Transaction at any meeting of the REIT LP’s unitholders to be held, if required under applicable law, to vote on our Qualifying Transaction (a “Qualifying Transaction Meeting”), as further described in the Prospectus under “Qualifying Transaction – Redemption Rights” and “Description of Securities – Restricted Voting Units and Proportionate Voting Units” in the Prospectus. Holders of Restricted Voting Units will be given not less than 21 days’ notice of the Qualifying Transaction Meeting (if such meeting is required under applicable law) and of the corresponding redemption deposit deadline if such Qualifying Transaction Meeting is required. Participants through CDS Clearing and Depositary

A-44 Services Inc. (“CDS”) may have earlier deadlines for accepting deposits of Restricted Voting Units for redemption. If a CDS participant’s deadline is not met by a holder of Restricted Voting Units, such holder’s Restricted Voting Units may not be eligible for redemption.

Outstanding Units

As of the date of this MD&A, the REIT LP had 22,500,000 Class A Restricted Voting Units, 524,500 Class B Units and 57,562 Proportionate Voting Units issued and outstanding. In addition, the REIT LP had an aggregate of 23,027,000 Rights issued and outstanding.

Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52- 109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. As the REIT LP became a reporting issuer on December 23, 2019, the REIT LP has elected to file the alternative form of Chief Executive Officer and Chief Financial Officer interim certificates under Form 52-109F1 IPO/RTO. This filing option is available to the REIT LP under NI 52-109 as this period is the REIT LP’s first financial period ended since it became a reporting issuer.

Managing Risk

Except as otherwise disclosed in this MD&A and in the Audited Financial Statements, there have been no significant changes to the nature and scope of the risks faced by the REIT LP as described in the Prospectus, which is available on the REIT LP’s profile on SEDAR at www.sedar.com. Such business risks should be considered by interested parties when evaluating the REIT LP’s performance and its outlook.

A-45

B APPENDIX B INTERCURE FINANCIAL STATEMENTS

The unaudited consolidated interim financial statements of Intercure as of September 30, 2020 ...... B-2 The audited consolidated annual financial statements of Intercure as of December 31, 2019 and 2018, together with the notes thereto and the auditors’ report thereon ...... B-36

B-1

Intercure Ltd.

Condensed Consolidated Financial Statements as of September 30, 2020 Unaudited

B-2

Intercure Ltd.

Condensed Consolidated Financial Statements as of September 30, 2020 Unaudited

Table of Contents

Page

Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Statements of Financial Position 2-3

Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income 4

Condensed Consolidated Statements of Changes in Equity 5-7

Condensed Consolidated Statements of Cash Flows 8-9

Notes to the Condensed Consolidated Financial Statements 10-33

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B-3 Intercure Ltd.

Condensed Consolidated Statements of Financial Position

As of December As of September 30 31 2020 2019 2019 Unaudited Audited NIS in thousands Current assets Cash and cash equivalents 47,800 35,473 27,338 Restricted cash 40 - - Trade receivables 13,164 434 1,587 Other receivables 3,124 7,568 7,316 Inventories 10,938 2,579 4,645 Biological assets 4,997 794 1,145 Financial assets at fair value through profit or loss 242 188 177

Total current assets 80,305 47,036 42,208

Non-current assets Property, plant and equipment and right-of-use asset 49,818 25,273 32,150 Goodwill 190,103 167,965 167,965 Investments in investees measured at fair value through profit or loss: 626 50,247 39,910

Total non-current assets 240,547 243,485 240,025

Total assets 320,852 290,521 282,233

2 2

B-4 Intercure Ltd.

Condensed Consolidated Statements of Financial Position As of December As of September 30 31 2020 2019 2019 Unaudited Audited NIS in thousands Current liabilities Current maturities in respect of credit from banking corporations and other liabilities 878 414 213 Trade payables 15,322 2,097 4,935 Other payables 5,229 2,247 3,852 Short term loan from controlling shareholder 13,738 13,467 13,633 35,167 18,225 22,633

Non-current liabilities Borrowings 18 50 43 Liability for employee severance benefits, net 154 98 194 Loan from related party 290 446 393 Lease liability 3,721 1,061 2,769

4,183 1,655 3,399

Equity Share capital, premium and other reserves 450,584 404,138 406,297 Capital reserve for transactions with controlling shareholder 2,388 2,345 2,388 Receipts on account of shares 11,017 1,214 1,214 Accumulated loss (200,380) (137,285) (153,927)

Equity attributable to owners of the Company 263,609 270,412 255,972

Non-controlling interests 17,893 229 229

Total equity 281,502 270,641 256,201

Total equity and liabilities 320,852 290,521 282,233

The accompanying notes are an integral part of the interim consolidated financial statements.

March 8, 2021 “Signed” “Signed” “Signed” Ehud Barak Alexander Amos Cohen Approval Date of the Chairman of the Rabinovitch CFO Financial Statements Board CEO

3 3

B-5 Intercure Ltd.

Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income For the three-month period For the year For the nine-month period ended September 30 ended ended September 30 December 31 2020 2019 2020 2019 2019 Unaudited Unaudited Audited NIS in thousands (excluding data regarding earnings per share)

Sales revenue 37,941 7,098 22,497 2,598 8,926

Cost of sales before fair value adjustments 20,856 6,070 11,742 3,661 7,456

Gross profit (loss) before the impact of 17,085 1,028 10,755 (1,063) 1,470 changes in fair value

Unrealized changes to fair value 2,417 2,264 723 1,898 3,076 adjustments of biological assets Profit from fair value changes realized in (1,143) (2,770) (223) (3,067) the current year (697)

Gross profit 18,359 522 11255 138 1,479

Research and development expenses 1,234 1,258 448 993 1,710 General and administrative expenses 5,793 7,877 2,568 3,608 12,073 Marketing and selling expenses 5,376 2,485 2,492 582 2,693 Impairment losses and (gains) on 541 58 financial assets 39,845 (31,344) (20,996) Share-based payment expenses 8,333 65,877 2,324 9,351 68,036 Other expenses (income), net 3,632 (58,930) 505 (24) (58,962) Share of results of associates - 340 - - 340

Operating profit (loss) (45,854) 12,959 2,377 (14,430) (3,415)

Finance income 188 188 59 184 141 Finance expenses 325 3,071 240 1,263 3,292 Total finance income (expenses), net (137) (2,883) (181) (1,079) (3,151)

Income (loss) before taxes (45,991) 10,076 2,196 (15,509) (6,566)

Tax income (expenses) (277) 673 (277) 1 673

Profit (loss) for the period (46,268) 10,749 1,919 (15,508) (5,893)

Comprehensive income (loss) (46,268) 10,749 1,919 (15,508) (5,893)

Total comprehensive income for the period attributable to: Owners of the parent company (46,453) 10,749 1,734 (15,508) (5,893) Non-controlling interests 185 - 185 - -

Basic earnings (loss) per share (in NIS) (0.42) 0.11 0.02 (0.13) (0.06) Diluted earnings per share (in NIS) (0.42) 0.09 0.01 (0.13) (0.06)

Number of shares used in the calculation Basic earnings (loss) per share 110,680,388 102,035,932 114,878,288 107,090,807 103,665,119 Diluted earnings per share 110,680,388 116,207,504 118,977,469 107,090,807 103,665,119 The accompanying notes are an integral part of the interim consolidated financial statements. 4 4

B-6 Intercure Ltd.

Condensed Consolidated Statements of Changes in Equity

Reserve for Share capital, transaction Equity premium with Receipts on attributable to Non- and other controlling account of Accumulated owners of the controlling reserves shareholder options loss Company interests Total equity NIS in thousands

As of January 1, 2020 406,297 2,388 1,214 (153,927) 255,972 229 256,201

Allocation of shares for the acquisition of subsidiary 6,904 - - 6,904 16,951 23,855 Profit (loss) for the period - - (46,453) (46,453) 185 (46,268) Share-based payment 8,333 - - - 8,333 528 8,861 Exercise of options 833 - - - 833 - 833 Allocation to private and institutional investors 28,217 - 9,803 - 38,020 - 38,020

As of September 30, 2020 450,584 2,388 11,017 (200,380) 263,609 17,893 281,502

As of January 1, 2019 162,304 1,790 3,602 (148,034) 19,662 - 19,662 - Profit for the period - - - 10,749 10,749 - 10,749 Benefit in respect of transaction with controlling shareholder - 555 - - 555 - 555 Share-based payment 65,648 - - - 65,648 229 65,877 Exercise of options 6,271 - (2,388) - 3,883 - 3,883 Allocation of shares for the acquisition of subsidiary 107,632 - - - 107,632 - 107,632 Issuance of shares 62,283 - - - 62,283 - 62,283

As of September 30, 2019 404,138 2,345 1,214 (137,285) 270,412 229 270,641 5 5

B-7 Intercure Ltd.

Condensed Consolidated Statements of Changes in Equity

Share Reserve for Receipts on Accumulated Equity Non- Total equity capital, transaction with account of loss attributable to controlling premium and controlling options owners of the interests other shareholder Company reserves NIS in thousands

As of July 1, 2020 413,139 2,388 1,214 (202,114) 214,627 757 215,384

Allocation of shares for the acquisition of 6,904 6,904 16,951 23,855 subsidiary Profit (loss) for the period - - - 1,734 1,734 185 1,919 Share-based payment 2,324 - - - 2,324 - 2,324 Allocation to private and institutional 28,217 - 9,803 - 38,020 - 38,020 investors

As of September 30, 2020 450,584 2,388 11,017 (200,380) 263,609 17,893 281,502

As of July 1, 2019 393,579 2,345 1,214 (121,777) 275,361 229 275,590 - Profit (loss) for the period - - - (15,508) (15,508) - -15,508 Share-based payment 9,351 - - - 9,351 - 9,351 Exercise of options 1,208 - - - 1,208 - 1,208

As of September 30, 2019 404,138 2,345 1,214 (137,285) 270,412 229 270,641

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B-8 Intercure Ltd.

Condensed Consolidated Statements of Changes in Equity

Share Reserve for Equity capital, transaction attributable premium with Receipts on to owners of Non- and other controlling account of Accumulate the controlling reserves shareholder options d loss Company interests Total equity NIS in thousands

As of January 1, 2019 162,304 1,790 3,602 (148,034) 19,662 - 19,662

Loss for the period - - (5,893) (5,893) - (5,893) Exercise of options 6,271 - (2,388) - 3,883 - 3,883 Allocation of shares for the acquisition of subsidiary 107,632 - - - 107,632 - 107,632 Issuance of shares 62,283 - - - 62,283 - 62,283 Benefit in respect of transaction with controlling shareholder 598 - - 598 - 598 Share-based payment 67,807 - - - 67,807 229 68,036

As of December 31, 2019 406,297 2,388 1,214 (153,927) 255,972 229 256,201

The accompanying notes are an integral part of the interim consolidated financial statements.

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B-9 Intercure Ltd.

Condensed Consolidated Statements of Cash Flows

For the year For the nine-month period For the three-month period ended ended September 30 ended September 30 December 31 2020 2019 2020 2019 2019 NIS in thousands Unaudited Unaudited Audited Cash flows from operating activities

Profit (loss) for the period (46,268) 10,749 1,919 (15,508) (5,893) Adjustments required to present cash flows from operating activities (A) 44,689 (20,930) 4,406 8,979 (5,676) Net cash used in operating activities (1,579) (10,181) 6,325 (6,529) (11,569)

Cash flows from investing activities

Purchase of property, plant and (16,118) (22,340) (4,653) (9,335) equipment (28,144) Investment in associate - (2,260) - - (2,260) Provision of credit to associate - (600) - - (600) Rise to control of associate - 385 - - 385 Acquisition of subsidiary (Note 8B) 387 - 387 - - Investment in assets measured at (626) 4,531 (626) - 4,532 fair value through profit or loss Restricted cash on account of shares (10,500) - - - - Release of restricted cash on 10,500 - 10,500 - - account of shares Change in deposits (40) - - 141 - Net cash used in investing activities (16,397) (20,284) 5,608 (9,194) (26,087)

Cash flows from financing activities

Issuance of shares as part of 38,020 62,283 27,520 - 62,283 allocation of shares Repayment of loan to related party (120) (66) (52) (16) (143) Repayment of loans from banks (54) (200) (18) (42) (174) Lease payments (407) (115) (168) (115) (189) Deferred issuance expenses - (2,059) - (619) (2,426) Exercise of options 833 3,883 - 1,208 3,883 Net cash from (used in) financing 38,272 63,726 27,282 416 63,234 activities

Increase (decrease) in cash and cash 20,296 33,261 39,215 (15,307) 25,578 equivalents Exchange differences in respect of balances of cash and cash 166 (1,204) (18) (310) (1,656) equivalents Balance of cash and cash 27,338 3,416 8,603 51,090 3,416 equivalents at beginning of period

Balance of cash and cash 47,800 35,473 47,800 35,473 27,338 equivalents at end of period

The accompanying notes are an integral part of the interim consolidated financial statements.

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B-10 Intercure Ltd.

Condensed Consolidated Statements of Cash Flows

For the three-month For the nine-month period period ended September For the year ended ended September 30 30 December 31

2020 2019 2020 2019 2019 NIS in thousands Unaudited Unaudited Audited A) Adjustments required to present cash flows from operating activities

Adjustments to items in the consolidated statement of comprehensive income:

Depreciation and amortization 2,182 329 1,379 163 829 Cost of share-based payment 8,333 65,877 2,324 9,351 68,036 Change in the fair value of investments measured at fair value through profit or loss 39,845 (31,345) 541 57 (20,997) Capital gains in respect of rise to control of associate (Note 8B) - (58,808) - - (58,808) Financing expenses (income) 137 2,883 181 1,075 3,151 Company’s share in the profit or loss of associate - 340 - - 340 Change in liabilities in respect of employee benefits, net (40) - (28) - 96 Tax expenses (income) 277 (673) 277 (1) (673) 50,734 (21,397) 4,674 10,645 (8,026)

Changes in assets and liabilities items:

Increase in trade receivables (10,303) (30) (257) 572 (1,183) Decrease (increase) in inventory (6,056) 5,095 393 1,956 3,029 Decrease (increase) in other receivables 4,351 (4,860) 597 (3,900) (4,243) Increase (decrease) in trade payables 8,966 1,183 3,354 19 4,021 Increase (decrease) in other payables 873 (92) 323 402 1,913 Decrease (increase) in biological assets (3,852) (745) (4,662) (760) (1,096) (6,021) 551 (252) (1,711) 2,441

Cash which was paid and received during the year in respect of: Taxes paid - (50) - (50) (50) Interest received (paid), net (24) (34) (16) 95 (41) (24) (84) (16) 45 (91)

Cash generated by (used in) operations 44,689 (20,930) 4,406 8,979 (5,676)

B) Material non-cash operations Acquisition of shares of subsidiary 6,904 - 6,904 - - against issuance of shares (Note 8) Rise to control of associate against - 107,632 - - 107,632 issuance of shares

The accompanying notes are an integral part of the interim consolidated financial statements.

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B-11 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 1 - General

A. General description of the Group and its activity:

The Company is a public company and is listed on the Tel Aviv Stock Exchange. The Company is engaged in the medical cannabis industry through its holding of the entire issued and paid-up capital of Canndoc Ltd. (hereinafter: “Canndoc”), and through its 50.1% stake in the issued and paid-up capital of Cannolam Ltd. The Company also has additional holdings in the biomed industry and in the technology and medical device sectors in the life sciences industry, as specified in Note 5. For additional details regarding the Group’s operating segments, see Note 9.

These condensed consolidated statements should be read in the context of the Company’s annual financial statements as of December 31, 2019 and for the year then ended, as well as the accompanying notes.

B. Definitions:

In these financial statements:

Company - Intercure Ltd.

Group - The Company and its subsidiaries.

Related - Parties As defined in IAS 24

USD - US Dollar.

Subsidiaries - Companies which are controlled by the Company (as defined in IFRS 10), directly or indirectly, and whose financial statements are fully consolidated with the Company’s reports.

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B-12 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 2 - Significant Accounting Policies

A. Preparation basis of the financial statements

The Group’s condensed consolidated financial statements (hereinafter: the “Interim Financial Statements”) were prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (hereinafter: “IAS 34”).

In the preparation of these interim financial statements, the Group adopted an accounting policy, presentation rules and calculation methods which were identical to those which were implemented in the preparation of its financial statements as of December 31, 2019, and for the year then ended.

B. Taxes on income in interim reports

Expenses (income) in respect of taxes on income in the presented periods include the total amount of current taxes, as well as the total change in the balances of deferred tax, excluding deferred taxes due to transactions carried directly to equity, and business combination transactions.

Current tax expenses (income) during the interim period are accumulated using the average annual effective income tax rate. For the purpose of calculating the effective income tax rate, losses for tax purposes for which deferred tax assets were not recognized, and which are expected to reduce the tax liability during the reporting year, are subtracted.

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B-13 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 3 - Amendments to Financial Reporting Standards and Interpretations Which Were Published

New standards and amendments to standards which affect the current period and/or previous reporting periods

Amendment to IFRS 3, Business Combinations (regarding the definition of a “business”): The amendment determines that in order to be considered as a “business”, the acquired assets and operations must include, as a minimum, an input and substantive process which together significantly contribute to the ability to create outputs. The amendment removes the need to evaluate whether market participants are capable of replacing inputs or missing processes and to continue creating outputs, and removes from the definition of a “business” and “outputs” reduced costs or other economic benefits, and focuses on products and services which are provided to customers. The amendment also adds a “fair value concentration” test, according to which the subject under evaluation is not considered a business if the entire fair value of the gross assets is essentially concentrated in a single identifiable asset, or in a group of similar identifiable assets.

The amendment is applied to business combinations and asset acquisitions with an acquisition date beginning on January 1, 2020. For additional information, see Note 8.

Amendments to standards which have been published but not yet effective, which were not adopted early by the Group, and which are expected to or could have an impact on future periods

The amendment to IAS 41 removes the requirement for entities to exclude cash flows for taxation when measuring fair value. This aligns the fair value measurement in IAS 41 with the requirements of IFRS 13 Fair Value Measurement to use internally consistent cash flows and discount rates and enables preparers to determine whether to use pre-tax or post-tax cash flows and discount rates for the most appropriate fair value measurement.

The amendments will be applied to annual reporting periods beginning on or after January 1, 2022, with early application permitted.

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B-14 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period

A. Acquisition of 50.1% stake in shares of Cannolam Ltd. On May 14, 2020, the Company’s board of directors approved the engagement in a series of agreements for the acquisition of a 50.1% of the shares of Cannolam Ltd., an Israeli private company, which holds, independently and/or through its owned subsidiaries, the exclusive rights to produce, import, distribute and use of a leading international cannabis and lifestyle trademarks in the territory of Israel. In addition, Cannolam Ltd. has exclusive rights in respect of the brands Cookies, Mr. Nice and Oxon Pharma. For additional information, see Note 8.

B. Cellect transaction On March 3, 2020, the Company’s board of directors approved the engagement in a non-binding letter of intent regarding a merger of Canndoc into Cellect Biotechnology Ltd., an Israeli public company which is listed on the NASDAQ APOP, which is engaged in the development of stem cell technology (hereinafter: “Cellect”). On November 19, 2020, the parties reached a joint decision to discontinue the negotiations and cancel the letters of intent.

C. Production 1. During the reporting period, Canndoc entered into collaborations with corporations authorized to grow and produce medical cannabis in the corporation’s authorized growing facilities, based on Canndoc’s high-quality genetics. Additionally, due to the commencement of production activities in the southern facility, Canndoc did not extend two of those collaborations, whose agreement periods had concluded.

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B-15 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

2. On May 26, 2020, Canndoc announced the receipt of a license from the Medical Cannabis Unit of the Ministry of Health (the “Medical Cannabis Unit”), for the engagement in and holding of a dangerous drug, in accordance with sections 6 and 7 of the Dangerous Drugs Ordinance (New Version), 5733-1973, for the propagation and growing of cannabis plants, and the processing of inflorescence and plants under IMC-GAP quality conditions, in Canndoc’s growing facility in the south of Israel (hereinafter: the “Southern Site”), in a commercial scope of approximately 24,500 plants in parallel, as set forth in the growing license (hereinafter: the “Growing License”). In accordance with the standard practice, the license is conditional on completing the construction of a post-harvest processing facility, and receipt of a full IMC-GAP certification, no later than August 31, 2020. On August 30, an administrative extension was received until November 30, 2020. On November 25, 2020, an additional administrative extension was received until January 15, 2021. On December 24, 2020, Canndoc announced receipt of a permanent license from the Medical Cannabis Unit. In December 2020, there was an attempt to breach this facility. The security systems at the facility prevented the incident, in addition, nearby forces of the army and the Israeli police arrived at the scene immediately after the incident began. No damage was caused to the facility and nothing was stolen from it. As of the approval date of the financial statements, Canndoc has begun commercial cultivation in the southern facility.

3. Further to Note 16F to the annual report, an extension to the agreement was signed, which formalized, inter alia, the investment in the Company’s facility in Beit HaEmek. As of the publication date of this report, the suspensory conditions for the fulfillment of the agreement have not yet been met.

D. Importation

1. On January 2, 2020, Canndoc engaged in a series of agreements regarding the establishment of a strategic collaboration with a wholly owned company of Tilray Inc., one of the world’s leading companies in the medical cannabis sector (hereinafter: “Tilray”). As part of the series of agreements, the parties engaged in an importation agreement under which Canndoc will import from Tilray packaged and dried medical cannabis inflorescence at an EU-GMP quality level, within a period of a year, and will market them as finished goods in Israeli pharmacies. Until the end of the year, Canndoc had the option to import up to 2.5 tons of Tilray`s products, at predetermined agreed-upon prices.

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B-16 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

D. Importation (Cont.)

2. At the beginning of January 2020, the first shipment of approximately 250 kg. was received in Israel, after receiving all of the required authorizations for the import. To the best of the Company’s knowledge, the foregoing import was the first commercial shipment of medical cannabis to Israel. It is noted that Tilray’s inflorescences met all of the requirements of the Medical Cannabis Unit, and Canndoc began to distribute finished goods produced from the inflorescences in various authorized pharmacies. In March and July 2020, Canndoc received additional shipments of Tilray inflorescences, in significant amounts.

3. On June 9, 2020, Canndoc entered into a strategic collaboration with Organigram Inc., one of the world’s leading and highest-quality companies in the medical cannabis sector, regarding the importation of medical cannabis, as well as a collaboration on the development and exporting of products to Europe. Under the agreement, subject to the receipt of the required authorizations, Canndoc will import from Organigram approximately 3 tons of high-quality medical cannabis products from Organigram’s advanced indoor facility in Canada (hereinafter: “Indoor Products”), within a period of one year and a half, and will produce and market them in pharmacies in Israel and in the European Union. Canndoc will also have the option to import at least 3 tons of additional products during an additional period of two years after the end of the initial period, under identical conditions. In August, the first shipment of 1 ton of Organigram products arrived in Israel. Canndoc began to sell the finished products during the third quarter.

4. On August 4, 2020 Canndoc entered into a strategic and exclusive collaboration with Aphria Inc., one of the world’s leading and largest cannabis companies. Under the agreement, and subject to the receipt of the required authorizations, including the products’ fulfillment of the requirements of the Medical Cannabis Unit of the Ministry of Health, Canndoc will import from Aphria approximately 3 tons of high-quality medical cannabis products, over a period of two years, and will produce and market them under a shared brand in Israeli pharmacies. Canndoc has the option to import up to 6 tons of additional products, in two additional periods of two years each, beginning from the end of the first period, under identical conditions. In November the first shipment of 1.5 tons arrived in Israel. Canndoc began selling 15 15

B-17 Intercure Ltd.

the products during the fourth quarter.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

E. Exporting, marketing and distribution

1. As part of the series of agreements with Tilray, the parties engaged in an export agreement, under which Tilray will acquire up to approximately 5 tons of inflorescences produced by Canndoc, at agreed-upon prices, for the purpose of exporting them from Israel, and using them as medical cannabis products produced by Tilray, under the Tilray brand name, provided that Canndoc’s exported products meet the requirements of the EU-GMP standard, and based on the receipt of a permit for exporting from Israel. Under the export agreement, it was determined that insofar as export approval is not received from the State of Israel by April 1, 2020, Canndoc will have the option to obligate Tilray to purchase products for the purpose of selling them in Israel under the Tilray brand name, or through a joint brand which will be agreed upon between the parties. If Canndoc does not exercise the option, Tilray will be entitled, in accordance with an option which was given to it, to request Canndoc to sell the products to it. It is noted that, as of the approval date of the financial statements, the options have not yet been exercised by either of the parties.

On July 1, 2020, Canndoc submitted to the Medical Cannabis Unit of the Ministry of Health a request to export medical cannabis inflorescence of Canndoc, as part of a preliminary binding offer from Tilray, to acquire dozens of kilograms of Canndoc products for export to Portugal. Following the Company’s participation in a pilot of the Israeli government for the export of cannabis products, in parallel with the reduction of cannabis sale prices to patients in Israel, Canndoc received, on November 16, 2020, the first permission from the Ministry of Health, for commercial exports to Europe. On December 15, 2020, Canndoc completed the first commercial export, which consisted of several dozen kilograms, to the European Union as part of the Tilray Agreement. As of the approval date of the financial statements, the Company does not have any significant inventory of the type which was involved in the pilot.

2. Canndoc engaged in a distribution agreement through consignment with Salomon, Levin and Elstein Ltd. (hereinafter: “S.L.E.”), a member company of Teva Pharmaceutical Industries Ltd., for a period of 3 years, during which time S.L.E. will provide to Canndoc logistics, storage, collection and distribution services for Canndoc’s medical cannabis products to pharmacies. In consideration of the provision of the distribution services, S.L.E. will be entitled to receive a commission as a fixed rate of the sales turnover of Canndoc products to pharmacies. The other commercial terms of the distribution agreement are in 16 16

B-18 Intercure Ltd. accordance with the standard practice for agreements of this kind. During the reporting period, under the New Regulations published by the the Israeli Medical Cannabis Agency (hereinafter: “New Regulations"), some of Canndoc’s finished goods were distributed to the pharmacies by S.L.E.

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B-19 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

E. Exporting, marketing and distribution (Cont.)

The parties to the agreement have covenanted to negotiate in good faith and enter into a detailed agreement within 90 days from the date of the agreement. The parties, by mutual agreement have agreed to extend the said period to March 31, 2021 and negotiations of the detailed agreement remain ongoing.

4. On April 30, 2020, Canndoc’s board of directors approved an engagement in ten framework agreements with 12 private pharmacies which provide medical cannabis in significant amounts, distributed throughout the country (hereinafter: the “Pharmacies”), under which Canndoc will provide approximately 12 tons of medical cannabis products in accordance with Canndoc’s GMP certification during the years 2020 and 2021. As part of the engagements, the pharmacies will undertake to acquire, and Canndoc will undertake to supply, the agreed-upon quantity as finished goods in accordance with Canndoc’s GMP certification, according to the agreed-upon prices which were determined between the parties, an annual minimum consumption quantity was determined, which the pharmacies undertook to acquire, and Canndoc undertook to supply. The finished goods will be transferred from Canndoc’s production network to the authorized distributors through which the products will be distributed to the pharmacies. The engagements are in effect for a period of 24 months, whereby each party is entitled to give the other party 90 days’ advance notice regarding the termination of the engagement. During the reporting period, Canndoc began providing and marketing its products in the leading pharmacies. In July 2020 Canndoc engaged with additional pharmacies, under similar terms of engagement as those specified above.

5. On April 30, 2020, approval was given for the engagement in a strategic provision agreement with a company incorporated in the European Union, authorized under the EU-GMP standard, which will provide to Canndoc high-quality medical cannabis products under the EU-GMP standard. As of the publication date of the report, there has been no effect on the financial statements. 18 18

B-20 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

E. Exporting, marketing and distribution (Cont.)

6. On May 13, 2020, Canndoc informed the Company regarding the receipt of approval, in respect of Canndoc’s northern site, for Europe’s obligatory growing standard - Good Agriculture Collection Practices (GACP), following the fulfillment of conditions and in accordance with an inspection which was conducted by an authorized producer of the Company’s products (hereinafter: the “Approval” and the “Authorized Producer”, as applicable), as part of an inspection conducted by a regulatory body of the European Union in respect of the authorized producer, and its compliance with the EU-GMP standard. Additionally, on May 13, 2020, a free export order was signed regarding regulating the exporting of products, by the Ministry of Economy.

7. On May 25, 2020, Canndoc’s board of directors approved an engagement in a series of agreements, including a partnership agreement and a distribution agreement, with a British corporation which owns an EU-GMP-compliant production plant, and which holds import and export licenses for medical cannabis products in England, Wales, Scotland, Northern Ireland and Ireland (hereinafter: the “Partner” and the “Operating Area”, as applicable), regarding the creation of a partnership to perform the activity of distributing Canndoc’s medical cannabis products (hereinafter: the “Products”) in the operating area (hereinafter: the “Joint Operation”). As part of the joint operation, a joint company was formed which is held 51% by Canndoc and 49% by the partner, and which is under Canndoc’s control (hereinafter: the “Joint Company”). As part of the collaboration, Canndoc will export the products (as finished goods and/or as packaged and dried inflorescence) from Israel and/or any other territory in which Canndoc may produce the products, subject to the receipt of the required permits for exporting to those countries. The partner will be responsible for importing the products into the facility (including receiving the import permits for the operating area), packaging them in accordance with local requirements (if necessary), and for the entire product distribution network, independently and/or through related corporations. As part of the engagement in the series of agreements, and subject to an issuance of Canndoc shares at a minimum value of USD 200 million, if any, it was determined that the partner will be entitled to an allocation of Canndoc options worth approximately USD 600 thousand. The options will vest upon the fulfillment of the following conditions: (A) 50% on the date of a cumulative sale of 200 kg. of products in the territory; (B) 50% on the date of the cumulative sale of 500 kg. of products in the territory. During the reporting period, Canndoc has been working to supply its EU-GMP- compliant products from an authorized producer, independently of the receipt of a permit for exporting from Israel.

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B-21 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

F. Coronavirus pandemic During the first quarter of 2020, the coronavirus (COVID-19) pandemic began to spread in Israel and around the world. As of the approval date of the financial statements, Canndoc has not experienced and/or is not experiencing any change in the trend of demand for its medical cannabis products, and is continuing to manage its business and sell its products in an orderly and continuous basis. Canndoc is entitled to continue its activity provided that it reduces the number of employees to the minimum required to ensure essential operations. Company management has been evaluating, throughout the entire period, the financial implications of the crisis on the Company. Canndoc has prepared an inventory of raw materials required to ensure routine operating activities in the growing facility, planning a decentralized workforce, and preparing workforce reserves in case of the infection of one of its employees, as well as a remote access network for employees. Additionally, the Company’s support center is continuing to provide continuous support to patients, including complete and strict implementation of the Ministry of Health’s requirements regarding work methods and operating space. Company management believes that it has the financial stability required to deal with the coronavirus crisis and its short-term and medium-term consequences (if any), inter alia, based on the continuation of the Company’s operating activities, and the completion of the private allocations which were performed during the reporting period.

G. allocations 1. On January 9, 2020, a total of 18 thousand options (each) were allocated to three independent directors, including 2 outside directors, of the Company, in accordance with an agreement with them. The options will vest over a three-year period, in equal tranches.

2. In June 2020 the Company’s audit committee and board of directors approved an allocation of Company shares, in a private allocation of shares and options, to seven institutional investors, to one additional investor, Yael Feigel, an related party, and to the Company’s controlling shareholder or to a company under his control, which will invest in the Company a total of approximately NIS 38.2 million, in consideration of the allocation of 9,257,820 ordinary shares and 8,332,038 options exercisable into 8,332,038 shares. The allocation was approved by the general meeting on July 30, 2020, and the Company allocated the shares on August 4, 2020.

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B-22 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 4 - Significant Transactions and Events During the Reporting Period (Cont.)

E. Options plan On August 31, 2020, the Company’s board of directors authorized management to take action to offer a total of up to 4,303,356 options to an officer (the Company’s CFO) and to Canndoc employees, which constitute 3.6% of the Company’s shares (as of the approval date of the financial statements). On January 26, 2021 the Company’s board of directors decided that 3,895,796 unlisted options can be exercised to 3,895,796 ordinary shares of the Company and will be allocated to officers and employees of the Company and Canndoc. The options will be for a period of up to 5 years from the grant date, at an exercise price of NIS 4.13 per share. The options will vest on a quarterly basis over a period of 4 years after the grant date. On March 8, 2021, the company received the TASE final approval.

Note 5 - Investment in Assets Measured at Fair Value Through the Statement of Income

A. Financial assets The Company has investments which are measured at fair value through profit or loss. Presented below is the value of the financial instruments as of September 30, 2020, September 30, 2019 and December 31, 2019: As of September As of As of 30 September 30 December 31 2020 2019 2019 NIS in thousands Financial assets at fair value through profit or loss : Investment in XTL stocks 242 188 177

242 188 177 Investments in investees measured at fair value through profit or loss : Fair value of the investment in Regenera - A.1 - 43,381 39,910 Fair value of the investment in Novellus - A.2 626 6,866 - 626 50,247 39,910

Total investments in financial assets: 868 50,435 40,087

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B-23 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 5 - Investment in Assets Measured at Fair Value Through the Statement of Income

A. Financial assets (Cont.)

A.1. Value of the investment in Regenera

On April 30, 2020, the Company’s board of directors discussed a notice which was received from Regenera, in which it was stated that in light of weak clinical results from an optic nerve trial, and an adjustment to the trial protocol, Regenera intends to raise a total of approximately USD 3 million, according to a value which is significantly lower than the valuation as of December 31, 2019, as part of a private allocation including rights.

The Company chose not to participate in the rights issue, and accordingly, on May 18, 2020, the Company was informed that Regenera had completed the raising through a private allocation to some of the current shareholders, whereby in Stage A the investors provided a total of approximately USD 1.3 million, and subject to the achievement of milestones, the investors will provide an additional total of approximately USD 2 million (hereinafter: the “Additional Raising Rounds”). The milestones are linked to the adjustment of the outline of the optic nerve clinical trial, and include, inter alia, receipt of FDA approval for the updated trial outline, and reaching “first patient in” status.

As a result, the completion of the raising, the Company’s stake in Regenera was diluted from 11.76% to 9.33%. Subject to the completion of the remaining capital raising rounds, the Company’s stake will be diluted to a rate of 7.85%.

On September 29, the Company was informed that Regenera’s board of directors had resolved to discontinue Regenera’s activity. In light of the information which the Company received, the Company recorded impairment in the amount of NIS 583 thousand in its financial statements.

Value of the Company’s holding in Regenera: The preferred shares and derivative instruments are presented in the balance sheet under the item for the investment in Regenera - financial assets measured at fair value through profit or loss, and are classified at level 3, as described in Note 5B.

Presented below is the value of the financial instruments: As of As of As of September 30 September 30 December 31 2020 2019 2019 NIS in thousands Ordinary shares - 9,122 8,063 Series A preferred shares - 18,712 16,644 Series B preferred shares - 2,580 2,509 Series B-1 preferred shares - 9,200 8,789 Options for Series B-2 preferred shares - 3,767 3,905 Total - 43,381 39,910

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B-24 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 5 - Investment in Assets Measured at Fair Value Through the Statement of Income

A. Financial assets (Cont.)

A.2. Value of the investment in Novellus In September 2020, a capital raising round of approximately USD 56 million was completed. The Company undertook to provide a total of approximately USD 500 thousand, in three milestones. As of the approval date of the financial statements, the Company has invested a total of approximately 181 thousand. The impact of this raising on the value of the other shares which are held by the Company is immaterial. Following the raising, the Company’s stake in Novellus is 0.72%.

B. Levels of fair value The following table presents the Company’s financial assets and financial liabilities which are measured at fair value:

As of September 30, 2020 Level 1 Level 2 Level 3 Total NIS in thousands Assets:

Financial assets at fair value through profit or loss: Investment in XTL stocks 242 - - 242

Investments in investees measured at fair value through profit or loss: Investments in investees - - 626 626

Total assets 242 - 626 868

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B-25 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 5 - Investment in Assets Measured at Fair Value Through the Statement of Income

B. Levels of fair value (Cont.)

As of September 30, 2019 Level 1 Level 2 Level 3 Total NIS in thousands Assets:

Financial assets at fair value through profit or loss: Investment in XTL stocks 188 - - 188

Investments in investees measured at fair value through profit or loss: Investments in investees - - 50,247 50,247

Total assets 188 - 50,247 50,435

As of December 31, 2019 Level 1 Level 2 Level 3 Total NIS in thousands Assets:

Financial assets at fair value through profit or loss: Investment in XTL stocks 177 - - 177

Investments in investees measured at fair value through profit or loss: Investments in investees - - 39,910 39,910

Total assets 177 - 39,910 40,087

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B-26 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 6 - Contingent Liabilities:

1. On November 3, 2016, a motion to approve a class action was filed with the District Court of Tel Aviv-Yafo, against Canndoc and the other seven holders of the active license in accordance with the old arrangement regarding growing medical cannabis. On January 4, 2020 the Court rejected the motion, and determine that the applicants had not proved an evidentiary basis for thein motion.

2. Further to Note 16E(2) to the annual report, no significant developments have occurred regarding the claim, and at this preliminary stage it is not possible to estimate the chances of motion to approve the claim as a class action, therefore, the company did not include a provision in the financial statements.

3. On May 25, 2020, a motion was filed with the District Court of Tel Aviv-Yafo to approve a class action against the Company and its directors and officers, in which the petitioner’s main assertion is that the Company allegedly breached its obligation to report to the public, by the required date and in the required scope of the disclosure (as alleged), events and developments which affected the value of Regenera. According to the motion, the shareholders of Intercure were misled and the suffered personal damages in the amount 88 million NIS.The Company rejects the assertions in the motion, and emphasizes that its reports are submitted in accordance with the law. In October 2020 the Company filed a response to the motion in accordance with the provisions of the law. In January 2021, a preliminary hearing was held in which the court proposed the parties turn to an expert who would examine the issue of the claim to damages. In consideration of the very preliminary stage of the proceedings, it is not possible to estimate the chances of the motion to approve.

4. A lawsuit was filed on December 8, 2020 against Canndoc, claiming damages of 2,271,310 NIS. The plaintiff claims that Canndoc fundamentally breached a cooperation agreement between the parties. The allegations are that Canndoc was to purchase from the plaintiff goods weighing 386.5kg, the value of which according to the agreement was approximately 2,241,700 NIS (including VAT). The plaintiff also requested additional remedies for alleged breach of Canndoc's contractual obligation to provide the plaintiff with seedlings. Canndoc’s position is that the agreement was breached by the plaintiff who did not comply with Canndoc's guidelines, as required by the agreement, and therefore the product was deficient. In consideration of the very preliminary stage of the proceedings, it is not possible to estimate the effect of the lawsuilt.

Note 7 - Composition of Share Capital: 1) The Company’s registered capital as of September 30, 2020 is 1,000,000,000 shares with no par value. 2) The issued and paid-up capital as of September 30, 2020 is 119,870,650 shares.

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B-27 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 8 - Business Combination

A. Acquisition of subsidiary

On May 14, 2020, the Company’s board of directors approved the engagement in a series of agreements for the acquisition of a 50.1% stake in the shares of Cannolam Ltd. The Company allocated to some of the shareholders of Cannolam Ltd. (in a private allocation) 1,788,962 shares, which constitute approximately 1.62% of the Company’s issued and paid-up capital (1.41% fully diluted), in consideration of 21.9% of the shares of Cannolam Ltd. Cannolam Ltd. will also be given rights to agricultural produce which will be grown in Canndoc’s (current or future facilities), including providing the right to grow on land for which Canndoc has rights of use, or alternative land in which no less than NIS 10,200 thousand has been invested, in consideration of the allocation of 28.2% of Cannolam shares, such that the Company will hold a cumulative rate of 50.1% of Cannolam shares. As of the publication date of the report, Cannolam has begun using these rights, where the cost of the investment therein is approximately NIS 8 million. The Cannolam acquisition transaction was completed on July 1, 2020, and accordingly, its operating results were consolidated for the first time beginning on that date.

Presented below is the fair value, as of the acquisition date, of the transferred consideration:

NIS in thousands (Unaudited) Issuance of 1,788,962 ordinary Company shares (A) 6,904 Investment 10,200 Non-controlling interests 16,951 34,055

(A) The fair value of the ordinary shares which were issued as part of the cost of the business combination was determined based on the closing price of the Company’s stock on the Tel Aviv Stock Exchange as of July 1, 2020.

B. Net cash flow arising on acquisition NIS in thousands (Unaudited)

Consideration paid in cash - Less - acquired cash and cash equivalents 387 Total 387

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B-28 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 8 - Business Combination (Cont.)

C. Amounts recognized on the acquisition date in respect of assets and liabilities: NIS in thousands (Unaudited)

Financial assets 2,178 Rights to agricultural produce 10,200 Inventory 237 Property, plant and equipment 1,165 Lease asset 2,039 Financial liabilities (1,863) Lease liability (2,039) Total identifiable net assets 11,917

Goodwill 22,138

D. Goodwill The cost of the business combination included a payment in respect of the control premium for the acquisition of Cannolam Ltd. Additionally, the consideration which was paid in the business combination includes amounts associated with the benefits which are expected to arise from the synergy (collaboration), revenue growth, and future developments in the operating market of Cannolam. These benefits are not recognized separately from goodwill, since the future economic benefits which are expected to arise from them are not reliably measurable. All of the above led to the creation of goodwill in the amount of NIS 22,138 thousand as a result of the business combination.

E. Non-controlling interests The total sum of non-controlling interests in Cannolam Ltd. (49.9%) which was recognized on the acquisition date is NIS 16,951 thousand. The non-controlling interests were estimated based on their fair value.

F. Impact of the acquisition on the Group’s results Total revenue in the three-month period ended September 30, 2020 includes approximately NIS 4,579 thousand which is attributable to Cannolam Ltd. Additionally, total profit (loss) for the three-month period ended September 30, 2020 includes approximately NIS 371 thousand which is attributable to the Cannolam Ltd. Had the acquisition taken place at the start of the nine-month period ended September 30, 2020, the Group’s total revenue would have amounted to approximately NIS 45,025 thousand, and the Group’s losses would have amounted to approximately NIS 46,575 thousand.

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B-29 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 9 - Operating Segments The series of reports which are submitted to the Group’s Chief Operational Decision Maker, for the purpose of allocating resources and assessing the performance of the operating segments, are based on investment types, and include investment in portfolio companies in the biomed segment, and investment in companies in the cannabis segment.

Presented below are the segmental revenues and the correspondence between the segmental financial data and the financial statements:

Adjustments of segmental assets and liabilities for the consolidation include cancellation of revenues of the cannabis segment prior to the acquisition, and addition of assets and liabilities which were not attributed to segments.

NIS in thousands Adjustmen ts for the Cannabis Biomed consolidati segment segment on Total

Nine months ended September 30, 2020 External sales 37,941 - - 37,941 Segmental profit (loss) 6,331 (39,845) 450 (33,064)

General and administrative expenses not attributable to segments (9,158) Other expenses, net (3,632) Profit (loss) from operating (45,854) activities

NIS in thousands Adjustmen ts for the Cannabis Biomed consolidati segment segment on Total

Nine months ended September 30, 2019 External sales 7,781 - (683) 7,098 Segmental profit (loss) (9,676) 31,344 895 22,563

General and administrative expenses not attributable to segments (68,194) Other revenues, net 58,930 Equity losses (340) Profit (loss) from operating 12,959 activities

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B-30 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 9 - Operating Segments (Cont.) NIS in thousands Adjustments Cannabis Biomed for the segment segment consolidation Total

Three months ended September 30, 2020 External sales 22,497 - - 22,497 Segmental profit (loss) 6,091 (541) 90 5,640

General and administrative expenses not attributable to segments (2,758) Other expenses, net (505) Profit (loss) from operating 2,377 activities

NIS in thousands Cannabis Biomed Adjustments Total segment segment for the consolidation

Three months ended September 30, 2019 External sales 2,598 - 2,598 Segmental profit (loss) (4,363) (58) - (4,421)

General and administrative expenses not attributable to segments (10,033) Other revenues, net 24 Profit (loss) from operating (14,430) activities

NIS in thousands Adjustments Cannabis Biomed for the segment segment consolidation Total

Year ended December 31, 2019 Income from externals 9,609 - (683) 8,926 Segmental income (loss) (12,567) 20,996 895 9,324

General and administrative expenses not attributable to segments (71,361) Other revenues, net 58,962 Equity losses (340) Profit (loss) from operating (3,415) activities

Segmental assets (1) 47,846 39,910 194,477 282,233 Segmental liabilities (53,518) 27,486 (26,032)

(1) For additional details regarding the change in the value of assets in the biomed and cannabis segments during the reporting period, see Notes 5A1 and 8, respectively.

2 9 29

B-31 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 10 - Disclosure Regarding Assumptions Which Were Used To Estimate The Net Fair Value Of Biological Assets

A. The Company measures biological assets, which are mostly comprised of medical cannabis plants and agricultural produce, at fair value less selling costs until the harvesting point. This value is used as the cost basis of inventory after the harvest. Profit or loss due to changes in fair value less selling costs are included under the Company’s profit or loss in the year when they materialized. 30/09/2020 30/09/2019 31/12/2019 Net growing area (in dunams) 10.5 2.5 2.5 Estimated net yield as of the reporting date 1.7 0.2 0.4 (tons) (1) Estimated net selling price (NIS per gram) (2) 12-19 ~10 12-19 Estimated rate of products which will be sold as 85% 82% 82% inflorescence (in percent) (3) Estimated rate of products which will be sold as 15% 18% 18% oil (in percent) (3) Estimated growing cycle length (in weeks) (4) 13-15 13-15 13-15 Estimated growing cycle completion rate (in 43% 2% 33% percent) (5) Fair value of the biological asset as of the end of 4,997 34 1,145 the reporting period (NIS in thousands) (1) According to the number of seedlings as of the end of the reporting period (2) According to the price range of the Company’s existing products as of the end of the reporting period (3) The Company’s estimate regarding the future rate of sales (4) In accordance with the Company’s experience, and according to the strains which exist as of the reporting date (5) By planting date vs. growing cycle length

B. Sensitivity analysis in respect of a 10% increase in each of the variables on the fair value of the biological assets (NIS in thousands): 30/09/2020 30/09/2019 31/12/2019 Average selling price 500 4 120 Rate of oil products 86 1 7 Estimated growing cycle length (435) (1) (84)

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B-32 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 11 - Transactions with Related Parties A. Further to Note 13 to the annual report, on April 30, 2020 an extension was given for the two controlling shareholder loans until July 1, 2020. On June 30, 2020, an extension was given for the two controlling shareholder loans until October 1, 2020. On October 20 the two controlling shareholder loans were repaid, in the amount of approximately NIS 13.8 million.

B. Further to that stated in Note 13C to the Company’s financial statements as of December 31, 2019, on June 30, 2020 the Company’s audit committee and board of directors gave approval for a related company of the controlling shareholder to reduce its leased area, and the rent paid by it will therefore decrease accordingly.

Note 13 - Events After the Reporting Period A. On April 27, 2020 and April 30, 2020, the Company’s audit committee and board of directors approved an update to the directors’ fees to the minimum amount specified in the Companies Regulations (Rules Regarding Compensation and Expenses of External Director), 5760-2000 (hereinafter: the “Compensation Regulations”), as part of the Company’s efforts to deal with the coronavirus pandemic and to reduce the Company’s operating expenses. On November 26 and 30, 2020, the Company’s compensation committee, audit committee and board of directors (respectively) approved a resolution to restore the directors’ fees to the fixed amount specified in the Compensation Regulations.

B. On November 30, 2020, Mr. Avner Barak, a director, announced his resignation from tenure as a director in the Company.

C. On November 30, 2020, the Company’s board of directors approved the appointment of Mr. Alon Granot as a director in the Company, until the next annual meeting.

D. On November 30, 2020, the board of directors of the subsidiary Canndoc Ltd. approved the appointment of Mr. Alexander Rabinovitch, a director, as the CEO of Canndoc, instead of Mr. Alon Granot, who will continue his tenure as a director in Canndoc, and who was appointed, as stated above, as a director in the Company.

E. In October, 2020, Candoc engaged in a collaboration agreement with Pnina Rosenblum CBD Products Ltd for the production of lifestyle products for women combined with CBD. The parties will operate through joint company to develop the products, distribute and market them through a joint brand.

31 31

B-33 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 13 - Events After the Reporting Period (cont.)

F. In December 2020 Canndoc engaged in a collaboration agreement with Charlotte's Web, the owner of the largest worldwide CBD brand, in an exclusive partnership. Canndoc products will be marketed in Israel under a joint brand for the Israeli market. subject to certain conditions, including certain regulatory matters within central European countries and England. The arrangement is subject to the receipt of the required regulatory agreements.

G. In December 2020, Canndoc engaged in a strategic and exclusive collaboration with Fotmer, Uruguay Corporation, that cultivating and producing medical cannabis at an internationally high level. the parties engaged in an importation agreement under which Canndoc will import from Fotmer approximately 3,000 kilograms of quality medical cannabis products, each year for a period of four years. Pursuant to the agreement, Canndoc provided Fotmer an initial amount of US $650,000 as a down payment for the first shipment of medical cannabis products, which will be classified as a loan, bearing an annual interest rate of 5.51% and secured by Fotmer’s Canadian parent company, until the export and import permits for the first shipment of products are obtained.

H. In December 2020, Canndoc entered into a distribution agreement with Novolog, a leading Israeli company in the logistic health services field. Pursuant to the noted agreement, Novolog will provide Canndoc with logistics, storage, collection and distribution services for it`s medical cannabis products throughout Israel for a term of three years, with two optional extensions of two years each. Novolog holds an IMC-GDP distribution license and possesses an advanced logistics facility.

I. In January 2021, Cannolam purchased two pharmacies in Ashdod and Herzliya, in consideration for approximately NIS 3 million and a contingent consideration in amount of approximately NIS 5 to be adjusted based on the profit before tax in connection with the pharmacy in Ashdod for the period of 18 month starting from February 2021. These pharmacies will be added to the network of the pharmacies operated by Cannolam.

32 32

B-34 Intercure Ltd.

Notes to the Condensed Consolidated Financial Statements

Note 13 - Events After the Reporting Period (cont.)

J. Subversive Sponsor transaction On January 3, 2021, the Company entered into a merger agreement with Subversive Real Estate Acquisition REIT LP (the "LP"), Subversive Real Estate Acquisition Reit (GP) Inc and Subversive Real Estate Sponsor LLC. On February 9, 2021, the parties entered into an amended and restated definitive agreement, pursuant to which Intercure Sub (a wholly-owned subsidiary of the Company) will acquire all of the outstanding restricted voting units, proportionate voting units and limited partnership units of the LP in exchange for ordinary shares of the Company. Under the terms of the transaction, the Company is valued at 300 million dollar. On Closing, the Intercure Shares will continue to be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on Nasdaq and the TSX. The NEO has provided their acceptance of the transaction subject to the TSX approval. The TSX has not yet approved the transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will.

K. In March 2021 Canndoc engaged in an agreement with Cannasmatics Ltd., part of the GIGI laboratories group. The parties will operate through a joint company which 50.01% will be held the joint company will market and sell the products exclusively in Europe and Israel under joint branding. The products are active cosmetics, organic-based on scientific research, which meet the strict standard of Clean at Sephora. The arrangement is subject to the receipt of the required regulatory agreements.

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B-35

Intercure Ltd.

Consolidated Financial Statements as of December 31, 2019

B-36

Intercure Ltd.

Consolidated Financial Statements as of December 31, 2019

Table of Contents

Page

Independent Auditors’ Report to Shareholders 3

Consolidated Statements of Financial Position 4-5

Consolidated Statements of Profit or Loss and Other Comprehensive Income 6

Consolidated Statements of Changes in Equity 7-8

Consolidated Statements of Cash Flows 9-11

Notes to the Consolidated Financial Statements 12-88

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B-37

Independent Auditors’ Report to the Shareholders of Intercure Ltd. Opinion We have audited the consolidated financial statements of Intercure Ltd and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2019 and 2018, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for each of the years ended on December 31, 2019, December 31, 2018 and December 31, 2017 and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for each of years ended on December 31, 2019, December 31, 2018 and December 31, 2017, in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Israel, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key Audit Matter How our audit addressed the key audit matter Investments in companies measured at fair We focused our testing of the fair value of these non publicly value through profit or loss listed financial assets on the key assumptions made by management. Our audit procedures included: As at December 31, 2019, investment in companies measured at fair value through profit - Evaluating whether the models used to calculate the or loss is in the amount of 39,910 thousand NIS fair value were adequate and in line with IFRS13. (23,376 thousand NIS as of December 31, - Using our valuation specialists to assess the adequacy of 2018). valuation models and appropriateness of the key management's assumptions and inputs used in the models The fair value of these non-marketable financial (exercise price, lifetime, risk free interest, standard assets (investment in Regenera and Novellus) is deviation) classified at level 3 of the fair value hierarchy. The - Challenging management's assumptions applied and inputs fair value is determined according to the valuation in the respective models by comparing to market research methods, as detailed in Note 10, where certain where available, contractual arrangements, search for underlying assumptions are highly subjective. available contradictory information. - Performing stress testing on key estimates. - Review of events after the end of the reporting period, - Performing discussions, where applicable, with key management

Findings We found the models and assumptions applied in the calculation of the fair value of these nonpublicly listed assets to be appropriate. We considered the disclosure of the investments in companies measured at fair value through profit or loss to be appropriate for purposes of the consolidated financial statements.

B-38

Key Audit Matters (cont)

Key Audit Matter How our audit addressed the key audit matter Goodwill We focused our testing of the business combination and resulting goodwill on the following: As at December 31, 2019, goodwill is in the - Reading the acquisition agreements amount of 167,965 thousand NIS (nil as of December 31, 2018). - Assessing existence of control righs and when these were achieved and Goodwill resulted from the acquisition of - Evaluating appropriateness of calculation of Canndoc ltd, as detailed in 8B – which was a transferred consideration significant business combination. - Evaluating appropriateness of allocation of consideration to the In addition, as detailed in note 8D. acquired net assets management conducted their annual impairment test to assess the recoverability of We focused our testing of the impairment of goodwill on the the goodwill and consider whether there are key assumptions made by management. Our audit procedures indicators of impairment. The recoverable included: amount of the cash-generating unit was determined according to the fair value less - Evaluating whether the model used for the costs of disposal, which is identical to the fair testing of impairment complies with the value of the Company’s shares as of the end of requirements of IAS 36: Impairment of Assets. the reporting period on the Tel Aviv Stock - Challenging management's assumptions applied Exchange, less financial assets and the value of and inputs in the respective model, including the Company’s holdings in Novellus and measurement model and key assumptions in Regenera (as described in Note 10), net of determining the fair value of investments in estimated disposal costs This determination of Regenera and Novellus an impairment is highly subjective as - Performing stress testing of key estimates. significant judgement is required by the - Review of events after the end of the reporting period, and management in determining the value of the - Having discussions, when applicable, with key Company’s holdings in Novellus and management Regenera. Findings We found the models and assumptions applied in the goodwill impairment assessments to be appropriate. We considered the disclosure of the goodwill to be appropriate for purposes of the consolidated financial statements.

Other Information Management is responsible for the other information. The other information comprises management discussion and analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

B-39

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsiveto those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. - Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. - Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

B-40

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Marina Kaplun.

/s/ Brightman Almagor Zohar & Co., Certified Public Accountants A Firm in the Deloitte Global Network Haifa, March 12, 2021

B-41 Intercure Ltd.

Consolidated Statements of Financial Position

As of December 31 2019 2018 NIS in thousands Current assets Cash and cash equivalents 4 27,338 3,416 Trade receivables 1,587 - Other receivables 7,316 - Inventories 5 4,645 - Biological assets 6 1,145 - Financial assets at fair value through profit or loss 7 177 246 Short term credit to associate 8 - 1,296

42,208 4,958

Non-current assets Property, plan and equipment and Right-of- use asset 9 32,150 86 Goodwill 8 167,965 - Investment in associate 8 - 7,500 Investments in companies measured at fair value through profit or loss 10 39,910 23,376

240,025 30,962

Total assets 282,233 35,920

The accompanying notes are an integral part of the consolidated financial statements.

B-42 Intercure Ltd.

Consolidated Statements of Financial Position As of December 31 2019 2018 NIS in thousands

Current liabilities Current maturities 213 - Trade payables 4,935 227 Other payables 11 3,852 3,254 Short term loan from controlling shareholder 13A 13,633 12,777

22,633 16,258

Non-current liabilities Borrowings 43 - Liabilities in respect of employee benefits 194 - Loan from related party 13B 393 Lease liability 2,769 -

3,399 -

Equity 17 Share capital, premium and other reserves 406,297 162,304 Capital reserve for transactions with controlling shareholder 2,388 1,790 Receipts on account of shares 1,214 3,602 Accumulated loss (153,927) (148,034)

Equity attributable to owners of the Company 255,972 19,662

Non-controlling interests 229 -

Total equity 256,201 19,662

Total equity and liabilities 282,233 35,920

The accompanying notes are an integral part of the consolidated financial statements.

March 12, 2021 “Signed” “Signed” “Signed” Approval Date Ehud Barak Alex Rabinovitch Amos Cohen of the Financial Chairman of the CEO CFO Statements Board

B-43 Intercure Ltd.

Consolidated Statements of Profit or Loss and Other Comprehensive Income

For the year ended December 31 2019 2018 2017 Note NIS in thousands (excluding data regarding loss per share)

Sales revenue 8,926 - - Cost of sales before fair value adjustments 7,456 - -

Gross profit before impact of changes in fair value 1,470 - -

Unrealized changes to fair value adjustments of biological assets 6 3,076 - - Profit from fair value changes realized in the current year (3,067) - -

Gross profit 1,479 - -

Research and development expenses 1,710 - - General and administrative expenses 18 12,073 1,981 1,168 Marketing and selling expenses 2,693 - - Other expenses (income), net 8B (58,962) 324 (26) Share of results of associates 8 340 1 - Impairment losses and gains on financial assets 10 (20,996) 487 3,033 Share-based payment expenses 17L 68,036 7,829 7

Operating loss 3,415 10,622 4,182

Finance income 19 141 6 95 Finance expenses 20 3,292 2,182 1,434

Total finance expenses, net 3,151 2,176 1,339

Loss before tax 6,566 12,798 5,521

Income tax 15 (673) - -

Loss for the year 5,893 12,798 5,521

Total comprehensive loss for the year 5,893 12,798 5,521

Loss per share 21

Basic and diluted loss (0.06) (0.16) (0.07)

The accompanying notes are an integral part of the consolidated financial statements.

6 B-44 Intercure Ltd.

Consolidated Statements of Changes in Equity

Share Reserve for capital, transaction Equity premium with Receipts on attributable Non- and other controlling account of Accumulated to owners of controlling reserves shareholder shares loss the Company interests Total equity NIS in thousands

As of January 1, 2019 162,304 1,790 3,602 (148,034) 19,662 - 19,662

Loss for the period (5,893) (5,893) (5,893) Exercise of options (Note 17) 6,271 (2,388) 3,883 3,883 Allocation of shares for the acquisition of 107,632 107,632 107,632 Canndoc (Note 8B) Issuance of shares (Note 17E) 62,283 62,283 62,283 Benefit in respect of transaction with 598 598 598 controlling shareholder (Note 13A) Share-based payment (Note 17L) 67,807 67,807 229 68,036

As of December 31, 2019 406,297 2,388 1,214 (153, 927 255,972 229 256,201

7 B-45 Intercure Ltd.

Share Reserve for capital, transaction Receipts premium with on and other controlling account Accumulated Total reserves shareholder of shares loss equity NIS in thousands

As of January 1, 2018 153,804 1,617 1,533 (135,236) 21,718

Loss for the period - - - (12,798) (12,798) Exercise of options (Note 17) 670 - - - 670 Change in classification of options to - - 855 - 855 equity (Note 14) Issuance of options (Note 13A) - - 1,214 - 1,214 Benefit in respect of transaction with - 173 - - 173 controlling shareholder Share-based payment (Note 17L) 7,830 - - - 7,830

As of December 31, 2018 162,304 1,790 3,602 (148,034) 19,662

Share Reserve for capital, transaction Receipts premium with on and other controlling account Accumulated Total reserves shareholder of shares loss equity NIS in thousands

As of January 1, 2017 151,706 847 - (129,715) 22,838

Loss for the period - - - (5,521) (5,521) Issuance of shares (Note 17) 2,091 - 1,533 - 3,624 Benefit in respect of transaction with controlling shareholder (Note 13A) - 770 - - 770 Share-based payment 7 - - - 7

As of December 31, 2017 153,804 1,617 1,533 (135,236) 21,718

The accompanying notes are an integral part of the consolidated financial statements.

8 B-46 Intercure Ltd.

Consolidated Statements of Cash Flows

For the year ended

December 31

2019 2018 2017 NIS in thousands Cash flows from operating activities

Loss for the year (5,893) (12,798) (5,521) Adjustments required to present cash flows from operating (5,676) 11,312 4,555 activities (A)

Net cash used in operating activities (11,569) (1,486) (966)

Cash flows from investing activities

Purchase of property, plant and equipment (28,144) (93) - Investment in associate (Note 8) (2,260) (5,240) - Rise to control of associate 385 - - Investment in assets measured at fair value through profit 4,532 (1,326) (2,373) or loss Provision of credit to associate (600) (1,296) -

Net cash used in investing activities (26,087) (7,955) (2,373)

Cash flows from financing activities

Issuance of shares as part of private issuance 62,283 - - Issuance of shares and options as part of public issuance - - 2,091 Exercise of options (Note 17) 3,883 670 - Issuance of shares and options within the framework of - 1,214 rights issue, net - Deferred issuance expenses (2,426) - - Lease payments (189) - - Repayment of loans from banks (174) - - Repayment of loan to related party (143) 8,730 913

Net cash from financing activities 63,234 10,614 3,004

Increase (decrease) in cash and cash equivalents 25,578 1,173 (335) Exchange differences in respect of balances of cash and (1,656) 13 cash equivalents (96) Balance of cash and cash equivalents at beginning of 3,416 2,230 2,661 period

Balance of cash and cash equivalents at end of period 27,338 3,416 2,230 The accompanying notes are an integral part of the consolidated financial statements.

9 B-47 Intercure Ltd.

Consolidated Statements of Cash Flows

For the year ended

December 31

2019 2018 2017 NIS in thousands A) Adjustments required to present cash flows from operating activities

Adjustments to items in the consolidated statement of comprehensive income (loss):

Depreciation and amortization 829 10 4 Cost of share-based payment (Note 17L) 68,036 7,829 7 Changes in the fair value of financial assets through profit or loss (20,997) 577 3,121 Capital gains in respect of rise to control of Canndoc (Note 8B) (58,808) Increase in the value of liabilities in respect of options and price adjustment mechanism (Note 14) - 840 712 Exchange differences - 104 95 Financing expenses (income), net 3,151 1,021 672 Change in liabilities in respect of employee benefits, net 96 - - Tax expenses (income) (673) - - Company’s share in the profit or loss of associate 340 1 - (8,026) 10,382 4,611 Changes in assets and liabilities items:

Decrease (increase) in trade receivables (1,183) - - Decrease (increase) in other receivables (4,243) 40 (16) Decrease (increase) in inventory 3,029 - - Decrease (increase) in biological assets (1,096) - - Increase (decrease) in trade payables 4,021 228 - Increase (decrease) in other payables 1,913 662 (40)

2,441 930 (56) (5,585) 11,312 4,555

Cash which was paid and received during the year in respect of: Interest paid (41) - - Taxes paid (50) - - (91) - -

Cash generated by (used in) operations (5,676) 11,312 4,555

B) Material non-cash operations Rise to control of associate against share issuance (Note 8B) 107,632 - - Classification of liability for options to equity due to the change in functional currency - 855 - Withholding tax in connection with acquisition of associate (Note 8) - 2,260 -

10 B-48 Intercure Ltd.

Consolidated Statements of Cash Flows

C) Details regarding assets of acquired operation (Note 8)

Cancellation of investments in associate (65,967) Issuance of shares (107,632) Goodwill 167,965 Short term deposit 125 Trade receivables 404 Inventory 7,674 Biological assets 49 Other receivables - institutions 522 Property, plant and equipment 1,791 Loan (2,146) Trade payables (687) Other payables (946) Short term loan from related parties (716) Deferred tax liability (723) Liabilities in respect of employee benefits, net (98)

Total rise to control of associate (385)

The accompanying notes are an integral part of the consolidated financial statements.

11 B-49 Intercure Ltd.

Annex A

Note 1 - General

A. The Company’s activity

Intercure Ltd. (hereinafter: the “Company”) is a public company which is listed on the Tel Aviv Stock Exchange. The Company is engaged in the medical cannabis sector, through its holding of the issued and paid-up capital of Canndoc Ltd. (hereinafter: “Canndoc”), and through its 50.1% stake in the issued and paid-up capital of Cannolam Ltd (hereinafter: “Cannolam”). The Company also has additional holdings in the biomed sector and in the life sciences sector, in the technology and medical device segments. See Note 23 regarding operating segments.

Canndoc: In 2018, the Company decided to expand its activity to the medical cannabis sector, and therefore engaged in an investment agreement with Canndoc Ltd. (hereinafter: “Canndoc”). In 2019, the Company completed the acquisition of the entire holding of Canndoc, such that, after the transaction was closed, the Company holds 100% of Canndoc’s issued and paid-up capital. The Company, through Canndoc, is engaged in research, marketing, cultivation, production and distribution of medical cannabis products in Israel and around the world. For additional details regarding the investment in Canndoc, see Note 8.

Cannolam: In 2020, the Company’s board of directors approved the engagement in a series of agreements for the acquisition of a 50.1% of the shares of Cannolam Ltd., an Israeli private company, which holds, independently and/or through its owned subsidiaries, the exclusive rights to produce, import, distribute and use of a leading international cannabis and lifestyle trademarks in the territory of Israel. In addition, Cannolam Ltd. has exclusive rights in respect of the brands Cookies, Mr. Nice and Oxon Pharma. For additional details regarding the investment in Cannolam, see Note 24A.

Investments in the biomed sector: The portfolio companies may be in different stages of their business lifecycles, from companies which are still in the research and development stages in respect of a single product, to companies that have begun selling medical products.

The Company’s investments in the biomed sector and in the life sciences sector are in the bio-technology and medical equipment segments, which is a high risk segment, whereby the activities and success of the portfolio companies in which the Company will invest depend, inter alia, on many external factors, over which the Company has no control.

12 B-50 Intercure Ltd.

Annex A

Note 1 - General (Cont.)

A. The Company’s activity (Cont.)

The Company’s board of directors may decide to expand or reduce the characteristics of the portfolio companies. In order to ensure the Company’s involvement in and influence over the portfolio companies, the Company intends to actively participate in the board of directors and in meetings of management of the significant portfolio companies.

The Company entered into investment agreements with companies in the biomed and life sciences sectors in the technology and medical device segments, including Regenera Pharma Ltd. (hereinafter: “Regenera”) and NovellusDX Ltd. (hereinafter: “Novellus”).

For additional details regarding investments in the biomed sector, see Note 10. See also Note 24I, Events After the Reporting Period, in connection with Regenera.

B. Definitions:

In these consolidated financial statements:

Company - Intercure Ltd.

Group - The Company, its subsidiaries and an associate.

Related Parties - As defined in IAS 24

USD - US Dollar.

Subsidiaries - Companies which are controlled by the Company (as defined in IFRS 10), directly or indirectly, and whose financial statements are fully consolidated with the Company’s reports.

13 B-51 Intercure Ltd.

Annex A

Note 2 - Significant Accounting Policies

Framework for preparation of the financial statements

The accounting policy described below was applied in the financial statements consistently, in all of the presented periods, unless specified otherwise.

A. Presentation basis of the financial statements

The Company’s financial statements as of December 31, 2019, 2018, and for each of the three years in the period ended in December 31,2019, comply with International Financial Reporting Standards (hereinafter: “IFRS”) and clarifications thereto which have been published by the International Accounting Standards Board (IASB). The Company’s financial statements are prepared on a historical cost basis, except for available-for-sale financial assets and financial assets or financial liabilities measured at fair value through profit or loss.

The Company’s operating cycle does not exceed 12 months.

In its preparation of the financial statements, management is required to use significant accounting estimates. Management is also required to exercise discretion in the process of applying the significant accounting policies. The issues which require significant discretion and the use of estimates, which have a significant impact on the amounts which were recognized in the financial statements, are specified in Note 3. Actual results may differ significantly from the estimates and assumptions which were used by Company management.

B. Consolidated Financial Statements

The consolidated financial statements include the reports of companies over which the Company has control (subsidiaries). Subsidiaries are entities which are controlled by the Company. The Company controls an entity when the Company has the power to influence the investee entity, when it has exposure or rights to variable returns from its involvement in the entity, and when it has the ability to exercise its influence over the investee entity in order to affect the amount of returns which it will receive from that entity. Subsidiaries are fully included in the consolidation beginning from the date when the Company obtains control of them. Consolidation is discontinued on the date when control ceases.

The consolidation of financial statements is performed beginning on the date when control was obtained, until the date when control was discontinued.

14 B-52 Intercure Ltd.

Annex A Note 2 - Significant Accounting Policies (cont.)

B. Consolidated Financial Statements (cont.)

The financial statements of the Company and the subsidiaries are prepared for identical dates and periods. The accounting policy in the financial statements of the investees was implemented in a manner which was uniform and consistent with the policy which was applied in the Company’s financial statements. Material intercompany balances and transactions, and profit and loss due to transactions between the Company and the subsidiaries, were canceled in their entirety in the consolidated financial statements.

C. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively; • liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date (see below); and • assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

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Annex A Note 2 - Significant Accounting Policies (cont.)

C. Business combinations (cont.)

When a business combination is achieved in stages, the Group’s previously held interests (including joint operations) in the acquired entity are remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

Goodwill Goodwill is initially recognised and measured as set out above. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash- generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Investments in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5.

16 B-54 Intercure Ltd.

Annex A Note 2 - Significant Accounting Policies (cont.)

C. Business combinations (cont.)

Under the equity method, an investment in an associate is recognised initially in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When a Group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

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Annex A Note 2 - Significant Accounting Policies (cont.)

D. Functional currency and presentation currency

Until August 2018, the Company’s functional currency was the USD. In September 2018, the Company acquired 38% of the shares of Canndoc Ltd., and expanded its operations to the medical cannabis sector. The Company acquired Canndoc with the intention of completing the acquisition of its control. The acquisition of the remaining Canndoc shares was completed in early 2019. Canndoc Ltd. is an Israeli company whose functional currency is the NIS. The transaction involving the acquisition of Canndoc shares was executed through an NIS loan from Mr. Alex Rabinovitch, as stated in Note 13. The Company’s cash balances are mostly held in NIS, and the Company’s expenses are mostly denominated in NIS. In light of the foregoing, the Company determined that its main operating environment had changed, and accordingly, that its functional currency had changed from the USD to the NIS, on a prospective basis.

Presentation of comparative figures As stated above, the functional currency for the periods presented in comparative figures is the USD. The comparative figures which are presented in this report were translated to NIS according to the exchange rate on the date of the transition to NIS as the functional currency.

Assessment of the classification of liabilities and equity due to the change in functional currency

Following the change in functional currency, the Company re-assessed the classification of equity instruments and liabilities which it has issued. The Company has options which were granted to investors which, during the period when the functional currency was the USD, did not meet the definition of equity, and were therefore classified as liabilities. Following the change in functional currency, these instruments do not meet the definition of a liability, and therefore, on the date of the transition to NIS as the functional currency, they were classified as equity instruments according to their fair value on the reclassification date.

Transactions, assets and liabilities in foreign currency Transactions denominated in a foreign currency other than the Company’s functional currency are recorded upon initial recognition, according to the exchange rate on the transaction date. Following initial recognition, monetary assets and liabilities denominated in foreign currency are translated on each reporting date into the functional currency, according to the exchange rate as of that date. Exchange differences are carried to the statement of income. Non-monetary assets and liabilities denominated in foreign currency which are presented at cost are translated according to the exchange rate on the transaction date. Non-monetary assets and liabilities denominated in foreign currency which are presented at fair value are translated into the functional currency using the exchange rate as of the date when the fair value was determined.

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Annex A Note 2 - Significant Accounting Policies (cont.)

E. Cash and cash equivalents

Cash equivalents are considered highly liquid investments, including unrestricted short-term deposits in banking corporations whose maturity period does not exceed three months after the date of the deposit.

F. Short term deposits

Short term deposits in banking corporations whose original period exceeds three months after the date of the investment, and which do not meet the definition of cash equivalents. The deposits are presented according to the terms of their deposit.

G. Biological assets

In accordance with IAS 41, the Company measures biological assets which are mostly comprised of medical cannabis plants and agricultural produce at fair value less selling costs until harvesting. This value is used as the cost basis of inventory after the harvest. Profit or loss due to changes in fair value less selling costs are included under the Company’s profit / loss in the year when they materialized. Growing costs in respect of the biological assets are discounted to the cost of the biological assets.

H. Inventory

Inventory is measured as the lower of either cost or net realizable value. The Company classifies the cannabis agricultural produce from a biological asset to inventory when harvesting, according to the fair value less selling costs on that date. This value serves as the cost basis of inventory. Processing costs and other additional costs which materialize in the process of bringing the inventory to its current location and condition are added to the cost of inventory. Net realizable value represents the estimated selling price in the ordinary course of business, less estimated costs to completion and the costs required to execute the sale. The Company periodically evaluates the condition and age of inventory, and provisions for slow inventory are made accordingly.

19 B-57 Intercure Ltd.

Annex A

Note 2 - Significant Accounting Policies (cont.)

I. Revenue recognition

Revenue from contracts with customers is recognized in the statement of income when the control of the asset or of the service has been transferred to the customer. The control transfer date is generally the date of delivery to the customer. Revenue is measured and recognized according to the fair value of the proceeds which are expected to be received in accordance with the contract terms, less amounts which have been collected for third parties (e.g., taxes). Revenue is recognized in the statement of income up to the extent to which expected are expected to flow to the Company, and the revenue and costs, if relevant, are reliably measurable. When determining the amount of revenue from contracts with customers, the Company evaluates whether it functions as a primary provider, or as an agent in the contract. The Company is the primary supplier when it controls the guaranteed goods or services before they are transferred to the customer. In such cases, the Company recognizes revenue as the gross amount of proceeds. In cases where the Company functions as an agent, the Company recognizes the revenue as a net amount, after deducting the amounts which are owed to the primary provider.

J. Property, plant and equipment Items of property, plant and equipment are presented at cost plus direct acquisition costs, less accumulated depreciation and less accumulated impairment loss, and do not include routine maintenance expenses. The cost includes replacement parts and auxiliary equipment which are used in connection with fixed assets. Items of property, plant and equipment which are of significant cost relative to the total cost of the item are depreciated separately, according to the component approach.

The cost of items of property, plant and equipment includes the preliminary estimate of costs to dismantle and remove the asset, and to restore the site where the asset is located.

Depreciation is calculated in equal annual rates according to the straight-line method, throughout the asset’s useful lifetime, as follows: %

Machines and equipment 7-15 Computers 33 Building improvements 10 Building improvements are depreciated in a straight line throughout the estimated lifetime of the improvement.

The useful lifetime, depreciation method and residual value of each asset is evaluated, as a minimum, at the end of each year, and changes are treated as a prospective change in accounting estimate. The depreciation of assets is discontinued when the asset is classified as held for sale or when the asset is written off, whichever is earlier.

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Annex A

Note 2 - Significant Accounting Policies (cont.)

K. Taxation

Expenses (income) in respect of taxes on income include the total amount of current taxes, as well as the total change in the balances of deferred tax, excluding deferred taxes due to transactions carried directly to equity, and business combination transactions.

L. Financial instruments

1. Financial assets Financial assets are measured on the date of initial recognition at fair value plus transaction costs which are directly attributable to the acquisition of the financial asset, except in case of a financial asset measured at fair value through profit or loss, for which the transaction costs are carried to the statement of income.

The Company classifies and measures the debt instruments in its financial statements based on the following criteria: (A) The Company’s business model for the management of financial assets; and (B) The characteristics of the financial asset’s contractual cash flows. Most of the Company’s financial assets are classified as financial assets at fair value through profit or loss.

2. Impairment of financial assets

The Company evaluates, on each reporting date, the loss provision in respect of financial debt instruments which are not measured at fair value through profit or loss. The Company distinguishes between two situations involving recognition of a loss provision; A) Debt instruments whose credit quality has not significantly deteriorated since the initial recognition date, or cases involving low credit risk - the loss provision which will be recognized in respect of that debt instrument will take into account expected credit loss during the 12-month period after the reporting date; or B) Debt instruments whose credit quality has significantly deteriorated since the initial recognition date, and cases involving credit risk which is not low - the loss provision which will be recognized will take into account expected credit losses throughout the instrument’s remaining lifetime.

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Annex A

Note 2 - Significant Accounting Policies (cont.)

L. Financial instruments (cont.)

The Company applies the expedient which was determined in the standard, according to which it assumes that a debt instrument’s credit risk has not significantly increased since the initial recognition date if it was determined, on the reporting date, that the instrument’s credit risk is low, for example, when the instrument has an external rating of “investment grade”.

Impairment in respect of debt instruments which are measured at amortized cost is carried to the statement of income against a provision, while impairment in respect of debt instruments which are measured at fair value through other comprehensive income is carried against a capital reserve, and does not reduce the carrying amount of the financial asset in the statement of financial position.

The Company has financial assets with short credit periods, such as trade receivables, to which it is entitled to apply the expedient specified in the model, in other words, the Company will measure the loss provision in an amount equal to the expected credit losses throughout the instrument’s entire lifetime. The Company chose to adopt the expedient in respect of those financial assets.

3. Financial liabilities measured at amortized cost

On the date of initial recognition, the Company measures the financial liabilities at fair value less transaction costs which are directly attributable to the issuance of the financial liability. Following initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest method, except for: (A) Financial liabilies at fair value through profit or loss, such as derivatives; (B) Financial liabilities which are created when the transfer of the financial asset does not qualify for derecognition, or when the continuing involvement approach applies; (C) Financial guarantee contracts; (D) Obligarions to provide a loan at an interest rate which is lower than the market interest rate; (E) Contingent consideration which has been recognized by a buyer in business combination according to according IFRS 3.

22 B-60 Intercure Ltd.

Annex A

Note 2 - Significant Accounting Policies (cont.)

L. Financial instruments (cont.)

4. Derecognition of financial liabilities

The Company derecognizes a financial liability when and only when it has been settled - in other words, when the contractually defined liability has been settled or canceled, or has expired. A financial liability is extinguished when the debtor has settled the liability by cash payment, through other financial assets, through goods or services, or has been legally released from the liability. In case of changes to the terms of an existing financial liability, the Company evaluates whether the terms of the liability differ significantly from the current terms. When a significant change is made to the terms of an existing financial liability, the change is treated as derecognition of the original liability, and recognition of the new liability. The difference between the aforementioned two liabilities in the financial statements is credited to the statement of income. In case the change is immaterial, the Company updates the amount of the liability, in other words, discounts the new cash flows using the original effective interest rate, while the differences are carried to the statement of income. When evaluating whether the case involves a significant change to the terms of an existing liability, the Company takes into account qualitative and quantitative considerations.

M. Fair value measurement

Fair value is the price which would be received upon the sale of an asset, or the price which would be paid upon the transfer of a liability, in an ordinary transaction between market participants on the measurement date.

The measurement of fair value is based on the assumption that the transaction will be executed in the main market of the asset or liability in question, or in lieu of a main market, in the most advantageous market.

The fair value of an asset or liability is measured according to assumptions which market participants would use when pricing the asset or liability, assuming the market participants are working in favor of their own economic interests.

The Group uses valuation techniques as appropriate for the circumstances, and for which sufficient obtainable data exists in order to measure fair value, while maximizing the use of relevant observable inputs, and minimizing the use of unobservable inputs.

23 B-61 Intercure Ltd.

Annex A

Note 2 - Significant Accounting Policies (cont.)

M. Fair value measurement (cont.)

All assets and liabilities which are measured at fair value, or whose fair value was disclosed, are divided into categories in the fair value hierarchy, based on the lowest level of inputs which is significant to the measurement of fair value in its entirety:

Level 1: Quoted prices (without adjustments) in an active market of identical assets and liabilities. Level 2: Inputs which are not quoted prices which are included in level 1, which are directly or indirectly observable. Level 3: Inputs which are not based on observable market inputs (appraisal techniques without the use of observable market inputs).

N. Provisions

A provision is recognized when the Group has a (legal or constructive) liability in the present due to an event which occurred in the past, when it is expected that economic resources will be required in order to settle the liability, and when it can be reliably measured.

O. Share-based payment transactions

Employees / other service providers of the Company are entitled to benefits in the form of the Group’s equity-settled share-based payment plans.

The cost of equity-settled transactions with employees is measured according to the fair value of the equity instrument on the grant date. The fair value is established using a generally accepted options pricing model.

The cost of equity-settled transactions is recognized in the statement of profit and loss along with the corresponding increase in equity over the period when the terms of performance and/or the service are fulfilled, and ends on the date when the relevant employees become entitled to the compensation (hereinafter: the “Vesting Period”). The cumulative expense which is recognized in respect of equity-settled transactions at the end of each reporting date until the vesting date reflects the rate of passage of the vesting period, and the Group’s best estimate of the number of equity instruments that will eventually vest. The expense or income in the statement of income reflects the change between the expense which accrued until the end of the reporting period, and that which accrued until the end of the previous period.

When the Company makes changes to the terms of an equity-settled grant, an additional expense is recognized, beyond the original expense which was calculated in respect of the change, which increases the overall fair value of the compensation which is granted or which benefits the employee / other service provider, according to the fair value on the date of the change.

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Annex A

Note 2 - Significant Accounting Policies (cont.)

P. Earnings (loss) per share

The Company calculated the amounts of basic earnings (loss) per share and diluted earnings (loss) per share in respect of the profit or loss for the year which is attributable to holders of the Company’s ordinary shares. Basic earnings (loss) per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares that were outstanding during the year.

The weighted average of the number of shares which were used to calculate diluted earnings (loss) per share is the weighted average of the number of ordinary shares which was calculated for the purpose of basic earnings (loss) per share, plus the weighted average of the number of ordinary shares which would have been issued as a result of the conversion of all of the dilutive potential ordinary shares into ordinary shares. Dilutive potential ordinary shares are considered as if they had been converted to ordinary shares at the beginning of the period, or beginning on their issuance date, whichever is later. Potential ordinary shares are considered dilutive when their inclusion decreases the earnings per share from continuing operations, or increases the loss per share from continuing operations.

Q. Segments

Reported operating segments according to the same basis which is used for the purpose of internal reports submitted to the Company’s Chief Operating Decision Maker, who is responsible for allocating resource to the Company’s operating segments, and assessing their performance. Until August 2018, the Company was engaged in a single operating segment - investments in portfolio companies in the biomed sector. Since the date of significant influence over Canndoc Ltd., the Company has 2 operating segments: 1. Investments in portfolio companies in the biomed sector; 2. Investments in a company in the medical cannabis sector.

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Annex A

Note 2 - Significant Accounting Policies (cont.)

R. Adoption of new and revised Standards

New and amended IFRS Standards that are effective for the current year

Impact of initial application of IFRS 16 Leases

In January 2016, the IASB published International Financial Reporting Standard 16, Leases (hereinafter: the “New Standard”) In accordance with the new standard, a lease is defined as a contract, or as part of a contract, when it transfers, in consideration of payment, the right to use the asset for a defined period of time. Listed below are the new standard’s main effects: • The new standard requires lessee to recognize all leases as an asset against a liability in the statement of financial position (except for certain cases, see below) similarly to the accounting treatment of a finance lease in accordance with the existing standard IAS 17, Leases. • Lessees will recognize a liability in respect of the lease payments, and will also recognize right-of-use asset. Lessees will also recognize interest expenses and depreciation expenses separately. • Variable lease payments which do not depend on any index or interest rate, and which are based on performance or use (e.g., a percentage of turnover) will be recognized as an expense by the lessees, or as income by the lessors, on the date of their materialization. • In case of a change in the index-linked variable lease payments, the lessee is required to re-assess the lease liability, with the impact of the change being applied to the right-of-use asset. • The new standard includes two exceptions under which lessees may account for leases according to the current accounting treatment in respect of operating leases, in case of leases of assets of low monetary value, or in case of leases for periods of up to one year. • The lessor’s accounting treatment remains with no significant change relative to the current standard, i.e., classification as a finance lease or operating lease.

The new standard will be applied in respect of annual periods beginning on or after January 1, 2019. The impact of the adoption of the standard on the statement of profit and loss is immaterial.

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Annex A

Note 2 - Significant Accounting Policies (cont.)

R. Adoption of new and revised Standards (cont.)

New and revised IFRS Standards in issue but not yet effective as at 31 December 2019

Amendment to IFRS 3, Business Combinations (regarding the definition of a “business”): The Group has adopted the amendments to IFRS 3 for the first time in 2020. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.

The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after 1 January 2020.

IAS 41 Agriculture

The amendments will be applied to annual reporting periods beginning on or after January 1, 2022, with early application permitted.

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Annex A

Note 3 - Significant Accounting Estimates and Approximations:

In the process of applying the significant accounting policies in the financial statements, the Group exercised discretion and took into account considerations regarding the following matters, which have a significant impact on the amounts which were recognized in the financial statements:

Significant estimates and assumptions

In the preparation of the financial statements, management is required to make use of estimates and assumptions which affect the implementation of the accounting policy and the reported amounts of assets, liabilities, income and expenses, regarding which there is a significant risk of the performance of significant adjustments to the carrying amounts of assets and liabilities during the next fiscal year. Changes in accounting estimates are applied during the period when the estimate was changed.

Determination of fair value of non-marketable financial assets - investments in companies in the biomed sector The fair value of non-marketable financial assets classified at level 3 of the fair value hierarchy (investments in stocks and options of portfolio companies in the biomed sector) is determined according to the valuation methods described in Note 10. The estimated fair value of financial instruments which are not listed for trade in an active market includes several assumptions, where any change therein, or the non-materialization thereof, could significantly affect their fair value.

Determination of the fair value of biological assets and net realizable value of inventory The fair value of biological assets and the cost of inventory on the harvest date is determined based on the overall estimates of management (key assumptions - expected selling price according to the determined arrangements, completion and processing costs, percentage of mature plants), changes in assumptions used to measure fair value may affect the fair value of biological assets or the realizable value.

Goodwill For the purpose of determining whether impairment of goodwill has occurred, Company management estimates the value in use of cash-generating units to which goodwill has been allocated. For details regarding the calculation of value in use, see Note 8D.

During the financial reporting year, no changes occurred in the estimated value in use of cash-generating units to which goodwill has been allocated. The carrying amount of goodwill as of the date of the statement of financial position was NIS 167,965 thousand.

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Note 4 - Cash and Cash Equivalents:

December 31 2019 2018 NIS in thousands

Cash in the bank and in hand 27,338 3,416

The currencies in which balances of cash and cash equivalents are denominated, or to which they are linked, are:

December 31 2019 2018 NIS in thousands

USD 15,879 - NIS 11,368 3,416 EUR 91 - Total cash and cash equivalents 27,338 3,416

Note 5 - Inventory: Inventory is comprised of finished goods of dry packaged or rolled medical cannabis and cannabis oil, as well as the outputs of processing procedures, which include, inter alia, agricultural produce which has been transferred from biological assets, where the procedure of processing into finished goods has not yet been completed.

December 31 2019 NIS in thousands

Finished goods 990 Goods in process and dried inflorescence 3,655 4,645

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Note 6 - Biological Assets: As stated in Note 2G above, the Company measures biological assets, which are mostly comprised of medical cannabis plants and agricultural produce, at fair value less selling costs until harvesting. This value serves as the cost basis of inventory after the harvest. Profit or loss due to changes in fair value less selling costs are included under the Company’s profit / loss in the year when they materialized.

The Company’s biological assets are primarily comprised of medical cannabis seedlings and medical cannabis. Presented below are the changes in biological assets during the reporting period:

December 31 2019 NIS in thousands Balance as of January 1 - Commencement of consolidation (Note 8B) 49 Costs of growing medical cannabis plants 3,129 Change in fair value less selling costs 3,076 Transfer to inventory (5,109)

Balance as of December 31 1,145

Note 7 - Investments in Financial Assets at Fair Value Through Profit or Loss:

As of December 31, 2019 and as of December 31, 2018, the Company holds 3,840,617 shares of XTL Biopharmaceuticals Ltd. (hereinafter: “XTL”), which constitute 0.75% of XTL’s issued and paid-up capital. As of the end of the reporting period, the Company’s controlling shareholder holds 24.95% of XTL shares.

The fair value of these shares as of the end of the reporting period was estimated based on the quoted share price. The fair value measurement is performed according to level 1, as described in Note 12B.

The fair value and changes in securities which were classified “financial assets at fair value through profit or loss” during the reporting periods was as follows: 2019 2018 NIS in thousands Balance at beginning of year 246 335 Changes in fair value carried to profit or loss (69) (89) 177 246

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Annex A

Note 8 - Investment in Canndoc Ltd.

A. Acquisition of 38% of Canndoc shares

On September 4, 2018, the Company acquired 38% of the share capital of Canndoc Ltd., a private company which is unrelated to the Company, and which holds an active license from the Ministry of Health for growing medical cannabis and for distributing it to patients in Israel (the “Operating Company”).

A. Canndoc Ltd. was incorporated in March 2010, and is engaged in the field of propagating, growing and marketing medical cannabis products (IMC Medical Grade), as well as conducting studies in the field.

B. Canndoc Ltd. holds a license from the Ministry of Health for growing medical cannabis and for distributing it to patients in Israel. The Company has also been certified as fulfilling the Ministry of Health’s regulation process regarding regulation and preparedness for exporting - the IMC-GAP standard, as defined and established by the Medical Cannabis Unit at the Ministry of Health, which was given to the Company, both in respect of the propagation farm, and in respect of the growing farm.

As stated in Note 13, the financing for the acquisition in accordance with the agreement was provided to the Company by the Company’s controlling shareholder, Mr. Alex Rabinovitch (the “Controlling Shareholder”), who presented the transaction to the Company, and offered the Company to engage in the transaction, instead of engaging in the agreement himself. In consideration of the financing for the transaction, and subject to its completion, the Company granted to the controlling shareholder options convertible into ordinary Company shares.

In consideration of the acquired interests, the Company paid a total of NIS 8,216 thousand. The consideration included a total of NIS 7,500 thousand which was paid to the seller in respect of the sold shares, while the rest of the consideration was provided to the operating company as a shareholder’s loan bearing interest of 2.61%, to finance a shareholder’s loan which the seller provided to the operating company in the past to finance its operating activities. See Note 13B. Out of the consideration in the amount of NIS 7,500 thousand, withholding tax in the amount of NIS 2,260 thousand, was transferred to the tax authorities in January 2019. Additionally, on the acquisition date the Company provided an additional loan of NIS 500 thousand. The loan bears annual interest at a fixed rate of 5% per year. The loan will be repaid on the earlier of either: 1. One year after the date of receipt of the loan; 2. The completion of a capital raising by the borrower. As of the end of the reporting period, this loan has not yet been repaid.

On January 27, 2019, the Company announced that, further to the decision of the Government of Israel in which approval was given to export medical cannabis-based medical products, Canndoc’s board of directors had decided to accelerate Canndoc’s production capacity in the State of Israel, and preparations regarding the marketing thereof in countries with supportive regulations.

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Note 8 - Investment in Canndoc Ltd. (cont.)

B. Completion of the acquisition of 100% of Canndoc shares:

A. On February 11, 2019, the Company completed the acquisition of 100% of Canndoc shares, against an allocation of Company shares. In respect of the completion of the acquisition, the Company performed an updated valuation of the investment in Canndoc in its financial statements.

Presented below is the fair value, as of the acquisition date, of the transferred consideration:

NIS in thousands Issuance of 7,931,589 ordinary shares of the Company with no 107,632 par value (A) Total transferred consideration 107,632 Fair value of the investment in Canndoc prior to the business combination (B) 65,968 Total 173,600

(A) The fair value of the ordinary shares which were issued as part of the consideration of the business combination was determined based on the closing price of the Company’s stock on the Tel Aviv Stock Exchange on February 11, 2019. (B) The Group recognized a profit in the amount of approximately NIS 58,808 thousand as a result of the fair value measurement of its equity rights, at a rate of 38%, in Canndoc Ltd., which were held before the business combination. The profit was included under the item for other expenses (income), net, in the statement of comprehensive income for the period ended December 31, 2019.

B. Cash flow, net

2019 NIS in thousands Total acquisition cost 107,632 Less - non-cash consideration for Canndoc Ltd. (107,632) Consideration paid in cash - Plus acquired cash and cash equivalents 385 Total 385

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Note 8 - Investment in Canndoc Ltd. (cont.)

B. Completion of the acquisition of 100% of Canndoc shares: (cont.)

C. Amounts recognized on the acquisition date

NIS in

thousands Financial assets 1,051 Inventory and biological assets 7,723 Property, plant and equipment 1,791 Financial liabilities (3,420)

Total 7,145

D. Goodwill

The cost of the business combination included payment in respect of the control premium for the acquisition of Canndoc. Additionally, the consideration which was paid in the business combination included amounts associated with the expected benefits from growth in revenue, and future developments in Canndoc’s operating market. Insofar as the list of returning customers, or other identified intangible assets, have an economic value, it is immaterial. All of the above led to the creation of goodwill in the amount of NIS 167,965 thousand due to the business combination. Impairment test of goodwill: The goodwill is allocated to a cash-generating unit - the cannabis segment. As of the end of the reporting period, the Company performed an impairment test of goodwill. The recoverable amount of this cash-generating unit was determined according to the fair value less costs of disposal, which is identical to the fair value of the Company’s shares as of the end of the reporting period on the Tel Aviv Stock Exchange, less financial assets and the value of the Company’s holdings in Novellus and Regenera (as described in Note 10), net of estimated disposal costs.

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Note 9 - Property, Plant and Equipment:

2019 Right-of- Computers use asset Machines and office and equipment Buildings equipment Total NIS in thousands Cost Balance as of January 1, 2019 100 - - 100 Changes due to initial consolidation 58 - 547 1,186 1,791 Additions during the year 268 1,130 26,746 28,144 Right-of-use asset in respect of the initial adoption of IFRS 16 - 2,957 - - 2,957 Balance as of December 31, 2019 426 2,957 1,677 27,932 32,992

Less accumulated depreciation Balance as of January 1, 2019 14 - - - 14 Additions during the year 57 246 138 387 828 Balance as of December 31, 2019 71 246 138 387 842

Property, plant and equipment, net, as of December 31, 2019 355 2,711 1,539 27,545* 32,150

*See Note 16F.

2018 Computers and office equipment NIS in thousands Cost Balance as of January 1, 2018 7 Additions during the year 93 Balance as of December 31, 2018 100

Less accumulated depreciation Balance as of January 1, 2018 3 Additions during the year 11 Balance as of December 31, 2018 14

Property, plant and equipment, net, 86 as of December 31, 2018

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: 2019 2018 NIS in thousands Fair value of the investment in Regenera (1) (A) 39,910 12,312 Fair value of the investment in Novellus (B) - 11,064 39,910 23,376

(1) For additional details see Note 24I, Events After the Reportimg Period.

A. Regenera Pharma Ltd (“Regenera”) – A.1 Contractual agreement with Regenera Ltd. On April 22, 2015, the Company signed an investment agreement with Regenera Pharma Ltd. (hereinafter: “Regenera”), an Israeli private company in the biomed sector, which is engaged in the research and development of innovative treatment methods for tissue restoration in the human body, involving an investment by the Company, in Regenera, of a total of approximately USD 2.5 million. On May 20, 2015, the Company closed the transaction, and invested USD 1.25 million against 10.87% of the issued and paid-up capital of Regenera. In accordance with the agreement, an additional sum of USD 1.25 million will be transferred following approval regarding the achievement of a milestone, which is presenting successful intermediate results in a clinical trial (Phase II) which is being conducted in Israel (the agreement regarding the investment of the other 50% is described below).

In consideration of the investment, 543,104 Series A preferred shares of Regenera were allocated to the Company, whereby each Series A preferred share is convertible to 1.1 ordinary shares (the conversion price may be adjusted in various circumstances). This conversion will take place automatically in the following circumstances: (1) Regenera performs an IPO on the Tel Aviv Stock Exchange, at a valuation of at least USD 30 million (hereinafter: “Eligible IPO”); (2) Completion of a transaction involving a merger and/or acquisition transaction with a public shell corporation or by other means, as decided by Regenera’s board of directors; or (3) By written consent of a majority of the holders of Series A preferred shares.

Additionally, in consideration of the investment, the Company has an option to invest an additional amount of up to 125% of the amount in the preliminary investment, in consideration of the allocation of Series A preferred shares, or in consideration of the allocation of ordinary shares. If Regenera issues its shares to the public on the Tel Aviv Stock Exchange, the foregoing option will be provided to the Company by the earlier of either: (1) Until the end of the nine-month period after the achievement of the milestone; (2) December 31, 2016 ((hereinafter: the “Options for Series A1 Preferred Shares”).

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.1 Contractual agreement with Regenera Ltd. (cont.)

On November 20, 2016, Regenera’s board of directors notified the Company that it had extended the validity of the options which were allocated to the Company until September 1, 2017, and on September 3, 2017, Regenera notified the Company that Regenera’s board of directors had extended the validity of the Regenera options until March 1, 2018, or earlier, in case of an IPO, merger, sale of the Company or its operations, or capital raising of USD 3 million or more. On March 1, 2018, 173,793 Series A1 preferred shares were exercised by Angels, and the remainder expired without being exercised.

The Company identified the agreement regarding the investment of the additional 50% and the option for Series A1 preferred shares as additional components which constitute a derivative and are therefore measured at fair value through profit and loss.

A.2 Achievement of milestone In accordance with the agreement, the milestone is considered achieved when more than 20% and at least 2 patients who received the drug treatment have shown improvement of at least 2 lines in visual acuity, and so long as no significant negative events have been documented, as defined in the trial protocol, and/or Regenera has not discontinued the trial due to negative events, as defined in the trial protocol. The milestone will be evaluated on the date determined by Regenera’s board of directors, and so long as more than 4 patients are participating in the trial, who have received the treatment of the drug for a period of no less than 3 consecutive months, in accordance with the trial protocol, and no later than June 30, 2016 (hereinafter: the “Milestone”).

On February 22, 2016, Regenera’s board of directors determined that according to the interim results, Regenera had achieved the defined milestone.

In accordance with the achievement of the milestone, on March 9, 2016, the Company transferred the second payment of the investment, in the amount of USD 1,250 thousand, against an allocation of 271,552 Series A preferred shares, and 271,552 share options for the acquisition of Series A1 preferred shares (hereinafter: the “Allocated Securities”).

Regenera also reported that it had held a pre-IND meeting with the FDA, and had received an official positive response that the FDA will approve for Regenera continuation to a Phase III clinical trial, in accordance with the clinical research plan which Regenera submitted to the FDA, subject to, inter alia, the conducting of long-term toxicity tests.

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.2 Achievement of milestone (cont.) On February 21, 2018, the Company announced that Regenera had received approval from the FDA for the performance of a Phase III trial with the drug RPh201, on patients with NAION, and on June 27, 2018, the Company announced that Regenera had received fast track approval from the FDA for development of the drug RPh201 on NAION patients. This status allows shortening the procedures for promoting a drug until marketing, and is given by the FDA only for drugs that the authority wants to promote, in accordance with criteria such as urgent need in the market due to non-existence of an approved drug for the condition, lifesaving drugs, etc. In July 2018, Regenera reported that it had begun a Phase III trial with the RPh201 drug on NAION patients in the United States. In accordance with Regenera’s notice to the Company, the trial for NAION (Neuropathy Optic Ischemic Anterior Nonarteritic), which currently does not have any approved drug treatment, is planned for performance in around twelve leading medical centers in the United States, and to include 234 patients which have been diagnosed with the condition for at least one year. According to the plan, the final results of the trial are expected to be received in 2019. The trial will be conducted in a double-blind format. The participants will receive shots twice per week for six months, whereby some will receive the drug, and others will receive a placebo. The main goal of the trial, similarly to the goal and plan of the Phase II trial which concluded, is to prove improvement in visual acuity of at least 15 letters (3 lines) from the baseline until the 26th week of the trial. In March 2018 Regenera recruited its first patient to begin the Phase A2 trial on Alzheimer’s patients in Canada. The trial is expected to be conducted on 45-80 patients suffering from middle-stage Alzheimer’s disease. The trial was conducted in five medical centers in Canada, and concluded in November 2019.

A.3 Increase of the Company’s stake in Regenera in consideration of a private allocation to Bamot Ltd. On September 27, 2016, the Company completed a transaction in which the Company acquired from Bamot Investments, Promotion and Energy (1996) Ltd. (hereinafter: “Bamot”) 240,203 ordinary shares with a par value of NIS 0.01 each (hereinafter: the “Acquired Shares”) of Regenera, and in exchange, the Company allocated to Bamot 5,500,000 shares and 1,000,000 marketable options (new series), at an exercise price of 100 agorot per share, over three years beginning from the signing date of the agreement. The value of the consideration, based on a price of 49.6 agorot per Company share, is approximately NIS 2,625 thousand (USD 701 thousand).

The option was treated as a derivative liability measured at fair value through the statement of income, until the date of the change in functional currency. Following the change in functional currency, the option is no longer considered a financial derivative, and was therefore classified to equity.

The fair value of the options which the Company allocated to Bamot was calculated using the B&S model, based on the following parameters:

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.2 Increase of the Company’s stake in Regenera in consideration of a private allocation to Bamot Ltd. (cont.)

Calculation date June 30, 2018 Expected volatility 115.08% Value of the underlying asset 0.766 (NIS) Risk-free interest rate 0.27% Expiration date September 11, 2019 Exercise price (NIS) 1

Presented below is the value of the consideration: Value of the options Amount (NIS in thousands) Options 1,000,000 308

On September 1, 2019, Bamot exercised all of its options at an exercise price of 100 agorot per share, in consideration of 1,000,000 shares.

A.4 Loan convertible into shares On December 18, 2016, Regenera engaged in a convertible, interest-bearing loan agreement with the Company and Angels High Tech Investments Ltd. (the “2016 Loan Agreement”). In the first stage, the Company and Angels lent, in accordance with the 2016 loan agreement, a total of USD 350 thousand each, and Regenera may borrow from its shareholders and additional lenders a total amount of up to USD 5 million in accordance with the 2016 loan agreement, until April 15, 2017 (the Company’s share in the loan facility is approximately USD 1.25 million, according to the Company’s exclusive discretion). The loan in accordance with the 2016 loan agreement is convertible into Regenera shares in case of an investment of at least USD 3 million in share capital, an event involving the acquisition of Regenera, an IPO of Regenera, or if requested by the lenders in case of investment in Regenera’s share capital in an amount less than USD 3 million. The conversion in each of these cases will be implemented according to a price per share which will be determined on that conversion date, following a discount of 20%. Insofar as the loan has not been converted by June 18, 2018, the lenders will be entitled to demand the repayment of the loan in cash. Regenera’s undertakings in accordance with the 2016 loan agreement are secured by a floating charge on its assets, and by a floating charge on Regenera’s intellectual property.

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.4 Loan convertible into shares (cont.)

On January 16, 2017, the Company invested an additional total of USD 650 thousand in Regenera, in accordance with the 2016 loan agreement, such that the total amount of the loan in accordance with the agreement amounted to a total of USD 1 million.

The loan was given under market conditions, following negotiations between the Company and Angels, and Regenera.

Further to the signing of the investment agreement, which is based on the principles specified in the aforementioned offer, the first investment amount of approximately USD 10.7 million was transferred to Regenera.

In February 2018 the loan was converted to 712,896 Series B-1 preferred shares of Regenera with a par value of NIS 0.01 each (hereinafter: the “Series B-1 Preferred Shares”) as part of the 2018 investment transaction, and on the allocation date those shares constituted approximately 6.45% of Regenera’s capital, fully diluted. As part of the conversion of the loan, 475,264 options exercisable into 475,264 Series B2 preferred shares of Regenera, with a par value of NIS 0.01 each (hereinafter: the “Series B2 Preferred Shares”) were allocated to the lenders, at an exercise price of USD 6.96 per share, which, on the allocation date, constituted 4.30% of the Company’s capital, fully diluted.

A.5 2018 investment agreement 1. Capital raising in February 2018 (completed in March 2018) - On February 27, 2018, Regenera engaged in an investment agreement with the Company and additional investors (all of which are current shareholders, with Angels as the leading investor), in accordance with the letter of intent which was signed between Regenera and Angels on December 31, 2017 (the “2018 Investment Agreement”). According to the terms of the 2018 investment agreement, a total of up to USD 20 million will be invested in Regenera, of which, on the closing date of the investment (February 27, 2018), approximately USD 10.7 million was invested (including USD 10 million invested by Angels), and 1,845,878 Series B preferred shares of Regenera with a par value of NIS 0.01 each (hereinafter: the “Series B preferred shares”) were allocated to the investors, according to a price per share derived from a pre-money valuation of Regenera in the amount of USD 28,760,042 (USD 5.80 per share). These shares constituted, on the allocation date, 30.95% of the issued and paid-up capital of Regenera, and approximately 16.70% of Regenera’s capital, fully diluted. In this raising, 1,538,233 options exercisable into 1,538,233 Series B2 preferred shares were allocated to the investors (in addition to the options which were allocated on that date to the lenders, as specified in section D above), at an exercise price of USD 6.96 per share, which, on the allocation date, constituted 13.92%, fully diluted.

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Annex A

Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.5 2018 investment agreement (cont.) Other shareholders of Regenera are entitled to notify Regenera of their wish to join the investment under identical conditions, by March 26, 2018. On March 28, 2018, a single shareholder invested USD 140 thousand, in accordance with the terms of the round. Regenera was entitled to raise additional amounts in accordance with the terms of the 2018 investment agreement, up to a maximum total of USD 20 million, by February 27, 2019. Any amount which has not been invested as stated above (subtracting amounts which will be invested by Regenera under other conditions which will be approved by Regenera) will be invested by Angels and additional shareholders who will undertake to do so, in accordance with the conditions specified above, unless Regenera has issued its shares under conditions which reflect a value for Regenera of at least USD 40 million (including by way of a merger into a public shell corporation) in which case additional amounts will not be invested in accordance with the 2018 investment agreement. As part of the investment agreement, the loan which was given to Regenera in accordance with the 2016 loan agreement was also converted - see section A4 above. 2. On April 2 the investment transaction in Regenera was completed, according to which: 2.1 As a result of the investment of USD 10 million by Mr. Marius Nacht, and the exercise of rights of additional Regenera shareholders to participate in the investment, the investment sum in the amount of approximately USD 10.85 million was transferred to Regenera (the “Initial Investment”). 2.2 Additionally, in accordance with the investment agreement, the leading investor and an additional shareholder undertook to provide to Regenera an additional investment in the amount of up to approximately USD 9.15 million (in accordance with the terms of the initial investment), once one year has passed after the date of the initial investment (i.e., February 27, 2019), such that the total sum of the investment, in accordance with the terms of the initial investment, will amount to USD 20 million, after deducting amounts which Regenera will raise, if at all, by February 27, 2019 (in accordance with the terms of the initial investment, or under other conditions which will be approved by Regenera), unless Regenera has been listed for trading on the stock exchange, or has merged with a company which is listed for trading on the stock exchange. 2.3 Additionally, as part of the investment round, shareholder’s loans in the amount of USD 2.3 million were converted, including a total of USD 1 million, plus accrued interest, which was converted by the Company against the loan that it provided to Regenera.

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.5 2018 investment agreement (cont.)

2.4 In December 2018, Intercure invested an additional total of approximately USD 350 thousand, under the same conditions as those described in section A.5.1. above.

On December 12, 2019, Angels partially exercised an option and acquired 344,828 Series B2 preferred shares, at an exercise price of USD 6.95 per share, and for a total consideration of USD 2.4 million. The foregoing shares constituted, on the allocation date, 4.14% of the issued and paid-up capital of Regenera, and approximately 2.55% of Regenera’s capital, fully diluted.

A.6 Remark in Regenera’s financial statements In Regenera’s financial statements as of December 31, 2018, the independent auditors’ report included reference to significant doubts regarding the ability of Regenera to continue functioning as a going concern. Regenera’s 2019 reports have not yet been signed as of the reporting date.

A.7 Value of the Company’s holding in Regenera: The preferred shares and derivative instruments are presented in the balance sheet under the item for the investment in Regenera - financial assets measured at fair value through the statement of income and classified at level 3, as described in Note 12B.

Presented below is the value of the financial instruments: As of December 31 2019 2018 NIS in thousands Ordinary shares 8,063 1,630 Series A preferred shares 16,644 5,420 Series B preferred shares 2,509 - Series B-1 preferred shares 8,789 5,105 Options for series B-2 preferred shares 3,905 157 Total 39,910 12,312

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.7 Value of the Company’s holding in Regenera (cont.)

Parameters used to calculate the fair value of preferred shares

In accordance with the valuation of the investment, the fair value of series A preferred shares was estimated according to the options pricing model (OPM). In this method, the investment in each series of shares is likened to a call option, where the rights of the share series with priority for that investment represents an exercise addition. Parameters used to calculate the fair value of share types: Underlying asset - The underlying asset is the value of all of the Company’s equity instruments, as assessed according to the OPM model. Exercise addition - The exercise addition of each share layer is that layer’s superior liquidation rights. Lifetime - The estimated duration until the occurrence of an event involving a merger or acquisition of the Company. In accordance with the assessments of Company management, the lifetime was estimated at two years. Risk-free interest rate - Calculated based on the yield to maturity of US government bonds with an average lifetime which is approximately equal to the contractual lifetime until the liquidation event. The risk-free interest rate which was used in the calculation was 1.58%. Standard deviation - Based on the average standard deviation of five public companies which are similar, in terms of their characteristics and operations, to the Company. The determined standard deviation was 57.28%.

The following table presents a sensitivity analysis to the estimated fair value of Regenera and of Regenera’s debt instruments as of December 31, 2019:

Sensitivity analysis - Decrease of standard deviation: Increase of 10% Fair value 10% Fair value changes of Regenera’s equity instruments 39,689 39,910 40,173

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

A. Regenera Pharma Ltd (“Regenera”) – (cont.) A.8 Sale of Regenera shares: On May 22, 2019, the Company completed the sale of 105,833 Series A preferred shares of Regenera, which constitute approximately 1.35% of the issued and paid- up capital of Regenera (undiluted), for a total cash consideration of USD 1.27 million, reflecting a price per share of approximately USD 12.

A.9. Stake: As of December 31, 2019, the Company’s stake in Regenera is approximately 11.76% of capital, undiluted (assuming conversion into ordinary shares), and approximately 8.91%, fully diluted. For additional details see Note 24I1, Events After the Reporting Period.

B. NovellusDX Ltd. (“Novellus”)

B.1. Contractual agreement with NovellusDX Ltd.

On December 22, 2015, the Company signed an investment agreement together with the Pontifax Venture Capital and additional investors, for the performance of an investment in a total amount of approximately USD 10 million in NovellusDX Ltd. (hereinafter: the “Agreement” and “Novellus”), a Israeli private company.

Novellus is developing an innovative technology which is intended to significantly improve the results of treatment of patients suffering from various types of cancer, using designated biological drugs (hereinafter: the “Product”).

The amount of the investment under the agreement is approximately USD 10 million, according to a valuation of Novellus, prior to the transaction, of approximately USD 15 million, in respect of Series B preferred shares of Novellus with a par value of NIS 0.01, at a price per share of USD 6.395 (hereinafter: the “Series B Preferred Shares”). Additionally, options were allocated to the investors for an additional investment of USD 10 million, according to a price per Series B Preferred Share which is 25% higher than the current price, as specified below.

Under the agreement, the Company will invest a total of USD 2.5 million (hereinafter: the “Investment Amount”), of which USD 1.25 million was invested on the initial closing date (as defined in the agreement), and an additional USD 1.25 million will be invested after the achievement of the milestone, as defined in the agreement between the parties.

In consideration of the Company’s total investment, 390,930 Series B preferred shares and 312,734 options to acquire Series B1 preferred shares, at an exercise price of USD 7.994 per exercise share, were allocated to the Company.

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

B. NovellusDX Ltd. (“Novellus”)

B.1. Contractual agreement with NovellusDX Ltd.

Additional investments - It was also determined that if an additional investment of up to USD 2.5 million is made by another anchor investor, as defined in the agreement, the new investment amount will be deducted from the investment amount which remains for investment subject to the achievement of the milestone, as defined below, such that, on the closing date of the agreement the total investment amount, including in case of the additional investment, will not exceed USD 10 million.

B.2. Novellus’ signing of an investment agreement with OrbiMed On June 21, 2016, the Company announced that NovellusDX had signed a binding investment agreement with OrbiMed Venture Capital, regarding an additional investment of USD 2.5 million in NovellusDX, for Series B preferred shares with a par value of NIS 0.01 each, at a price per share of USD 6.395.

B.3. Successful achievement of milestone On August 16, 2016, the Company announced that Novellus’ board of directors had determined that the milestone, as defined in the Novellus investment agreement, and as specified below, had been successfully achieved. Novellus’ board of directors determined that the company met two targets in each of the sections (6 targets in total). The targets the Company has met include completing a prototype of the biological chip that the Company is developing and protecting it with a patent, completing the successful coverage of the first 12 genes in accordance with the plan, receiving CLIA certification from the FDA and ISO 13485 certification for the laboratory, successfully demonstrating Novellus’ technology in a real case at a leading hospital, and successful evaluation of Novellus’ prognostic technology in a retrospective study of cancer patients.

In the first stage, Novellus’ board of directors decided not to ask for the second part of the investment from the investors, and on November 9, 2016, Novellus invited eligible investors to invest the second part, in accordance with the investment agreement. The second payment in accordance with the agreement, in the amount of USD 1.25 million, was transferred on November 22, 2016 from the Company to Novellus, in consideration of the allocation of 195,465 Series B preferred shares and 156,367 additional options.

B.4. Patent approval from the European Patent Office On January 7, 2018, Novellus notified the Company that it had received approval from the European Patent Office for a patent in accordance with a request from January 16, 2014, entitled “Methods And Systems For Identifying Patient Specific Driver Mutations”, number WO/2014/011936 (hereinafter: the “Patent”), for systems and methods to identify specific mutations in cancer patients. The methods include the identification of the patient’s specific indicators involving defective signaling pathways in the cancer patient’s biological samples. This approval, subject to the payment of the fee by Novellus, and selection of the target countries in the EU in which the patent will be registered (validation process), constitutes reference of the granting of the patent.

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Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

B. NovellusDX Ltd. (“Novellus”) (cont.)

B.5. Novellus’ announcement of an investment agreement with three international funds On April 30, 2018, the Company announced that Helsinn Fund of Switzerland, Windham Fund of the USA, and Bio Capital Impact Fund of Australia, had joined the investment in Novellus’ capital, and had invested in Novellus approximately USD 6 million, in equal parts, i.e., USD 2 million each. The investment was performed under identical conditions, by expanding the previous raising round, which included the participation, as leading investors, of the Company and of Pontifax and OrbiMed funds, such that, after the aforementioned round, the Company held approximately 9.3% of NovellusDX, fully diluted.

B.6. Binding merger agreement between NovellusDX Ltd. and Cancer Genetics, Inc. NASDAQ: CGIX) On September 18, 2018, NovellusDX entered into an agreement with Cancer Genetics, Inc. (“CGI”) (NASDAQ: CGIX), a company incorporated in Delaware, USA, and listed on the NASDAQ, under which Novellus’ operations will be merged into a private Israeli subsidiary of CGI, in consideration of an allocation of ordinary shares of CGI which constitute 49% of the issued and paid-up capital of CGI, fully diluted (including several adjustments), to Novellus shareholders (the “Merger”). Novellus’ current shareholders are expected to invest a total of up to USD 10 million, in accordance with their proportional part in the holding of Novellus, in CGI’s capital, as part of a private issuance which is expected to take place immediately after and in connection with the completion of the merger. The Company also undertook to invest in the capital of the merged company a total of up to USD 1.2 million, subject to the approval of the Company’s competent organs, which must be received no later than 80 days after the signing date of the merger agreement. Novellus will also provide to CGI a bridging loan in the amount of up to USD 3.2 million. In December 2018, Novellus notified CGI of the termination of the merger agreement, due to CGI’s failure to fulfill the terms of the agreement, and demanded termination fees and reimbursement of expenses.

B.7. Collaboration between NovellusDX and the Leon Bernard Medical Center On February 25, 2018, the Company reported that it had begun a collaboration with Leon Bernard Medical Center in France, regarding the conducting of a retrospective analysis of two research branches from the MOST trial. The MOST (My Own Specific Treatment) clinical trial is a Phase II trial which is intended to assess the clinical efficacy of dedicated treatments for cancer patients with specific genetic changes, regardless of the type of cancer affecting the patient. The trial began in February 2014, and will include the recruitment of around 560 patients, for seven different research branches. The genetic sequencing data of patients from two branches will be subject blind analysis by NovellusDx’s system, in order to retrospectively predict the patients’ clinical response to the treatment. This collaboration is being implemented as part of NovellusDX’s business strategy.

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Annex A

Note 10 - Investment in Assets Measured at Fair Value Through Profit or Loss: (cont.)

B. NovellusDX Ltd. (“Novellus”) (cont.)

B.8. Patent approval from the US Patent Office On April 25, 2018, the Company announced the approval of a patent entitled “Methods And Systems For Identifying Patient Specific Driver Mutations”. The methods of the patent announced by the Company include identification of the patient’s specific indicators involving defective signaling pathways, in the cancer patient’s biological samples. This approval, subject to the payment of a fee by Novellus, constitutes proof that the patent was given.

B.9. Stake: As of December 31, 2019, the Company’s stake in Novellus is approximately 8.88% of capital, undiluted (assuming conversion to ordinary shares), and approximately 7.24%, fully diluted.

B.10. Remark in Novellus’ financial statements In Novellus’ financial statements as of December 31, 2019, the auditors drew attention to significant doubts regarding the ability of Novellus to continue operating as a going concern.

B.11. Value of the Company’s holding in Novellus: In September 2018 Novellus engaged in an agreement involving a merger of its activity into a subsidiary of a public corporation listed on the NASDAQ. Due to the failure of the aforementioned subsidiary to fulfill the terms of the agreement, Novellus announced, in December 2018, the termination of the merger, and demanded termination fees and reimbursement of expenses. In light of the termination of the merger agreement, and in light of information which the Company received from Novellus, there are doubts regarding the ability of Novellus to continue operating, and the Company therefore recorded impairment in the amount of NIS 11,064 thousand in its financial statements.

For additional details see Note 24I2, Events After the Reporting Period.

Note 11 - Other Payables:

December 31 2019 2018 NIS in thousands Expenses payable 1,938 574 Institutions 794 2,261 Others 1,120 419 3,852 3,254

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Annex A

Note 12 - Financial Instruments and Management of Financial Risks:

A. Financial risk factors

The Company’s activity exposes it to various financial risks, such as market risks (foreign currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management plan focuses on activities to minimize possible negative effects on the Company’s financial performance.

1) Market risks:

a) Foreign currency risk The carrying amounts of the Group’s financial assets and liabilities which are denominated in foreign currency are as follows: Assets Liabilities As of December 31 As of December 31 2019 2018 2019 2018 NIS in thousands NIS in thousands

Cash - USD 15,879 - - - Cash - EUR 91 - - - Investment in Regenera - USD 39,190 12,312 - - Investment in Novellus - USD - 11,064 Loan from controlling shareholder - USD 4,320 4,489

b) Price risk The Company has investments in marketable shares listed on the stock exchange, which are classified as financial assets in respect of which the Group is exposed to risk due to volatility in the security’s price, which is determined based on market prices on the stock exchange. The balance of these investments in the financial statements as of December 31, 2019 is NIS 177 thousand.

2) Credit risk Credit risk arises in respect of cash and cash equivalents. The Company engaged with banking corporations which have been given minimum independent ratings of AA.

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Annex A

Note 12 - Financial Instruments and Management of Financial Risks: (cont.)

A. Financial risk factors (cont.)

3) Liquidity risk:

The Company evaluates the risk of cash shortage using monthly budgets. The following table presents the repayment periods of the Group’s financial liabilities, in accordance with their contractual terms, by undiscounted amounts (including payments in respect of interest):

As of December 31, 2019: Up to One one year or year more Total NIS in thousands

Credit from banking corporations 33 43 76 Trade payables and other payables 8,787 - 8,787 Lease liability 546 2,223 2,769 Short term loan from related party 14,206 - 14,206 23,572 2,266 25,838

As of December 31, 2018: Up to One one year or year more Total NIS in thousands

Trade payables and other payables 3,254 - 3,254 Short term loan from related party 13,920 - 13,920 17,174 - 17,174

B. Disclosure of fair value

The following table presents the Company’s financial assets and financial liabilities which are measured at fair value as of December 31, 2019:

Level 1 Level 2 Level 3 Total NIS in thousands Assets: Financial assets at fair value through profit or loss: Investments in investees - - 39,910 39,910

Investment in XTL stocks 177 - - 177

Total assets 177 - 39,910 40,087

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Annex A

Note 12 - Financial Instruments and Management of Financial Risks: (cont.)

B. Disclosure of fair value (cont.)

The following table presents the Company’s financial assets and financial liabilities which are measured at fair value as of December 31, 2018:

Level 1 Level 2 Level 3 Total

NIS in thousands Assets: Financial assets at fair value through profit or loss: Investments in investees - - 23,376 23,376

Investment in XTL stocks 246 - - 246

Total assets 246 - 23,376 23,622

Financial assets

The Company has investments in investees measured at fair value through profit or loss. The fair value of the investments in these investees as of December 31, 2019 amounted to a total of NIS 39,910 thousand, in accordance with a valuation which was received from an external valuer (level 3). For additional information see Note 10 above and Note 24I1, Events After the Reporting Period.

For details regarding the fair value of the investment in XTL shares, see Note 7 above.

Changes in financial instruments whose fair value measurement was classified at level 3:

Financial assets at fair value through the statement of income in 2019 2018 NIS in thousands

Opening balance 23,376 22,539 Investment (sale) of assets measured at fair value through profit or loss (4,532) 1,324 Profit (loss) which was recognized in the statement of income 21,066 (487) Closing balance 39,910 23,376

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Annex A

Note 12 - Financial Instruments and Management of Financial Risks: (cont.)

C. Sensitivity tests to changes in market factors:

The following table specifies the sensitivity to an increase or decrease of 1.5% in the relevant exchange rate. This metric represents the estimate of management regarding reasonably possible changes to the exchange rate. The sensitivity analysis includes current balances of monetary items denominated in foreign currency, and adjusts the translation thereof at the end of the period to a change of 1.5% in foreign currency rates.

Impact of the USD Impact of the EUR As of December 31 As of December 31 2019 2019 NIS in thousands NIS in thousands

Profit or loss 771 1

Sensitivity tests and main working assumptions

The selected changes to the relevant risk variables, as presented in Note 10, were determined in accordance with the estimates of management regarding reasonably possible changes to those risk variables.

The Company performed sensitivity tests to main market risk factors which could affect the reported operating results or financial position. The sensitivity tests present profit or loss and/or the change in capital (before tax) for each financial instrument in respect of the relevant risk variable which was chosen for it, as of each reporting date. The evaluation of risk factors was performed based on the significance of the exposure of the operating results or financial position in respect of each risk factor, with reference to the functional currency, and assuming that all other variables remain unchanged.

The risk tests in respect of marketable investments for which quoted market prices (stock exchange prices) are available were based on possible changes in those market prices.

Note 13 - Engagements with Related Parties:

A. Loans from controlling shareholder

On December 23, 2015, the Company entered into an agreement with Mr. Alexander Rabinovitch, the Company’s controlling shareholder, under which Mr. Rabinovitch undertook to provide to the Company, independently or through a company under his control, a total amount of USD 1.25 million, as a loan or guarantee, in the Company’s exclusive discretion. The aforementioned loan / guarantee will be available to the Company for 12 months, i.e., from December 22, 2015 to December 22, 2016 (hereinafter: the “Repayment Date”), unless the parties have agreed to defer the repayment date of the loan / guarantee (hereinafter: the “Line Of Credit”).

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Annex A

Note 13 - Engagements with Related Parties: (cont.)

A. Loans from controlling shareholder (cont.)

As part of the foregoing engagement, the Company undertook that in case it has not repaid the line of credit by the foregoing repayment date, the line of credit will be converted by way of an allocation of ordinary Company shares with no par value, as part of a rights issue to Company shareholders, which will be performed by the Company within 6 months after the repayment date. In case the foregoing rights issue is not executed, for any reason whatsoever, the Company will be obligated to repay the line of credit on a date which will be agreed upon between the parties. The foregoing line of credit was given under eligible transaction conditions - i.e., the amount of the loan / guarantee will not accrue interest or linkage differentials. At the Company’s request, on March 8, 2016 Mr. Rabinovitch provided a loan to the Company in the amount of USD 750 thousand (hereinafter: the “Loan”). The loan amount was used by the Company to perform the second part of the investment in Regenera. On December 25, 2016, the Company signed an agreement with the controlling shareholder, according to which the line of credit and the loan, which were due to expire on December 22, 2016, would be extended until December 22, 2017. In November 2017, the Company signed an agreement with the controlling shareholder regarding an additional extension until December 22, 2018. On January 16, 2017, the Company reported that it had withdrawn an additional USD 250 thousand from the line of credit, such that the total amount of the loan from the controlling shareholder will amount to USD 1 million, and the remaining line of credit will amount to USD 250 thousand. The fair value of the loan was estimated based on the expected cash flows in respect of the loan, discounted by the interest rate which the Company would have been required to pay on a similar loan under market conditions, as estimated by an independent external valuer. The loan was initially recognized on December 23, 2015, at a fair value of USD 649 thousand (according to a discount rate of 20%), and on the extension date of the loan repayment date, December 22, 2016, the loan was recorded in the amount of USD 619 thousand (according to a discount rate of 21.11%), where the difference between these values and the loan amount was carried to the capital reserve for transactions with the controlling shareholder. On January 16, 2017, an additional loan in the amount of USD 250 thousand was provided, which was recorded in its financial statements in accordance with its fair value of USD 211 thousand (according to a discount rate of 20.1%). On the loan extension date, December 22, 2017, the loan in the amount of USD 1 million, was recorded in accordance with its fair value in the amount of USD 828 thousand (according to a discount rate of 18.9%). The difference between these values and the loan amount was carried to the capital reserve for transactions with the controlling shareholder. In December 2018, it was agreed with the controlling shareholder that the repayment date will be March 31, 2019. During the period, it was decided to extend the repayment date until no later than December 31, 2019.

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Annex A

Note 13 - Engagements with Related Parties: (cont.)

A. Loans from controlling shareholder (cont.)

On the extension date, the Company recognized a capital reserve in the amount of NIS 598 thousand, in respect of the interest benefit. During the period, NIS 386 thousand was recorded in the Company’s books as finance expenses in respect of this loan.

On June 24, 2018, the Company reported an agreement for the acquisition of Canndoc shares. The acquisition was financed by the provision of a credit facility, which was provided to the Company by the Company’s controlling shareholder. The consideration in the amount of NIS 9,000 thousand which was given to the Company was in respect of a loan with a fair value of NIS 7,786 thousand and a total of NIS 1,214 thousand in respect of 8,570,000 options. The par value of the loan bears annual interest in NIS, calculated annually, according to the minimum interest rate prescribed in section 3J of the Income Tax Ordinance (2.61% in 2018). The loan principal, plus the loan interest, will be paid within one year after the date when the loan was provided to the Company in practice, unless the parties have agreed otherwise (the “Loan Period”). The Company will be entitled to execute a prepayment of the balance of the loan during the loan period. For additional details see Note 24J1, Events After the Reporting Period.

B. Loans from related party

Following the rise to control of Canndoc, and the appointment of Mr. Avner Barak as a director in the Company, a loan of Mr. Avner Barak to Canndoc in the amount of NIS 718 thousand was recorded in the Group’s books. The loan principal bears annual interest in NIS, calculated annually, according to the minimum interest rate prescribed in section 3J of the Income Tax Ordinance (2.61% in 2018).

The loan will be repaid in equal monthly installments (principal and interest) in the amount of NIS 15 thousand. The Group recognized a capital reserve in the amount of NIS 17 thousand in respect of the interest benefit.

During the period, interest expenses were recorded in the Company’s books in the amount of NIS 25 thousand in respect of this loan.

C. Sublease agreement with companies related to a related party

The subsidiary Canndoc leases an office floor, and subleases to three related companies of the controlling shareholder. Revenue of NIS 113 thousand was recorded in the financial statements. For additional details see Note 24J2, Events After the Reporting Period.

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Annex A

Note 14 - Liabilities Measured at Fair Value Through the Statement of Income:

A. Options for the acquisition of Company shares On November 20, 2017, the Company listed on the Tel Aviv Stock Exchange 2,125,000 options (Series 3) for the acquisition of ordinary Company shares, as part of an issuance of a shares and options package. The options are exercisable until June 23, 2019. The options bear a variable exercise price, as follows: NIS 0.7 until May 23, 2018, and an exercise price of NIS 1.25 from May 24, 2018, until the end of the exercise period, i.e., June 23, 2019. The exercise prices are not linked to any index.

The fair value of the options as of the date of the classification to equity following the change in functional currency was calculated using the B&S model, based on the following parameters:

Calculation date 30/06/2018 31/12/2017 Underlying asset NIS 0.77 NIS 0.37 Exercise price NIS 1.25 NIS 1 Expiration date 23/06/2019 11/09/2019 Risk-free interest rate 0.21% 0.15% Standard deviation 125.37% 46.93% Dividend - - Option value (NIS 549 7.3 thousands)

Following the change in the functional currency, as stated in Note 2D, this instrument was reclassified to equity, according to its value on June 30, 2018.

B. Price protection mechanism given to investors On November 21, 2016, the Company completed two investment agreements in the total amount of NIS 6,750,000 (USD 1,749 thousand), in consideration of the allocation of 12,053,571 ordinary Company shares, at a price of 56 agorot per share (hereinafter: “Allocation Agreement A”). For details, see Note 17C below.

On December 5, 2016, the Company completed an investment agreement with a third party, regarding the investment of NIS 1,500,000 (USD 390 thousand), in consideration of an allocation of 2,678,571 shares, at a price of 56 agorot per share (hereinafter: “Allocation Agreement B”). For details, see Note 17C below.

In accordance with the investment agreements, if during a period of one year after the transaction closing date, the Company performs a private or public capital raising, at a price per share less than 56 agorot per share, the Company, on a one-time basis, will compensate the investors with shares in a quantity which will be determined according to the difference between the price of 56 agorot per share, and the share price in the future capital raising. The compensation will be up to a price of 30 agorot per share.

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Annex A

Note 14 - Liabilities Measured at Fair Value Through the Statement of Income:

B. Price protection mechanism given to investors (cont.)

The net consideration in respect of the share issuance was split, for measurement purposes, into an equity component and the price protection mechanism which constitutes a financial liability, and which was classified in the financial statements under the item for “liabilities in respect of options for the acquisition of Company shares”. The financial liability is classified in accordance with the provisions of IAS 39 regarding financial liabilities at fair value through profit or loss, which is measured at fair value as of each date of the statement of financial position, with changes in its fair value being routinely carried to the statement of income.

On February 22, 2018, the Company reported the issuance of these shares to the investors.

Due to the activation of the price adjustment mechanism, as stated above, the Company recorded the liability regarding the allocation of the compensation shares on November 19, 2017 as an equity component, in the amount of USD 420 thousand.

Note 15 - Taxes on Income:

A. Tax rates applicable to the Company The corporate tax rate which applied to the Company in 2017 was 24%. From 2018 onwards, the tax rate will be 23%.

B. Tax assessments In accordance with the agreement with the tax authorities, the Company has tax assessments that are considered as final up to and including the tax year 2015. Canndoc has tax assessments that are considered as final up to and including the tax year 2015.

C. Carryforward tax losses and other temporary differences As of December 31, 2019, the Company has business losses and capital losses for tax purposes which are carried forward to future years in total amount of approximately NIS 69,467 thousand. The subsidiary Intercure Inc. has business losses and capital losses for tax purposes which are carried forward to future years and which amount, as of December 31, 2017, to a total of approximately USD 25 million. It is noted that following the change in control of the Company in 2012, the use of the foregoing losses is restricted, and they are expected to decrease significantly in accordance with internal law in the United States. Up to the date of the approval of the financial statements, these losses are no longer permited.

Deferred tax assets were not recognized in respect of carryforward business losses.

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Annex A

Note 16 - Commitments, Charges and Contingent Liabilities A. Investment in Regenera Ltd. See Note 10A above. B. Investment in Novellus Ltd. See Note 10B above. C. Sale of the RESPERATE operation On October 22, 2015, the Company entered into an agreement with Yazmonit Ltd. (hereinafter: the “Buyer”), for the sale of the Company’s business activity in the RESPERATE devices segment, and on November 2, 2015, the Company announced that the transaction had been closed on November 1, 2015. The transaction includes the sale of the existing inventory of devices, including its different versions, and the sale of all assets associated with its activity in this segment, including patents and trademarks (hereinafter: “RESPERATE”). It is clarified that, as part of the transaction, the Company transferred to the buyer the entire RESPERATE activity, and after the closing date, as stated above, it will no longer be engaged in this segment. Presented below are the main terms of the agreement: 1) In respect of the patents and trademarks, and any product which may be developed on the basis thereof, the buyer will pay royalties in the amount of 3% of each net payment which the buyer will receive, for a period of 4 years beginning on the transaction closing date. 2) In addition to the foregoing royalty payments, the buyer will also pay, in respect of the other assets of RESPERATE: A) USD 15 thousand on the agreement signing date. B) USD 15 thousand 45 days after the transaction closing date. C) Payment for the remaining inventory of RESPERATE products which will remain until the transaction closing date, according to the cost price per device. This payment will be paid up to 90 days after the closing date of the transaction. 3) The Company will be responsible for monetary refund demands of customers, if any, in respect of devices which were sold before the transaction closing date, until 4 years after the transaction closing date. 4) The buyer will continue fulfilling the Company’s warranty obligations for 3 years after the device purchase date. Any payments in respect of maintaining the foregoing warranty period will be offset from the royalty payments, as specified above. Up to the date of the approval of these financial statements, no material revenues were recognized.

D. Loan from the Company’s controlling shareholder See Note 13 above.

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Annex A

Note 16 - Commitments, Charges and Contingent Liabilities (cont.) E. Contingent liabilities 1. On November 3, 2016, a motion to approve a class action was filed with the District Court of Tel Aviv-Yafo, against Canndoc and the other seven holders of the active license in accordance with the old arrangement regarding growing medical cannabis. On January 4, 2020 the Court rejected the motion, and determine that the applicants had not proved an evidentiary basis for thein motion.

2. On August 19, 2019, a motion was filed with the District Court of Tel Aviv-Yafo against 17 companies which are engaged in the medical cannabis production and growing segment, or which hold plants for the production of cannabis products, including Canndoc, to approve a claim as a class action (the “Motion”), asserting the provision of drugs to patients in poor condition (as alleged in the motion), in a manner which constitutes prohibited discrimination, as stated in the Equal Rights for Persons with Disabilities Law, 5758-1998, as well as activities within the framework of a restrictive arrangement, in a manner which breaches the provisions of the Economic Competition Law, 5748-1988 due to the allegedly defective marking of the product components, while restricting the quantity and/or quality and/or type of the provided services. The amount claimed is NIS 686 million. In consideration of the very preliminary stage of the proceedings, it is not currently possible to estimate the chances of the motion to approve. In any case, we are unable to estimate the eventual chances of the claim, insofar as the motion to approve is approved as a class action. In light of the above, a provision in respect of the motion was not included in the Company’s financial statements.

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Annex A

Note 16 - Commitments, Charges and Contingent Liabilities (cont.)

F. Commitments 1. Canndoc has an advanced propagation and growing facility which is located in Kibbutz Beit HaEmek, in which it develops and grows a wide variety of unique strains of medical cannabis (hereinafter: the “Northern Facility”). As of the financial statement approval date, the northern facility is spread over an area of approximately 5 dunams, whereby Canndoc has the right of first refusal regarding an option to expand the area of the northern facility to a total area of approximately 16 dunams. The northern facility includes a greenhouse for propagating, growing and florescence, as well as a processing facility and operational areas. During the reporting period, Canndoc performed extension, upgrade and adjustment works on the northern facility, for the purpose of ensuring the northern facility’s compliance with the high-quality standards required to export from Israel, and adjusting the quality of the products to the level required in Israel and in the target countries. The performance of the upgrade works was concluded in the fourth quarter of 2019; For additional details see Note 24D3, Events After the Reporting Period.

Note 17 - Capital: A. Composition of share capital:

December 31 December 31 2019 2018 2019 2018 Registered Issued and paid-up

Ordinary shares with no par value 1,000,000,000 1,000,000,000 108,481,848 82,525,591

B. On September 27, 2016, the Company completed a transaction in which the Company acquired from Bamot 240,203 ordinary shares with a par value of NIS 0.01 each (hereinafter: the “Acquired Shares”) of Regenera. In consideration of the acquired shares, the Company allocated to Bamot 5,500,000 shares and 1,000,000 marketable options (new series), at an exercise price of 100 agorot per share, over three years beginning from the signing date of the agreement (for details, see Note 10A and Note 17G).

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Annex A

Note 17 - Capital: (cont.) C. On November 9, 2016, the Company reported the signing of two investment agreements in the total amount of NIS 6,750 thousand (approximately USD 1,750 thousand), in consideration of an allocation of 12,053,571 ordinary Company shares (hereinafter: the “Offered Shares”), at a price of NIS 0.56 per share. One investment agreement was signed vis-à-vis the controlling shareholder, in accordance with the meeting’s approval on November 3, 2016, as specified above, and an additional investment agreement was signed vis-à-vis Altshuler Shaham Mutual Fund Management Ltd. (hereinafter: “Altschuler Funds”), regarding an investment, in identical conditions, of NIS 3,900,000 (USD 1,008 thousand), in consideration of the allocation of 6,964,286 ordinary Company shares, with no par value, at a price of NIS 0.56 per share. In case, during the 12-month period after the transaction closing date, the Company performs a capital raising, including through a private allocation, at a price per share which will be lower than a price per share of NIS 0.56, Altschuler and the controlling shareholder will be entitled to receive compensation in shares, in a quantity which will be determined according to the difference between a price of NIS 0.56 per share, and the share price in the future capital raising. In any case, no shares whatsoever will be allocated at a price less than thirty agorot per share.

On November 17, 2016, the Stock Exchange notified the Company of the receipt of approval for the allocation of the aforementioned shares, and on November 21, 2016 the Company announced the closing of the aforementioned transactions, and receipt of the entire consideration from the controlling shareholder and from Altschuler Funds. As of the reporting date, Altschuler Funds are not related parties of the Company. On November 28, 2016, the Company reported the signing of an investment agreement with a third party, regarding the investment of NIS 1,500,000 (USD 392 thousand), in consideration of the allocation of 2,678,571 shares, at a price of 56 agorot per share. In case, during the 12-month period after the transaction closing date, the Company performs a capital raising, including through a private allocation, at a price per share which will be lower than a price of NIS 0.56 per share, the third party will be entitled to compensation in shares, in a quantity which will be determined according to the difference between the price of NIS 0.56 per share, and the share price in the future capital raising. In any case, no shares whatsoever will be allocated at a price less than thirty agorot per share. On December 4, 2016, the Stock Exchange notified the Company of the receipt of approval for the allocation of the aforementioned shares, and on December 5, 2016, the Company announced the closing of the transaction and the receipt of the entire consideration.

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Annex A

Note 17 - Capital: (cont.)

D. On November 31, 2017, the Company reported the results of the public offering, according to which the Company allocated 4,250,000 shares and 2,125,000 options (Series 3) for a gross consideration in the amount of approximately NIS 2,083 thousand. E. In the shareholders’ meeting which was held on February 7, 2019, an approval was received for an extraordinary private allocation of 14,291,667 Company shares to 4 investors, in consideration of investment in the Company of a total of approximately USD 17.15 million (NIS 62,283 thousand) (according to an exchange rate of 1.2). The foregoing allocation was completed on February 19, 2019. F. June 23, 2019 was the deadline for exercising the options (Series 3) of the Company which had been allocated based on the shelf offering report dated November 19, 2017. Until that date, approximately -99.99% of the allocated options (Series 3) were exercised, including by the Company’s controlling shareholder, who exercised 885,415 options (Series 3). A total of NIS 2,675 thousand was paid to the Company in respect of the exercise of these options during the period. G. On September 1, 2019, Bamot exercised all of its options at an exercise price of 100 agorot per share, in consideration of 1,000,000 ordinary shares of the Company. H. On September 1, 2019, a consultant exercised 557,050 options in consideration of an exercise price of NIS 0.3736 per share, in consideration of 557,050 ordinary Company shares.

I. Price protection mechanism given to investors As stated in Note 14B above, and following the capital raising in November 2017, at a price which reflects a share value of 46.87 agorot, the price protection mechanism was activated, and the investors became entitled to 2,869,735 additional shares. The shares were allocated in practice on March 26, 2018. The value of the undertaking regarding the allocation of the compensation shares as of November 19, 2017 was USD 420 thousand. This cost was carried to a capital reserve.

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Annex A

Note 17 - Capital: (cont.)

J. Changes in share capital: 1) The Company’s registered capital as of December 31 is 1,000,000,000 shares with no par value. 2) Issued and paid-up capital Number of shares Balance as of January 1, 2019 82,525,591 Options exercised by investors 2,100,951 Options exercised by employees 75,000 Allocation of shares in respect of the acquisition of Canndoc 7,931,589 Private allocation (Note 17E) 14,291,667 Options exercised by consultant (Note 17H) 557,050 Options exercised by consultant (Note 17G) 1,000,000 Balance as of December 31, 2019 108,481,848

K. Rights associated with shares:

Each share gives its owner the right to participate and to vote in the general meetings (each share has one voting right), and the right to receive dividends and/or bonus shares.

L. Share-based payment transactions: Expense (income) recognized in the financial statements

The expense which was recognized in the financial statements for received services is presented in the following table: For the year ended December 31 2019 2018 2017 NIS in thousands Equity-settled share-based payment plans 65,139 7,829 7.3

Total expenses recognized from share-based payment transactions 65,139 7,829 7.3

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Note 17 - Capital: (cont.) M. Options plan On March 31, 2015, the Company’s board of directors resolved to adopt a new plan for the allocation of shares and options to employees, directors and consultants (the “2015 Options Plan”).

Presented below are the main terms of the 2015 options plan: • In accordance with the 2015 options plan, options or shares will be allocated to the Company’s employees in accordance with section 102 of the Income Tax Ordinance (New Version), 5721-1961 (hereinafter: the “Income Tax Ordinance”), in accordance with the trustee track or the non-trustee track. Options will be allocated to consultants, service providers, controlling shareholders or any other entity other than Company employees in accordance with section 3(I) of the Income Tax Ordinance only. • The exercise price of each share option will be determined by the board of directors in its exclusive discretion, in accordance with the provisions of the law, and subject to guidelines which will be recommended by the committee from time to time.

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Note 17 - Capital: (cont.) M. Options plan (cont.) Characteristics and scope of share-based payment arrangements during the period:

During the period ended December 31, 2019, the Company had share-based payment arrangements as described below: Allocation of Allocation of Allocation of Allocation of Options 2 options 3 options 4 options 5

Grant date 25/07/12 31/03/15 01/09/15 01/09/15 Number granted 7,500 1,442,667 75,000 67,500 Original contract duration 10 10 10 10 Vesting period Fully vested Fully vested Fully vested Fully vested Exercise addition (NIS) 2.273 0.33 0.66 2.27 Economic value of all options (B&S) as of the grant date (NIS in thousands) 307 18 15

Data and economic assumptions in the model: Share price (in NIS) 0.393 0.343 0.343 Risk-free interest rate 2% 1.78% 0.1% 0.1% Volatility rate 112.06% 96.31% 79.18% 79.18%

Options as of January 1, 2019 - - 75,000 - Exercised share options: - - 75,000 - Options exercisable as of December 31, 2019: - - - - Additional details Chairman of the Director Board CEO Director

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Note 17 - Capital: (cont.) M. Options plan (cont.) Allocation Allocation Allocation of of options of options Allocation of options options 6 7 8 9

Grant date 07/02/19 07/02/19 07/02/19 07/02/19 Number granted 916,837 1,833,673 1,833,673 1,100,000 Original contract duration 5 5 5 10 Vesting period 1/3 vest on the 1/3 vest on 1/3 vest on 25% vest on the grant grant date, the grant the grant date; 25% on October and the date, and date, and 1, 2019; remainder the the 20% on October 1, over a period remainder remainder 2020; 15% on October of 36 months over a over a 1, 2021; and 15% vest after the period of period of on October 1, 2022 grant date 36 months 36 months In case the employee after the after the got fired, the options grant date grant date that should be vested in the coming year starting from the dismissal date will be accelerated Exercise addition (NIS) 2.00 3.00 4.00 5.00 Economic value of all options (B&S) as of the grant date (NIS in thousands) 11,344 22,226 21,835 14,015

Data and economic assumptions in the model: Share price (in NIS) 13.2 13.2 13.2 13.2 Risk-free interest rate 1.29% 1.29% 1.29% 2.22% Volatility rate 116.53% 116.53% 116.53% 116.53%

Options as of January 1, 2019 - - - - Granted options: 916,837 1,833,673 1,833,673 1,100,000 Vested options 475,402 950,795 950,795 550,000 Exercised share options: - - - - Options exercisable as of December 31, 2019: 475,402 950,795 950,795 550,000 Additional details Chairman Chairman Chairman of of the of the the Board Board Board CEO of Canndoc

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Note 17 - Capital: (cont.) M. Options plan (cont.) Allocation Allocation Allocation of of options of options Allocation of options 10 Options 11 12 13

Grant date 07/02/19 11/02/19 21/05/19 23/04/19 Number granted 700,000 486,111 62,020 70,939 Original contract duration 10 3 1 3 Vesting period 25% vest on the grant date; 25% Grant date Grant date Grant date on October 1, 2019; 20% on October 1, 2020; 15% on October 1, 2021; and 15% vest on October 1, 2022 In case the employee got fired, the options that should be vested in the coming year starting from the dismissal date will be accelerated Exercise addition (NIS) 5.00 0.3756 4.00 0.3756 Economic value of all options (B&S) as of the grant date (NIS in thousands) 8,918 6,433 340 742

Data and economic assumptions in the model: Share price (in NIS) 13.2 13.57 8 10.81 Risk-free interest rate 2.22% 0.66% 0.32% 0.63% Volatility rate 116.53% 119.23% 149.11% 113.56%

Options as of January 1, 2019 - - - - Granted options: 700,000 486,111 62,020 70,939 Vested options 350,000 486,111 62,020 70,939 Options exercised into shares - 486,111 - 70,939 Options exercisable as of December 31, 2019: 350,000 - 62,020 - Additional details Two Director Consultant consultants Consultant

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Note 17 - Capital: (cont.) M. Options plan (cont.) Allocation of Allocation of Allocation of options 14 Options 15 Options 16

Grant date 29/05/19 11/02/19 11/02/19 Number granted 100,000 700,000 400,000 Original contract duration 10 10 10 Vesting period 25% vest on 25% vest on January 31, 2019; January 31, 2019; 25% on October 25% on October 1, 1, 2019; 2019; 20% on October 30,000 vested 20% on October 1, 1, 2020; 15% on on the grant 2020; 15% on October 1, 2021; date; the October 1, 2021; and 15% vest on remainder will and 15% vest on October 1, 2022 vest in 9 equal October 1, 2022 In case the quarterly In case the employee got tranches until employee got fired, fired, the options February 1, the options that that should be 2022. should be vested in vested in the the coming year coming year starting from the starting from the dismissal date will dismissal date will be accelerated be accelerated Exercise addition (NIS) 7.2 5 2.09 Economic value of all options (B&S) as of the grant date (NIS in thousands) 594 9,171 5,315

Data and economic assumptions in the model: Share price (in NIS) 6.45 13.57 13.57 Risk-free interest rate 1.89% 0.66% 2.23% Volatility rate 109.79% 119.23% 116.36%

Options as of January 1, 2019: - - - Granted options: 100,000 700,000 400,000 Vested options: 30,000 490,000 280,000 Exercised share options: Options exercisable as of December 31, 2019: 30,000 490,000 280,000 Additional details CFO Officer Officer

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Note 17 - Capital: (cont.) M. Options plan (cont.)

For additional details regarding the approval of a grant of additional options to directors after the reporting period, see Note 24H.

Changes during the year

Presented below is a table listing the number of share options, the weighted average of their exercise prices, and the changes which were made to the employee options plans during the current year: 2019 2018 2017 Weighted Weighted Weighted average average average Number exercise Number exercise Number of exercise of options price of options price options price NIS NIS NIS

Share options at beginning of year 75,000 0.66 1,592,667 0.43 1,592,667 0.43 Share options which were granted during the year 7,584,183 3.79 - - - - Share options which were forfeited during the year 950,000 4.79 - - - - Share options which expired during the year - - - - Share options which were exercised during the year 75,000 0.66 1,517,667 0.43 - -

Share options at end of year 6,284,183 3.64 75,000 0.66 1,592,667 0.43

Exercisable share options at year end 4,076,992 3.78 75,000 0.66 1,557,042 0.41

The exercise prices of the stock options in the years 2017 to 2019 ranged from NIS 0.33-7.2 per option. The remaining contractual lifetime of the options as of December 31, 2019 was around 6.83 years. The Company also has a compensation policy which was approved on December 31, 2019.

After the reproting period, an allocation to Company directors was performed, as described in Note 24H.

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Note 18 - General and Administrative Expenses: For the year ended December 31 2019 2018 2017 NIS in thousands General and administrative expenses Payroll and associated expenses 6,655 16 - Consulting and professional expenses 2,889 1,047 595 Directors’ fees including share-based payment 417 312 405 Insurance - 189 29 Rent and maintenance 750 115 - Provision for doubtful debts 550 - - Fees 176 65 88 Depreciation 303 Other 333 237 51

12,073 1,981 1,168

Note 19 - Finance Income: For the year ended December 31 2019 2018 2017 NIS in thousands

Revenues from deposits 141 - - Exchange differences - 6 95

Total finance income 141 6 95

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Note 20 - Finance Expenses: For the year ended December 31 2019 2018 2017 NIS in thousands

Impairment of financial assets - 90 88 Increase in the value of liabilities in respect of options and price adjustment mechanism - 11 675 Interest in respect of loan from related party 1,801 1,026 672 Expenses in respect of fees 134 840 - Exchange differences 1,320 215 - Finance in respect of lease liability 37 - -

Total finance expenses 3,292 2,182 1,435

Note 21 - Earnings (Loss) Per Share: Details regarding the number of shares in the calculation of loss per share

For the year ended December 31 2019 2018 2017 Loss Loss Weighted NIS in Weighted Loss Weighted NIS in number of thousan number of NIS in number of thousa shares ds shares thousands shares nds

Number of shares and earnings (loss) for the purpose of calculating basic earnings (loss) 103,665,119 (5,893) 79,921,694 (12,798) 74,670,882 (5,521)

Options which could potentially be dilutive in the future, currently antidilutive 16,216,203 11,743,528 1,442,667

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Note 22 - Balances and Transactions with Related Parties: A. Balances with related parties (consolidated)

Composition:

December 31 2019 2018 NIS in thousands

Short-term loans (Note 13) 13,633 12,777 Expenses payable - 143 13,633 12,920

B. Benefits in respect of the employment of key management personnel (including directors) (*) who are employed in the Company:

For the year ended December 31 2019 2018 2017 Amount Amount Amount Num- Num- Num- ber of NIS in ber of NIS in ber of NIS in people thousands people thousands people thousands

Short-term employee benefits 3 833 - - - - Share-based payment 2 37,157 - - - -

3 37,990 - - - -

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Note 22 - Balances and Transactions with Related Parties: (cont.) B. Benefits in respect of the employment of key management personnel (including directors) (*) who are employed in the Company (cont.):

(*) The key management personnel include the Chairman of the Board, the Company’s CEO, and the CFO

Main employment terms of key management personnel employed in the Company: A. Chairman of the Board, Mr. Ehud Barak • His scope of employment will be 40 monthly hours, as a minimum, for which he will be entitled to the payment of a monthly payment, in terms of cost for the Company, of USD 10 thousand. • Fringe benefits - Mr. Barak will be entitled to 12 vacation days per year, 18 paid sick days and convalescence days according to the number prescribed in law, as it stands from time to time. Mr. Barak will also be included in the Company’s directors and officers' liability insurance policy, and he will be entitled to receive a letter of indemnity, in accordance with the Company’s standard practice. • Reimbursement of expenses - Mr. Barak will be entitled to reimbursement of expenses, both in Israel and abroad, in accordance with the Company’s standard practice, in the interest of promoting the Company’s affairs. • Options - additionally, 4,584,184 (unlisted) options were allocated to Mr. Barak, which are exercisable into 4,584,184 ordinary Company shares subject to the provisions of the Company’s options plan, which was adopted by the Company on March 31, 2015, and in accordance with the options agreement with Mr. Barak.

B. Director and CEO, Mr. Alexander Rabinovitch • Mr. Rabinovitch is not entitled to payment in respect of his position as a director in the Company. Mr. Rabinovitch was appointed as the Company’s CEO, and the terms of Mr. Rabinovitch’s tenure as the Company’s CEO, beginning on January 1, 2019, were approved by the Company’s general meeting on February 7, 2019, in accordance with the following: • Monthly salary - Mr. Rabinovitch is entitled, in respect of his tenure as Company CEO, to a monthly payment in the amount of NIS 15,000, in consideration of a 50% position. • Agreement period - In accordance with the provisions prescribed in law, and in accordance with the general meeting’s approval, the agreement with Mr. Rabinovitch is limited to a period of 3 years after the date of the meeting’s approval of his appointment, as stated above. • Reimbursement of expenses - Mr. Rabinovitch is entitled to reimbursement of expenses, in Israel and abroad, in accordance with the Company’s standard practice, in the interesting of promoting the Company’s affairs. • He is also entitled to be included in the Company’s directors and officers' liability insurance policy, and he will be entitled to receive a letter of indemnity, in accordance with the Company’s standard practice.

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C. Ariel Romano, Former CFO • Mr. Romano was appointed as the CFO of the Company and as the CFO of Canndoc Ltd. beginning on February 1, 2019 (hereinafter: the “Grant Date”), for an undefined period. Mr. Romano’s terms of employment were approved on May 29, 2019. Mr. Romano ceased serving as CFO on January 23, 2020, and Mr. Amos Cohen was appointed in his place. • Mr. Romano was entitled to monthly consulting fees in the amount of NIS 15 thousand, in respect of his position as Intercure’s CFO, and to a monthly salary of NIS 25 thousand in respect of his tenure as Canndoc’s CFO. He also received an allocation of 100,000 Company options, at an exercise price of NIS 7.2 per share, 30% of the options vested immediately on the grant date, and the remainder will vest on a quarterly basis, over a period of 3 years beginning on February 1, 2019.

C. Benefits in respect of key management personnel (including directors) who are not employees of the Company:

For the year ended December 31 2019 2018 2017 Amount Amount Amount Num- NIS in Num- NIS in Num- NIS in ber of thous- ber of thous- ber of thous- people ands people ands people ands

Short term employee benefits 1 493 5 409 5 569 Management fees 4 234 Share-based payment - - 1 7,732 2 7

4 727 5 8,141 5 576

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Note 22 - Balances and Transactions with Related Parties: (cont.) C. Benefits in respect of key management personnel (including directors) who are not employees of the Company: (cont.)

(*) The key management personnel who are not employees of the Company include one director, two outside directors, and one independent director.

Main employment terms of key management personnel employed in the Company:

A. Director and President of Canndoc, Mr. Avner Barak • Tenure as a director in the Company - In consideration of Mr. Barak’s tenure as a director in the Company, he will be entitled to payment of NIS 8,000 per month. • Mr. Barak is also employed as President of Canndoc, in a full-time position. In consideration of his tenure in Canndoc, Mr. Barak is entitled to a monthly salary at a monthly cost of NIS 28,000, including a monthly payment for the purpose of providing a vehicle, social benefits in accordance with the law, study fund and cellphone. • Fringe benefits - Mr. Barak is entitled to 18 vacation days per year, 10 convalescence days, and full sick pay beginning on from the first day of absence due to illness. Mr. Barak will also be included in the Company’s directors and officers' liability insurance policy, and he will be entitled to receive a letter of indemnity, in accordance with the Company’s standard practice. • Reimbursement of expenses - Insofar as Mr. Avner Barak is required to travel abroad for the purpose of his position, he will be entitled to reimbursement of international travel, food and lodging expenses, in accordance with the Company’s standard practice. • Signing bonus - Mr. Barak was entitled to a one-time signing bonus in the amount of NIS 88,000, which was paid to him upon the general meeting’s approval of the foregoing terms. • Annual bonus based on the fulfillment of targets - The bonus will be in an amount equal to 2 to 6 monthly salaries, which will be paid to Mr. Avner Barak in respect of the year in which the targets and successes were achieved. • Options - additionally, 700,000 (unlisted) options were allocated to Mr. Barak, which are exercisable into 700,000 ordinary Company shares subject to the provisions of the Company’s options plan, which was adopted by the Company on March 31, 2015, and in accordance with the options agreement with Mr. Barak.

B. Independent director, Dudy Salton • Mr. Salton serves as an independent director in the Company, and receives directors’ compensation in accordance with the amount prescribed in the Companies Regulations (Rules Regarding Compensation and Expenses of External Director), 5760-2000.

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Note 22 - Balances and Transactions with Related Parties: (cont.) C. Benefits in respect of key management personnel (including directors) who are not employees of the Company: (cont.)

C. Outside director, Lenny Greenbaum • Ms. Greenbaum serves as an independent director in the Company, and receives directors’ compensation in accordance with the amount prescribed in the Companies Regulations (Rules Regarding Compensation and Expenses of External Director), 5760-2000.

D. Outside director, Gideon Hirschfeld • Mr. Hirschfeld serves as an independent director in the Company, and receives directors’ compensation in accordance with the amount prescribed in the Companies Regulations (Rules Regarding Compensation and Expenses of External Director), 5760-2000.

E. Other transactions with related parties

Receipt of loan from the Company’s controlling shareholder - See Note 13 above.

Investment agreement between the controlling shareholder and the Company - See Notes 13 and 17C above.

Rental expenses - See Note 13C above.

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Note 23 - Operating Segments: Until August 2018, the Company was engaged in a single operating segment - investments in portfolio companies in the biomed sector. Since the date of significant influence over Canndoc Ltd., the Company has 2 operating segments: (A) Investments in portfolio companies in the biomed sector; (B) Investments in a company in the medical cannabis sector.

A. Investments in portfolio companies in the biomed sector: the Company has investments in Regenera and Novellus. These investments are measured at fair value through profit or loss. See Note 10.

Presented below are financial data regarding the segment: 2019 2018 2017 NIS in thousands Loss (profit) from investment in Regenera (32,130) 212 6,081 Loss (profit) from investment in Novellus 11,064 275 (3,048) (21,066) 487 3,033

2019 2018 NIS in thousands Fair value of the investment in Regenera 39,910 12,312 Fair value of the investment in Novellus - 11,064 39,910 23,376

B. Investment in associate in the medical cannabis sector - in 2018, the Company acquired 38% of Canndoc Ltd., a company engaged in the medical cannabis sector. In 2019, the Company acquired the remaining 62%, and now holds 100% of Canndoc. The Chief Operating Decision Maker reviews Canndoc’s financial results, and the data for the segment are therefore presented under segmental reporting, as presented in Canndoc’s reports. For additional details regarding Canndoc’s financial results, see Note 8.

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Note 23 - Operating Segments: (Cont.)

C. Adjustment of the segmental financial data for the financial statements:

Adjustments of segmental assets and liabilities for the consolidation include cancellation of assets of the cannabis segment, addition of the investment in accordance with the equity method, and addition of assets and liabilities which were not attributed to segments. 2019 NIS in thousands Adjustments Cannabis Biomed for the segment segment consolidation Total

External sales 9,609 (683) 8,926 Segmental loss (profit) 12,567 (20,996) (895) (9,324)

General and administrative expenses not attributable to segments 71,361 Other income, net (58,962) Equity losses 340 Profit (loss) from operating activities (3,415)

Segmental assets 47,846 39,910 194,477 282,233 Segmental liabilities (53,518) 27,486 (26,032)

2018 NIS in thousands Adjustments Cannabis Biomed for the segment (1) segment consolidation Total

External sales 6,955 (6,955) Segmental loss (profit) (719) 487 719 487

General and administrative expenses not attributable to segments 9,810 Other expenses , net 324 Equity loss 1 Profit (loss) from operating activities (10,622)_

Segmental assets 11,141 23,376 1,403 35,920 Segmental liabilities (4,612) (11,646) (16,258) (1) In 2018, the Company held 38% of Canndoc’s issued and paid-up capital. The Chief Operating Decision Maker reviewed 100% of the results in the segment, despite its status as an associate.

It is noted that in 2017, the Company was not engaged in Cannabis business activity and operated only in the Biomed sector.

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Note 24 - Events After the Reporting Period:

A. Business Combination 1. Acquisition of 50.1% stake in shares of Cannolam Ltd. On May 14, 2020, the Company’s board of directors approved the engagement in a series of agreements for the acquisition of a 50.1% stake in the shares of Cannolam Ltd. The Company allocated to some of the shareholders of Cannolam Ltd. (in a private allocation) 1,788,962 shares, which constitute approximately 1.62% of the Company’s issued and paid-up capital (1.41% fully diluted), in consideration of 21.9% of the shares of Cannolam Ltd. Cannolam Ltd. will also be given rights to agricultural produce which will be grown in Canndoc’s (current or future facilities), including providing the right to grow on land for which Canndoc has rights of use, or alternative land in which no less than NIS 10,200 thousand has been invested, in consideration of the allocation of 28.2% of Cannolam shares, such that the Company will hold a cumulative rate of 50.1% of Cannolam shares. As of the approval date of the financial statements, Cannolam has begun using these rights, where the cost of the investment therein is approximately NIS 8 million. The Cannolam acquisition transaction was completed on July 1, 2020, and accordingly, its operating results were consolidated for the first time beginning on that date.

Presented below is the fair value, as of the acquisition date, of the transferred consideration: NIS in thousands (Unaudited) Issuance of 1,788,962 ordinary Company shares (A) 6,904 Investment 10,200 Non-controlling interests 16,951 34,055 (A) The fair value of the ordinary shares which were issued as part of the cost of the business combination was determined based on the closing price of the Company’s stock on the Tel Aviv Stock Exchange as of July 1, 2020.

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Note 24 - Events After the Reporting Period: (cont.)

A. Business Combination (cont.)

2. Net cash flow arising on acquisition NIS in thousands (Unaudited)

Consideration paid in cash - Less - acquired cash and cash equivalents 387 Total 387

3. Amounts recognized on the acquisition date in respect of assets and liabilities: NIS in thousands (Unaudited)

Goodwill 22,138

4. Goodwill The cost of the business combination included a payment in respect of the control premium for the acquisition of Cannolam Ltd. Additionally, the consideration which was paid in the business combination includes amounts associated with the benefits which are expected to arise from the synergy (collaboration), revenue growth, and future developments in the operating market of Cannolam. These benefits are not recognized separately from goodwill, since the future economic benefits which are expected to arise from them are not reliably measurable. All of the above led to the creation of goodwill in the amount of NIS 22,138 thousand as a result of the business combination.

5. Non-controlling interests

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Annex A The total sum of non-controlling interests in Cannolam Ltd. (49.9%) which was recognized on the acquisition date is NIS 16,951 thousand. The non- controlling interests were estimated based on their fair value.

Note 24 - Events After the Reporting Period: (cont.) B. Cellect transaction On March 3, 2020, the Company’s board of directors approved the engagement in a non-binding letter of intent regarding a merger of Canndoc into Cellect Biotechnology Ltd., an Israeli public company which is listed on the NASDAQ APOP, which is engaged in the development of stem cell technology (hereinafter: “Cellect”). On November 19, 2020, the parties reached a joint decision to discontinue the negotiations and cancel the letters of intent.

C. Subversive Sponsor transaction On January 3, 2021, the Company entered into a merger agreement with Subversive Real Estate Acquisition REIT LP (the "LP"), Subversive Real Estate Acquisition Reit (GP) Inc and Subversive Real Estate Sponsor LLC. On February 9, 2021, the parties entered into an amended and restated definitive agreement, pursuant to which Intercure Sub (a wholly-owned subsidiary of the Company) will acquire all of the outstanding restricted voting units, proportionate voting units and limited partnership units of the LP in exchange for ordinary shares of the Company. Under the terms of the transaction, the Company is valuaed at 300 million dollar. On Closing, the Intercure Shares will continue to be listed on the TASE and it is a condition to closing that the Intercure Shares will also be listed for trading on Nasdaq and the TSX. The NEO has provided their acceptance of the transaction subject to the TSX approval. The TSX has not approved the transaction and neither the Nasdaq, the TSX nor the TASE have approved the listing of any Intercure Shares and there is no assurance that they will.

D. Production 1. After the reporting period, Canndoc entered into collaborations with corporations authorized to grow and produce medical cannabis in the corporation’s authorized growing facilities, based on Canndoc’s high-quality genetics. Additionally, due to the commencement of production activities in the southern facility, Canndoc did not extend two of those collaborations, whose agreement periods had concluded.

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Note 24 - Events After the Reporting Period: (cont.) D. Production (cont.)

3. Further to Note 16F, an extension to the agreement was signed, which formalized, inter alia, the investment in the Company’s facility in Beit HaEmek. As of the publication date of this report, the suspensory conditions for the fulfillment of the agreement have not yet been met.

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Note 24 - Events After the Reporting Period: (cont.) E. Importation 1. On January 2, 2020, Canndoc engaged in a series of agreements regarding the establishment of a strategic collaboration with a wholly owned company of Tilray Inc., one of the world’s leading companies in the medical cannabis sector (hereinafter: “Tilray”). As part of the series of agreements, the parties engaged in an importation agreement under which Canndoc will import from Tilray packaged and dried medical cannabis inflorescence at an EU-GMP quality level, within a period of a year, and will market them as finished goods in Israeli pharmacies. Until the end of 2020, Canndoc had the option to import up to 2.5 tons of Tilray`s products, at predetermined agreed-upon prices.

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Note 24 - Events After the Reporting Period: (cont.) E. Importation (cont.)

4. On August 4, 2020 Canndoc entered into a strategic and exclusive collaboration with Aphria Inc., one of the world’s leading and largest cannabis companies. Under the agreement, and subject to the receipt of the required authorizations, including the products’ fulfillment of the requirements of the Medical Cannabis Unit at the Ministry of Health, Canndoc will import from Aphria approximately 3 tons of high-quality medical cannabis products, over a period of two years, and will produce and market them under a shared brand in Israeli pharmacies. Canndoc has the option to import up to 6 tons of additional products, in two additional periods of two years each, beginning from the end of the first period, under identical conditions. In November the first shipment of 1.5 tons arrived in Israel. Canndoc began selling the products during the fourth quarter.

5. In December 2020, Canndoc engaged in a strategic and exclusive collaboration with Fotmer, Uruguay Corporation, that cultivating and producing medical cannabis at an internationally high level. the parties engaged in an importation agreement under which Canndoc will import from Fotmer approximately 3,000 kilograms of quality medical cannabis products, each year for a period of four years. Pursuant to the agreement, Canndoc provided Fotmer an initial amount of US $650,000 as a down payment for the first shipment of medical cannabis products, which will be classified as a loan, bearing an annual interest rate of 5.51% and secured by Fotmer’s Canadian parent company, until the export and import permits for the first shipment of products are obtained.

F. Exporting, marketing and distribution 1. As part of the series of agreements with Tilray, the parties engaged in an export agreement, under which Tilray will acquire up to approximately 5 tons of inflorescences produced by Canndoc, at agreed-upon prices, for the purpose of exporting them from Israel, and using them as medical cannabis products produced by Tilray, under the Tilray brand name, provided that Canndoc’s exported products meet the requirements of the EU-GMP standard, and based on the receipt of a permit for exporting from Israel. Under the export agreement, it was determined that insofar as export approval is not received from the State of Israel by April 1, 2020, Canndoc will have the option to obligate Tilray to purchase products for the purpose of selling them in Israel under the Tilray brand name, or through a joint brand which will be agreed upon between the parties. If

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Annex A Canndoc does not exercise the option, Tilray will be entitled, in accordance with an option which was given to it, to request Canndoc to sell the products to it. It is noted that, as of the approval date of the financial statements, the options have not yet been exercised by either of the parties.

Note 24 - Events After the Reporting Period: (cont.)

F. Exporting, marketing and distribution (cont.) 1. (cont.) On July 1, 2020, Canndoc submitted to the Medical Cannabis Unit of the Ministry of Health a request to export medical cannabis inflorescence of Canndoc, as part of a preliminary binding offer from Tilray, to acquire dozens of kilograms of Canndoc products for export to Portugal. Following the Company’s participation in a pilot of the Israeli government for the export of cannabis products, in parallel with the reduction of cannabis sale prices to patients in Israel, Canndoc received, on November 16, 2020, the first permission from the Ministry of Health, for commercial exports to Europe. On December 15, 2020, Canndoc completed the first commercial export which consisted of several dozen kilograms, to the European Union as part of the Tilray Agreement. As of the approval date of the financial statements, the Company does not have any significant inventory of the type which was involved in the pilot.

3. On March 4, 2020, the Company’s board of directors approved Canndoc’s engagement in a binding agreement with Super Pharm (Israel) Ltd. (hereinafter: “Super Pharm”), which operates approximately 60 pharmacies for the sale of medical cannabis, in a strategic collaboration, under which Canndoc will provide to Super Pharm 10 tons of medical cannabis products in accordance with Canndoc’s IMC-GMP certification, over a period of 3 years. After the reporting period, and in accordance with the New Regulations, Canndoc began selling products to Super Pharm. The parties to the agreement have covenanted to negotiate in good faith and enter into a detailed agreement within 90 days from the date of the agreement. The parties, by mutual agreement have agreed to extend the said period to March 31,

82 B-120 Intercure Ltd.

Annex A 2021 and negotiations of the detailed agreement remain ongoing.

Note 24 - Events After the Reporting Period: (cont.)

F. Exporting, marketing and distribution (cont.)

4. On April 30, 2020, Canndoc’s board of directors approved an engagement in ten framework agreements with 12 private pharmacies which provide medical cannabis in significant amounts, distributed throughout the country (hereinafter: the “Pharmacies”), under which Canndoc will provide approximately 12 tons of medical cannabis products in accordance with Canndoc’s GMP certification during the years 2020 and 2021. As part of the engagements, the pharmacies will undertake to acquire, and Canndoc will undertake to supply, the agreed-upon quantity as finished goods in accordance with Canndoc’s GMP certification, according to the agreed-upon prices which were determined between the parties, an annual minimum consumption quantity was determined, which the pharmacies undertook to acquire, and Canndoc undertook to supply. The finished goods will be transferred from Canndoc’s production network to the authorized distributors through which the products will be distributed to the pharmacies. The engagements are in effect for a period of 24 months, whereby each party is entitled to give the other party 90 days’ advance notice regarding the termination of the engagement. After the reporting period, Canndoc began providing and marketing its products in the leading pharmacies. In July 2020 Canndoc engaged with additional pharmacies, under similar terms of engagement as those specified above.

83 B-121 Intercure Ltd.

Annex A Additionally, on May 13, 2020, a free export order was signed regarding regulating the exporting of products, by the Ministry of Economy.

Note 24 - Events After the Reporting Period: (cont.)

F. Exporting, marketing and distribution (cont.)

7. On May 25, 2020, Canndoc’s board of directors approved an engagement in a series of agreements, including a partnership agreement and a distribution agreement, with a British corporation which owns an EU-GMP-compliant production plant, and which holds import and export licenses for medical cannabis products in England, Wales, Scotland, Northern Ireland and Ireland (hereinafter: the “Partner” and the “Operating Area”, as applicable), regarding the creation of a partnership to perform the activity of distributing Canndoc’s medical cannabis products (hereinafter: the “Products”) in the operating area (hereinafter: the “Joint Operation”). As part of the joint operation, a joint company was formed which is held 51% by Canndoc and 49% by the partner, and which is under Canndoc’s control (hereinafter: the “Joint Company”). As part of the collaboration, Canndoc will export the products (as finished goods and/or as packaged and dried inflorescence) from Israel and/or any other territory in which Canndoc may produce the products, subject to the receipt of the required permits for exporting to those countries. The partner will be responsible for importing the products into the facility (including receiving the import permits for the operating area), packaging them in accordance with local requirements (if necessary), and for the entire product distribution network, independently and/or through related corporations. As part of the engagement in the series of agreements, and subject to an issuance of Canndoc shares at a minimum value of USD 200 million, if any, it was determined that the partner will be entitled to an allocation of Canndoc options worth approximately USD 600 thousand. The options will vest upon the fulfillment of the following conditions: (A) 50% on the date of a cumulative sale of 200 kg. of products in the territory; (B) 50% on the date of the cumulative sale of 500 kg. of products in the territory. Canndoc has been working to supply its EU-GMP-compliant products from an authorized producer, independently of the receipt of a permit for exporting from Israel.

8. In December 2020, Canndoc entered into a distribution agreement with Novolog, a leading Israeli company in the logistic health services field. Pursuant to the noted agreement, Novolog will provide Canndoc with logistics, storage, collection and distribution services for it`s medical cannabis products throughout Israel for a term of three years, with two optional extensions of two years each. Novolog holds an IMC-GDP distribution license and possesses an

84 B-122 Intercure Ltd.

Annex A advanced logistics facility.

Note 24 - Events After the Reporting Period: (cont.)

G. Coronavirus pandemic During the first quarter of 2020, the coronavirus (COVID-19) pandemic began to spread in Israel and around the world. As of the approval date of the financial statments, Canndoc has not experienced and/or is not experiencing any change in the trend of demand for its medical cannabis products, and is continuing to manage its business and sell its products in an orderly and continuous basis. Canndoc is entitled to continue its activity provided that it reduces the number of employees to the minimum required to ensure essential operations. Company management has been evaluating, throughout the entire period, the financial implications of the crisis on the Company. Canndoc has prepared an inventory of raw materials required to ensure routine operating activities in the growing facility, planning a decentralized workforce, and preparing workforce reserves in case of the infection of one of its employees, as well as a remote access network for employees. Additionally, the Company’s support center is continuing to provide continuous support to patients, including complete and strict implementation of the Ministry of Health’s requirements regarding work methods and operating space. Company management believes that it has the financial stability required to deal with the coronavirus crisis and its short-term and medium-term consequences (if any), inter alia, based on the continuation of the Company’s operating activities, and the completion of the private allocations which were performed during the reporting period.

H. Allocations 1. On January 9, 2020, a total of 18 thousand options (each) were allocated to three independent directors, including 2 outside directors, of the Company, in accordance with an agreement with them. The options will vest over a three- year period, in equal tranches.

85 B-123 Intercure Ltd.

Annex A Company allocated the shares on August 4, 2020.

Note 24 - Events After the Reporting Period: (cont.)

H. Allocations

3. On August 31, 2020, the Company’s board of directors authorized management to take action to offer a total of up to 4,303,356 options to an officer (the Company’s CFO) and to Canndoc employees, which constitute 3.6% of the Company’s shares (as of the approval date of the financial statements) On January 26, 2021 the Company’s board of directors decided that 3,895,796 unlisted options can be exercised to 3,895,796 ordinary shares of the Company and will be allocated to officers and employees of the Company and Canndoc. The options will be for a period of up to 5 years from the grant date, at an exercise price of NIS 4.13 per share. The options will vest on a quarterly basis over a period of 4 years after the grant date. On March 8, 2021, the company received the TASE final approval.

I. Investment in Assets Measured at Fair Value Through the Statement of Income. 1. Value of the investment in Regenera On April 30, 2020, the Company’s board of directors discussed a notice which was received from Regenera, in which it was stated that in light of weak clinical results from an optic nerve trial, and an adjustment to the trial protocol, Regenera intends to raise a total of approximately USD 3 million, according to a value which is significantly lower than the valuation as of December 31, 2019, as part of a private allocation including rights.

On September 29, the Company was informed that Regenera’s board of directors had resolved to discontinue Regenera’s activity. In light of the information which the Company received, the Company recorded an impairment in the amount of NIS 583 thousand in the period of three months ended in 30 September, 2020.

86 B-124 Intercure Ltd.

Annex A

Note 24 - Events After the Reporting Period: (cont.)

I. Investment in Assets Measured at Fair Value Through the Statement of Income.

2. Value of the investment in Novellus In September 2020, a capital raising round of approximately USD 56 million was completed. The Company undertook to provide a total of approximately USD 500 thousand, in three milestones. As of the approval date of the financial statements, the Company has invested a total of approximately 181 thousand. The impact of this raising on the value of the other shares which are held by the Company is immaterial. Following the raising, the Company’s stake in Novellus is 0.72%.

J. Transactions with Related Parties 1. Further to Note 13, on April 30, 2020 an extension was given for the two controlling shareholder loans until July 1, 2020. On June 30, 2020, an extension was given for the two controlling shareholder loans until October 1, 2020. On October 20 the two controlling shareholder loans were repaid, in the amount of approximately NIS 13.8 million.

2. Further to that stated in Note 13C, on June 30, 2020 the Company’s audit committee and board of directors gave approval for a related company of the controlling shareholder to reduce its leased area, and the rent paid by it will therefore decrease accordingly.

K. CBD Activity 1. In December 2020 Canndoc engaged in a collaboration agreement with Charlotte's Web, the owner of the largest worldwide CBD brand, in an exclusive partnership. Canndoc products will be marketed in Israel under a joint brand for the Israeli market. subject to certain conditions, including certain regulatory matters within central European countries and England. The arrangement is subject to the receipt of the required regulatory agreements.

2. In March 2021 Canndoc engaged in an agreement with Cannasmatics Ltd., part of the GIGI laboratories group. The parties will operate through a joint company which 50.01% will be held the joint company will market and sell the products exclusively in Europe and Israel under joint branding. The products are active cosmetics, organic-based on scientific research, which meet the strict standard of Clean at Sephora. The arrangement is subject to the receipt of the required regulatory

87 B-125 Intercure Ltd.

Annex A agreements.

Note 24 - Events After the Reporting Period: (cont.)

K. CBD Activity (cont.)

3. In October, 2020, Candoc engaged in a collaboration agreement with Pnina Rosenblum CBD Products Ltd for the production of lifestyle products for women combined with CBD. The parties will operate through joint company to develop the products, distribute and market them through a joint brand.

J. Other

1. On April 27, 2020 and April 30, 2020, the Company’s audit committee and board of directors approved an update to the directors’ fees to the minimum amount specified in the Companies Regulations (Rules Regarding Compensation and Expenses of External Director), 5760-2000 (hereinafter: the “Compensation Regulations”), as part of the Company’s efforts to deal with the coronavirus pandemic and to reduce the Company’s operating expenses. On November 26 and 30, 2020, the Company’s compensation committee, audit committee and board of directors (respectively) approved a resolution to restore the directors’ fees to the fixed amount specified in the Compensation Regulations.

2. On November 30, 2020, Mr. Avner Barak, a director, announced his resignation from tenure as a director in the Company.

3. On November 30, 2020, the Company’s board of directors approved the appointment of Mr. Alon Granot as a director in the Company, until the next annual meeting.

4. On November 30, 2020, the board of directors of the subsidiary Canndoc Ltd. approved the appointment of Mr. Alexander Rabinovitch, a director, as the CEO of Canndoc, instead of Mr. Alon Granot, who will continue his tenure as a director in Canndoc, and who was appointed, as stated above, as a director in the Company.

5. In January 2021, Cannolam purchased two pharmacies in Ashdod and Herzliya, in consideration for approximately NIS 3 million and a contingent consideration in amount of approximately NIS 5 to be adjusted based on the profit before tax in connection with the parmachy in Ashdod for the period of 18 month starting from February 2021. These pharmacies will be added to the network of the pharmacies operated by Cannolam.

88 B-126

C APPENDIX C CANNDOC FINANCIAL STATEMENTS

The audited consolidated interim financial statements of Canndoc as of December 31, 2018 and 2017, together with the notes thereto and the auditors’ report thereon ...... C-2 The management’s discussion and analysis of financial condition and results of operations of Canndoc as for the period ended December 31, 2018 ...... C-41

C-1 Canndoc Ltd. Consolidated Financial Statements As Of December 31, 2018

Index

Page

Independent Auditors` Report to Shareholders...... F-2

Consolidated Statements of Financial Position ...... F-3

Consolidated Statements of Profit or Loss and Other Comprehensive Income ...... F-4

Consolidated Statements of Changes in Equity ...... F-5

Consolidated Statements of Cash Flows ...... F-6

Notes to Consolidated Financial Statements ...... F-7-37

F-1

C-2

Independent Auditors’ Report to the Shareholders of Canndoc Ltd.

Opinion We have audited the consolidated financial statements of Canndoc Ltd and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2018 and 2017, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for each of the years ended on December 31, 2018 and December 31 , 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for each of the years ended on December 31, 2018 and December 31, 2017, in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.

Key Audit Matters

Key Audit Matter How our audit addressed the key audit matter Inventory We focused our testing of the carrying amounts of product in process and dried flowering on the key assumptions made by management. Our audit procedures included: As noted in note 5, inventories consist of finished products of dried and packaged or rolled medical cannabis and cannabis oil as well as - Evaluating whether the calculation methods were products in process which include, among adequately and consistently applied, others, agricultural produce (carrying amount - Challenging key assumptions – such as prices of finished of product in process and dried flowering medical cannabis, the cost to complete the growth cycle– included in Inventory was 7,672 thousand by comparing management inputs to actual prices or costs, NIS as of December 31, 2018 and 7,379 and discussions with management and other company thousand NIS as of December 31, 2017), that employees involved in the production process and, has been transferred from biological assets but - Reviewing of adequacy of calculations applied. its processing into finished products has not yet

been completed. Findings We noted that assumptions applied in measuring product in Measuring the initial value of the products in process and dried flowering to be appropriate. process and dried flowering involves estimation uncertainty, mainly around prices of finished medical cannabis and the cost to complete the growth cycle.

F-2

C-3

Other Information Management is responsible for the other information. The other information comprises management discussion and analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

F-3

C-4

- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. - Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

The engagement partner on the audit resulting in this independent auditor’s report is Marina Kaplun.

/s/ Brightman Almagor Zohar & Co., Certified Public Accountants A Firm in the Deloitte Global Network Haifa, March 12, 2021

F-4

C-5 Canndoc Ltd.

Consolidated Statements of Financial Position

as of December 31, 2018 2017 2018

NIS in NIS in USD in thousands thousands thousands Note

ASSETS CURRENT ASSETS: Cash and cash equivalents ...... 344 474 92 Accounts receivable ...... 861 432 230 3 Inventories...... 8,176 7,899 2,181 5 Biological assets ...... 49 — 13 4

9,430 8,805 2,516

NON-CURRENT ASSETS: Property, plant and equipment ...... 1,621 1,319 433 6

Deposits ...... 90 27 24 7 1,711 1,346 457

TOTAL ASSETS ...... 11,141 10,151 2,973

LIABILITIES AND EQUITY CURRENT LIABILITIES: Bank loans...... 200 414 53 9 Trade payables ...... 747 162 199 Taxes payable...... 220 443 59 Other accounts payable ...... 681 687 182 10 Loans from related parties ...... 1,942 1,585 518 17 3,790 3,291 1,011 NON-CURRENT LIABILITIES: Employee benefit liabilities, net ...... 99 78 26 Deferred taxes ...... 723 990 193 13 822 1,068 219 TOTAL LIABILITIES ...... 4,612 4,359 1,230

EQUITY: 11 Share capital ...... 2 2 1 Reserve from transactions with controlling shareholders ...... 407 389 109 Retained earnings ...... 6,120 5,401 1,633

TOTAL EQUITY ...... 6,529 5,792 1,743 TOTAL LIABILITIES AND EQUITY ...... 11,141 10,151 2,973

The notes to the consolidated financial statements form an integral part thereof.

March 12, 2021 “Signed” “Signed” Date of approval of the Alexander Rabinovich Amos Cohen financial statements CEO CFO

F-5

C-6 Canndoc Ltd.

Consolidated Statements of Comprehensive Income

Year ended December 31, 2018 2017 2018

NIS (in thousands, NIS (in thousands, USD (in thousands, except for per except for per except for per share data) share data) share data) Note

Revenue ...... 6,955 6,154 1,856 Cost of sales: Cost of sales before fair value adjustments .... (2,535) (2,643) (676) 15a Gross profit before fair value adjustments .... 4,420 3,511 1,180 Change in fair value of biological assets ...... 1,293 2,687 345 4 Realized portion of change in fair value of biological assets on inventory sold ...... (2,229) (3,460) (595) Gross profit ...... 3,484 2,738 930 Selling, general and administrative expenses . . (2,478) (1,815) (661) 15b Operating income...... 1,006 923 269 Finance expenses, net ...... (120) (75) (32) 15c Income before taxes ...... 886 848 237 Taxes on income ...... (167) (188) (45) 13 Net income ...... 719 660 192

Basic and diluted net earnings per share ...... 48 44 13 16

The notes to the consolidated financial statements form an integral part thereof.

F-6

C-7 Canndoc Ltd.

Consolidated Statements of Changes in Equity

Reserve from transactions with Share controlling Retained capital shareholders earnings Total equity

NIS in thousands

Balance as of January 1, 2017...... 2 343 4,741 5,086 Equity benefit from transactions with controlling shareholders ...... — 46 — 46 Net income ...... — — 660 660 Balance as of December 31, 2017 ...... 2 389 5,401 5,792 Equity benefit from transactions with controlling shareholders ...... — 18 — 18 Net income ...... — — 719 719 Balance as of December 31, 2018 ...... 2 407 6,120 6,529

USD in thousands Balance as of January 1, 2018...... 1 104 1,441 1,546 Equity benefit from transactions with controlling shareholders ...... — 5 — 5 Net income ...... — — 192 192 Balance as of December 31, 2018 ...... 1 109 1,633 1,743

The notes to the consolidated financial statements form an integral part thereof.

F-7

C-8 Canndoc Ltd.

Consolidated Statements of Cash Flows

Year ended December 31, 2018 2017 2018

NIS in NIS in USD in thousands thousands thousands Cash flows from operating activities:

Net income ...... 719 660 192 Adjustments to the profit or loss items: Interest expenses, net...... 121 50 32 Taxes on income ...... 167 188 45 Change in employee benefit assets, net ...... 21 13 6 Depreciation and amortization ...... 241 203 64 550 454 147 Changes in asset and liability items: Accounts receivable ...... (429) (121) (114) Inventories ...... (277) 225 (74) Biological assets ...... (49) — (13) Trade payable ...... 585 (652) 156 Other accounts payable ...... (6) 247 (2) (176) (301) (47) Cash paid and received during the year for: Interest paid ...... (84) (5) (23) Interest received ...... — 1 — Taxes paid ...... (657) (217) (175) (741) (221) (198) Net cash provided by operating activities ...... 352 592 94 Cash flows from investing activities: Purchase of property, plant and equipment ...... (543) (283) (145) Withdrawal of deposits...... — 134 — Deposits made ...... (63) — (17) Net cash used in investing activities ...... (606) (149) (162) Cash flows from financing activities: Repayment of loans from controlling shareholders ...... (877) (401) (234) Proceeds of loans from Intercure Ltd...... 1,215 — 324 Receipt of loans from banks ...... 250 625 67 Repayment of loans from banks ...... (464) (396) (124) Net cash provided by (used in) financing activities ...... 124 (172) 33 Increase (decrease) in cash and cash equivalents ...... (130) 271 (35) Cash and cash equivalents at the beginning of the year ...... 474 203 127 Cash and cash equivalents at the end of the year ...... 344 474 92

The notes to the consolidated financial statements form an integral part thereof.

F-8

C-9

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 1: GENERAL

A. The Company was incorporated in March 2010. The Company produces and distributes pharmaceutical-grade cannabis and cannabis-based products for medical use.

B. The Company holds an active license in Israel to produce cannabis for medical use from the Israel Medical Cannabis Agency, which is the Medical Cannabis Unit of the Israeli Ministry of Health and to distribute it to patients in Israel according to the Old Regulations adopted by the Israeli Ministry of Health. In addition, the Company received approval for its compliance with the quality and standardization of the Ministry of Health regarding the certification and export readiness under the Israel Medical Cannabis—Good Agricultural Practices standard.

After the reporting period, the company received permanent licenses from the Medical Cannabis Unit regarding it`s facilities in Beit HaEmek and Kibbutz Nir Oz according the New Regulations published by the Israeli Medical Cannabis Agency (hereinafter: “New Regulations"). See note 18f1 and 18f2.

C. During September 2018, a transaction was completed whereby Intercure Ltd., a company whose shares are traded on the Tel Aviv Stock Exchange, acquired 38% of the Company’s ordinary shares and 50% of the Company’s management share capital from Mr. Yaron Blubstein, one of the controlling shareholders of the Company until that date. Following completion of the transaction, the Company repaid a loan from Mr. Yaron Blubstein and received additional loans from Intercure Ltd. See Note 17.

In February 11, 2019, Intercure Ltd. completed the acquisition of the entire holding of the Company, such that, after the transaction was closed, Intercure Ltd holds 100% of the Company’s issued and paid-up capital.

D. Definitions:

In these financial statements:

Joint operation — An arrangement in which the Company has joint control of the rights to the assets and obligations for the liabilities relating to the arrangement.

NIS — New Israeli Shekel

Related parties — A person or entity that is related to the Company as defined in IAS 24

The Company — Canndoc Ltd.

The Group — The Company and the Partnership

The Partnership — An unregistered partnership which is 70% held by the Company and which represents a joint operation. See Note 8b.

USD — U.S. Dollars

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, described below, have been applied consistently for all periods presented, unless otherwise stated.

A. International Financial Reporting Standards:

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

F-9

C-10

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

B. Basis of presentation of the financial statements: 1. The consolidated financial statements include the Company’s proportionate share of a partnership which represents a joint operation. 2. The operating cycle of the Company is 12 months. 3. The Company has elected to present profit or loss items using the function of expense method.

C. Investment in joint arrangements:

Joint arrangements are arrangements in which the Company has joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Joint operations:

In joint operations the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement. The Company recognizes in relation to its interest in the joint operations: (i) its assets, including its share of any assets held jointly; (ii) its liabilities, including its share of any liabilities incurred jointly; (iii) its revenue from the sale of its share of the output arising from the joint operations; (iv) its share of the revenue from the sale of the output by the joint operations; and (v) its expenses, including its share of any expenses incurred jointly.

D. Functional currency, presentation currency and foreign currency:

The functional currency and presentation currency of the Company is the NIS.

For the convenience of the reader, the reported NIS amounts as of December 31, 2018 have been translated into U.S. dollars, at the daily representative rate of exchange between the NIS and the U.S. dollar reported by the Bank of Israel on December 31, 2018 (U.S. $1 = NIS 3.748).

The U.S. dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollars or convertible into U.S. dollars, unless otherwise indicated. The U.S. dollar amounts were rounded to whole numbers for convenience.

E. Cash and cash equivalents:

Cash and cash equivalents include cash that is immediately available, deposits that can be immediately withdrawn and unrestricted term deposits with a maturity of three months or less from the date of investment.

F. Short-term deposits:

Short-term deposits are deposits with an original maturity of more than three months from the date of investment and which do not meet the definition of cash equivalents. The deposits are presented according to their terms of deposit.

G. Biological assets:

The Company measures biological assets which comprise mainly of plants and agricultural produce of cannabis at fair value less costs to sell until the point of harvest. This value is used as the basis for the cost of inventories after harvest. Gains or losses from changes in fair value less costs to sell are included in the Company’s profits/losses for the year in which they arise. The costs of growing biological assets are capitalized to the cost of biological assets.

F-10

C-11

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

H. Inventories:

Inventories are measured at the lower of cost and net realizable value. The Company classifies agricultural produce of cannabis crops from a biological asset to inventories at the time of harvest at fair value less costs to sell at that date. This value serves as the cost basis of inventories. The cost of inventories comprises processing costs and costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale. The Company periodically evaluates the condition and age of inventories and makes provisions for slow moving inventories accordingly.

I. Revenue recognition:

As described in Note 2.q, the Company adopted IFRS 15, “Revenue from Contracts with Customers” using the modified retrospective method from January 1, 2018.

Under IFRS 15, revenue from contracts with customers is recognized when the control over the goods or services is transferred to the customer. The transaction price is the amount of the consideration that is expected to be received based on the contract terms, excluding amounts collected on behalf of third parties (such as taxes).

Revenue is recognized in profit or loss to the extent that the economic benefits are expected to flow to the Company, and the income and costs, if relevant, can be measured reliably.

J. Taxes on income:

The tax results of current or deferred taxes are recognized in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income or equity.

1. Current taxes:

The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability payable in respect of previous years.

2. Deferred taxes:

Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.

Deferred tax balances are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that have been enacted or substantively enacted by the reporting date.

The probability of the utilization of deferred tax assets is reviewed in the initial recognitions and at each reporting date. Deductible carryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset is recognized to the extent that their utilization is probable.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

F-11

C-12

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

K. Leases:

The criteria for classifying leases as finance or operating depend on the substance of the agreements and are made at the inception of the lease in accordance with the following principles as set out in IAS 17.

The Group as lessee:

1. Finance leases:

Assets that transfer all the risks and rewards incidental to ownership of the asset to the Group are classified as finance leases. At the commencement of the lease term, the leased asset is measured at the lower of the fair value of the leased asset or the present value of the minimum lease payments.

The leased asset is depreciated over the shorter of its useful life and the lease term.

2. Operating leases:

Assets which do not transfer substantially all the risks and rewards of ownership inherent to the ownership of the leased asset are classified as operating leases. Lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term.

L. Property, plant and equipment:

Items of property, plant and equipment are measured at cost, including direct acquisition costs, less accumulated depreciation, accumulated impairment losses and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment that are used in connection with property, plant and equipment.

A part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately using the component method.

The cost of items of property, plant and equipment comprise the initial estimate of the costs of dismantling and removing the property and restoring the site on which the property is located.

Depreciation is calculated on a straight-line basis over the useful life of the asset at equal annual rates as follows:

% Machinery and equipment ...... 7 – 15 Computers ...... 33 Improvements of buildings ...... 10

Improvements of buildings are depreciated on a straight-line basis over the expected life of the improvement.

The useful life, depreciation method and residual value of an asset are reviewed at least each year- end and any changes are accounted for prospectively as a change in accounting estimate. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized.

F-12

C-13

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

M. Financial instruments:

As described in Note 2 q. of the Company adopted IFRS 9, “Financial Instruments” retrospectively without restatement of comparative data.

The accounting policy for financial instruments that applies starting January 1, 2018 is as follows:

1. Financial assets:

Financial assets are measured upon initial recognition at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets, except for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.

The Company classifies and measures debt instruments in the financial statements based on the following criteria:

- The Company’s business model for managing financial assets; and

- The contractual cash flow terms of the financial asset.

1a) Debt instruments are measured at amortized cost when:

The Company’s business model is to hold the financial assets in order to collect their contractual cash flows, and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, the instruments in this category are measured according to their terms at amortized cost using the effective interest rate method, less any provision for impairment.

On the date of initial recognition, the Company may irrevocably designate a debt instrument as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency, such as when a related financial liability is also measured at fair value through profit or loss.

1b) Debt instruments are measured at fair value through profit or loss when:

A financial asset which is a debt instrument does not meet the criteria for measurement at amortized cost or at fair value through other comprehensive income. After initial recognition, the financial asset is measured at fair value.

2. Impairment of financial assets:

The Company evaluates at the end of each reporting period the loss allowance for financial debt instruments which are not measured at fair value through profit or loss. The Company distinguishes between two types of loss allowances:

2a) Debt instruments whose credit risk has not increased significantly since initial recognition, or whose credit risk is low—the loss allowance recognized in respect of this debt instrument is measured at an amount equal to the expected credit losses within 12 months from the reporting date (12-month ECLs); or

2b) Debt instruments whose credit risk has increased significantly since initial recognition, and whose credit risk is not low—the loss allowance recognized is measured at an amount equal to the expected credit losses over the instrument’s remaining term (lifetime ECLs).

The Company implements the exception detailed in the standard, according to which it assumes that the credit risk of a debt instrument did not increase significantly from the date of initial recognition if it was determined at the reporting date that the instrument has a low credit risk, for example when the instrument has an external rating of “investment grade”.

F-13

C-14

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

An impairment loss on debt instruments measured at amortized cost is recognized in profit or loss with a corresponding loss allowance that is offset from the carrying amount of the financial asset.

The Company has short-term financial assets such as trade receivables in respect of which the Company applies a simplified approach and measures the loss allowance in an amount equal to the lifetime expected credit losses.

3. Derecognition of financial assets:

A financial asset is derecognized only when:

a. The contractual rights to the cash flows from the financial asset has expired; or

b. The Company has transferred substantially all the risks and rewards deriving from the contractual rights to receive cash flows from the financial asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or

c. The Company has retained its contractual rights to receive cash flows from the financial asset but has assumed a contractual obligation to pay the cash flows in full without material delay to a third party.

4. Financial liabilities:

4a) Financial liabilities measured at amortized cost:

Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial liability.

After initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate method, except for:

a. Financial liabilities at fair value through profit or loss such as derivatives;

b. Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies;

c. Financial guarantee contracts;

d. Commitments to provide a loan at a below-market interest rate;

e. Contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies.

4b) Financial liabilities measured at fair value through profit or loss:

At initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss.

After initial recognition, changes in fair value are recognized in profit or loss

5. Derecognition of financial liabilities:

A financial liability is derecognized only when it is extinguished, that is when the obligation specified in the contract is discharged or cancelled or expires. A financial liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services; or is legally released from the liability.

When there is a modification in the terms of an existing financial liability, the Company evaluates whether the modification is substantial.

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C-15

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

If the terms of an existing financial liability are substantially modified, such modification is accounted for as an extinguishment of the original liability and the recognition of a new liability. The difference between the carrying amounts of the above liabilities is recognized in profit or loss.

If the modification is not substantial, the Company recalculates the carrying amount of the liability by discounting the revised cash flows at the original effective interest rate and any resulting difference is recognized in profit or loss.

When evaluating whether the modification in the terms of an existing liability is substantial, the Company considers both quantitative and qualitative factors.

6. Offsetting financial instruments:

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously. The right of set-off must be legally enforceable not only during the ordinary course of business of the parties to the contract but also in the event of bankruptcy or insolvency of one of the parties. In order for the right of set-off to be currently available, it must not be contingent on a future event, there may not be periods during which the right is not available, or there may not be any events that will cause the right to expire.

N. Fair value measurement:

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 is based on the assumption that the transaction will take place in the asset’s or the liability’s principal market, or in the absence of a principal market, in the most advantageous market.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - inputs other than quoted prices included within Level 1 that are observable directly or indirectly.

Level 3 - inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).

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C-16

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

O. Employee benefit liabilities:

The Company has several employee benefit plans:

1. Short-term employee benefits:

Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. 2. Post-employment benefits:

The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans. The Company has defined contribution plan pursuant to section 14 to the Severance Pay Law under which the Company pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently with performance of the employee’s services. P. Earnings (loss) per share:

Earnings per share are calculated by dividing the net income by the weighted number of ordinary shares outstanding during the period. Management shares (refer to Note 11) do not confer upon their holders the right to receive dividends and as such are excluded from the calculation of earnings per share. There were no ordinary share equivalents that would have a dilutive impact in 2017 and 2018. Q. Changes in accounting policies—initial adoption of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards:

1. Initial adoption of IFRS 9, “Financial Instruments”:

In July 2014, the IASB issued the final and complete version of IFRS 9, “Financial Instruments” (“IFRS 9”), which replaces IAS 39, “Financial Instruments: Recognition and Measurement”. IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to all assets within the scope of IAS 39. IFRS 9 has been applied for the first time in these financial statements retrospectively without restatement of comparative data. IFRS 9 had no significant effect on the Company financial statements.

2. Initial adoption of IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”): IFRS 15 establishes a comprehensive and uniform mechanism that regulates the accounting treatment of income deriving from contracts with customers. IFRS 15 supersedes IAS 18 “Revenue” and IAS 11 “Construction Contracts” and the related interpretations. The core principle of IFRS 15 is that recognition of revenue will reflect the transfer of goods or services to customers in an amount representing the economic benefits that the entity expects to receive in exchange for them. For this purpose, IFRS 15 provides that the recognition of revenue shall be made when the entity transfers to the customer the goods and / or services listed in the contract with it in such a manner that the customer obtains control over those goods or services.

F-16

C-17

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

IFRS 15 introduces a five-step model that applies to revenue earned from contracts with customers: Step 1: Identify the contract (or contracts) with a customer.

Step 2: Identify the distinct performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Assigning the transaction price to the execution obligations. Step 5: Recognize revenue when a performance obligation is satisfied. Implementation of the model depends on the specific facts and circumstances of the contract and requires, at times, extensive discretion. In addition, IFRS 15 requires extensive disclosures regarding contracts with customers, significant estimations and changes in estimations upon application of IFRS 15, in order for the user of the financial statements to understand the timing, amount of revenue and future cash flow from customers.

IFRS 15 is effective for annual financial statements beginning as of January 1, 2018 and forward. The Company applied IFRS 15 using the modified retrospective method. IFRS 15 had no impact on the Company’s financial statements.

3. IFRS 16, “Leases”.

In January 2016, the IASB issued IFRS 16 regarding Leases. According to IFRS 16, a lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration. The key effects of IFRS 16 are as follows:

• Lessees are required to recognize an asset and a corresponding liability in the statement of financial position in respect of all leases (except in certain cases, see below) similar to the accounting treatment of finance leases according to the existing IAS 17, “Leases”. • Lessees are required to initially recognize a lease liability for the obligation to make lease payments and a corresponding right-of-use asset. Lessees will also recognize interest and depreciation expense separately. • Variable lease payments that are not dependent on changes in the Israeli CPI or interest but are based on performance or use (such as a percentage of revenues) are recognized as an expense by the lessees as incurred and recognized as income by the lessors as earned. • In the event of change in variable lease payments that are CPI-linked, lessees are required to remeasure the lease liability and the effect of the remeasurement is an adjustment to the carrying amount of the right-of-use asset.

• IFRS 16 includes two exceptions according to which lessees are permitted to elect to apply a method similar to the current accounting treatment for operating leases. These exceptions are leases for which the underlying asset is of low value and leases with a term of up to one year.

• The accounting treatment by lessors remains substantially unchanged, namely classification of a lease as a finance lease or an operating lease.

IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Once adopted, IFRS 16 will not have a material impact on the financial statements.

F-17

C-18

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

R. New and revised IFRS Standards in issue but not yet effective as at 31 December 2018

IAS 41 Agriculture The amendment to IAS 41 removes the requirement for entities to exclude cash flows for taxation when measuring fair value. This aligns the fair value measurement in IAS 41 with the requirements of IFRS 13 Fair Value Measurement to use internally consistent cash flows and discount rates and enables preparers to determine whether to use pre-tax or post-tax cash flows and discount rates for the most appropriate fair value measurement.

The amendments will be applied to annual reporting periods beginning on or after January 1, 2022, with early application permitted.

S. Estimates and assumptions used in the preparation of the financial statements:

The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.

The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

- Inventories and biological assets:

The computation of the fair value of biological assets, requires the Company to make several estimates and assumptions which include, among others, an estimate of the growing degree of the plant until the date of harvest, harvesting costs, costs to sell, extraction cost of oil and packaging costs of finished products, estimates of selling price of the Company’s products and estimates of material loss during the process.

- Deferred tax assets:

Deferred tax assets are recognized for unused carryforward tax losses and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the losses can be utilized. Management estimation is required to determine the amount of deferred tax asset that can be recognized based upon the timing and level of probable taxable profit, its source and the tax planning strategy.

F-18

C-19

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 3: ACCOUNTS RECEIVABLE

December 31, 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Prepaid expenses ...... 76 55 21 Credit cards ...... 225 193 60 Joint operations with a kibbutz ...... 309 61 82 Debtors and other receivables ...... 251 123 67 861 432 230

NOTE 4: BIOLOGICAL ASSETS

Year ended December 31, 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Balance at January 1 ...... — — — Costs of medical cannabis plant growth ...... 2,884 2,580 769 Change in fair value less costs to sell ...... 1,293 2,687 345 Transfer to inventories ...... (4,128) (5,267) (1,101) Balance at December 31 ...... 49 — 13

The biological assets of the Company comprise mainly of seedlings and agricultural produce of medical cannabis. Below is the movement in biological assets:

For each of the years ended December 31, 2018 and 2017, after the harvest time had passed, only mother plants were left at the farm, which were used for cutting and growing new cannabis seedlings of the same species. Apart from the cutting process, the Company does not use mother plants for the purpose of growing agricultural produce. Therefore, mother plants are included in property, plant and equipment.

The growth cycle of cannabis plants, which are not mother plants, lasts on average 15 weeks, during which they undergo a process of vegetation and flowering and, at the end, the agricultural produce is harvested.

The agricultural produce at the point of harvest is measured at Level 3 in the fair value hierarchy, using fixed prices of finished medical cannabis products supervised by the Medical Cannabis Unit, less costs to turning agricultural produce into finished product, which include costs of drying, packaging and extraction, less cost to sell. In measuring the fair value of agricultural produce, the Company relies on estimates which include, among others, estimation of loss of agricultural produce in process as well as an estimation of the percentage of finished products to be sold as medical cannabis oil and the percentage of products sold as dry medical cannabis out of total finished products sold.

F-19

C-20

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 4: BIOLOGICAL ASSETS (Continued)

Plants prior to harvest are measured at Level 3 in the fair value hierarchy using fixed prices of finished medical cannabis products supervised by the Medical Cannabis Unit similarly to the way agricultural produce is measured. In estimating the fair value of plants prior to harvest, also the cost to complete the growth cycle as well as the amount of agricultural produce to be received at the end of the flowering phase are estimated.

NOTE 5: INVENTORIES

Inventories consist of finished products of dried and packaged or rolled medical cannabis and cannabis oil as well products in process which include, among others, agricultural produce that has been transferred from biological assets but its process into finished products has not yet been completed.

December 31, 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Cannabis: Finished products ...... 299 166 80 Product in process and dried flowering ...... 7,672 7,379 2,047 7,971 7,545 2,127 Cannabis oil: Finished products ...... 118 86 31 Products in process ...... 87 268 23 205 354 54 Total Inventories ...... 8,176 7,899 2,181

F-20

C-21

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 6: PROPERTY, PLANT AND EQUIPMENT

2018:

Computers Machinery and office and

equipment equipment Building Total NIS in thousands Cost:

Balance at January 1, 2018 ...... 34 1,142 1,146 2,322 Additions during the year ...... 45 60 438 543 Balance at December 31, 2018 ...... 79 1,202 1,584 2,865 Less—accumulated depreciation: Balance at January 1, 2018 ...... 25 543 435 1,003 Additions during the year ...... 7 105 129 241 Balance at December 31, 2018 ...... 32 648 564 1,244 Net property, plant and equipment at December 31, 2018 ...... 47 554 1,020 1,621

USD in thousands

Cost: Balance at January 1, 2018 ...... 9 305 306 620 Additions during the year ...... 12 16 117 145 Balance at December 31, 2018 ...... 21 321 423 765 Less—accumulated depreciation: Balance at January 1, 2018 ...... 7 145 116 268 Additions during the year ...... 2 28 34 64 Balance at December 31, 2018 ...... 9 173 150 332 Net property, plant and equipment at December 31, 2018 ...... 12 148 273 433

2017:

Computers Machinery and office and equipment equipment Building Total

NIS in thousands Cost:

Balance at January 1, 2017 ...... 31 998 1,010 2,039 Additions during the year ...... 3 144 136 283 Balance at December 31, 2017 ...... 34 1,142 1,146 2,322 Less—accumulated depreciation: Balance at January 1, 2017 ...... 21 455 324 800 Additions during the year ...... 4 88 111 203 Balance at December 31, 2017 ...... 25 543 435 1,003 Net property, plant and equipment at December 31, 2017 ...... 9 599 711 1,319

F-21

C-22

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 7: DEPOSITS

December 31 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Car lease deposits(1) ...... — 27 Other deposits(2) ...... 90 — 24 Total deposits ...... 90 27 24

1) The amounts were deposited for the lease of vehicles for a period of 3 years ending in June 2019. (In 2018, the amount was classified as short-term). (2) The amounts were deposited for the option of future lease of the Company offices in Herzliya.

NOTE 8: INVESTMENTS IN INVESTEES

Investments in joint arrangements:

a. General information:

Company’s rights in Principal equity and place of voting business rights December 31, 2018:

Joint operation (see Note 8b) ...... Israel 70% December 31, 2017: Joint operation (see Note 8b) ...... Israel 70%

b. Partnership’s agreement:

In May 2015, the Company signed a partnership agreement with a wholly controlled entity of a kibbutz in the north of Israel (“the Partnership Agreement”). Pursuant to the Partnership Agreement, the Company and the kibbutz established a joint venture by way of an unregistered partnership for the purpose of breeding, cultivation and harvesting cannabis for medical use that will be processed and sold under the Company’s brand (the “Partnership”). Since the Partnership was established only for these purposes, the kibbutz has no right in any other activities of the Company, including the processing of cannabis or any collaboration between the Company and its partners. To the best of the Company’s knowledge, the kibbutz is entitled to lease land from ILA (Israel Land Authority) for a period of 49 years ending on September 30, 2038. The kibbutz undertook to make available the land for the use of the Partnership at no consideration during the entire term of the agreement. The Partnership is responsible for the payment of municipal tax and any other tax applicable to the holder and user of land and not the owners or lessee of land.

F-22

C-23

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

The Company holds 70% of the rights to the Partnership and the kibbutz holds the remaining rights. The profits and losses of the Partnership are divided between the parties based on the above ratio. However, decisions taken by the Partnership’s management on the following issues require a unanimous decision and not a majority decision: sale of the rights or part of the rights in the Partnership, introduction of additional partners to the Partnership, approval of the annual business plan, approval of dividend distribution, approval of transactions with interested parties, issuance of guarantees to third parties, raising capital or debt for investments, signatory rights in the Partnership and appointment of the CEO and chairman of the Partnership. Pursuant to the provisions of the Partnership Agreement, all current and future rights to the Partnership’s intellectual property, including all its components, are the sole property of the Company.

The Partnership Agreement provides for an initial term of 5 years, including 3 options of 5 years each, renewable automatically subject to the parties’ compliance with the terms of the Partnership Agreement. The kibbutz is entitled to terminate the Partnership Agreement for any reason by giving an advance notice of the earlier of 18 months or until the Company is able to find and receive approval for an alternative location. The Company is entitled to terminate the Partnership Agreement for any reason by giving an advance notice of 3 months.

For additional details see also Note 18f1, Events After the Reporting Period.

NOTE 9: BANK LOANS

Composition:

Effective Stated interest interest rate rate Carrying amount

NIS in USD in % thousands thousands December 31, 2018:

Loans from banks(1) ...... Prime+1.8 3.55 200 53 December 31, 2017: Loans from banks(2) ...... Prime+1.95 3.55 300 80 Loans from banks(3) ...... Prime+2.2 3.8 114 30 Total Bank Loans ...... 414 110

(1) The Company obtained a loan of NIS 250 thousand (USD 67 thousand) in November 2018 with a term of six months. Principal and interest are payable in 6 monthly payments.

(2) The Company obtained a loan of NIS 300 thousand (USD 80 thousand) in December 2017 with term of one year. Principal and interest are payable in 12 monthly payments.

(3) The Company obtained a loan of NIS 225 thousand (USD 60 thousand) in June 2017 with a term of one year. Principal and interest are payable in 12 monthly payments.

F-23

C-24

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 10: OTHER ACCOUNTS PAYABLE December 31, 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Accrued expenses ...... 186 139 50 Employees ...... 148 81 39 Accrued vacation ...... 128 111 34 Checks payable ...... 25 255 7 Government authorities for employees ...... 78 46 21 Government authorities...... 6 46 2 Other payables ...... 110 9 29 Total Other Accounts Payable ...... 681 687 182

NOTE 11: EQUITY

a. Composition of share capital: December 31, 2018 and 2017 Issued and Authorized outstanding

Number of shares Ordinary shares of NIS 0.1 par value ...... 2,999,990 15,000 Management shares of NIS 0.1 par value(1) ...... 10 10 3,000,000 15,010

(1) Any two management shares confer on the holder the right to appoint a director in the Company and terminate the appointment and the right to receive the par value of the share upon liquidation. Except for these rights, management shares do not confer any right in the Company.

b. Distribution of profits:

Since its establishment, the Company has not distributed and/or has not declared the distribution of any dividend.

Dividend distribution policy—Under the Company’s articles of association, in each year the Company will distribute to its shareholders, subject to the provisions of the law and in accordance with the Company’s financial position, a dividend from the Company’s profits after tax that is not less than 50% of the Company’s distributable profits. Apart from the restrictions set forth by the law, the Company does not have limits on distribution of dividends.

c. Capital reserve from transactions with controlling shareholders:

Assets and liabilities involved in a transaction between the Company and the controlling shareholder are recognized at fair value at the date of the transaction. The difference between the fair value and the consideration determined in the transaction is taken to equity. A positive difference arises from beneficiary loans from controlling shareholders with off-market conditions. A positive difference represents, in substance, owners’ investment and is therefore presented in a separate item in equity “reserve from transactions with controlling shareholders”.

F-24

C-25

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

As for beneficiary loans from controlling shareholders in respect of which a benefit from controlling shareholder was taken to reserve from transactions with controlling shareholders, see Note 17c.

NOTE 12:- FINANCIAL INSTRUMENTS a. Classification of financial assets and financial liabilities:

The financial assets and financial liabilities in the statement of financial position are classified by groups of financial instruments:

December 31, 2018 2017 2018

NIS in NIS in USD in thousands thousands thousands Financial assets at amortized cost:

Other accounts receivable ...... 875 404 233

Total current ...... 785 377 209

Total non-current ...... 90 27 24 b. Financial liabilities, interest-bearing loans and borrowings:

December 31 Effective Interest 2018 2017 2018

rate NIS in NIS in USD in % Maturity date thousands thousands thousands Loan from Bank Leumi of NIS 300 thousand...... 3.55% December 2018 — 300 — Loan from Bank Leumi of NIS 225 thousand...... 3.8% June 2018 — 114 — Loan from Bank Leumi of NIS 250 thousand...... 3.4% April 2019 200 — 53

Total current interest-bearing bank loans ...... 200 414 53 c. Other financial liabilities:

December 31, 2018 2017 2018

NIS in NIS in USD in Financial liabilities: thousands thousands thousands Financial liabilities at amortized cost:

Bank Loans ...... 200 414 53 Loans from related parties ...... 1,942 1,585 518 Trade and other accounts payable ...... 1,216 646 325 Total current ...... 3,358 2,645 896

F-25

C-26

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 12: FINANCIAL INSTRUMENTS (Continued)

d. Fair value of financial instruments:

The carrying amount of cash and cash equivalents, deposits, other accounts receivable, trade payables, bank loans, loans from related parties and other accounts payable approximate their fair value. e. Financial risk factors:

The Company’s activities expose it to various financial risks such as market risks, credit risk and liquidity risk. The Company’s comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects on the Company’s financial performance.

Management of the above risks is performed by the Chairman of the Board and the Company’s CEO who establish principles for the overall risk management as well as specific policies with respect to certain exposures to risks such as interest rate risk and credit risk.

1. Market risks:

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risks such as share price risk. Financial instruments that are affected by market risk include, among others, loans, borrowings, deposits and derivative financial instruments.

2. Interest risk:

Interest risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates.

The Group is exposed to the risk of changes in the market interest on loans from a bank with variable interest which depends on the Prime interest. As of December 31, 2018, nearly 6% of the financial liabilities bear variable interest.

3. Credit risk:

Credit risk is the risk of a loss to the Group if a counterparty fails to meet its obligations as a customer or liabilities that arise from a financial instrument.

As of December 31, 2018, cash and cash equivalents totaled NIS 344 thousand (USD 92 thousands). Cash is invested with strong financial corporations.

The Company’s revenues are performed mostly in cash or by credit cards upon sale or close to the date of the transaction.

4. Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to the management of its liquidity risk is to ensure, to the extent possible, sufficient level of liquidity to meet liabilities when due.

The Company’s policy is to review liquidity resources and ensure that sufficient funds are available to meet financial obligations as they become due. The above does not consider the potential effect of extreme scenario that cannot be reasonably predicted.

F-26

C-27

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 13: TAXES ON INCOME a. Tax rates applicable to the Group companies:

The Israeli corporate tax rate was 24% in 2017 and 23% in 2018. b. Final tax assessments: By virtue of the Income Tax Ordinance, the assessments of the Company are considered final through the 2012 tax year. c. Taxes on income included in profit or loss:

Year ended December 31, 2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Current taxes ...... 434 417 116 Deferred taxes, see also d below ...... (267) (229) (71) 167 188 45 d. Deferred taxes:

Composition:

Statements of Statements of financial position comprehensive income Year ended December 31, December 31,

2018 2017 2018 2018 2017 2018

NIS in NIS in USD in NIS in NIS in USD in thousands thousands thousands thousands thousands thousands Deferred tax liabilities:

Biological assets ...... 775 990 207 (215) (229) (57) Employee accruals...... (52) (14) (52) — (14) Deferred tax expenses (income) .... — — — (267) (229) (71) Total deferred tax liabilities ...... 723 990 193

F-27

C-28

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

e. Theoretical tax:

A reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in profit or loss were taxed at the statutory tax rate and the taxes on income recorded in profit or loss is as follows: Year ended December 31,

2018 2017 2018 NIS in NIS in USD in thousands thousands thousands

Income before taxes on income...... 886 848 237

Statutory tax rate...... 23% 24% 23% Tax computed at the statutory tax rate ...... 204 204 55 Tax expenses (tax benefit) in respect of update in tax rate ...... - (28) - Recognition of deferred taxes in respect of prior year temporary differences ...... (43) - (12) Other reconciling items...... 6 12 2 Taxes on income ...... 167 188 45

NOTE 14:- COMMITMENTS AND CONTINGENT LIABILITIES a. Partnership Agreement:

In May 2015, the Company signed a Partnership Agreement with a wholly controlled entity of a kibbutz in the north of Israel for the purpose of breeding and growing cannabis for medical use that will be processed and sold under the Company’s brand. For additional details regarding the Partnership Agreement, see Note 8b. b. Claims against the Company: 1. On November 3, 2016, a motion to approve a class action was filed with the District Court of Tel Aviv-Yafo, against Canndoc and the other seven holders of the active license in accordance with the old arrangement regarding growing medical cannabis. On January 4, 2020 the Court rejected the motion and determine that the applicants had not proved an evidentiary basis for thein motion.

2. Municipal tax payments demand for the years 2011-2018 from the Bat-Yam Municipality:

On January 15, 2018, the Company, together with Abarbanel Hospital in Bat Yam and another 6 dealers in the field of cannabis for medical use, received a demand for the payment of municipal tax of approximately NIS 2.5 million (USD 667 thousands) (jointly and severally) for the distribution of medical cannabis at Abarbanel Hospital in 2011- 2017 and another demand for the payment of an additional amount of approximately NIS 275 thousand (USD 73 thousands) for 2018 (“the Municipal Tax Demand”). After the reporting period, settlement agreement was signed and no payments were made by the Company.

For additional details see Note 18d1 and 18d2, Events After the Reporting Period.

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Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 15:- ADDITIONAL INFORMATION TO THE PROFIT OR LOSS ITEMS

Year ended December 31, 2018 2017 2018

NIS in NIS in USD in thousands thousands thousands a. Cost of sales before fair value adjustments:

Raw and auxiliary materials consumed ...... 218 96 58 Salaries, wages and related expenses ...... 1,347 1,538 359 Subcontracted works...... 1,469 1,060 392 Management, consulting and other services...... 247 165 66 Maintenance and other expenses ...... 281 146 75 Depreciation ...... 235 186 63 Increase in raw and auxiliary materials inventories ...... (1,262) (548) (337) 2,535 2,643 676

b. Selling, general and administrative expenses: Salaries, wages and related expenses ...... 799 298 213 Consulting and other services ...... 822 640 219 Marketing and sales ...... 610 724 163 Office expenses ...... 241 149 64 Depreciation and amortization ...... 6 4 2 2,478 1,815 661

c. Finance income (expenses): Finance income: Interest income on bank deposits ...... — 1 —

Finance expenses: Finance expenses in respect of loans from banks . . . 25 6 7 Finance expenses in respect of loans from controlling shareholders ...... 72 46 19 Bank commission and other ...... 23 24 6 120 76 32

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C-30

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

NOTE 16: NET EARNINGS PER SHARE

Details of the number of ordinary shares and net income used in the computation of net earnings per share are as follows:

Year ended December 31, 2018 2017 2018 Weighted average Weighted number number of average ordinary Net of ordinary Net Net shares income shares income income In NIS in NIS in USD in

thousands thousands In thousands thousands thousands Number of ordinary shares

and net income ...... 15,000 719 15,000 660 192

NOTE 17: BALANCES AND TRANSACTIONS WITH RELATED PARTIES a. Balances with interested and related parties:

Controlling shareholders

As for terms NIS in USD in see Note thousands thousands December 31, 2018: Loans from related parties:

Controlling shareholders ...... 17c 751 200 Intercure ...... 17d 1,191 318 Other accounts payable ...... 110 29 2,052 547

December 31, 2017: Loans from related parties- Controlling shareholders ...... 17c 1,585 423 Other accounts payable ...... 8 2 1,593 425

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C-31

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

b. Transactions with interested and related parties:

Controlling shareholders

As for terms NIS in USD in see Note thousands thousands Year ended December 31, 2018:

Cost of sales ...... 17e 152 41 Finance expenses ...... 17c, 17d 72 19 224 60

Year ended December 31, 2017:

General and administrative expenses ...... 17e 125 33 Cost of sales ...... 17e 145 39 Finance expenses ...... 17c 46 12 316 84 c. Loans from controlling shareholders:

During 2013, the Company obtained two loans in the aggregate amount of NIS 2,380 thousand from its controlling shareholders at that time, Avner Barak and Yaron Blubstein. The loans are linked to the Consumer Price Index, interest free and with no fixed repayment date. The Company repaid the loan from Mr. Blubstein in September 2018.

In 2013, Avner Barak made an additional loan of NIS 200 thousand to the Company. The loan is for a period of 4 years with interest at the prime rate plus a 1.65% spread. The principal and interest are to be repaid with equal monthly payments at each month.

In 2018 and 2017, the total amount repaid was approximately NIS 858 thousand (USD 229 thousand) and NIS 401 thousand, respectively. The carrying amount of loans owed by the Company to Avner Barak as of December 31, 2018 and 2017 was approximately NIS 751 thousand (USD 200 thousand) and NIS 1,585 thousand, respectively.

As no fixed repayment date has been set on the NIS 2,380 thousand loans, the Company estimated the fair value of the loans based on the expected cash flows discounted at the interest rate that the Company would be required to pay for a similar loan under market conditions. The fair value of loans with no fixed repayment date is determined at each reporting date, assuming that the loans are to be repaid at such date.

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Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

Below are the key parameters used in the valuation model:

2017 2018 Average interest of the Bank of Israel for the period...... 0.1% 0.12% Prime spread ...... 1.5% 1.5% Risk premium ...... 1.95% 1.95% Inflationary expectation ...... 0.6% 1.2% Real market interest ...... 2.95% 2.37%

The difference between the fair value and the carrying of the NIS 2,380 thousand loans amount is recorded in a separate item in equity, “reserve from transactions with controlling shareholders”. d. Loans from Intercure:

In September 2018, after completing the purchase of the holdings in the Company from Yaron Blubstein by Intercure, Intercure issued to the Company a loan in the total amount of approximately NIS 715 thousand (USD 191 thousand) with a one year term and bearing annual interest of 5% (the “Initial Intercure Loan”). The Initial Intercure Loan was used to repay the debt to Mr. Blubstein and to finance the Company’s operations. The balance under the Initial Intercure Loan as of December 31, 2018 was NIS 683 thousand (USD 182 thousand).

In September 2018, the Company obtained from Intercure a loan in the amount of NIS 500 thousand (USD 133 thousand) at an annual interest rate of 5% (the “Intercure Supplemental Loan”). The Intercure Supplemental Loan will be repaid at the earlier of: (i) one year as of the date receiving the loan, and (ii) completion the capital raising by the Company. e. Employment of controlling shareholders in the Company:

Since the date of commencement of operations, the controlling shareholders Avner Barak and Yaron Blubstein have been employed by the Company. In return, each is entitled to the minimum wage in the market, plus company car, cellular phone, reimbursement of expenses and social benefits. At first, the controlling shareholders were mainly engaged in the management of the Company’s operations and as expert growers in the farm and, subsequently, from August 2015, they are employed mainly as expert growers in the growing farm. In 2018, the cost of their employment totaled NIS 152 thousand (USD 41 thousand) and, in 2017, NIS 270 thousand.

NOTE 18: EVENTS AFTER THE REPORTING PERIOD a. On January 27, 2019, the Israeli government approved the export of medical cannabis from Israel. As a result, the Company decided to accelerate the production capacity of its products in the State of Israel and for preparations for its marketing in countries with supportive regulation. The Company sees this event as a fundamental change that opens up to existing and future global markets of medical cannabis with market potential of billions of dollars.

b. On February 11, 2019, Intercure Ltd. completed the acquisition of the Company’s entire share capital (100%) by issuing Intercure Ltd. shares to the Company’s shareholders. c. In February 2019, four members of the Company’s senior management signed new employment agreements with the Company and each was granted options to purchase Intercure ordinary shares. The grants were as follows: Avner (Neri) Barak, 700,000 options; Roei Zerahia, 1,100,000 options; Iris Dolev, 700,000 options; and Omer Zerahia, 400,000 options. The options will vest, subject to the individual’s continued employment with the Company, over three years. The options are subject to an expiration period of 10 years. The exercise price for each option ranges between NIS 2.00 and NIS 5.0.

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C-33

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

d. Contingent liabilities 1. On August 19, 2019, a motion was filed with the District Court of Tel Aviv-Yafo against 17 companies which are engaged in the medical cannabis production and growing segment, or which hold plants for the production of cannabis products, including Canndoc, to approve a claim as a class action (the “Motion”), asserting the provision of drugs to patients in poor condition (as alleged in the motion), in a manner which constitutes prohibited discrimination, as stated in the Equal Rights for Persons with Disabilities Law, 5758-1998, as well as activities within the framework of a restrictive arrangement, in a manner which breaches the provisions of the Economic Competition Law, 5748-1988 due to the allegedly defective marking of the product components, while restricting the quantity and/or quality and/or type of the provided services. The amount claimed is NIS 686 million. In consideration of the very preliminary stage of the proceedings, it is not currently possible to estimate the chances of the motion to approve. In any case, we are unable to estimate the eventual chances of the claim, insofar as the motion to approve is approved as a class action. In light of the above, a provision in respect of the motion was not included in the Company’s financial statements.

2. A lawsuit was filed on December 8, 2020 against Canndoc, claiming damages of 2,271,310 NIS. The plaintiff claims that Canndoc fundamentally breached a cooperation agreement between the parties. The allegations are that Canndoc was to purchase from the plaintiff goods weighing 386.5kg, the value of which according to the agreement was approximately 2,241,700 NIS (including VAT). The plaintiff also requested additional remedies for alleged breach of Canndoc's contractual obligation to provide the plaintiff with seedlings. Canndoc’s position is that the agreement was breached by the plaintiff who did not comply with Canndoc's guidelines, as required by the agreement, and therefore the product was deficient. In consideration of the very preliminary stage of the proceedings, it is not possible to estimate the effect of the lawsuilt . e. Cellect transaction On March 3, 2020, the Company’s board of directors approved the engagement in a non-binding letter of intent regarding a merger of Canndoc into Cellect Biotechnology Ltd., an Israeli public company which is listed on the NASDAQ APOP, which is engaged in the development of stem cell technology (hereinafter: “Cellect”). On November 19, 2020, the parties reached a joint decision to discontinue the negotiations and cancel the letters of intent. f. Production 1. Canndoc has an advanced propagation and growing facility which is located in Kibbutz Beit HaEmek, in which it develops and grows a wide variety of unique strains of medical cannabis (hereinafter: the “Northern Facility”). As of the financial statement approval date, the northern facility is spread over an area of approximately 5 dunams, whereby Canndoc has the right of first refusal regarding an option to expand the area of the northern facility to a total area of approximately 16 dunams. The northern facility includes a greenhouse for propagating, growing and florescence, as well as a processing facility and operational areas. After the reporting period, Canndoc performed extension, upgrade and adjustment works on the northern facility, for the purpose of ensuring the northern facility’s compliance with the high-quality standards required to export from Israel, and adjusting the quality of the products to the level required in Israel and in the target countries. The performance of the upgrade works was concluded in the fourth quarter of 2019; An extension to the agreement was signed, which formalized, inter alia, the investment in the Company’s facility in Beit HaEmek. As of the publication date of this report, the suspensory conditions for the fulfillment of the agreement have not yet been met.

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C-34

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

2. On April 23, 2019, Canndoc signed a binding agreement with an Israeli corporation which holds agricultural areas in Kibbutz Nir Oz, in the Western Negev, for the construction of a production complex with maximum production potential of up to 88 tons of medical cannabis per year, which will operate in addition to the northern facility (hereinafter: the “Southern Site”). On May 26, 2020, Canndoc announced the receipt of a license from the Medical Cannabis Unit of the Ministry of Health (the “Medical Cannabis Unit”), for the engagement in and holding of a dangerous drug, in accordance with sections 6 and 7 of the Dangerous Drugs Ordinance (New Version), 5733-1973, for the propagation and growing of cannabis plants, and the processing of inflorescence and plants under IMC- GAP quality conditions, in Canndoc’s growing facility in the south of Israel (hereinafter: the “Southern Site”), in a commercial scope of approximately 24,500 plants in parallel, as set forth in the growing license (hereinafter: the “Growing License”). In accordance with the standard practice, the license is conditional on completing the construction of a post-harvest processing facility, and receipt of a full IMC-GAP certification, no later than August 31, 2020. As of the publication date of the report, Canndoc has begun planting in the southern facility. On August 30, an administrative extension was received until November 30, 2020. On November 25, 2020, an additional administrative extension was received until January 15, 2021. On December 24, 2020, Canndoc announced receipt of a permanent license from the Medical Cannabis Unit. In December 2020, there was an attempt to breach this facility. The security systems at the facility prevented the incident, in addition, nearby forces of the army and the Israeli police arrived at the scene immediately after the incident began. No damage was caused to the facility and nothing was stolen from it. As of the approval date of the financial statements, Canndoc has begun commercial cultivation planting in the southern facility.

3. After the reporting period, the Company entered into collaborations with corporations authorized to grow and produce medical cannabis in the corporation’s authorized growing facilities, based on the Company’s high-quality genetics. Additionally, due to the commencement of production activities in the southern facility, the Company did not extend two of those collaborations, whose agreement periods had concluded . g. Importation 1. On January 2, 2020, Canndoc engaged in a series of agreements regarding the establishment of a strategic collaboration with a wholly owned company of Tilray Inc., one of the world’s leading companies in the medical cannabis sector (hereinafter: “Tilray”). As part of the series of agreements, the parties engaged in an importation agreement under which Canndoc will import from Tilray packaged and dried medical cannabis inflorescence at an EU-GMP quality level, within a period of a year, and will market them as finished goods in Israeli pharmacies. Until the end of 2020, Canndoc had the option to import up to 2.5 tons of Tilray`s products, at predetermined agreed-upon prices.

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C-35

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

4. On August 4, 2020 Canndoc entered into a strategic and exclusive collaboration with Aphria Inc., one of the world’s leading and largest cannabis companies. Under the agreement, and subject to the receipt of the required authorizations, including the products’ fulfillment of the requirements of the Medical Cannabis Unit at the Ministry of Health, Canndoc will import from Aphria approximately 3 tons of high-quality medical cannabis products, over a period of two years, and will produce and market them under a shared brand in Israeli pharmacies. Canndoc has the option to import up to 6 tons of additional products, in two additional periods of two years each, beginning from the end of the first period, under identical conditions. In November the first shipment of 1.5 tons arrived in Israel. Canndoc began selling the products during the fourth quarter.

h. Exporting, marketing and distribution

1. In January 2019, the Company entered into a memorandum of understanding with a licensed producer of cannabis located in Canada to form a 51-49 joint venture for the purpose of producing, manufacturing and distributing the Company’s pharmaceutical-grade products. The joint venture partner holds a license to produce, manufacture and distribute cannabis products. The partner will supply personnel that will service the operations of the joint venture. The Company will grant the joint venture a license to its intellectual property, including rights to use our CANNDOC brand. The Company will also assist the joint venture with logistical procedures within the production and manufacturing facility, and we are training our partner’s employees on our breeding and cultivation practices. The agreement was finalized in May 2019.

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C-36

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

2. As part of the series of agreements with Tilray, the parties engaged in an export agreement, under which Tilray will acquire up to approximately 5 tons of inflorescences produced by Canndoc, at agreed-upon prices, for the purpose of exporting them from Israel, and using them as medical cannabis products produced by Tilray, under the Tilray brand name, provided that Canndoc’s exported products meet the requirements of the EU-GMP standard, and based on the receipt of a permit for exporting from Israel. Under the export agreement, it was determined that insofar as export approval is not received from the State of Israel by April 1, 2020, Canndoc will have the option to obligate Tilray to purchase products for the purpose of selling them in Israel under the Tilray brand name, or through a joint brand which will be agreed upon between the parties. If Canndoc does not exercise the option, Tilray will be entitled, in accordance with an option which was given to it, to request Canndoc to sell the products to it. It is noted that, as of the approval date of the financial statements, the options have not yet been exercised by either of the parties.

On July 1, 2020, Canndoc submitted to the Medical Cannabis Unit of the Ministry of Health a request to export medical cannabis inflorescence of Canndoc, as part of a preliminary binding offer from Tilray, to acquire dozens of kilograms of Canndoc products for export to Portugal. Following the Company’s participation in a pilot of the Israeli government for the export of cannabis products, in parallel with the reduction of cannabis sale prices to patients in Israel, Canndoc received, on November 16, 2020, the first permission from the Ministry of Health, for commercial exports to Europe. On December 15, 2020, Canndoc completed the first commercial export which consisted of several dozen kilograms, to the European Union as part of the Tilray Agreement. As of the approval date of the financial statements, the Company does not have any significant inventory of the type which was involved in the pilot.

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C-37

Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

4. On April 30, 2020, Canndoc’s board of directors approved an engagement in ten framework agreements with 12 private pharmacies which provide medical cannabis in significant amounts, distributed throughout the country (hereinafter: the “Pharmacies”), under which Canndoc will provide approximately 12 tons of medical cannabis products in accordance with Canndoc’s GMP certification during the years 2020 and 2021. As part of the engagements, the pharmacies will undertake to acquire, and Canndoc will undertake to supply, the agreed-upon quantity as finished goods in accordance with Canndoc’s GMP certification, according to the agreed-upon prices which were determined between the parties, an annual minimum consumption quantity was determined, which the pharmacies undertook to acquire, and Canndoc undertook to supply. The finished goods will be transferred from Canndoc’s production network to the authorized distributors through which the products will be distributed to the pharmacies. The engagements are in effect for a period of 24 months, whereby each party is entitled to give the other party 90 days’ advance notice regarding the termination of the engagement. After the reporting period, Canndoc began providing and marketing its products in the leading pharmacies. In July 2020 Canndoc engaged with additional pharmacies, under similar terms of engagement as those specified above.

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Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

in the territory; (B) 50% on the date of the cumulative sale of 500 kg. of products in the territory. Canndoc has been working to supply its EU-GMP-compliant products from an authorized producer, independently of the receipt of a permit for exporting from Israel.

During the first quarter of 2020, the coronavirus (COVID-19) pandemic began to spread in Israel and around the world. As of the approval date of the financial statements, Canndoc has not experienced and/or is not experiencing any change in the trend of demand for its medical cannabis products, and is continuing to manage its business and sell its products in an orderly and continuous basis. Canndoc is entitled to continue its activity provided that it reduces the number of employees to the minimum required to ensure essential operations. Company management has been evaluating, throughout the entire period, the financial implications of the crisis on the Company. Canndoc has prepared an inventory of raw materials required to ensure routine operating activities in the growing facility, planning a decentralized workforce, and preparing workforce reserves in case of the infection of one of its employees, as well as a remote access network for employees. Additionally, the Company’s support center is continuing to provide continuous support to patients, including complete and strict implementation of the Ministry of Health’s requirements regarding work methods and operating space. Company management believes that it has the financial stability required to deal with the coronavirus crisis and its short-term and medium-term consequences (if any), inter alia, based on the continuation of the Company’s operating activities, and the completion of the private allocations which were performed during the reporting period.

j. CBD Activity 1. In December 2020 Canndoc engaged in a collaboration agreement with Charlotte's Web, the owner of the largest worldwide CBD brand, in an exclusive partnership. Canndoc products will be marketed in Israel under a joint brand for the Israeli market. subject to certain conditions, including certain regulatory matters within central European countries and England. The arrangement is subject to the receipt of the required regulatory agreements. 2. In October 2020, Candoc engaged in a collaboration agreement with Pnina Rosenblum CBD Products Ltd for the production of lifestyle products for women combined with CBD. The parties will operate through joint company to develop the products, distribute and market them through a joint brand 3. In March 2021 Canndoc engaged in an agreement with Cannasmatics Ltd., part of the GIGI laboratories group. The parties will operate through a joint company which 50.01% will be held the joint company will market and sell the products exclusively in Europe and Israel under joint branding. The products are active cosmetics, organic-based on scientific research, which meet the strict standard of Clean at Sephora. The arrangement is subject to the receipt of the required regulatory agreements.

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Canndoc Ltd.

Notes To Consolidated Financial Statements—(Continued)

k. On November 30, 2020, the board of directors of the subsidiary Canndoc Ltd. approved the appointment of Mr. Alexander Rabinovitch, a director, as the CEO of Canndoc, instead of Mr. Alon Granot, who will continue his tenure as a director in Canndoc, and who was appointed, as stated above, as a director in the Company.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF CANNDOC LTD.

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the Canndoc Financial Statements, which are included elsewhere in this prospectus. The financial information contained herein is taken or derived from the Canndoc Financial Statements, unless otherwise indicated. The following discussion contains forward-looking statements. Actual results could differ materially from those that are discussed in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus, particularly under “Risk Factors” and “Caution Regarding Forward Looking Statements”. In this MD&A, references to the “Company”, “Canndoc” “we,” “us,” and “our” are intended to refer to the business and operations of Canndoc, unless the context clearly indicates otherwise.

All amounts presented are in thousands of NIS, except for amounts otherwise noted as being presented in USD. The USD/NIS exchange rate used, unless noted otherwise, was 3.18 NIS for 1 USD.

Overview

1. The Company produces and distributes pharmaceutical-grade cannabis and cannabis-based products for medical use.

2. The Company holds an active license in Israel from the Israeli Medical Cannabis Agency (“IMCA”), to produce cannabis for medical use and to distribute it to patients in Israel. The Company complies with the quality standards imposed by the Ministry of Health with respect to the medical cannabis products it produces.

3. In September 2018, Intercure Ltd. (“Intercure”), a company whose shares are traded on the Tel Aviv Stock Exchange, acquired 38% of the Company’s ordinary shares and in February 2019, Intercure completed the acquisition of the remaining ordinary shares of the Company.

Results of Operations for 2018 Compared with 2017

Financial data is expressed in thousands of NIS. The following table summarizes our historical consolidated statements of comprehensive income:

For the year For the year ended on ended on December 31, December 31, 2018 2017 Revenues 6,955 6,154 Gross profit before effect of fair value 4,420 3,511 Gross profit after effect of fair value 3,484 2,738 General Administrative, Marketing, selling R&D expenses (2,478) (1,815)

Consolidated operating profit (loss) 1,006 923

Comprehensive profit (loss) 719 660 Finance cost 120 75 Tax expenses (income) 167 188 Amortization and depreciation 241 203 EBITDA 1,247 1,126 decrease (Increase ) in financial assets measured in fair value against profit or loss 936 773 Adjusted EBITDA 2,183 1,899 Basic earnings (loss) per share 48 44

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Revenues – Our revenue increased to 6,955 NIS for fiscal 2018, representing an increase of 13% over fiscal 2017. The increase was primarily driven by an increase in the number of patients using medical cannabis during that year. The New Regulation (that become effective as of April 2019) changed the price model of the market and transformed it from a fix fee market to a free pricing market, thus allowing manufacturers like us to price the products. Under the fix free model there was a maximum price of 370 NIS per patient, regardless the amount purchased, and the average consumption per patient in Israel is 33 grams per month. Under the New Regulation, the fix price model was replaced by a free pricing market. As a result, we were able to price our products under the New Regulations higher due to our high quality products and our well-known brands. Prices went from 370 NIS per patient regardless the quantity consumed to a price of 260 NIS per product (10 gram per product).

Gross profit after effect of fair value – Our gross profit margin was 50% for fiscal 2018, this represents an increase from 44% for fiscal 2017. The increase in the gross profit margin was primarily driven by operational improvements and the impacts on pricing stemming from the New Regulations.

Total Assets and Liabilities

As of December 31st ,

2018 2017 Total current assets ...... 9,430 8,805 Total non-current assets ...... 1,711 1,346 Current Liabilities ...... 3,790 3,291 Non-current Liabilities...... 822 1,068

Total Current assets

The increase was primarily due to increases in our operational and production activities.

Total non-current assets

The increase was primarily due to improvements and upgrades in the production facility located in the Kibbutz Beit-Hamak.

Current Liabilities

The increase was primarily due to the increase in our operational and production activities and a loan obtained from Intercure as part of Intercure’s acquisition of 38% of the issued and outstanding ordinary shares of Canndoc in September 2018.

Cash Flow

Our primary source of cash flow is revenue collected from processed transactions. Canndoc’s approach to liquidity is to always maintain sufficient liquidity to meet its liabilities as they become due. Our success in this approach is attributable to our continual monitoring of cash flows and our regular review of actual operating expenditures and revenue against the budget.

For the year For the year ended on ended on Cash Flow December 31, December 31, 2018 2017 Net cash provided by operating activities ...... 352 592 Net cash provided by (used in) financing 124 (172) activities ...... Net cash used in investing activities ...... (606) (149) Change in cash during the year ...... (130) 271

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For the year For the year ended on ended on Cash Flow December 31, December 31, 2018 2017 Cash and cash equivalents, beginning of 474 203 year ...... Cash and cash equivalents, end of year ...... 344 474

For the year ended December 31, 2018, cash from operating activities decreased due to negative changes to non-cash working capital. The increase in net cash provided by financing was due to loan provided by Intercure which partly repaid the existing shareholder loans. The increase in the financing activities was mainly due to capital investment in our facilities located at the Beit HaEmek Kibbutz.

Critical Accounting Estimates

Please refer to note 2 of Canndoc 2018 Annual Financial Statements.

Financial Instruments and Other Instruments

We do not have any financial instruments other than normal course accounts receivable and payables associated with our business activities.

Risk and Uncertainties

We are subject to foreign exchange and liquidity risks.

Liquidity risk. We monitor and forecast our liquidity reserve (which is comprised of cash and cash equivalents, available-for-sale financial assets, and short-term deposits). We generally carry out our monitoring and forecasting based on our expected cash flows in accordance with practice and limits set by our management. We are in the process of expanding our operations, and expect an increase in the expenses that are associated therewith, and we are therefore exposed to a liquidity risk.

Subsequent Events

(a) On January 27, 2019, the Israeli government approved the export of medical cannabis from Israel. As a result, the Company decided to accelerate the production capacity of its products in Israel and began preparations to market its products in countries with regulations that allow as much. The Company sees this event as a fundamental change that opens up access to the existing and future global markets of medical cannabis. These existing and future global markets have a market potential of billions of dollars.

(b) On February 11, 2019, Intercure acquired all of the remaining outstanding ordinary shares of the Company in consideration for the issuance of Intercure shares to the Company’s shareholders.

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D APPENDIX D CHARTER OF THE AUDIT COMMITTEE OF INTERCURE

PURPOSE

The audit committee (the “Audit Committee”) is a committee of the board of directors (the “Board”) of Intercure Ltd. (“Intercure”). The primary function of the Audit Committee is to assist the directors of Intercure in fulfilling their applicable roles by:

(a) recommending to the Board the appointment and compensation of Intercure’s external auditor;

(b) overseeing the work of the external auditor, including the resolution of disagreements between the external auditor and management;

(c) pre-approving all non-audit services (or delegating such pre-approval if and to the extent permitted by law) to be provided to Intercure by Intercure’s external auditor;

(d) satisfying themselves that adequate procedures are in place for the review of Intercure’s public disclosure of financial information, other than those described in (g) below, extracted or derived from its financial statements, including periodically assessing the adequacy of such procedures;

(e) establishing procedures for the receipt, retention and treatment of complaints received by Intercure regarding accounting, internal controls or auditing matters, and for the confidential, anonymous submission by employees of Intercure of concerns regarding questionable accounting or auditing matters;

(f) reviewing and approving any proposed hiring of current or former partner or employee of the current and former auditor of Intercure; and

(g) reviewing and approving the annual and interim financial statements, related Management Discussion and Analysis (“MD&A”) and other financial information provided by Intercure to any governmental body or the public.

The Audit Committee should primarily fulfill these roles by carrying out the activities enumerated in this Charter. However, it is not the duty of the Audit Committee to prepare financial statements, to plan or conduct internal or external audits, to determine that the financial statements are complete and accurate and are in accordance with International Financial Reporting Standards, to conduct investigations, or to assure compliance with laws and regulations or Intercure’s internal policies, procedures and controls, as these are the responsibility of management, and in certain cases, the external auditor.

LIMITATIONS ON AUDIT COMMITTEE’S DUTIES

In contributing to the Audit Committee’s discharge of its duties under this Charter, each member of the Audit Committee shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this Charter is intended to be, or may be construed as, imposing on any members of the Audit Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which the directors are subject.

Members of the Audit Committee are entitled to rely, absent actual knowledge to the contrary, on (i) the integrity of the persons and organizations from whom they receive information, (ii) the accuracy and completeness of the information provided, (iii) representations made by management as to the non-audit services provided to Intercure by the external auditor, (iv) financial statements of Intercure represented to them by a member of management or in a written report of the external auditors to present fairly the financial position of Intercure in accordance with generally

D-1

accepted accounting principles, and (v) any report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by any such person.

COMPOSITION AND MEETINGS

The Audit Committee should be comprised of not less than three directors as determined by the Board, all of whom shall be independent within the meaning of National Instrument 52-110 – Audit Committees (“52-110”) of the Canadian Securities Administrators (or exempt therefrom), and free of any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. All members of the Audit Committee should have (or should gain within a reasonable period of time after appointment) a working familiarity with basic finance and accounting practices. At least one member of the Audit Committee should have accounting or related financial management expertise and be considered a financial expert. Each member should be “financially literate” within the meaning of 52-110. The Audit Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by Intercure or an outside consultant.

The members of the Audit Committee shall be elected by the Board on an annual basis or until their successors shall be duly appointed. Unless a Chair of the Audit Committee (the “Chair”) is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership.

In addition, the Audit Committee members should meet all of the requirements for members of audit committees as defined from time to time under applicable legislation and the rules of any stock exchange on which Intercure’s securities are listed or traded.

The Audit Committee should meet at least four times annually, or more frequently as circumstances require. The Audit Committee should meet within 45 days following the end of the first three financial quarters to review and discuss the unaudited financial results for the preceding quarter and the related MD&A, and should meet within 90 days following the end of the fiscal year end to review and discuss the audited financial results for the preceding quarter and year and the related MD&A.

The Audit Committee may ask members of management or others to attend meetings and provide pertinent information as necessary. For purposes of performing their duties, members of the Audit Committee shall have full access to all corporate information and any other information deemed appropriate by them, and shall be permitted to discuss such information and any other matters relating to the financial position of Intercure with senior employees, officers and the external auditor of Intercure, and others as they consider appropriate.

For greater certainty, management is indirectly accountable to the Audit Committee and is responsible for the timeliness and integrity of the financial reporting and information presented to the Board.

In order to foster open communication, the Audit Committee or its Chair should meet at least annually with management and the external auditor in separate sessions to discuss any matters that the Audit Committee or each of these groups believes should be discussed privately. In addition, the Audit Committee or its Chair should meet with management quarterly in connection with Intercure’s interim financial statements.

A quorum for the transaction of business at any meeting of the Audit Committee shall be a majority of the number of members of the Audit Committee or such greater number as the Audit Committee shall by resolution determine.

Meetings of the Audit Committee shall be held from time to time and at such place as any member of the Audit Committee shall determine upon 48 hours’ notice to each of its members. The notice period may be waived by all members of the Audit Committee. Each of the Chair of the Board, the external auditor, the Chief Executive Officer, the Chief Financial Officer or the Secretary shall be entitled to request that any member of the Audit Committee call a meeting.

This Charter is subject in all respects to the Intercure Articles.

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ROLE

As part of its function in assisting the Board in fulfilling its oversight role (and without limiting the generality of the Audit Committee’s role), the Audit Committee should:

(1) Determine any desired agenda items;

(2) Review and recommend to the Board changes to this Charter, as considered appropriate from time to time;

(3) Review the public disclosure regarding the Audit Committee required by 52-110;

(4) Review and seek to ensure that disclosure controls and procedures and internal control over financial reporting frameworks are operational and functional;

(5) Summarize in Intercure’s annual information form the Audit Committee’s composition and activities, as required; and

(6) Submit the minutes of all meetings of the Audit Committee to the Board upon request.

Documents / Reports Review

(7) Review and recommend to the Board for approval Intercure’s annual and interim financial statements, including any certification, report, opinion, undertaking or review rendered by the external auditor and the related MD&A, as well as such other financial information of Intercure provided to the public or any governmental body as the Audit Committee or the Board require.

(8) Review other financial information provided to any governmental body or the public as they see fit.

(9) Review, recommend and approve any of Intercure’s press releases that contain financial information.

(10) Seek to satisfy itself and ensure that adequate procedures are in place for the review of Intercure’s public disclosure of financial information extracted or derived from Intercure’s financial statements and related MD&A and periodically assess the adequacy of those procedures.

External Auditor

(11) Recommend to the Board the selection of the external auditor, considering independence and effectiveness, and review the fees and other compensation to be paid to the external auditor.

(12) Review and seek to ensure that all financial information provided to the public or any governmental body, as required, provides for the fair presentation of Intercure’s financial condition, financial performance and cash flow.

(13) Instruct the external auditor that its ultimate client is not management and that it is required to report directly to the Audit Committee, and not management.

(14) Monitor the relationship between management and the external auditor including reviewing any management letters or other reports of the external auditor and discussing any material differences of opinion between management and the external auditor.

(15) Review and discuss, on an annual basis, with the external auditor all significant relationships it has with Intercure to determine the external auditor’s independence.

(16) Pre-approve all non-audit services (or delegate such pre-approval as the Audit Committee may determine and as permitted by applicable Canadian securities laws) to be provided by the external auditor.

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(17) Review the performance of the external auditor and any proposed discharge of the external auditor when circumstances warrant.

(18) Periodically consult with the external auditor out of the presence of management about significant risks or exposures, internal controls and other steps that management has taken to control such risks, and the fullness and accuracy of the financial statements, including the adequacy of internal controls to expose any payments, transactions or procedures that might be deemed illegal or otherwise improper.

(19) Communicate directly with the external auditor and arrange for the external auditor to be available to the Audit Committee and the full Board as needed.

(20) Review and approve any proposed hiring by Intercure of current or former partners or employees of the current (and any former) external auditor of Intercure.

Audit Process

(21) Review the scope, plan and results of the external auditor’s audit and reviews, including the auditor’s engagement letter, the post-audit management letter, if any, and the form of the audit report. The Audit Committee may authorize the external auditor to perform supplemental reviews, audits or other work as deemed desirable.

(22) Following completion of the annual audit and quarterly reviews, review separately with each of management and the external auditor any significant changes to planned procedures, any difficulties encountered during the course of the audit and, if applicable, reviews, including any restrictions on the scope of work or access to required information and the cooperation that the external auditor received during the course of the audit and, if applicable, reviews.

(23) Review any significant disagreements among management and the external auditor in connection with the preparation of the financial statements.

(24) Where there are significant unsettled issues between management and the external auditor that do not affect the audited financial statements, the Audit Committee shall seek to ensure that there is an agreed course of action leading to the resolution of such matters.

Financial Reporting Processes

(25) Review the integrity of the financial reporting processes, both internal and external, in consultation with the external auditor as they see fit.

(26) Consider the external auditor’s judgments about the quality, transparency and appropriateness, not just the acceptability, of Intercure’s accounting principles and financial disclosure practices, as applied in its financial reporting, including the degree of aggressiveness or conservatism of its accounting principles and underlying estimates, and whether those principles are common practices or are minority practices.

(27) Review all material balance sheet issues, material contingent obligations (including those associated with material acquisitions or dispositions) and material related party transactions.

(28) Review with management and the external auditor Intercure’s accounting policies and any changes that are proposed to be made thereto, including all critical accounting policies and practices used, any alternative treatments of financial information that have been discussed with management, the ramification of their use and the external auditor’s preferred treatment and any other material communications with management with respect thereto.

(29) Review the disclosure and impact of contingencies and the reasonableness of the provisions, reserves and estimates that may have a material impact on financial reporting.

D-4 (30) If considered appropriate, establish separate systems of reporting to the Audit Committee by each of management and the external auditor.

(31) Periodically consider the need for an internal audit function, if not present.

(32) Periodically consider the need for an internal audit function, if not present.

Risk Management

(33) Review program of risk assessment and steps taken to address significant risks or exposures of all types, including insurance coverage and tax compliance.

General

(34) With prior Board approval, the Audit Committee may at its discretion retain independent counsel, accountants and other professionals to assist it in the conduct of its activities and to set and pay (as an expense of Intercure) the compensation for any such advisors.

(35) Respond to requests by the Board with respect to the functions and activities that the Board requests the Audit Committee to perform.

(36) Periodically review this Charter and, if the Audit Committee deems appropriate, recommend to the Board changes to this Charter.

(37) Review the public disclosure regarding the Audit Committee required from time to time by applicable Canadian securities laws, including:

(a) the Charter of the Audit Committee;

(b) the composition of the Audit Committee;

(d) the external auditor services and fees; and

(e) such other matters as Intercure is required to disclose concerning the Audit Committee.

(38) Review in advance, and approve, the hiring and appointment of senior financial executives by the Board.

(39) Perform any other activities as the Audit Committee deems necessary or appropriate including ensuring all regulatory documents are compiled to meet Committee reporting obligations under 52-110.

AUDIT COMMITTEE COMPLAINT PROCEDURES

Submitting a Complaint

(1) Anyone may submit a complaint regarding conduct by Intercure or its employees or agents (including its independent auditors) reasonably believed to involve questionable accounting, internal accounting controls or auditing matters. The Chair should oversee treatment of such complaints.

Procedures

(2) The Chair will be responsible for the receipt and administration of employee complaints.

(3) In order to preserve anonymity when submitting a complaint regarding questionable accounting or auditing matters, the employee may submit a complaint confidentially.

D-5 Investigation

(4) The Chair should review and investigate the complaint. Corrective action will be taken when and as warranted in the Chair’s discretion.

Confidentiality

(5) The identity of the complainant and the details of the investigation should be kept confidential throughout the investigatory process.

Records and Report

(6) The Chair should maintain a log of complaints, tracking their receipt, investigation, findings and resolution, and should prepare a summary report for the Audit Committee.

The Audit Committee is a committee of the Board and is not and shall not be deemed to be an agent of Intercure’s securityholders for any purpose whatsoever. The Board may, from time to time, permit departures from the terms hereof, either prospectively or retrospectively, and no provision contained herein is intended to give rise to civil liability to securityholders of Intercure or other liability whatsoever.

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