Financial Statements as of June 30, 2025

INNOCAN PHARMA CORPORATION

TABLE OF CONTENTS

Unaudited condensed interim consolidated statements of financial position 2-3

Unaudited condensed interim consolidated statements of profit or loss 4

Unaudited condensed interim consolidated statements of changes in shareholders' equity 5

Unaudited condensed interim consolidated statements of cash flows 6

Notes to the unaudited condensed interim consolidated financial statements 7-34

TOTAL ASSETS 11,037 9,260

Trade accounts payable

Other current liabilities Warrants

EQUITY 11,037 9,260

Nelson Halpern Chief Financial Officer

Iris Bincovich Chief Executive Officer

Peter Bloch Audit Committee Chair

August 27, 2025 Date of approval of the Financial statements

Net profit (loss) for the period attributed to:

Basic and diluted earning (loss) per share

Weighted average number of common shares outstanding

1. Innocan Pharma Corporation (the "Company") was incorporated as a corporation in Canada and commenced its operations in May 2018. The Company's registered office is in Calgary, Canada.

2. The Company is a publicly listed company on the Canadian Securities Exchange (the "CSE") trading under the symbol INNO and is the parent company of Innocan Pharma Ltd. (the "Innocan") that was incorporated in Israel in October 2017 and commenced its operations in November 2017. Innocan is developing a Cannabidiol ("CBD")-loaded Liposome drug delivery Platform ("CBD-LPT") with exact dosing, prolonged and controlled release of synthetic CBD for non-opioid pain management. The CBD-LPT research is in the preclinical trial phase for chronic pain management. Innocan is at a preclinical stage and is expected to conduct activities mainly in the United States (US), Canadian and European (EU) markets. The Company also develops and markets self-care products to promote a healthier lifestyle.

3. On May 26, 2021, Innocan entered into a founder's agreement with Brandzon Co Ltd. (the "Brandzon") to establish a joint company, B.I. Sky Global Ltd. (the "Sky Global"), which engages in development, manufacture and marketing of cosmetic products. Innocan holds 60% of Sky Global's shares, while Brandzon holds the remaining 40%. Sky Global was incorporated in Israel on June 6, 2021. The Company consolidates Sky Global in the financial statements commencing on the date of establishment.

4. On May 5, 2021, Innocan Pharma UK Ltd. (the "Innocan UK") was established as a management and financial services provider of Innocan in the EU market regarding the sales of its CBD cosmetic products. Innocan holds 100% of Innocan UK's shares. The Company consolidates Innocan UK in the financial statements commencing on the date of establishment. During 2022 and 2023, Innocan UK had no activities. On August 13, 2024, Innocan UK was dissolved.

5. The Company, Innocan, Innocan UK and Sky Global are referred in the financial statements as the Group.

   NOTE 1 - GENERAL (CONT.):

6. In October 2023, Hamas terrorists infiltrated Israel's southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel's border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel's security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks.

   In addition, since the commencement of these events, there have been continued hostilities along Israel's northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in the region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. Israel has carried out a number of targeted strikes on sites belonging to these terror organizations. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. In addition, Iran recently launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. Such clashes may escalate in the future into a greater regional conflict.

   Since the war broke out on October 7, 2023, the Group's operations have not been adversely affected by this situation, and the Group has not experienced disruptions to its business operations. As such, the Group's product and business development activities remain on track. However, the intensity and duration of Israel's current war against Hamas is difficult to predict at this stage, as are such war's economic implications on the Group's business and operations and on Israel's economy in general. If the war extends for a long period of time or expands to other fronts, such as Lebanon, Syria and the West Bank, the Group's operations may be adversely affected.

   The Group continues to assess the effects of the state of war on its financial statements and business.

   NOTE 1 - GENERAL (CONT.):

7. Going concern

   During the six months period ended June 30, 2025, the Group incurred net loss of $544 thousand. Additionally, the Group generated $36,080 thousand of accumulated deficit since inception. Moreover, and while the Company's generated positive cash flows from operations during the six months ended June 30, 2025, the Company expects its negative cash flows from operations to significantly increase in the foreseeable future due to increase in R&D and R&D related expenses to be incurred as a result of commencement of clinical trials. Management plans to address these conditions by raising additional funds and by generating larger volumes of revenues. However, there is no assurance that such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives, or that the Company will successfully generate sufficient revenues to meet its objectives. These conditions raise substantial doubts about the Company's ability to continue as a going concern. These unaudited condensed interim consolidated financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.

8. Between February 2023 to December 2024, Innocan entered the fourth, fifth, sixth, seventh and eighth amendments (the "Fourth Amendment", "Fifth Amendment", "Sixth Amendment", "Seventh Amendment" and "Eighth Amendment", respectively) to the research and license agreement with Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. ("Yissum"). As part of the Fourth, Fifth, Sixth, Seventh and Eighth Amendments, Innocan agreed to finance additional research with the aim of meeting the U.S. Food and Drug Administration ("FDA") guidance on Liposome drug-products in a total amount of approximately $1,272 thousand, by December 2024 (the "December 2024 Goal"). The Company met the December 2024 Goal. The total expense due to research activity by Yissum incurred during the six months period ended June 30, 2025, amounted to $41 thousand (six months period ended June 30, 2024:

   $174).

9. On March 14, 2024, the Company closed a non-brokered private placement offering of 7,952,840 units (the "March 2024 Units") at a price of CAD 0.25 per March 2024 Unit (approximately $0.19) for aggregate gross proceeds of CAD 1,989 thousand (approximately $1,475 thousand). Each March 2024 Unit is comprised of one common share and one warrant (a "March 2024 Warrant"). Each March 2024 Warrant entitles the holder thereof to purchase one common share at an exercise price of CAD 0.32 (approximately $0.24) for a period of four (4) years from the date of issuance. The gross proceeds were first allocated to the March 2024 Warrants in the amount of $1,103 thousand with the residual balance of $372 allocated to the common shares (see also note 11).

10. On March 14, 2024, the Company granted an aggregate of 7,140,483 restricted share units (each, an "RSU") to directors and officers. Each RSU entitles the recipient to receive one common share on vesting. A total of 4,918,261 RSUs vested on March 14, 2024, and 2,222,222 RSUs vest as follows: (i) half on September 14, 2024; and (ii) half on March 14, 2025 (see also note 5(1)).

11. On May 30, 2024, the Company granted an aggregate of 140,000 RSUs to consultants which entitles the recipient to receive one common share on vesting. All such RSUs vested on September 30, 2024.

12. On August 29, 2024, the Company closed a non-brokered private placement offering of 5,025,725 units (the "August 2024 Units") at a price of CAD 0.22 per August 2024 Unit (approximately $0.16) for aggregate gross proceeds of CAD 1,106 thousand (approximately $822 thousand). Each August 2024 Unit is comprised of one common share and one warrant (a "August 2024 Warrant"). Each August 2024 Warrant entitles the holder thereof to purchase one common share at an exercise price of CAD 0.32 (approximately $0.24) for a period of four (4) years from the date of issuance. The gross proceeds were first allocated to the August 2024 Warrants in the amount of $517 thousand with the residual balance of $305 allocated to the common shares (see also note 11).

13. On December 31, 2024, the Company closed a non-brokered private placement offering of 3,177,223 units (the "December 2024 Units") at a price of CAD 0.20 per December 2024 Unit (approximately $0.14) for aggregate gross proceeds of C$635 thousand (approximately $442 thousand). Each December 2024 Unit is comprised of one common share and one warrant (a "December 2024 Warrant"). Each December 2024 Warrant entitles the holder thereof to purchase one common share at an exercise price of C$0.28 (approximately $0.19) for a period of four (4) years from the date of issuance. The gross proceeds were first allocated to the December 2024 Warrants in the amount of $215 thousand with the residual balance of $227 allocated to the common shares (see also note 8.7). The Company paid a finder a cash fee of CAD 13,500 and, in addition, issued to the finder 67,500 warrants (the "Finder Warrants"). Each Finder Warrant entitles the finder to purchase one common share at an exercise price of C$0.28 for a period of four (4) years from the date of issuance (see also note 11).

14. On March 7, 2025, the Company closed a non-brokered private placement offering of a debenture unit (the "Debenture Unit") to its largest shareholder, Tamar Innovest, for gross proceeds of $1,000,000 (the "March 2025 Offering"). The Debenture Unit consists of: (a) one secured convertible debenture in the principal amount of $1,000,000 (the "Debenture") and (b) 5,555,555 common share purchase warrants (each, a "March 2025 Warrant"). The Debenture matures two years from the date of issuance (the "Maturity Date"), will bear interest at the rate of 10% per annum and is convertible into common shares prior to the Maturity Date at a price of CAD 0.21 (approximately $0.15) per share (based on a foreign exchange rate on the day prior to the date of conversion). Each Warrant is exercisable into one common share at a price of CAD 0.26 (approximately $0.18) for a period of four years from the date of issuance. The March 2025 Warrant and the Debenture were accounted for as financial liabilities measured at fair value through profit or loss (see also note 11).

15. On April 15, 2025, the Company closed a non-brokered private placement offering of units (the "Units"), pursuant to which the Company issued 1,193,551 Units at a price of CAD 0.18 (approximately $0.13) per Unit (the "Offering Price") for aggregate gross proceeds of CAD 214,839 (approximately $156,684). Each Unit is comprised of one common share and one common share purchase warrant of the Company ("April 2025 Warrant"). Each April 2025 Warrant will entitle the holder thereof to purchase one common share at an exercise price of CAD 0.25 (approximately $0.17) for a period of four years from the date of issuance. The gross proceeds were first allocated to the April 2025 Warrants in the amount of $64 thousand with the residual balance of $93 allocated to the common shares (see also note 11).

16. On June 15, 2025, in light of continued nuclear threats and intelligence assessments indicating imminent attacks, Israel launched a pre-emptive strike directly targeting military and nuclear infrastructure inside Iran, aimed at disrupting Iran's capacity to coordinate or launch further hostilities against Israel, as well as to degrade its nuclear program. In response, Iran launched multiple waves of drones and ballistic missiles at Israeli cities, including Tel Aviv, Haifa, and Jerusalem. While most of these attacks were intercepted, several caused civilian casualties and damage to infrastructure. The Israeli military has since conducted additional operations against Iranian assets, and the situation remains volatile. A broader regional conflict involving additional state and non-state actors remains a significant risk.

    To date, the Group's operations have not been materially impacted. However, the intensity, duration, and geographic scope of the current conflict are unpredictable. An escalation or prolonged conflict could disrupt the Group's supply chains, impair communications or travel, delay project timelines, and hinder the Group's access to personnel, customers, and partners.

17. The Trump Administration has recently imposed a series of tariffs on U.S. trading partners. On April 2, 2025, the President issued an Executive Order announcing a "baseline" reciprocal tariff of 10% on all

U.S. trading partners effective April 5, 2025, and higher individualized reciprocal tariffs on 57 countries (with certain product exemptions for pharmaceutical-related products, among others). Previously, the administration had imposed a 25% tariff on Canada and Mexico for goods not covered by the United States-Mexico-Canada Agreement, or USMCA, and tariffs equaling 20% on China.

Prior to when the country-specific reciprocal tariffs were scheduled to take effect, the administration delayed the effective date of such tariffs for all countries except China.

While the Group does not believe that its first quarter 2025 financial results were materially affected by these developments, its second quarter sales were negatively affected by negative consumer sentiment and economic uncertainty in the Group's market. If substantial tariffs remain in place, the Group may begin to see the effect of higher duties on restocking later this year. The likely short-term impact of the tariffs is difficult to predict with any certainty, however. The Group is actively evaluating its options and the impact of trade policy changes on future quarters remains uncertain.

The material accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated.

The Group has applied the same accounting policies and methods of computation in its unaudited condensed interim consolidated financial statements as in its 2024 annual financial statements.

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the December 31, 2024 annual financial statements. These unaudited condensed interim consolidated financial statements were authorized for issue by the board of directors on August 27, 2025.

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

• IFRS 18 Presentation and Disclosures in Financial Statements

  IFRS 18 replaces IAS 1, carrying forward many of the requirements in IAS 1 unchanged and complementing them with new requirements.

  IFRS 18 introduces new requirements to:

  1. present specified categories and defined subtotals in the statement of profit or loss

  2. provide disclosures on management-defined performance measures (MPMs) in the notes to the financial statements

  3. improve aggregation and disaggregation.

     An entity is required to apply IFRS 18 for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. The amendments to IAS 7 and IAS 33, as well as the revised IAS 8 and IFRS 7, become effective when an entity applies IFRS 18. IFRS 18 requires retrospective application with specific transition provisions.

     The Group anticipates that the application of these amendments may have an impact on the consolidated financial statements in future periods.

     NOTE 2 - MATERIAL ACCOUNTING POLICIES (CONT.): Accounting standards issued but not yet effective (CONT)
• Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" (regarding classification and measurement requirements of financial instruments and additional disclosure requirements):

  The main amendments to IFRS 9:

  1. Introducing a derecognition option for derecognizing a financial liability that is settled via an electronic payment system before the settlement date.

  2. Providing application guidance and illustrative examples on how an entity can assess whether the expected contractual cash flows of a financial asset reflect solely payments of principal and interest for the outstanding principal amount, for classifying the financial asset.

  3. Clarifying that a financial asset has non-recourse features if an entity's ultimate right to receive cash flows is contractually limited to the cash flows generated by specified assets.

  4. Clarifying the characteristics of contractually linked instruments that distinguish them from other transactions.

     The main amendments to IFRS 7:

     1. Updated disclosures requirements for investments in equity instruments designated at FVTOCI.

     2. Introducing additional disclosure requirements for financial instruments that include contractual terms that could change the timing or amount of contractual cash flows upon the occurrence (or non-occurrence) of a contingent event that does not relate directly to changes in risks and costs of a basic lending arrangements (such as the time value of money or credit risk).

     The amendments are effective for annual reporting periods beginning on or after January 1, 2026, and will be applied retrospectively. Early application is permitted if all the amendments are applied simultaneously or if the amendments applied are related only to the classification of financial assets. An entity is not required to restate prior periods to reflect the application of the amendments, but it may restate prior periods if, and only if, it is possible to do so without the use of hindsight.

     NOTE 2 - MATERIAL ACCOUNTING POLICIES (CONT.): Accounting standards issued but not yet effective (CONT)
• Annual improvements to IFRS Accounting Standards (Volume 11):

  The following amendments were published by the IASB in July 2024, as part of its annual improvements process:

  1. Narrow-scope wording amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards", IFRS 10 "Consolidated Financial Statements" and IAS 7 "Statement of Cash Flows".

  2. Amendments to IFRS 9 "Financial Instruments", which clarify that when a lessee has determined that a lease liability has been extinguished in accordance with IFRS 9, the lessee is required to apply IFRS 9:3.3.3 and recognize any resulting gain or loss in profit or loss. It also clarifies that a receivable should be measured at initial recognition at an amount determined by applying IFRS 15, which might differ from the transaction price.

The amendments are effective for annual reporting periods beginning on or after January 1, 2026. Early application of the amendments is permitted, and if an entity applies the amendments early, it must disclose this fact.

The amendment to IFRS 9 regarding extinguished lease liabilities will be applied from the beginning of the annual reporting period in which the entity first applies that amendment.

The Group is currently assessing the impact of adopting the new standards and amendments on the consolidated financial statements.

(*) Deposits held as collateral for credit card lines, in accordance with bank requirements.

USD in thousands

Composition:

Common shares without nominal par value Unlimited 292,420,156

Common shares without nominal par value Unlimited 290,115,494

Changes in the number of issued common shares from December 31, 2024 to June 30, 2025, are as follows:

Changes in the number of issued common shares from December 31, 2023 to June 30, 2024, are as follows:

1. See note 1.10 above.

2. See note 1.15 above.

3. See note 1.9 above.

During the six months period ended June 30, 2025, the Company recorded share based compensation expenses for RSUs grants of $68 thousand, which is included in selling, marketing and distribution expenses, research and development expenses or general and administrative expenses, based on the function of the grantee (six months period ended June 30, 2024: $1,322).

During the six months period ended June 30, 2025, the Company recorded share based compensation expenses for share options grants of $50 thousand, which is included in selling, marketing and distribution expenses, research and development expenses or general and administrative expenses, based on the function of the grantee (six months period ended June 30, 2024: $212).

Activity in share options granted to employees and service providers is as follows:

(*) The weighted average remaining contractual life of the share options outstanding at the end of the period is approximately 28 months.

(*) Revenues in United States are attributed to B.I. Sky.

(**) Innocan's revenues are through sales in Europe.

June 30, June 30,

(*) includes online retailer selling fees, shipping and handling costs.

June 30, June 30,

The Company accounts for warrants issued to investors and the convertible debenture under IFRS 9, Financial Instruments. Warrants issued to service providers are accounted for as equity-classified awards under IFRS 2, Share-based Payment.

The Company recorded the October 2021 Unit Warrants, February 2023 Unit Warrants, August 2023 Unit Warrants, October 2023 Unit Warrants, March 2024 Warrants, August 2024 Warrants, December 2024 Warrants, March 2025 Warrants and April 2025 Warrants as a derivative financial liability at the fair value of the warrants on the issuance date due to the fact that they do not meet the criteria for a fixed number of equity instruments in exchange for a fixed amount of cash since the exercise price is stated in CAD while the Company's functional currency is the USD. In addition, the Company recorded the convertible debenture as a derivative financial liability at fair value due to the fact that it does not meet the criteria for a fixed number of equity instruments in exchange for a fixed amount of cash since the exercise price is stated in CAD while the Company's functional currency is the USD. The derivative financial liability and the convertible debenture are re-measured at each reporting date, with changes in fair value recognized in profit or loss. The carrying amounts represents fair value based on valuation performed by management with the assistance of an independent appraiser.

1. October 2021 Unit Warrants

   In connection with October 13, 2021 Private Placement, the Company issued 9,679,000 warrants to investors. Each October 2021 Unit Warrant entitles the holder thereof to acquire one common share at an exercise price of CAD 1.10 ($0.88) for a period of 60 months following October 13, 2021.

   The October 2021 Unit Warrants are transferable but are not listed or quoted on any stock exchange or market. The derivative financial liability as of issuance date amounted to $3,427 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $20 thousand and $39 thousand, respectively.

   NOTE 11 - WARRANTS AND CONVERTIBLE DEBENTURE (CONT.):

2. February 2023 Unit Warrants

   In connection with the private placement which closed on February 16, 2023, the Company issued 1,982,000 units to investors. Each February 2023 Unit consists of one (1) common share; one-half of one Class A warrant to purchase common shares ("February 2023 Class A Warrant"); and one-half of one Class B warrant to purchase common shares ("February 2023 Class B Warrant") (collectively each whole February 2023 Class A Warrant and each whole February 2023 Class B Warrant, a "February 2023 Warrant"). Each February 2023 Class A Warrant entitles the holder thereof to purchase one common share at a price of CAD 0.31 ($0.23) for a period of two (2) years from the date of issuance. Each February 2023 Class B Warrant entitles the holder thereof to purchase one common share at a price of CAD 0.44 ($0.33) for a period of three (3) years from the date of issuance.

   Following the date of issuance of the February 2023 Warrants, if the daily volume weighted average trading price of the common shares on the CSE for any period of 20 consecutive trading days equals or exceeds CAD

   0.62 ($0.46) in the case of a February 2023 Class A Warrant or CAD 1.32 ($0.98) in the case of a February 2023 Class B Warrant, the Company may, upon providing written notice to the holders of the February 2023 Warrants (the "Acceleration Notice"), accelerate the expiry date of the February 2023 Warrants to the date that is 30 days following the date of the Acceleration Notice. The derivative financial liability as of issuance date amounted to

   $154 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $7 thousand and $14 thousand, respectively.

   NOTE 11 - WARRANTS AND CONVERTIBLE DEBENTURE (CONT.):

3. August 2023 Unit Warrants

   In connection with the private placement which closed on August 3, 2023, the Company issued 8,409,735 units to investors. Each August 2023 Unit consists of: (i) one common share; (ii) one-half of one Class A common share purchase warrant (each whole Class A common share purchase warrant, a "August 2023 Class A Warrant"); and (iii) one-half of one Class B common share purchase warrant (each whole Class B common share purchase warrant, a "August 2023 Class B Warrant") (collectively each whole August 2023 Class A Warrant and each whole August 2023 Class B Warrant, a "August 2023 Warrant"). Each August 2023 Class A Warrant entitles the holder thereof to purchase one common share at a price of CAD 0.29 ($0.22) for a period of three

   (3) years from the date of issuance. Each August 2023 Class B Warrant entitles the holder thereof to purchase one common share at a price of CAD 0.40 ($0.3) for a period of five (5) years from the date of issuance.

   The derivative financial liability as of issuance date amounted to $692 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $356 thousand and $359 thousand, respectively.

4. October 2023 Unit Warrants

   In connection with October 12, 2023 and October 20, 2023 offerings, the Company issued 5,425,108 warrants (the "October 2023 Unit Warrants") to investors. Each October Unit Warrant entitled the holder therefore to acquire one common share at an exercise price of CAD 0.36 ($0.26) for a period of 36 months from the date of the closing. The derivative financial liability as of issuance date amounted to $538 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $147 thousand and $161 thousand, respectively.

5. March 2024 Warrants

   In connection with the private placement which closed on March 14, 2024, the Company issued 7,952,840 units to investors. Each March 2024 Unit entitles the holder thereof to acquire one common share at an exercise price of CAD 0.32 ($0.24) for a period of four years following March 15, 2024.

   The derivative financial liability as of issuance date amounted to $1,103 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $448 thousand and $427 thousand, respectively.

   NOTE 11 - WARRANTS AND CONVERTIBLE DEBENTURE (CONT.):

6. August 2024 Warrants

   In connection with the private placement which closed on August 29, 2024, the Company issued 5,025,725 units to investors. Each August 2024 Unit entitles the holder thereof to acquire one common share at an exercise price of CAD 0.32 ($0.24) for a period of four years following August 29, 2024.

   The derivative financial liability as of issuance date amounted to $517 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $378 thousand and $349 thousand, respectively.

7. December 2024 Warrants

   In connection with the private placement which closed on December 31, 2024, the Company issued 3,177,223 units to investors. Each December 2024 Unit entitles the holder thereof to acquire one common share at an exercise price of CAD 0.28 ($0.19) for a period of four years following December 31, 2024.

   The derivative financial liability as of issuance date amounted to $215 thousand. As of June 30, 2025 and December 31, 2024, it amounted to $232 thousand and $215 thousand, respectively.

8. March 2025 Warrants

   In connection with the private placement which closed on March 7, 2025, the Company issued 5,555,555 units to its largest shareholder, Tamar Innovest. Each March 2025 Unit entitles the holder thereof to acquire one common share at an exercise price of CAD 0.26 ($0.18) for a period of four years following March 7, 2025.

   The derivative financial liability as of the issuance date amounted to $360 thousand. As of June 30, 2025, it amounted to $435 thousand.

   NOTE 11 - WARRANTS AND CONVERTIBLE DEBENTURE (CONT.):

9. April 2025 Warrants

   In connection with the private placement which closed on April 15, 2025, the Company issued 1,193,551 units to investors. Each April 2025 Unit entitles the holder thereof to acquire one common share at an exercise price of CAD 0.25 ($0.17) for a period of four years following April 15, 2025.

   The derivative financial liability as of issuance date amounted to $64 thousand. As of June 30, 2025, it amounted to $97 thousand.

   The fair value measurements of the warrants as of June 30, 2025, were measured using:

   1. For the warrants containing no accelerated exercise provisions, the Black-Scholes model.

   2. The warrants containing accelerated exercise provisions, as described in note 11.2 above, were estimated using a binomial lattice model, under the assumption that once the price per share exceeds the defined threshold, the warrants become immediately exercisable.

      The key inputs that were used in measuring the fair value of the warrants as of June 30, 2025 were: average risk-free interest rate - 2.57%, average expected volatility - 70%, year-end expected dividend yield - 0 and share price of the Company as of June 30, 2025 - CAD 0.225 ($0.155).

10. Convertible debenture

In connection with the private placement which closed on March 7, 2025, as discussed in note 1.14 above, the fair value of the convertible debenture as of the issuance date amounted to $640 thousand. As of June 30, 2025, it amounted to $1,394 thousand.

The fair value measurements of the Debenture as of June 30, 2025, were measured using the binomial model.

The key inputs that were used in measuring the fair value of the Debenture as of June 30, 2025 were: average risk-free interest rate - 3.79%, average expected volatility - 70%, year-end expected dividend yield - 0 and share price of the Company as of June 30, 2025 - CAD 0.225 ($0.155).

The following table sets out the Company's liabilities that are measured and recognized at fair value in the financial statements:

The changes in derivative warrant liabilities for the six months period ended June 30, 2025, are as follows:

The changes in the convertible debenture as of June 30, 2025 are as follows:

March 2025 Debenture Unit Warrants 640

Changes in fair value 754

Warrants accounted for under IFRS 2 are as follows:

Warrants outstanding at beginning of period 457,046 0.313

Warrants outstanding at end of period 457,046 0.313 Exercisable warrants 457,046 0.313