Mr. Blair Wilson reports

FORBIDDEN SPIRITS ANNOUNCES FORECLOSURE ON LEASED PROPERTY AND AGREEMENT FOR SALE OF ASSETS

Forbidden Spirits Distilling Corp. has provided an update concerning the foreclosure of the property located at 4380 Wallace Hill Rd., Kelowna, B.C.

The company leases a portion of the property from Apple Orchard RV Ltd., an entity that is controlled by related parties of the company, and operates its business from the property.

On Nov. 4, 2024, the Supreme Court of British Columbia issued an order providing, among other things, that the property be offered for sale free and clear of all encumbrances, and granting Instafund Mortgage Management Corp. (the creditor) exclusive conduct of the sale of the property.

As a consequence of the order, the company understood that the creditor or any purchaser of the property could require vacate possession of the property, which would result in the company ceasing to be able to continue its operations on the property. The company also understood that it may be required by law to also abandon certain of its assets that are deemed to be fixtures of the property. In light of the foregoing, on Dec. 17, 2024, the company entered into a memorandum of understanding with the creditor, the landlord, and Blair Wilson and Kelly Wilson (each an insider of the company and also the sole shareholders of the landlord), pursuant to which the company agreed that it would co-operate in good faith in furtherance of the sale of the property and granted the creditor the right, though not the obligation, to sell all or substantially all of the company's assets in the sale of the property, including all equipment used by the company in relation to its business and located upon the property, as well as all licences, operating systems, stock in trade, work in progress and all goodwill, including all marks and brands associated with the company.

On Jan. 23, 2025, the creditor accepted an offer to purchase the property and the company's fixtures. The offer, which remains subject to court approval, stipulates that the purchaser will not assume any existing leases or tenancies relating to the property, and requires vacant possession of the property. The offer also contemplates that the purchaser will not acquire any of the company's other assets. It is anticipated that on or about Feb. 19, 2025, the creditor will seek an order from the Supreme Court of British Columbia approving the sale of the property and the company's assets on the terms set out in the offer and that the company will then be required to vacate the property on or before March 6, 2025.

Assuming that the offer receives the required court approval and the company cannot come to an agreement with the purchaser allowing the company to continue operations on the property, the company will be required to source an alternative location from which to operate its business. Any such disruption in the company's operations would have a material and adverse effect on the company. Moreover, the company would need to acquire new assets to replace the company's fixtures. The company does not have the financial resources to acquire such assets, and the company can provide no assurance that it will be able to raise sufficient funds to do so in the future.

The company continues to be subject to a failure-to-file cease trade order (FFCTO) that was issued by the British Columbia Securities Commission (BCSC) against the company on May 8, 2023, for failing to file certain outstanding continuous disclosure documents in a timely manner. On July 9, 2024, the BCSC granted the company a partial revocation order, which permitted the company to raise a limited amount of funds; the amounts raised were not sufficient to enable the company to complete all rectification matters required to seek a full revocation order of the FFCTO. The company can provide no assurance that it will be able to raise additional financing in the future, and, at this time, does not anticipate being in a position to rectify its continuous disclosure record, seek a full revocation of the FFCTO and apply to the TSX Venture Exchange to return to trading.

We seek Safe Harbor.