Management's discussion and analysis
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Eshbal Functional Food Inc. (Formerly the Hakken Capital Corp.) Management’s Discussion and Analysis June 30, 2026
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 2 The following management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Eshbal Functional Food Inc., formerly the Hakken Capital Corp. (the “Company” or "Eshbal" or “Eshbal Inc”), was prepared by management of the Company as of August 26, 2026 and should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2025 and the condensed interim consolidated financial statements for the three and six months ended June 30, 2026. The Company’s financial statements are prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All amounts are expressed in US dollars unless otherwise stated. Other information contained in this document has also been prepared by management and is consistent with the data contained in the Financial Statements. The Company’s certifying officers are responsible for ensuring that the Financial Statements and MD&A 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 is made. The Company’s certifying officers certify that the Financial Statements 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 Company as the date of and for the periods presented in the interim filings. The Audit Committee and the Board of Directors provide an oversight role with respect to all public financial disclosures by the Company. The Board of Directors approves the Financial Statements and MD&A after the completion of its review and recommendation for approval by the Audit Committee, which meets periodically to review all financial reports, prior to filing. The Company’s financial statements, MD&A and all other continuous disclosure documents are filed with Canadian securities regulators and are available for review under the Eshbal Functional Food Inc. profile on SEDAR+ at www.sedarplus.ca Forward-Looking Statements Certain statements contained in this document constitute “forward-looking statements”. All statements other than statements of historical fact contained in this MD&A, including, without limitation, those regarding the Company’s future financial position and results of operations, strategy, proposed acquisitions, plans, objectives, goals and targets, and any statements preceded by, followed by, or that include the words “believe”, “expect”, “aim”, “intend”, “plan”, “continue”, “will”, “may”, “would”, “anticipate”, “estimate”, “forecast”, “predict”, “project”, “seek”, “should”, or similar expressions or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 3 Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, risks associated with: the Company’s ability to successfully integrate acquired businesses and execute its North American expansion strategy; fluctuations in raw material and transportation costs; supply chain disruptions; customer concentration; competitive pressures; changes in consumer demand; reliance on key personnel and strategic relationships; foreign exchange fluctuations; access to working capital and additional financing if required; risks associated with acquisitions and integration activities; regulatory compliance relating to food manufacturing and distribution; and general economic, market and industry conditions. See “Risks and Uncertainties”. Management provides forward-looking statements because it believes they provide useful information to readers when considering their investment objectives and cautions readers that the information may not be appropriate for other purposes. Consequently, all of the forward-looking statements made in this MD&A are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward- looking statements are made as of the date of this MD&A and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law. The forward-looking statements in this MD&A are based on numerous assumptions regarding the Company’s present and future business strategies, operating performance, market conditions and the environment in which the Company expects to operate. NATURE AND DESCRIPTION OF OPERATIONS Eshbal Functional Food Inc., formerly the Hakken Capital Corp., (the “Company” or “Eshbal Inc.”) was incorporated under the Business Corporations Act (British Columbia) on October 11, 2018. Prior to the completion of the reverse take over in April 2025, the Company had no operating business. Following the completion of the reverse take over, the Company, through its Israeli subsidiary is an Israeli food-tech Company, located in Kibbutz Ma’anit, Israel, that develops and manufactures various products in the “better for you” Sector such as gluten free, GLP-1 food support for GLP-1 users, vegan, low carb, sugar free, super- foods, dietary supplements and more. Eshbal Functional Food (Agricultural Cooperative) Ltd. (“Eshbal Israel”) is an Israeli food-tech cooperative (in the process of being changed to the limited liability company), located in Kibbutz Ma’anit, Israel, that develops and manufactures various products in the “better for you” Sector such as gluten free, vegan, low carb, sugar free, super-foods, dietary supplements and more. During 2026, the Company expanded its North American operations through the acquisitions of Gluten Free Nation and a majority interest in Dare to Be Different Foods, together with local manufacturing, e- commerce and commercial initiatives.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 4 Eshbal focuses on the development of unique formulations of functional food products that it believes promote health beyond their nutritional values, for retail brands, private labels, and B2B. Eshbal’s products can be found in many supermarkets as well as other food retailers, health stores and foodservice throughout Israel and selected locations in North America and Europe. On April 14, 2026, the Company completed a continuance from the Province of British Columbia into the Province of Ontario under the Business Corporations Act (Ontario). The Company’s registered office, head office and records office are located at 181 Bay Street, Suite 4400, Toronto, Ontario, M5J 2T3, Canada. 2026 Private Placement On February 11, 2026, the Company closed a non-brokered private placement offering of 4,245,117 units ("February 2026 Private Placement Units") for gross proceeds of CAD$721,000 the (“Offering”). Each February 2026 Private Placement Units consisted of one Common Share and one full Common Share purchase warrant ("February 2026 Private Placement Warrant "). Each February 2026 Private Placement Warrant entitles the holder to purchase one additional Common Share at an exercise price of CAD$0.30 until February 10, 2028. The applicable resale restrictions expired on June 11, 2026 in accordance with applicable securities laws. In connection with the Offering the Company paid an aggregate of CAD$10,721 and issued 63,070 February 2026 Private Placement Warrants to Haywood Securities Inc. Board Appointment and RTO Performance Milestones On May 29, 2026, the Company announced the appointment of Nir Peles to its Board of Directors and confirmed the achievement of the first two performance milestones associated with the April 2025 reverse takeover transaction, resulting in the issuance of 11,200,000 common shares pursuant to previously issued performance warrants. In addition, during Q1 2026, 3,241,238 common shares were issued upon conversion of previously issued financing-linked share receipts (FLSRs) following expiry of the applicable post-closing financing adjustment period. Effective April 14, 2026, the Company completed its continuance from British Columbia into Ontario under the Business Corporations Act (Ontario).
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 5 Operations Review During the six months ended June 30, 2026, the Company continued advancing several operational and commercial initiatives, including: Core Operations Record Half Annual Revenues: Revenues for H1 2026 totaled approximately $8,760 thousand, representing an increase of approximately 30.4% compared to revenues of approximately $6,720 thousand during H1 2025. Management believes the increase was driven by continued growth in the Company’s core operations together with initial contributions from expanding North American commercial activities. Protein shake production: During H1 2026, the Company commenced commercial production of private-label protein shake mixes for a customer in the sports nutrition market. Initial production totaled approximately US$250 thousand. Global whey protein pricing remains a potential margin and raw-material cost risk. Swonder Integration and Direct Distribution Expansion: Following the acquisition of Swonder Bread completed in September 2025, the Company continued integrating and expanding the business during H1 2026 through the development of direct distribution relationships targeting specialty and health-oriented retail stores. The initiative currently includes approximately 100 retail locations and focuses on selected Swonder and Barili branded products. The Company currently distributes approximately five Swonder products through this channel and intends to continue expanding both store count and product offerings. Management believes direct distribution may improve customer relationships, market feedback and brand visibility compared to traditional third- party distribution channels. During H1 2026, the Company initiated a product development program focused on nutritional solutions tailored for GLP-1 medication users. Management believes growing market awareness regarding the nutritional challenges associated with GLP-1 therapies — including reduced protein intake and potential muscle mass loss — may create demand for targeted functional food products designed to support balanced nutrition and wellness. Management believes the rapid global adoption of GLP-1 therapies is creating a new category of demand for functional nutrition products tailored to evolving dietary and wellness needs. North American Expansion Manufacturing Initiative – Gluten-Free Pita Bread: During H1 2026, the Company continued commercialization of local North American production of its gluten-free Pita Bread and Mini Pita Bread products through manufacturing partnerships in Ontario. Initial commercial sales were generated during the quarter, including sales to foodservice customers in North America. Management continues to focus on expanding distribution of its gluten-free baked products across retail, foodservice and online channels. Gluten Free Nation Acquisition: On February 6, 2026, the Company completed the acquisition of the Gluten Free Nation business and related assets, which were transferred into Eshbal USA Inc., the Company’s wholly owned U.S. subsidiary. During Q2 2026, the Company continued integrating and operating the business across its retail, foodservice and direct-to-consumer sales channels while also creating additional distribution opportunities for other Eshbal products within the North American market.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 6 Expansion of Eshbal USA Platform: During H1 2026, Eshbal USA Inc., the Company’s wholly owned U.S. subsidiary, continued expanding its operational and commercial infrastructure and serves as the Company’s primary platform for North American operations, e-commerce activities, acquisitions and commercialization initiatives, including the integration of Gluten Free Nation. During Q2 2026, the Company launched its North American direct-to-consumer and B2B online platforms for its Barili, Gluten Free Nation and D2BD brands through www.barilifoods.com and www.d2bdfoods.com - complementing its existing retail and foodservice activities. Dare to Be Different Acquisition: On February 10, 2026, the Company completed the acquisition of a majority interest in Dare to Be Different Foods (“D2BD”), a U.S.-based better-for-you food company specializing in low-carb and clean-label frozen products. During Q2, 2026, the Company continued integrating and operating the business with a focus on expanding sales, product offerings and North American distribution capabilities to support future growth. Outlook Eshbal expects to continue executing its North American growth strategy during the remainder of 2026 through the following priorities: Integration and Consolidation: The Company intends to continue integrating and expanding the operations of Gluten Free Nation and Dare to Be Different while leveraging their existing retail, foodservice, e-commerce and distribution channels to support the introduction and expansion of additional Eshbal products within the North American market. Commercial Expansion in North America: Management’s focus for the remainder of 2026 includes expanding the Company’s North American commercial activities across retail, foodservice and e-commerce channels. This includes continued expansion of the Company’s gluten-free Pita and Mini Pita products together with the introduction of additional Eshbal and acquired-brand products into the North American market through existing and newly developed distribution relationships. Strategic and M&A Initiatives: The Company continues evaluating selective acquisition opportunities within the better-for-you food segment as part of its broader North American growth and roll-up strategy, with the goal of expanding its product portfolio and distribution footprint in North America. Management’s focus through 2026 remains on integrating and scaling the Company’s North American platform, expanding branded product distribution and supporting sustainable revenue growth and profitability.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 7 Selected financial information The following table sets forth selected financial information is presented for the three and six months ended June 30, 2026 and 2025. The selected financial information is prepared in accordance with IFRS Accounting Standards and is presented in thousands of USD, except for per share data. The following table details the Earnings before interest, tax, depreciation and amortization (EBITDA): 1. EBITDA is a non-GAAP financial measure that does not have any standardized meaning under the Company’s GAAP and therefore may not be comparable to similar measures presented by other issuers; 2. EBITDA means “earnings before interest, taxes, depreciation and amortization” and when calculated by the Company will not exclude any items other than interest, taxes, depreciation and amortization; and 3. The most directly comparable GAAP measurement will be Operating Income (loss). 2026 2025EBITDA $ 135 $ 559 1.54% 8.32%Three Months EndedJune 30,
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 8 Three-month period ended June 30, 2026, compared to the three-month period ended June 30, 2025 Revenues Revenue is primarily generated from the sale of food products across retail, industrial, and foodservice sectors, serving retailers, food manufacturers, wholesalers and direct distribution channels. Revenues were $3,377 thousand for the three months ended June 30, 2026, compared to $2,965 thousand for the three months ended June 30, 2025, representing an increase of approximately 13.9% year-over-year. The increase was primarily driven by the expansion of the Company’s North American operations, partially offset by lower sales in the Israeli operations. The impact of the decline in Israeli sales on reported revenues was partially mitigated by changes in the USD/NIS exchange rate. Gross Profit For the three months ended June 30, 2026, Eshbal reported a gross profit of $511 thousand, representing 15.1% of total revenues, compared to $628 thousand for the three months ended June 30, 2025, which accounted for 21.2% of revenues for the three months ended June 30, 2025. This reflects a decrease of approximately 18.6% year-over-year. The decrease in gross profit and gross margin was primarily attributable to lower sales in the Israeli operations, changes in product mix, and relatively lower margins generated by the North American operations during their early stage of activity. Selling and marketing expenses Selling and marketing expenses were $374 thousand for the three months ended June 30, 2026, compared to $227 thousand for the three months ended June 30, 2025. As a percentage of revenues, these expenses increased from 7.6% in 2025 to 11% in 2026. The higher ratio reflects additional hire of sales personnel in North America to support the Company’s North American expansion and amortization of certain intangible assets purchased in the D2BD and GFN transactions. Research and development expenses Research and development expenses were $89 thousand for the three months ended June 30, 2026, compared to $82 thousand for the three months ended June 30, 2025. As a percentage of revenues, R&D expenses were 2.6% in 2026 versus 2.8% in 2025, a slight decrease. During the period, the Company made significant investments in the development of new product lines in Israel under the “K’ragil”, “Swonder bread” and “GLP-1” brands. Development costs of approximately $91 thousand were capitalized during the six months ended June 30, 2026. General and administrative expenses General and administrative expenses were $855 thousand for the three months ended June 30, 2026, compared to $549 thousand for the three months ended June 30, 2025. The increase primarily reflects higher costs associated with the Company’s ongoing operations as a public company, which were at an earlier stage in the comparable prior-year period, as well as significant professional and other costs related to M&A activities undertaken during 2026. These expenses included higher audit and legal fees, listing and filing expenses, directors’ and officers’ insurance, and investor relations and public relations activities.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 9 Net Loss The net loss for the three months ended June 30, 2026 was $789 thousand, compared to a net loss of $1,996 thousand for the three months ended June 30, 2025. The decrease in net loss primarily reflects the absence in the current period of $1,689 thousand in listing expenses related to the reverse takeover (“RTO”) that were recognized in the comparable prior-year period. This was partially offset by the factors discussed above, including changes in gross profit and higher general and administrative expenses associated with the Company’s expanded operations, public company requirements and M&A activities. Six-month period ended June 30, 2026, compared to the six-month period ended June 30, 2025 Revenues Revenue is primarily generated from the sale of food products across retail, industrial, and foodservice sectors, serving retailers, food manufacturers, wholesalers and direct distribution channels. Revenues were $8,760 thousand for the six months ended June 30, 2026, compared to $6,720 thousand for the six months ended June 30, 2025, representing an increase of approximately 30.4% year-over-year. Management believes the increase was primarily driven by continued growth in the Company’s core operations together with initial contributions from expanding North American commercial activities. Gross Profit For the six months ended June 30, 2026, Eshbal reported a gross profit of $2,061 thousand, representing 23.53% of total revenues, compared to $1,726 thousand for the six months ended June 30, 2025, which accounted for 25.7% of revenues for the six months ended June 30, 2025. This reflects an increase of approximately 23.2% year-over-year. The improvement was mostly driven by higher sales volumes and selective price adjustments to offset input cost inflation. Selling and marketing expenses Selling and marketing expenses were $664 thousand for the six months ended June 30, 2026, compared to $408 thousand for the six months ended June 30, 2025. As a percentage of revenues, these expenses increased from 6.1% in 2025 to 7.6% in 2026. The higher ratio reflects additional hiring of sales personnel in North America to support the Company’s North American expansion and amortization of certain intangible assets purchased in the D2BD and GFN transactions. Research and development expenses Research and development expenses were $209 thousand for the six months ended June 30, 2026, compared to $157 thousand for the six months ended June 30, 2025. As a percentage of revenues, R&D expenses were 2.4% in 2026 versus 2.3% in 2025, a modest increase. The increase reflects continued investment in product development and improvements. In addition, during the period, the Company capitalized approximately $91 thousand (NIS 270 thousand) of development costs related to new product lines in Israel, including products under the “K’ragil” and “Swonder bread” brands and the GLP-1 product line.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 10 General and administrative expenses General and administrative expenses were $1,741 thousand for the six months ended June 30, 2026, compared to $957 thousand for the for the six months ended June 30, 2025. The increase primarily reflects higher costs associated with the Company’s ongoing operations as a public company, as the comparable prior-year period included only Eshbal Israel for the first quarter of 2025 and an earlier stage of the Company’s public company operations thereafter. The increase also reflects significant professional and other costs related to M&A activities undertaken during 2026, as well as higher audit and legal fees, listing and filing expenses, directors’ and officers’ insurance, and investor relations and public relations activities. Net loss The net loss for the six months ended June 30, 2026 was $719 thousand compared to $1,606 thousand of net loss for the six months ended June 30, 2025. The decrease in net loss primarily reflects the absence in the current period of $1,689 thousand in listing expenses related to the RTO that were recognized in the comparable prior-year period. This was partially offset by the factors discussed above, including higher general and administrative expenses associated with the Company’s expanded public company operations and M&A activities, as well as changes in gross profit. The year-over-year comparison also reflects the fact that the first quarter of 2025 included only the operations of Eshbal Israel. Summary of Quarterly Results (in thousands of USD): The last four quarters represented the operations of Eshbal following the RTO completed in April 2025 and therefore include the costs of the transaction and on-going public company costs. The previous four quarters represent the activities of Eshbal Israel as the accounting acquirer.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 11 Liquidity and capital resources Cash and Working Capital The Company has an accumulated deficit of $6,856 thousand as of June 30, 2026 and net loss for the six months ended June 30, 2026 of $719 thousand. The Company financed its operations to date through its cash flows from continuing operations and issuance of debt and equity. In order to assess whether it is appropriate for the Company to continue as a going concern, management is required to apply judgements and make estimates with regards to future cash flow projections. In arriving at this judgement there were several assumptions and estimates involved in calculating the future cash flow projections. These include making estimates regarding the timing. As of the date of the report the Company has secured a credit line in the total amount of NIS 9.3 million ($3,123 thousand) and the majority of the Unitholders of the Company agreed to postpone payment of the dividend. The Company’s cash on hand as at June 30, 2026 was $324 thousand compared to $585 thousand at December 31, 2025. During the six months ended June 30, 2026, the Company ’s overall position of cash decreased by $261 thousand compared to an increase of $752 thousand a during the six months ended June 30, 2025. This decrease in cash in the current period can be attributed to the following: ● The Company’s net cash used in operating activities for the six months ended June 30, 2026, was $759 thousand as compared net cash provided by operating activities for the six months ended June 30, 2025 of $168 thousand. This cash used in operating activities is primarily as a result of an increase in inventory and a decrease in accounts payable. ● Net cash used in investing activities for the six months ended June 30, 2026, was $570 thousand as compared to $63 thousand for the six months ended June 30, 2025 and relates to investments in property plant and equipment in both periods and investment in GFN and D2BD during the six months ended June 30, 2026. ● Net cash provided by financing activities for the six months ended June 30, 2026, was $1,062 thousand as compared to $1,071 thousand in 2025. In 2026, the Company completed a non-brokered private placement and the receipt of bank loans. in 2025, the Company also completed a private placement, and received cash in respect of the RTO. As at the date of this report, management believes the Company has sufficient working capital to meet its ongoing financial obligations and needs for at least the coming year.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 12 Related Party Transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party’s making of financial or operational decisions, or if both parties are controlled by the same third party. The Group has transactions with key management personnel and directors (presented in thousands of USD). a. Transaction with related parties during the three and six months ended June 30, 2026 and 2025: b. Balances with related parties as of June 30, 2026 and December 31, 2025: c. Liabilities related to related party: Change in Accounting Policies and Significant Accounting Judgements and Estimates There have been no changes in accounting policies for the six-month period ended June 30, 2026. The preparation of financial statements requires management to establish accounting policies, estimates and assumptions that affect the timing and reported amounts of assets, liabilities, revenues and expenses. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances and require judgment on matters which are inherently uncertain. Details of the Company’s significant accounting policies can be found in note 2 of the Company’s audited financial statements for the fiscal year ended December 31, 2025 March 31, December 31, 2026 2025Other accounts payable-$ 4$ Trade receivables-$ 193$ Trade payables 56$ 191$ Dividend payable 908$ 901$ Loans from related parties300$ 240$ Directors and officers28$ 25$
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 13 Legal proceedings In January 2022, Eshbal Israel completed a transaction to purchase the "Sarale" bakery brand's activities from "Hecht Products LTD." This purchase involved a milestone payment of NIS 230 thousand (approximately $75 thousand), contingent upon achievement of a specified sales milestone within 12 months of acquisition. The milestone was not achieved, and the previous owners subsequently initiated legal proceedings claiming entitlement to the payment. On June 1, 2026, the court dismissed the claim, finding that the applicable milestone had not been achieved and ordering the plaintiffs to pay Eshbal Israel NIS 20 thousand (approximately $6.5 thousand) in legal costs. The case has accordingly been concluded. Subsequent Events Chief Financial Officer Appointment: On July 13, 2026, the Company announced the appointment of Maya Katzman, CPA, as Chief Financial Officer. DTC Eligibility: Subsequent to quarter-end, the Company’s common shares became eligible for electronic clearing and settlement through The Depository Trust Company (“DTC”) in the United States. The required eligibility deposit was subsequently completed, facilitating electronic custody and settlement of the Company’s shares through DTC-participating brokers. Management's Responsibility for Financial Information The Company’s financial statements and the other financial information included in this MD&A are the responsibility of management and have been reviewed by the Audit Committee and approved by the Board of Directors of the Company. The financial statements were prepared by management in accordance with IFRS Accounting Standards and include certain amounts based on management’s best estimates and judgments. The selection of accounting principles and methods is management’s responsibility. Management recognizes its responsibility for conducting the Company’s affairs in compliance with applicable laws, regulations and established financial reporting standards, and for maintaining appropriate standards of business conduct and internal controls. Directors / Conflicts of Interest Certain directors of the Company are also directors, officers and/or shareholders of other companies. Such associations may give rise to conflicts of interest from time to time. The directors of the Company are required to act in good faith with a view to the best interests of the Company and to disclose any interest which they may have in any project opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any directors in a conflict will disclose their interests and abstain from voting in such matters. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time. As at the date of this MD&A, the members of the management committee of Eshbal Israel are Yuval Levy, Tamir Dagan and David Bar Meir.
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 14 Credit risk The Company manages credit risk, in respect of cash, by holding them at major Israeli financial institutions in accordance with the Company’s investment policy. The Company places its cash with high credit quality Israeli financial institutions. Concentration of credit risk exists with respect to the Company’s cash. The Company’s main financial assets are cash and cash equivalents and trade accounts receivable and represent the Company’s maximum exposure to credit risk in connection with its financial assets. Wherever possible and commercially practical the Company holds cash with major financial institutions In Israel. Liquidity risk Liquidity risk is the risk that the Cooperative will encounter difficulty in obtaining funds to meet current obligations and future commitments. The Company's approach to managing liquidity risk is to forecast cash requirements to provide reasonable assurance that it will have sufficient funds to meet its liabilities when due. As of June 30, 2026, the Company had cash and cash equivalents of $324 to settle current liabilities in the amount of $6,948 compared to cash and cash equivalents of $585 to settle current liabilities in the amount of $6,533 as of December 31, 2025. The tables below present the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments: As of June 30, 2026: As of December 31, 2025:
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Eshbal Functional Food Inc. (Formerly Hakken Capital Corp) Management’s Discussion and Analysis June 30, 2026 15 Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of two types of risk: interest rate risk, and foreign currency risk. (i) Interest rate risk The Company is exposed to cash flow interest rate risk from short- and long-term borrowings at variable rate. During 2026 and 2025, the Company’s borrowings at variable rate were denominated in NIS. The Company analyses the interest rate exposure on a quarterly basis. A sensitivity analysis is performed, and various scenarios are run taking into consideration refinancing, renewal of the existing positions, alternative financing, and hedging. Based on the simulations performed, the impact on profit and loss and net assets of a 100-basis point shift (being the maximum reasonable expectation of changes in interest rates) would be approximately $32 thousand. (ii) Foreign currency risk The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Israel and most of the Company’s expenditures are currently incurred in NIS. The Company's reporting currency is the USD and a fluctuation in the currency rate may impact the results; however, this would not have a cash effect on the Company. Disclosure of Outstanding Share Data As of the date of this report, the Company has 83,261,203 ordinary shares outstanding, 7,715,000 options granted, 2,140,143 RSU’s and 8,423,117 warrants and 16,000,000 performance warrants. Each warrant, RSU and option entitles the right of the holder thereof to acquire one ordinary share. Other Information Additional information about the Company is available at SEDAR+ at www.sedarplus.ca