CR Brands CannaRoyalty has built a leading distribution platform in the first two quarters and has positioned the Company to rapidly expand the sales and reach of its distributed and in-house brand portfolio to access shelf-space across the state, as well as for dispensaries seeking access to a full spectrum of top products and brands. On July 1st, 2018 California began enforcing new packaging and regulatory rules. Strategic initiatives undertaken by the Company in the first half of the year has positioned CannaRoyalty as a fully compliant manufacturer and distributor ready to drive significant top line growth during the second half of 2018. As the close of the Company’s acquisition of Kaya took place in the final days of Q1 2018, the Company did not generate material direct revenues from the sale of CR Brands products in that quarter. Kaya now manufactures all CR Brands products, as well as all Bhang® cannabis products sold in the state of California. Starting in Q2, the Company noted that the consolidation of manufacturing operations under Kaya drove substantial quarter-over-quarter growth which is expected to continue through the remainder of 2018. MD&A for the Three and Six Months Ended June 30, 2018 On February 15, 2018, the Company entered into a strategic partnership with leading premium craft cannabis cultivator in California, FloraCal® Farms (“FloraCal”), to develop and sell branded cannabis products. On April 18, 2018, the Company announced that it has entered into a binding agreement to acquire 100% of FloraCal® Farms for total purchase considerations of US$1 million in cash and 3,508,772 CannaRoyalty shares on close, in addition to other considerations, based on completion of certain milestones. The addition of FloraCal adds branded premium cannabis flower and pre-roll products to CannaRoyalty’s diverse portfolio. Soon after the end of the second quarter, on July 3, CannaRoyalty announced that it had closed the acquisition of FloraCal Farms. The growing facility currently has 15,000 square feet of purpose-built indoor growing space and is being expanded to approximately 65,000 square feet of growing space. Further details regarding the acquisition close are set out below under the heading “Recent Developments – CR Brands”. Investing in the expansion of the Company’s California distribution footprint and supporting local entrepreneurs, on May 28, 2018, CannaRoyalty announced that it has partnered with Posh Green Collective delivery (“Posh Green”), a California-based, boutique cannabis delivery service. The strategic partnership will contribute towards the scale-up of Posh Green’s delivery systems in California. Posh Green will in turn provide downstream demand for CannaRoyalty’s distributed product portfolio, along with support on community initiatives.