BHST BioHarvest Sciences Inc

Exhibits:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BioHarvest Sciences Inc.

Unaudited Interim Condensed Consolidated Financial Statements For the Three and Nine Months Ended September 30, 2024

Expressed in U.S. dollars in thousands

BioHarvest Sciences Inc.

Unaudited Interim Condensed Consolidated Financial Statements For the Three and Nine Months Ended September 30, 2024

Expressed in U.S. dollars in thousands

TABLE OF CONTENTS

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Going concern (Note 1C)

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statement.

3

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

4

For the nine-months period ended September 30, 2024:

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

5

For the nine-months period ended September 30, 2023, and for the year ended December 31, 2023:

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.

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The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.

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A.The Company: 

BioHarvest Sciences Inc. (the “Company” or “BioHarvest Sciences”), together with its wholly owned subsidiaries was incorporated under the Business Corporations Act of British Columbia on April 19, 2013. The Company fully owns BioHarvest Ltd., (“BioHarvest”), a company incorporated in Israel, and Superfood Nutraceuticals Inc., (“Superfood”) a company incorporated in Delaware, USA.

BioHarvest was incorporated in January 2007 and commenced its activity in July 2007.

In July 2014, BioHarvest Ltd incorporated a Delaware based wholly owned subsidiary, BioHarvest Inc (“BioHarvest Inc”).

On October 28, 2020, BioHarvest Sciences incorporated a Delaware based wholly owned subsidiary, Superfood Nutraceuticals Inc. (“Superfood”).

The Company is publicly traded on the Nasdaq stock market under the symbol BHST, on the Canadian Securities Exchange under the symbol BHSC, on the Frankfurt Stock Exchange under the symbol 8MV, the Munich Stock Exchange under the symbol “8MV”, the Stuttgart Stock Exchange under the symbol “CA09076J1084.SG” and the Tradegate Exchange under the symbol “8MV”.

The registered address of the Company is 1140-625 Howe St., Vancouver, BC V6C 2T6, Canada.

Description of Business

The Company is a biotechnology company that has developed the Botanical Synthesis Platform Technology, which enables the Company to grow, at an industrial scale, the active and beneficial ingredients in certain fruits and plants without the need to grow the plant itself. The Botanical Synthesis Platform Technology is the only non-genetically modified organism platform that can produce plant cells with significantly higher concentrations of active ingredients (as compared to those that are produced naturally), as well as extremely high levels of solubility and bio-availability. The Botanical Synthesis Platform Technology is economical, ensures consistency and avoids the negative environmental impacts associated with traditional agriculture by providing consistent product production, a year-round production cycle and products that are devoid of sugar, calories and contaminants, such as pesticides, heavy metals and residues.

The Company is currently focused on utilizing the Botanical Synthesis Platform Technology to develop the next generation of science-based and clinically proven therapeutic solutions through two business units:

1.The Products Business Unit, comprises: 

a)Nutraceuticals: Research, development, manufacturing, marketing and sales of science-based therapeutic nutraceutical solutions (capsules, powders, chews and other delivery mechanisms such as coffee, teas and protein bars); 

b)Cosmeceuticals: Research and development for future manufacturing, marketing and sales of science-based therapeutic cosmeceutical solutions; and 

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NOTE 1 - GENERAL (Continued):

2.The CDMO Services Business Unit comprising a Contract Development and Manufacturing Operation (“CDMO”) that offers customers from the pharmaceutical, cosmeceutical, nutraceutical and nutrition industries the development and future manufacturing of specific plant-based active molecules, via an end-to-end service agreement. 

B.War in Israel: 

The Company manufacturing facility and offices are located in Israel. On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Following the attack, Israel declared war against Hamas and the Israeli military began to call-up reservists for an active duty. At the same time, and because of the declaration of war against Hamas, the clash between Israel and Hezbollah in Lebanon has escalated and there is a possibility that it will turn into a greater regional conflict in the future. As of the date of these Financial Statements, these events have had no material impact on the Company’s operations.

C.Going concern: 

The Company has incurred losses from operations since its inception. As at September 30, 2024, the Company has an accumulated deficit of $93,462. The Company generated negative cash flows from operating activities of $4,295 and a loss in the amount of $9,957 for the nine months ended September 30, 2024. As at the date of the issuance of these financial statements, the Company has not yet commenced generating sufficient sales to fund its operations, and therefore depends on fundraising from new and existing investors to finance its activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The company’s management believes that the company will fund near term anticipated activities based on proceeds from capital fund raising and future revenues.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The accompanying unaudited interim condensed consolidated financial statements of the Company were authorized for issue by the Board of Directors in November 25, 2024.

NOTE 2 - BASIS OF PREPARATION:

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB) and Interpretations (collectively IFRS). These interim unaudited condensed consolidated financial statements have been prepared in accordance with International Accounting Standards IAS 34 Interim Financial Reporting.

This interim condensed consolidated financial information does not include all of the information required for annual consolidated financial statements and should be read in conjunction with the Company’s annual financial statements as of December 31, 2023. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2023, are applied consistently in these interim consolidated financial statements.

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NOTE 2 - BASIS OF PREPARATION (Continued):

New IFRSs adopted in the period

The following amendments are effective for the period beginning January 1, 2024:

a)Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7); These amendments have no effect on the measurement or presentation of any items in the Interim Condensed Consolidated Financial Statements of the Company but affect the disclosure of accounting policies of the Company. 

b)Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); These amendments had no material effect on the Interim Condensed Consolidated Financial Statements of the Company. 

c)Classification of Liabilities as Current or Non-Current (Amendments to IAS 1); These amendments had no material effect on the Interim Condensed Consolidated Financial Statements of the Company. 

d)Non-current Liabilities with Covenants (Amendments to IAS 1). These amendments had no material effect on the Interim Condensed Consolidated Financial Statements of the Company. 

In April 2024, the IASB issued IFRS 18 “Presentation and Disclosure in Financial Statements” replacing IAS 1 to improve the usefulness of information presented and disclosed in financial statements. IFRS 18 introduces three sets of new requirements. The standard defines categories for income and expenses, such as operating, investing and financing, and requires entities to provide new defined subtotals, including operating profit. IFRS 18 also requires entities that define entity-specific measures that are related to the income statement to disclose explanations of those measures, referred to as management-defined performance measures. In addition, it sets out enhanced guidance on how to organize information and whether to provide it in the primary financial statements or in the notes and requires entities to provide more transparency about operating expenses. These new requirements are to improve the entities’ reporting of financial performance and give investors a better basis for analyzing and comparing entities. The standard carries forward many requirements from IAS 1 unchanged. The standard is effective for annual periods beginning on or after January 1, 2027. The Company is currently evaluating the potential impact that the adoption of the standard will have on its consolidated financial statements.

There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to December 31, 2023, that the Company has decided not to adopt early. The Company is currently assessing the impact of these new standards, interpretations and amendments. The Company does not believe that the standards, interpretations and amendments will have a material impact on the financial statements once adopted.

NOTE 3 - LEASES:

The Company leases several facilities in Israel from which it operates. The Company also leases certain items of property and equipment which contain a lease of vehicles.

All leases are stated in Israeli New Shekel (“NIS” or “ILS”) and accounted for by recognizing a right-of-use asset and a lease liability except for:

a)Leases with low value assets; and 

b)Leases with a duration of 12 months or less. 

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NOTE 3 – LEASES (Continued):

In April 2024, the Company entered into a lease agreement for leasing approximately 10,300 square meters facility in Yavne, Israel (“Yavne 2 facility”) from April 1, 2024, until September 30, 2030, subject to 2 extension options for an additional 5 years each. The average monthly fees are NIS 327 ($88), including an annual increase and other adjustments, subject to the Consumer Price Index published by the Israeli Central Bureau of Statistics.

At lease commencement, the Company believes it’s probable the 2 extension options for an additional total of 10 years will be exercised.

On April 1, 2024, the Company recorded a right-of-use asset and lease liability with carrying amount of $8,648.

NOTE 4 - PROPERTY AND EQUIPMENT:

In April 2024, the Company entered an equipment purchase agreement for purchasing 12 GMP (Good manufacturing practices standards) cleanrooms, laboratory spaces and offices. The equipment purchase price was approximately $3,532.

NOTE 5 - SHARE CAPITAL:

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

a)The Company is authorized to issue an unlimited number of common shares. 

b)On May 27, 2024, the Company’s shareholders approved a 35-for-1 share consolidation, (hereinafter referred to as the 35:1 Share Consolidation) of the Company’s common shares pursuant to which the holders of the Company’s common shares received one common share in exchange for every 35 common shares held. The 35:1 Share Consolidation was approved by the Canadian Securities Exchange and is effective from June 3, 2024. All common shares (issued and unissued) were consolidated on the basis that every 35 common shares of no-par value were consolidated into 1 common share of no-par value. 

c)On June 28, 2024 the Company completed a private placement financing by issuing 603,904 units at a price of $7.17 per unit. Each unit consists of one common share of the Company and one quarter (1/4) of one $7.68 warrant and one quarter (1/4) of one $11.52 warrant. Each whole $7.68 warrant will entitle the holder to purchase one common share and is exercisable for a period of 6 months. Each whole $11.52 warrant will entitle the holder to purchase one common share and is exercisable of a period of 18 months. The total proceeds from the private placement were $4,330. The increase in share capital and premium as a result of this transaction is $4,330. 

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NOTE 5 - SHARE CAPITAL (Continued):

d)During the nine-months period ended September 30, 2024, the Company issued 2,940,882 common shares as a result of the conversion of convertible loans. Based on the terms of the convertible loans, upon conversion, the Company also issued 1,359,216 early exercise warrants with an exercise price of $7.77. 1,178,501 warrants are exercisable until October 30, 2025, and 180,715 are exercisable until December 22, 2025 (see Notes 7a, 7b, 7c). The increase in share capital and premium as a result of this transaction is $20,527. 

e)During the nine-months period ended September 30, 2024, the Company issued 106,132 common shares as a result of the exercise of options. The increase in share capital and premium as a result of this transaction is $408. 

f)The following table summarizes information about the warrants outstanding as at September 30, 2024: 

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

NOTE 6 - SHARE BASED COMPENSATION:

a)Options granted under the Company’s 2008 Israeli Share Option Plan (“Plan”) are exercisable within 10 years from the date of grant upon payment of the exercise price as indicated in the Plan. 

b)On February 20, 2024, the Company granted employees and consultants 2,857 options to purchase shares of the Company at CAD 7.875 ($5.95) per share under the Company’s share option plan. The options will be exercisable for a 10-year period. The options will vest quarterly over a 2-year period. The total value of the options granted is CAD 11 ($8). 

c)On February 20, 2024, the Company granted employees and consultants 13,600 options to purchase shares of the Company at CAD 7.875 ($5.95) per share under the Company’s share option plan. The options will be exercisable for a 2-year period. The options will vest immediately in May 2024. The total value of the options granted is CAD 24 ($18). 

d)On March 22, 2024, the Company granted employees and consultants 47,144 options to purchase the Company’s shares at CAD 9.975 ($7.35) per share under the Company’s share option plan. The options will be exercisable for a 10-year period. 11,429 options will vest quarterly over a 2-year period, 32,287 options will vest quarterly over a 3-year period, 2,857 options will vest quarterly over a 1-year period, 571 options will vest over a 18-months period. The total value of the options granted is CAD 237 ($175). 

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NOTE 6 - SHARE BASED COMPENSATION (Continued):

e)On March 22, 2024, the Company granted employees and consultants 22,857 options to purchase the Company’s shares at CAD 9.975 ($7.35) per share under the Company’s share option plan. The options will be exercisable for a 3-year period. 14,286 options will vest quarterly over a 2.75-year period after a 3-months period from the date of the grant and 8,571 options will vest monthly over a 2.5-year period after a 6-months period from the date of the grant. The total value of the options granted is CAD 77 ($57). 

f.On April 26, 2024, the Company granted employees and consultants 8,571 warrants to purchase the Company’s shares at CAD 9.1 ($6.65) per share under the Company share option plan. The warrants will be exercisable for 2-year period. The total value of the warrants granted is CAD 24 ($18). 

g.On April 26, 2024, the Company granted employees and consultants 20,000 restricted share units (“RSU”) under the Company’s Restricted Share Units plan with an expiry date of December 31, 2024. The RSU vesting is subject to the performance condition of achieving the Company’s specified targets in 2024. 

h.On May 31, 2024, the Company granted employees and consultants 16,429 options to purchase the Company’s shares at CAD 8.925 ($6.65) per share under the Company’s share option plan. The options will be exercisable for a 10-year period. The options will vest quarterly over a 3-year period. The total value of the options granted is CAD 75 ($55). 

i.The following table summarizes information regarding expenses relating to share-based compensation: 

j)A summary of activity related to options granted to purchase the Company’s shares under the Company’s share option plan is as follows: 

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NOTE 6 - SHARE BASED COMPENSATION (Continued):

(*)Restated for giving effect to the reverse stock split (see also Note 5b). 

(**)During the nine-months period ended September 30, 2024, 9,190 options were forfeited due to termination of employment. 

(***)The options outstanding at September 30, 2024, had a weighted-average contractual life of 6.55 years (December 31, 2023: 7.24 years). 

The following table summarizes information about the options outstanding as at September 30, 2024:

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

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NOTE 6 - SHARE BASED COMPENSATION (Continued):

Warrants

k)A summary of activity related to warrants granted to purchase the Company’s shares, accounted for as share based compensation, is as follows: 

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

The following table summarizes information about the warrants outstanding as at September 30, 2024:

(*) Restated for giving effect to the reverse stock split (see also Note 5b)

NOTE 7 - CONVERTIBLE LOANS:

A.Convertible loan A: 

In April 2022, the Company signed an agreement (“the Agreement”) with certain lenders (the “Lenders”), according to which the Company authorized the sale and issuance to the Lenders a convertible loan (the “Convertible Loan”) with aggregate principal amounts of $7,658 (CAD 10,034) closed in three tranches. The first tranche of $5,308 (CAD 6,878) closed on October13, 2022, the second tranche of $1,950 (CAD $2,613) closed on November 15, 2022, and the third tranche of $400 (CAD 543) closed on December 15, 2022 (“Principal Loan Amount”). The Principal Loan Amount, to the extent and for the period of time that such Principal Amount is unconverted, shall bear interest at a rate of 9% per annum from the closing date (the “Closing Date”) up to and including the date that is 24 months following the Closing Date (the “Second Anniversary”). The Company will pay the Lenders, to the extent such interest is unconverted:

a)any interest accrued up to and including the date that is twelve months following the Closing Date (the “Anniversary”), on the Anniversary; and 

b)any interest accrued between and including the dates that are one day following the Anniversary and twenty-four months following the Closing Date (the “Secondary Anniversary”), on the Second Anniversary. 

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NOTE 7 - CONVERTIBLE LOANS (Continued):

A.Convertible loan A (Continued): 

The Convertible Loan shall mature on the date that is twenty-four months following the Closing Date (the “Maturity Date”). Any unconverted portion of the Principal Loan Amount will be repaid on the Maturity Date.

The Lenders may, at any time prior to the Maturity Date, elect to convert any unconverted portion of the Principal Loan Amount together with the accrued Interest thereon (the “Remaining Amount”), into common shares in the capital of the Company as constituted on the date hereof (“Shares”) at the Conversion Price.

The conversion price is the price per share (the “Conversion Price”) that is equal to:

a)CAD 11.20, if the date of the receipt of such Conversion Notice by the Company occurs between and including the Closing Date and the date that is 90 days following the Closing Date. 

b)CAD 12.25, if the date of the receipt of such Conversion Notice by the Company occurs between and including the dates that are 91 days following the Closing Date and 180 days following the Closing Date. 

c)CAD 13.65, if the date of the receipt of such Conversion Notice by the Company occurs between and including the dates that are 181 days following the Closing Date and 270 days following the Closing Date. 

d)CAD 15.40, if the date of the receipt of such Conversion Notice by the Company occurs between and including the date that is 271 days following the Closing Date and the date that is one day prior to the Anniversary; or 

e)If the date of the receipt of such Conversion Notice by the Company occurs on or following the Anniversary the Discounted Conversion Price shall be: 

·75% of the closing price of the shares, on the principal exchange on which the shares are listed (the “Exchange”), on the date of receipt of the Conversion Notice by the Company (the “Closing Price”) if the Closing Price is CAD 17.50 or less; or 

·80% of the Closing Price, if the Closing Price is CAD 17.85 or greater. 

In the event that the Discounted Conversion Price is less than CAD 9.10 per share (the “Floor Price”), the Conversion Price will be equal to the Floor Price. In the event that the Discounted Conversion Price is greater than CAD 22.75 per share, the Conversion Price shall not exceed:

·CAD 22.75, if the date of the receipt of such Conversion Notice by the Company occurs between and including the Anniversary and the date that is 90 days following the Anniversary. 

·CAD 26.25, if the date of the receipt of such Conversion Notice by the Company occurs between and including the dates that are 91 days following the Anniversary and 180 days following the Anniversary. 

·CAD 29.75, if the date of the receipt of such Conversion Notice by the Company occurs between and including the dates that are 181 days following the Anniversary and 270 days following the Anniversary: or 

·CAD 33.25, if the date of the receipt of such Conversion Notice by the Company occurs between and including the date that is 271 days following the Anniversary and the date that is one day prior to the Maturity Date. 

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NOTE 7 - CONVERTIBLE LOANS (Continued):

During the nine-month period ended September 30, 2024, the company issued 510,888 shares as a result of the conversion of $3,383 (principal and accrued interest) related to the Convertible loan A (see Note 5d).

The Convertible Loan is denominated in Canadian dollars and convertible into common shares based on the principal and interest balance. The conversion rate to common shares is variable as it depends on the Company’s share price prevailing at specific dates on the stock exchange. Therefore, the convertible loan is a hybrid instrument that includes a debt host contract and an embedded derivative liability.

As the instrument contains an embedded derivative, it has been designated at fair value through profit or loss on initial recognition and as such the embedded conversion feature is not separated. All transaction costs related to financial instruments designated as fair value through profit or loss are expensed as incurred.

The component of fair value changes relating to the Company’s own credit risk is recognized in other comprehensive income (“OCI”). Amounts recorded in OCI related to credit risk are not subject to recycling in profit or loss but are transferred to retained earnings when realized. Fair value changes relating to market risk are recognized in profit or loss. There was no change in the Company’s own credit risk since the issuance of the convertible notes.

The fair value of the Convertible Loans has been determined using the Binomial model. The following assumptions were used to determine the fair value of the Convertible Loans:

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NOTE 7 - CONVERTIBLE LOANS (Continued):

B.Convertible loan B: 

In March 2023, the Company signed an agreement (“the Agreement”) with certain lenders (the “Lenders”), according to which the Company authorized the sale and issuance to the Lenders a convertible loan (the “Convertible Loan”) with aggregate principal amounts of $10,077 (CAD 13,622) closed in two tranches. The first tranche of $8,710 (CAD 11,786) closed on October 30, 2023, and the second tranche of $1,367 (CAD $1,836) closed on December 22, 2023 (“Principal Loan Amount”). The Principal Loan Amount, to the extent and for the period of time that such Principal Amount is unconverted, shall bear interest at a rate of 12% per annum from the closing date (the “Closing Date”) up to and including the date that is 24 months following the Closing Date (the “Second Anniversary”). The Company will pay the Lenders, to the extent such interest is unconverted:

a)any interest accrued up to and including the date that is twelve months following the Closing Date (the “Anniversary”), on the Anniversary; and 

b)any interest accrued between and including the dates that are one day following the Anniversary and twenty-four months following the Closing Date (the “Secondary Anniversary”), on the Second Anniversary. 

The Convertible Loan shall mature on the date that is twenty-four months following the Closing Date (the “Maturity Date”). Any unconverted portion of the Principal Loan Amount will be paid on the Maturity Date.

The Lenders may, at any time prior to the Maturity Date, elect to convert any unconverted portion of the Principal Loan Amount together with the accrued Interest thereon (the “Remaining Amount”), into common shares in the capital of the Company as constituted on the date hereof (“Shares”) at the Conversion Price.

The conversion price is the price per share (the “Conversion Price”) that is equal to:

·80% of the closing price of the shares, on the principal exchange on which the shares are listed (the “Exchange”), on the date of receipt of the Conversion Notice by the Company (the “Closing Price”). 

·In the event that the Discounted Conversion Price is less than CAD 8.40 per Share (the “Floor Price”), the Conversion Price will be equal to the Floor Price. 

·In the event that the Discounted Conversion Price is greater than CAD 26.25 per Share (the “Ceiling Price”), the Conversion Price will be equal to the Ceiling Price. 

An investor who invests a minimum amount of CAD 2,700,000 will also receive upon closing an additional warrant (the “Major Investment Warrant”) for each CAD 10.50 invested. Each Major Investment Warrant will be exercisable for a period of 24 months from the Closing Date of the convertible loan to purchase a common share of the Company at CAD 10.50 per share. On October 30, 2023, the Company issued 518,174 Major Investment Warrants. These Warrants were classified as Derivative liability (see Note 8). On March 28, 2024, all Major Investment Warrant holders agreed to convert the exercise price of the warrants from CAD to the equivalent in USD, based on the exchange rate at the dated of the approval of the Canadian Securities Exchange. Since the warrants have an exercise price denominated in US dollars which is the Company’s functional currency, the Company reclassified the Major Investment Warrants as an equity instrument.

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NOTE 7 - CONVERTIBLE LOANS (Continued):

B.Convertible loan B (Continued): 

As an incentive for early conversion, any investor who converts their investment amount within 12 months following the Closing Date of the convertible loan will receive a warrant for each CAD 10.50 converted (the “Early Conversion Warrant”). Each Early Conversion Warrant will be exercisable to purchase a common share of the Company at an exercise price of CAD 10.50 per share for a period expiring on the maturity date of the convertible loan. On March 28, 2024, all Early Conversion Warrant holders agreed to convert the exercise price of the warrants from CAD to the equivalent in USD, based on the exchange rate at the dated of the approval of the Canadian Securities Exchange. Since the warrants have an exercise price denominated in US dollars, which is the Company’s functional currency, the Company reclassified the Major Investment Warrants as an equity instrument.

During the nine-month period ended September 30, 2024, the company issued 1,699,018 shares as a result of the conversion of $10,500 (principal and accrued interest) related to the Convertible loan B and 1,359,216 Early Conversion Warrants to purchase shares of the Company at USD 7.77 per share. 1,178,501 warrants will expire on October 30, 2025, and 180,715 warrants will expire on December 22, 2025 (see Note 5d).

The Convertible Loan is denominated in Canadian dollars and convertible into common shares based on the principal and interest balance. The conversion rate to common shares is variable as it depends on the Company’s share price prevailing at specific dates on the stock exchange. Therefore, the convertible loan is a hybrid instrument that includes a debt host contract and an embedded derivative liability.

As the instrument contains an embedded derivative, it has been designated at fair value through profit or loss on initial recognition and as such the embedded conversion feature is not separated. All transaction costs related to financial instruments designated as fair value through profit or loss are expensed as incurred.

The component of fair value changes relating to the company’s own credit risk is recognized in OCI. Amounts recorded in OCI related to credit risk are not subject to recycling in profit or loss but are transferred to retained earnings when realized. Fair value changes relating to market risk are recognized in profit or loss. There was no change in the company company’s own credit risk since the issuance of the convertible notes.

The fair value of the Convertible Loans has been determined using the Binomial model. The following assumptions were used to determine the fair value of the Convertible Loans:

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NOTE 7 - CONVERTIBLE LOANS (Continued):

C.Convertible loan C: 

In April 2023, the Company signed an agreement (“the Agreement”) with certain lenders (the “Lenders”), according to which the Company authorized the sale and issuance to the Lenders a convertible loan (the “Convertible Loan”) with aggregate principal amounts of $3,440 (“Principal Loan Amount”). The Principal Loan Amount, to the extent and for the period of time that such Principal Amount is unconverted, shall bear interest at a rate of 9% per annum from the closing date (the “Anniversary”). The Company will pay the Lenders, to the extent such interest is unconverted any interest accrued up to and including the date that is twelve months following the Closing Date on the Anniversary.

The Convertible Loan shall mature on the date that is twelve months following the Closing Date (the “Maturity Date”). Any unconverted portion of the Principal Loan Amount will be paid on the Maturity Date.

The Lenders may, at any time prior to the Maturity Date, elect to convert any unconverted portion of the Principal Loan Amount together with the accrued Interest thereon (the “Remaining Amount”), into common shares in the capital of the Company as constituted on the date hereof (“Shares”) at the Conversion Price.

The conversion price is CAD 7.00 per share (the “Conversion Price”).

During the nine-month period ended September 30, 2024, the company issued 730,976 shares as a result of the conversion of $3,764 (principal and accrued interest) related to Convertible loan C (see Note 5d).

The Convertible Loans are denominated in Canadian dollars and convertible into common shares based on the principal and interest balance. Therefore, the convertible loan is a hybrid instrument that includes a debt host contract and an embedded derivative liability.

As the instrument contains an embedded derivative, it has been designated at fair value through profit or loss on initial recognition and as such the embedded conversion feature is not separated. All transaction costs related to financial instruments designated as fair value through profit or loss are expensed as incurred.

The component of fair value changes relating to the company’s own credit risk is recognized in other comprehensive income. Amounts recorded in OCI related to credit risk are not subject to recycling in profit or loss but are transferred to retained earnings when realized. Fair value changes relating to market risk are recognized in profit or loss. There was no change in the company company’s own credit risk since the issuance of the convertible notes.

The fair value of the Convertible Loans has been determined using the Binomial model. The following assumptions were used to determine the fair value of the Convertible Loans:

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NOTE 8 - FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT:

This note provides an update on the judgements and estimates made by the Company in determining the fair values of the financial instruments since the last annual financial report.

The following table summarizes the information about the level 3 fair value measurements:

* A change in the volatility measure by 5% results in a change of +/- $1 of the fair value

Reconciliation of fair value measurements that are categorized within Level 3 of the fair value hierarchy:

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NOTE 8 - FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT (Continued):

Financial instruments not measured at fair value:

Financial instruments not measured at fair value include cash and cash equivalents, restricted cash, trade accounts receivable, other accounts receivable, trade accounts payable, other accounts payable and Liability to Agricultural Research Organization.

Due to their short-term nature, the carrying value of cash and cash equivalents, restricted cash, trade accounts receivable, other accounts receivable, trade accounts payable, other accounts payable approximates their fair value.

The fair value of Liability to Agricultural Research Organization for September 30, 2024 and December 31, 2023, is not materially different to the carrying amount.

NOTE 9 - RELATED PARTIES TRANSACTIONS:

Related parties including the Company’s CEO, CFO, Chairman of the Board and Directors.

Related party transactions:

Related party balances:

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NOTE 10 - OPERATING SEGMENTS:

Effective January 1, 2024, the Company has two operating segments or business units: the Products business unit and the CDMO Services business unit. In identifying these operating segments, management generally follows the Company service lines representing its main products and services.

Segment description:

1.Products business unit. 

oNutraceuticals: Research, development, manufacturing, marketing and sales of science-based therapeutic nutraceutical solutions (capsules, powders, chews and other delivery mechanisms such as coffee, teas and protein bars); 

oCosmeceuticals: Research and development for future manufacturing, marketing, and sales of science-based therapeutic cosmeceutical solutions. 

2.CDMO Services business unit 

Offering customers from the pharmaceuticals, cosmeceuticals, nutraceuticals, and nutrition industries through an end-to-end service agreement for development and manufacturing of specific plant-based active molecules.

Segment information:

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NOTE 10 - OPERATING SEGMENTS (Continued):

1)Entity wide disclosures of external revenue by location of customers: 

2)Additional information concerning revenues: 

There is no single customer from which revenues amount to 10% or more of total revenues reported in the financial statements.

NOTE 11 - SUBSEQUENT EVENTS:

a)During November 2024 the Company engage with lenders and received an aggregate principal amount of $2,000 as part of a short-term loan agreement for a period of 12 months. 

b)On November 15, 2024, the Company granted employees and consultants 111,998 options to purchase shares of the Company at CAD 8.48 ($6.05) per share under the Company’s share option plan. 

c)On November 15, 2024, the Company granted 5,400 restricted share units to employees and consultants pursuant to deemed issuance price of CAD 8.48 ($6.05) per share unit. 

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INTRODUCTION

The following Management’s Discussion and Analysis (“MD&A”) for BioHarvest Sciences Inc., together with its wholly owned subsidiaries (“BioHarvest Sciences” or “the Company”) prepared as of November 25, 2024, has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (IASB).  All amounts (other than per share amounts) are stated in U.S dollars rounded to the nearest thousand, unless otherwise indicated.

The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, and the related notes to those financial statements.

Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements. Readers are cautioned not to put undue reliance on forward-looking statements.

The Company is publicly traded on the Nasdaq stock market under the symbol “BHST”, on the Canadian Securities Exchange under the symbol “BHSC”, on the Frankfurt Stock Exchange under the symbol “8MV”, the Munich Stock Exchange under the symbol “8MV”, the Stuttgart Stock Exchange under the symbol “CA09076J1084.SG” and the Tradegate Exchange under the symbol “8MV”.

Continuous disclosure materials are available on our website at www.bioharvest.com. This additional information is not incorporated into this Management’s Discussion and Analysis and does not constitute a part of this Management’s Discussion and Analysis.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains certain information that may constitute “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. Such statements can be identified by the use of forward-looking terminology such as “expect,” “likely”, “may,” “will,” “should,” “intend,” or “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. The forward-looking statements included in this MD&A are made only as of the date of this MD&A. Forward-looking statements in this MD&A may include, but are not limited to, statements with respect to: a) licensing risks;

b) regulatory risks; c) change in laws, regulations and guidelines; d) market risks; e) expansion of facilities; f) history of net losses; and g) competition. Certain of the forward-looking statements and forward-looking information and other information contained herein concerning the, nutraceutical, pharmaceutical and cosmeceutical industries, the general expectations of the Company concerning these industries and concerning the Company are based on estimates prepared by the Company using data from publicly available governmental sources, from market research and industry analysis and on assumptions based on data and knowledge of these industries,  which the Company believes to be reasonable. The Company is not aware of any misstatement regarding any industry or government data presented herein. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company’s forward-looking statements are expressly qualified in their entirety by this cautionary statement. In particular, but without limiting the foregoing, disclosure in this MD&A under “Nature of the Business and Overview of Operations” as well as statements regarding the Company’s objectives, plans and goals, including future operating results and economic performance may make reference to or involve forward-looking statements. A number of factors could cause actual events, performance or results to differ materially from what is projected in the forward-looking statements. See “Risk and Uncertainties” for further details. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose. You should not place undue reliance on forward- looking statements contained in this MD&A. The Company undertakes no obligation to update or revise any forward-looking statements.

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GOING CONCERN

The Company has incurred losses from operations since its inception. As of September 30, 2024, the Company has an Accumulated Deficit of $93,462 thousands. The Company generated negative cash flows from operating activities of $4,295 thousands and a loss in the amount of $9,957 thousands for the nine months ended September 30, 2024. As of the date of the issuance of the unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, the Company has not yet commenced generating sufficient sales to fund its operations, and therefore depends on fundraising from new and existing investors to finance its activities. These factors raise material uncertainties that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s plans to fund near term anticipated activities based on proceeds from capital fund raising and future revenues.

The unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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NATURE OF BUSINESS AND OVERVIEW OF OPERATIONS

1.Summary 

BioHarvest Sciences Inc. (the “Company” or “BioHarvest Sciences”) was incorporated under the Business Corporations Act of British Columbia on April 19, 2013.

2.Corporate Structure 

3.Overview of the business 

The Company is a biotechnology company that has developed the Botanical Synthesis Platform Technology, which enables the Company to grow, in bioreactors at an industrial scale, the active and beneficial ingredients in certain fruits and plants without the need to grow the plant itself. The Botanical Synthesis Platform Technology is a non-genetically modified organism platform that can produce plant cells with higher concentrations of active ingredients (as compared to those that are produced naturally), as well as high levels of solubility and bio-availability. The Botanical Synthesis Platform Technology is economical, ensures consistency and avoids the negative environmental impacts associated with traditional agriculture by providing consistent product production, a year-round production cycle and products that are devoid of sugar, calories and contaminants, such as pesticides, heavy metals and residues.

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The Company is currently focused on utilizing the Botanical Synthesis Platform Technology to develop the next generation of science-based and clinically proven health solutions through its two (2) business units:

1.The Products Business Unit, comprising: 

(a)Nutraceuticals: Research, development, manufacturing, marketing and sales of science-based health and wellness nutraceutical solutions which are manufactured and sold as dietary supplements and/or functional food (capsules, powders, chews and other delivery mechanisms such as coffee, teas and electrolyte-enhanced beverages); and 

(b)Cosmeceuticals: Research and development for future manufacturing, marketing and sales of science-based health and cosmeceutical solutions which are to be developed, manufactured and sold as cosmetic products; and 

2.The CDMO Services Business Unit comprising a CDMO that offers customers from the pharmaceuticals, cosmeceuticals, nutraceuticals and nutrition industries, through an end-to-end service agreement, the development and manufacturing of specific plant-based active molecules. 

Products Business Unit Activities:

I.Nutraceuticals 

The Company is engaged in the research and development of science-based health and wellness solutions for the nutraceutical industry. The Company’s first product entry into this market is a polyphenol/anti-oxidant superfruit product called VINIA®, which is a red grape powder that supplies the benefits of red wine consumption but without the sugar, calories and alcohol found in wine.

VINIA® is made of red grape (Vitis vinifera) cells grown in the Company’s proprietary bioreactor facility. VINIA® is a fine, dry pink-purple powder containing a matrix of polyphenols (with a high concentration of piceid resveratrol) in their natural state (as can be found in red wine) that has additive and synergistic benefits. One of the main active ingredients in VINIA® is piceid resveratrol, maintaining the quality and inherent benefits present in nature without any solvent extraction or genetic modification. VINIA® is soluble when integrated with various liquids or cosmetics.

The Company has invested over $80 million, primarily in R&D activities, to support the business. This investment has enabled the Company to develop a disruptive technology platform which mirrors nature and allows it to efficiently produce plant cells that are identical to those originally sourced from the parent plant, ensuring optimal bio-availability and efficacy of the secondary metabolites.

In terms of manufacturing capacity, the Company has established a 20 ton manufacturing facility   and commenced implementation of the required technology and process improvements to drive significant cost reduction through economies of scale.  This facility received Good Manufacturing Practice (GMP) approvals from the Israeli Ministry of Health in October 2021 as well as key ISO certifications. The Company completed the biological technology transfer to the new manufacturing facility in March 2022 and has commenced actively scaling up its manufacturing of

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VINIA® red grape cells at this new facility. This enables the Company to better meet the increasing demand for VINIA ® which is driven from the US market as a result of the Company’s marketing activities. The Company continued to focus significant resources in the third quarter of 2024 to increase its bioreactor capacity levels for each bioreactor by 22% to improve capacity levels and operational efficiency. The Company started to commence operationalizing this larger bioreactor size in August and will complete the scale up of all its Bioreactors to this size by the end of Q1 2025. In addition, the Company has successfully secured additional 3rd party drying capacity to be able to cope with growing quarter on quarter demand levels. The Company expects this to positively impact capacity levels and gross profit delivery in Q1 2025.

In the third quarter of 2024, VINIA® revenues increased by 102% versus the comparable period in the previous year. This was a major demonstration of the Company’s ability to scale its VINIA® business using its Botanical Synthesis technology. Importantly, as a result of the aggressive scaling of the business and management’s focus on driving efficiencies where possible across the value chain, the Company continues to improve gross profit margin levels of the Products business unit, realizing a gross profit margin increase to 56% (for the Products business unit) during the third quarter of 2024 as compared to 45% during the comparable period in the previous year. Management continues to focus on accelerating revenue momentum and improving gross profit margins as well as marketing efficiencies.

The Company has a well-developed innovation pipeline in its Products business unit. Over the next 12 months, the Company plans to introduce a number of new products under the VINIA® brand as well as additional cell-based products utilizing its Botanical Synthesis technology. The pipeline of products planned, based on VINIA®, includes the launching of consumer products in major multibillion dollar categories including a hot tea beverages products line to be launched in Q4 2024, and an electrolyte enhanced beverage line to be launched in H1 2025. The Company has experienced a very successful initial launch of its Keurig compatible VINIA Superfood Coffee pods, demonstrating that its “VINIA Inside” strategy is working as the Company delivers on its promise to consumers of  delivering “Superior Science, Superior Efficacy and Superior Taste” in categories where consumers are yearning for products with improved health and wellness credentials. To date, the Company has sold more than $1.4M USD of coffee via its website and via Amazon.

II.Cosmeceuticals 

Since Q1 2023, the Company has spent significant resources investigating the opportunities that exist for its Red Grape Cell molecules in the growing beauty and cosmetics skincare market. The skin care market in the United States is worth approximately US$23 billion as of 2023, and the Company believes that consumers are searching for new natural and natural origin molecules to better address their skin care needs.

In Q1 2023, the Company conducted a small-scale skin care assessment in Seoul, South Korea (the “Skin Care Assessment”), which received positive anecdotal feedback from all participants regarding their various skin ailments, such as atopic dermatosis, psoriasis, facial redness and folliculitis, after using VINIA®.

Based on the positive results of the Skin Care Assessment, the Company plans to bring to the USA market, a VINIA cosmeceutical product which will include its VINIA supplement combined with a VINIA powered topical solution such as a skin moisturizer. The Company is working with a

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major renowned skin care topical solution contract manufacturer to finalize its topical solution and plans to conduct a clinical study in the United States to assess the efficacy of this unique VINIA® solution on skin health promotion. The Company plans to launch this product in the US market by the end of 2025.

CDMO Services Business Unit

In Q1 2024, the Company announced the launch of its CDMO Services Business Unit, including its entry into two (2) development agreements to develop complex molecules.

This CDMO Services Business Unit allows pharmaceutical, cosmeceutical, nutraceutical and nutrition industry companies the opportunity to partner with the Company to utilize the Botanical Synthesis Platform Technology through a CDMO contracting model. The Botanical Synthesis Platform Technology enables the development and manufacturing of patentable plant-based small molecules, complex molecules and unique compositions, which include both small and complex molecules. The Botanical Synthesis Platform Technology can develop complex molecules, otherwise known as biologics, which have a number of unique advantages, including lower costs of development and manufacturing, a faster speed of development and non-immunogenic properties that enhance safety. As a result of these advantages, the Company has decided to name these unique plant-derived complex molecules BIOLOGICS+. BIOLOGICS+ will help address unmet needs in the health industry across pharmaceutical, nutraceutical, cosmeceutical and nutrition verticals.

The Company currently has a number of customers in its short-term pipeline and expects to sign additional strategic contracts by the end of 2024 with customers from the pharmaceutical, nutraceutical, cosmeceutical and food ingredients/nutrition industries.

Environmental, Social and Governance Reporting:

On September 2021 the Company announced the publication of its inaugural Environmental, Social, and Governance (ESG) Report, detailing the Company’s performance and ongoing commitment to creating a sustainable future. The report is aligned with the United Nations Sustainable Development Goals and the reporting requirements of the Task Force on Climate-Related Financial Disclosures and the Sustainability Accounting Standards Board.

On September 6, 2022, Business Intelligence Group awarded the Company its prestigious Sustainability Leadership Award. The award recognizes the sustainability impact of the Company’s Botanical Synthesis platform technology, which enables industrial production of plant metabolites without growing the plant itself. The Company received the award with other industry thought leaders such as AstraZeneca, Agilent, and Honeywell.

In addition, the Company has completed its own Supplier Guiding Principles (SGP) for its ecosystem of supply chain partners and has commenced rolling this out and plans to complete the roll out of these SGP principles by end of Q1 2025.

At the time of writing this MDNA, the Company has also completed the development of critical HR policies such as a “Belonging, Inclusion, Diversity and Equity Policy”, a “Whistle Blower Policy” and a “Grievance Policy”. The Company will deploy resources in Q4 2024 and Q1 2025 in rolling out these policies to all employees of the Company.

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Significant Developments

To better understand the Company’s financial results, it is important to gain an appreciation of the significant events, transactions and activities that occurred during or have affected the period under review up to and including the date of this MD&A.

1.During the nine-month period ended September 30, 2024, the Company issued 2,940,882 common shares as a result of conversion of Convertible Loans.  

2.During the nine-month period ended September 30, 2024, the Company issued 106,132 common shares as a result of exercise of options. 

3.During the nine-month period ended September 30, 2024, the Company issued 1,359,216 Early Conversion Warrants to purchase shares of the Company at $7.77. 1,178,501 warrants will expire on October 30, 2025, and 180,715 warrants will expire on December 22, 2025. 

4.During the nine-month period ended September 30, 2024, the Company issued 603,904 units at price of $7.17 per unit. Each unit consists of one common share of the Company and one quarter (1/4) of one $7.68 warrant and one quarter (1/4) of one $11.52 warrant. Each whole $7.68 warrant will entitle the holder to purchase one common share and is exercisable for a period of 6 months. Each whole $11.52 warrant will entitle the holder to purchase one common share and is exercisable for a period of 18 months. 

5.On May 27, 2024, the Company’s shareholders approved a 35-for-1 share consolidation (hereinafter referred to as the Share Consolidation) of the Company’s common shares pursuant to which the holders of the Company’s common shares received one common share for every 35 common shares held. The 35:1 Share Consolidation was approved by the Canadian Securities Exchange and is effective from June 3, 2024. All common shares (issued and unissued) were consolidated on the basis that every 35 common shares of no-par value were consolidated into 1 common share of no-par value. 

Selected Information

(*)Restated for giving effect to the reverse stock split (see also ‘Significant Developments’ in section 5) 

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Three-month period ended September 30, 2024, compared to the three-month period ended September 30, 2023:

Revenues, of which 99% relate to the Products Business Unit of the Company, were $6,539 thousands for the three months ended September 30, 2024, as compared to $3,239 thousands during the same period in the prior year. The increase in the third quarter of 2024 is a result of the Company’s significant scaling of its business-to-consumer and medical practitioner focused e-commerce strategy.

Cost of revenues were $2,825 thousands for the three months ended September 30, 2024, as compared to $1,797 thousands during the same period in the prior year. The increase is due to growth in production, demand and sales during the period.

Gross margins were 57% for the three months ended September 30, 2024, as compared to 45% during the same period in the prior year. The increase in gross margins was a result of the Company’s continuing focus on cost reduction and production scaling.

Research and development expenses were $1,278 thousands for the three months ended September 30, 2024, as compared to $894 thousands during the same period in the prior year. The change is mainly due to an increase in wages and salaries (related to the CDMO services business unit) as well as professional fees and travel to support both segments.

Sales and marketing expenses, which relate mainly to the Products Business Unit, were $3,417 thousands for the three months ended September 30, 2024, as compared to $1,798 thousands during the same period in the prior year. The change is due to the higher marketing expenditure and wages and salaries required to support sales growth.

General and administrative expenses increased to $1,121 thousands for the three months ended September 30, 2024, as compared to $757 thousands during the same period in the prior year. The main increase is due to an increase in wages and salaries as well as investor relation expenses. General and administrative expenses are incurred to support both of our business segments.

Finance expenses, were $587 thousands for the three months ended September 30, 2024, as compared to $155 thousands during the same period in the prior year. The increase is primarily the result of accrued interest over lease liability. Finance expenses are incurred to support both of our business segments.

The Company had no finance income for the three months ended September 30, 2024, as compared to $435 thousands during the same period in the prior year. The decrease is primarily the result of fair value adjustments applicable to the Company’s convertible loan recorded in the three-month

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period ended September 30, 2023. Finance income is incurred to support both of our business segments.

Nine-month period ended September 30, 2024, compared to the nine-month period ended September 30, 2023:

Revenues, of which 99% relate to the Products Business Unit of the Company, were $17,910 thousands for the nine months ended September 30, 2024, as compared to $8,152 thousands during the same period in the prior year. The increase in the first nine months of 2024 is a result of the Company’s significant scaling of its business-to-consumer and medical practitioner focused e-commerce strategy.

Cost of revenues were $8,091 thousands for the nine months ended September 30, 2024, as compared to $4,812 thousands during the same period in the prior year. The increase is due to a growth in demand and sales, with a corresponding growth in production, during the period.

Gross margins were 55% for the nine months ended September 30, 2024, as compared to 41% during the same period in the prior year. The increase in gross margins was a result of the Company’s focus on cost reduction and production scaling.

Research and development expenses were $3,400 thousands for the nine months ended September 30, 2024, as compared to $2,317 thousands during the same period in the prior year. The change is mainly due to an increase in wages and salaries, primarily to support the new CDMO Services Business Unit, as well as professional fees, share-based compensation, travel and depreciation and amortization to support both segments.

Sales and marketing expenses, which relate mainly to the Products Business Unit, were $8,793 thousands for the nine months ended September 30, 2024, as compared to $5,490 thousands during the same period in the prior year. The change is due to the higher marketing expenditure and wages and salaries required to support sales growth.

General and administrative expenses decreased to $2,928 thousands for the nine months ended September 30, 2024, as compared to $2,950 thousands during the same period in the prior year. General and administrative expenses are incurred to support both of our business segments.

Finance expenses were $4,655 thousands for the nine months ended September 30, 2024, as compared to $457 thousands during the same period in the prior year. The increase is primarily the result of fair value adjustments applicable to the Company’s convertible loans and issuance of warrants. Finance expenses are incurred to support both of our business segments.

The Company had no finance income for the nine months ended September 30, 2024, as compared to $2,545 thousands during the same period in the prior year. The decrease is primarily the result of fair value adjustments applicable to the Company’s convertible loan recorded in the nine-month period ended September 30, 2023. Finance income is incurred to support both of our business segments.

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Summary of Quarterly Results

The following represents the summarized quarterly financial results for the past eight quarters:

(*)Restated for giving effect to the reverse stock split (see also ‘Significant Developments’ in section 5) 

Financial instruments and risk management

The Company is exposed to a variety of financial risks, which results from its financing, operating and investing activities. The objective of financial risk management is to contain, where appropriate, exposures to these financial risks to limit any negative impact on the Company’s financial performance and position. The Company’s financial instruments are its Cash and cash equivalents, Restricted cash, Trade accounts receivable, Other accounts receivable, Trade accounts payable, Other accounts payable and Liability to Agricultural Research Organization. The main purpose of these financial instruments is to raise finance for the Company’s operation. The Company actively measures, monitors and manages its financial risk exposures by various functions, including the segregation of duties and the application of financial control principals. The risks arising from the Company’s financial instruments are mainly currency risk and liquidity risk. The Company has no interest rate risk as the balances exposure to interest is minimal. The risk management policies employed by the Company to manage these risks are discussed below.

Foreign currency risk

Foreign exchange risk arises when the Company enters into transactions denominated in a currency other than its functional currency. The Company is exposed to currency risk to the extent that there is a mismatch between the currency in which it is denominated and the respective functional currency of the company. The currencies in which some transactions are primarily denominated are CAD, US dollars and NIS. The Company’s policy is not to enter into any economic hedging transactions to neutralize the effects of foreign currency fluctuations.

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Liquidity and Capital resources

The unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, have been prepared on a going concern basis whereby the Company is assumed to be able to realize its assets and discharge its liabilities in the normal course of operations. The unaudited interim condensed consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern assumption was not appropriate for the unaudited interim condensed consolidated financial statements, then adjustments of a material nature would be necessary in the carrying value of assets such as property and equipment, liabilities, the reported expenses, and the balance sheet classifications used. Management continues to pursue financing opportunities for the Company to ensure that it will have sufficient cash to carry out its planned programs beyond the next year.

At September 30, 2024, the Company had cash and cash equivalents of $2,768 thousands (September 30, 2023, $1,559 thousands). The Company had current assets of $7,982 thousands (September 30, 2023, $4,723 thousands) and current liabilities of $9,929 thousands (September 30, 2023, $14,595 thousands).

At September 30, 2024, the Company had net working capital of negative $1,947 thousands (September 30, 2023, negative $9,872 thousands).

During the nine months ended September 30, 2024, the Company’s overall position of cash and cash equivalents decrease by $2,596 thousands (September 30, 2023, decreased by $164 thousands). This change in cash and cash equivalents held can be attributed to the following:

·The Company’s net cash used in operating activities during the nine months ended September 30, 2024, was $4,295 thousands as compared to net cash used of $5,528 thousands for the nine months ended September 30, 2023. The amount is primarily a result of the losses incurred in the operations of the Company. 

·The Company’s net cash used in investing activities during the nine months ended September 30, 2024, was $2,627 thousands as compared to net cash used of $1,183 thousands for the nine months ended September 30, 2023. The amounts used primarily to the purchase of property and equipment. 

·The Company’s net cash provided by financing activities during the nine months ended September 30, 2024, was $4,326 thousands as compared to net cash provided by financing activities of $6,547 thousands for the nine months ended September 30, 2023. 

Since the Company will not be able to generate cash from its operations in the foreseeable future, the Company will have to rely on the issuance of shares or the exercise of options, warrants and loans to fund ongoing operations and investment. The ability of the Company to raise capital will depend on market conditions and it may not be possible for the Company to issue shares on acceptable terms or at all.

Off Balance Sheet Agreements

The Company has not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative financial obligations or arrangements with respect to any obligations under a variable interest equity arrangement.

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Transactions with Related Parties

The Company’s key management personnel have the authority and responsibility for overseeing, planning, directing, and controlling the activities of the Company. Key management personnel include members of the Board of Directors, the Chief Executive Officer and the Chief Financial Officer.

Compensation earned by key management for the three- and six-months period ended September 30, 2024, and September 30, 2023, was as follows:

Related party transactions:

Related party balances:

Critical Accounting Estimates and Judgements

The preparation of unaudited interim condensed consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

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The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are described below. The Company based its assumptions and estimates on parameters available when the Unaudited Interim Condensed Consolidated Financial Statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

1.Liability to Agricultural Research Organization: 

The Company measures the liability to the Agricultural Research Organization, each period, based on discounted cash flows derived from the Company’s future anticipated revenues. The discount rate reflects the market rate.

2.Determining the transaction price and amounts allocated to the performance obligations: 

In transactions with customers that include variable consideration, the Company assesses, based on past experience, business forecasts and current economic conditions, whether it is highly probable that a significant reversal in the amount of revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. In determining the transaction price for each contract with a customer, the Company considers the effect of the right of return.

The Company also assesses for each transaction with variable consideration the approach that will best reflect the amount of the consideration to which the Company will be entitled, using either the “expected value” method or the “most likely amount” method.

Common Share Data

As at the date of this MD&A, the Company had the following securities issued and outstanding:

Investor Relations Contracts

There are no investor relations contacts outstanding.

Contractual Obligations

The Company has no contractual obligations that have not been disclosed.

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Risks and Uncertainties

Global Economic Uncertainty. The Company’s ability to raise capital is subject to the risk of adverse changes in the market value of the Company’s share price. Periods of macroeconomic weakness or recession and heightened market volatility caused by adverse geopolitical developments could increase these risks, potentially resulting in adverse impacts on the Company’s ability to raise further capital on favorable terms. The impact of geopolitical tension, such as the conflict in the Middle East, a deterioration in the bilateral relationship between the US and China or an escalation in conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the US and/or other countries against governmental or other entities in, for example, Russia, also could lead to disruption, instability and volatility in global trade patterns, which may in turn impact the Company’s ability to source necessary raw materials and other inputs for manufacturing or the Company’s ability to close new revenue generating orders.

On October 7, 2023, an attack was launched against Israel by Hamas (a terror organization) which thrust Israel into a state of war (hereinafter: “The state of war”) in Israel and in Gaza strip. At the same time, there is also a war between Israel and Hezbollah in Lebanon. The company is continuing with its operations both in Israel and globally, as the state of war had no material impact on its operations or business result. While none of the Company’s facilities or infrastructure have been damaged since the war broke out on October 7, 2023, the import and export of goods may experience disruptions in and out of Israel as a result of such war. The Company currently relies on drying locations in Northern Israel, in areas which may be at greater risk for disruption as a result of such war and is in the process of examining and evaluating other potential drying alternatives and growing inventory levels in the United States to mitigate the risk of disruption. The Company continues to assess the effects of the state of war on its Consolidated Financial Statements and business.

Market Risks. The Company’s securities trade on public markets and the trading value thereof is determined by the evaluations, perceptions and sentiments of both individual investors and the investment community taken as a whole. Such evaluations, perceptions and sentiments are subject to change, both in short-term time horizons and long-term time horizons. An adverse change in investor evaluations, perceptions and sentiments could have a material adverse outcome on the Company and its securities.

Financing Risks. The Company will be dependent on raising capital through a combination of debt and/or equity offerings. There can be no assurance that the capital markets will remain favorable in the future, and/or that the Company will be able to raise the financing needed to continue its business at favorable terms, or at all. Restrictions on the Company’s ability to finance could have a material adverse outcome on the Company and its securities.

Share Price Volatility and Price Fluctuations. In recent years, the securities markets all over the world have experienced a high level of price and volume volatility, and the market prices of securities of many corporations have experienced wide fluctuations which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.

Key Personnel Risks. The Company’s efforts are dependent to a large degree on the skills and experience of certain of its key personnel, including the board of directors. The Company does not maintain “key man” insurance policies on these individuals. Should the availability of these

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persons’ skills and experience be in any way reduced or curtailed, this could have a material adverse outcome on the Company and its securities.

General Business Risk and Liability. Given the nature of the Company’s business, it may from time to time be subject to claims or complaints from investors or others in the normal course of business. The legal risk facing the Company, its directors, officers and employees in this respect includes potential liability for violations of securities laws, breach of fiduciary duty or misuse of investors’ funds. Some violations of securities laws and breach of fiduciary duty could result in civil liability, fines, sanctions or the suspension or revocation of the Company’s right to carry on its existing business. The Company may incur significant costs in connection with such potential liabilities.

Competition. There is the potential that the Company will face intense competition from other companies, some of which can be expected to have more financial resources, industry, manufacturing and marketing experience than the Company. Additionally, there is potential that the industry will undergo consolidation, creating larger companies that may have increased geographic scope and other economies of scale. Increased competition between larger, better-financed competitors with geographic or other structural advantages could materially and adversely affect the business, financial condition and results of operations of the Company. To remain competitive, the Company will require a continued level of investment in research and development, marketing, sales and client support. The Company may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations of the Company.

Reliance on Key Business Inputs. The Company’s business is dependent on a number of key inputs and their related costs including raw materials and suppliers related to its growing operations as well as electricity, water, and other utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition and operating results of the Company. Any liability to secure required supplies and services or to do so on appropriate terms could also have a materially adverse impact on the business, financial condition, and operating results of the Company.

Potential product recalls. Manufacturers and distributers of products are sometimes subjected to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packing safety and inadequate or inaccurate labeling disclosers. If the Company’s product is recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expenses of the recall and any legal proceedings that might arise in connection with the recall.

The Company may lose a significant number 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.

Although the Company had detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problem will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuit. Additionally, if one of the Company’s products was subject to recall, the image of the Company could be harmed. A recall for any one of

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the foregoing reasons could lead to decreased demand for the Company’s products and could have a material adverse effect on the results of operations and financial condition of the Company.

History of Net Losses; Accumulated Deficit; Lack of Revenue from Operations. The Company has incurred net losses to date. The Company may continue to incur losses. There is no certainty that the Company will operate profitably or provide a return on investment in the future.

Uninsurable risks. The Company may become subject to liability for events against which it cannot insure or against which it may elect not to insure. Such events could result in substantial damage to property and personal injury. The payment of any such liabilities may have a material, adverse effect on the Company’s financial position.

No History of Dividends. Since incorporation, the Company has not paid any cash or other dividends on its common stock and does not expect to pay such dividends in the foreseeable future, as all available funds will be invested primarily to finance the Company’s operations. The Company will need to achieve profitability prior to any dividends being declared.

Additional information related to the Company, is available for viewing on SEDAR+ at www.sedarplus.ca. This additional information is not incorporated into this Management’s Discussion and Analysis and does not constitute a part of this Management’s Discussion and Analysis.

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Certification of interim filings - venture issuer basic certificate

I, Ilan Sobel, Chief Executive Officer of BioHarvest Sciences Inc., certify the following:

1.Review: I have reviewed the condensed consolidated interim financial report and interim MD&A (together, the “interim filings”) of BioHarvest Sciences Inc. (the “issuer”) for the interim period ended September 30, 2024. 

2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. 

3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. 

Date: November 25, 2024

/s/ Ilan Sobel

Ilan Sobel CEO

Certification of interim filings - venture issuer basic certificate

I, Bar Ditcher, Chief Financial Officer of BioHarvest Sciences Inc., certify the following:

1.Review: I have reviewed the condensed consolidated interim financial report and interim MD&A (together, the “interim filings”) of BioHarvest Sciences Inc. (the “issuer”) for the interim period ended September 30, 2024. 

2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. 

3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. 

Date: November 25, 2024

/s/ Bar Ditcher

Bar Ditcher CFO