APPAREL · PDF file3 RYU APPAREL INC. 2015 Annual Information Form PART 1 INFORMATION ABOUT...

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RYU APPAREL INC.

Annual Information Form For the year ended December 31, 2015 Prepared as of: September 15, 2016

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RYU APPAREL INC. 2015 Annual Information Form

Table of Contents

PART 1 INFORMATION ABOUT CONTENT IN THIS DOCUMENT .............................................. 3 1.1 Date of Information ....................................................................................................3 1.2 Currency .....................................................................................................................3 1.3 Cautionary Note Regarding Forward‐Looking Information ........................................3

PART 2 CORPORATE STRUCTURE ............................................................................................. 4 2.1 Name, Address and Incorporation ..............................................................................4 2.2 Intercorporate Relationships ......................................................................................4

PART 3 GENERAL DEVELOPMENT OF THE BUSINESS ............................................................... 4 3.1 Three Year History ......................................................................................................4 3.2 Significant Acquisitions ...............................................................................................5

PART 4 DESCRIBE THE BUSINESS .............................................................................................. 5 4.1 General .......................................................................................................................5 4.2 Reorganizations ..........................................................................................................8 4.3 Risk Factors .................................................................................................................8

PART 5 DIVIDENDS AND DISTRIBUTIONS ............................................................................... 13 PART 6 DESCRIPTION OF CAPITAL STRUCTURE ..................................................................... 13 PART 7 MARKET FOR SECURITIES ........................................................................................... 14 7.1 Trading Price and Volume .........................................................................................14 7.2 Prior Sales .................................................................................................................15

PART 8 DIRECTORS AND EXECUTIVE OFFICERS ..................................................................... 15 8.1 Name, Occupation and Security Holding ..................................................................15 8.2 Cease Trade Orders, Bankruptcies, Penalties or Sanctions ......................................18 8.3 Conflicts of Interest ..................................................................................................18

PART 9 LEGAL PROCEEDINGS AND REGULATORY ACTIONS .................................................. 19 PART 10 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ............. 19 PART 11 TRANSFER AGENTS AND REGISTRARS ....................................................................... 20 PART 12 MATERIAL CONTRACTS .............................................................................................. 21 PART 13 NAMES AND INTERESTS OF EXPERTS ........................................................................ 22 PART 14 AUDIT COMMITTEE INFORMATION ........................................................................... 22 PART 15 ADDITIONAL INFORMATION ...................................................................................... 22

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RYU APPAREL INC. 2015 Annual Information Form

PART 1 INFORMATION ABOUT CONTENT IN THIS DOCUMENT

1.1 Date of Information All information contained in this Annual Information Form (“AIF”) is as of September 15, 2016, unless otherwise indicated.

1.2 Currency The reporting currency of the Company is the Canadian dollar and all financial information presented in this AIF is in Canadian dollars, unless otherwise indicated.

1.3 Cautionary Note Regarding Forward‐Looking Information As used in this AIF and unless otherwise indicated, the terms “we”, “us”, “our”, “Company”, and “RYU” refer to RYU Apparel Inc. and its wholly owned subsidiary Respect Your Universe, Inc. This AIF contains forward‐looking statements. Forward‐looking statements may also be made in the Company’s other reports filed with or furnished to applicable securities commissions. Forward‐looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements. The words “aim,” “anticipate,” “believe,” “continue,” “could,” “expect,” “intend,” “likely”, “may,” “optimistic,” “plan,” “potential”, “predict”, “should,” “would,” and other similar expressions are intended to identify forward‐looking statements. These statements are not guarantees of future performance, and therefore you should not put undue reliance upon them. The material assumptions supporting these forward‐looking statements include, among other things the Company’s ability to:

• obtain any necessary financing on acceptable terms; • keep pace with rapid changes in consumer demands; • compete with other athletic apparel brands; • rely on third party manufacturers; • manage expansion effectively; • enforce its intellectual property rights; • launch additional product lines; • retain its skilled personnel; • manage current tax and regulatory regimes; • manage the fluctuation in foreign currency exchange rates and interest rates; and • follow general economic and financial market conditions.

Some of the factors that may cause actual results to differ materially from those indicated are found in the section “Risk Factors” in this AIF. The forward‐looking statements contained in this AIF reflect our views and assumptions only as of the date of this AIF. The Company undertakes no obligation to update or revise any forward‐looking statements after the date on which the statement is made, except as required by applicable laws, including applicable securities laws.

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PART 2 CORPORATE STRUCTURE

2.1 Name, Address and Incorporation The Company was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on December 4, 2014 under the name “RYU Apparel Inc.”. Its head office is located at 1672 West 2nd Ave, Vancouver, BC, V6J 1H4, and its registered and records office is located at 800 – 885 West Georgia Street, Vancouver, British Columbia V6C 3H1. Prior to December 4, 2014, business was formerly carried on through Respect Your Universe, Inc., a Nevada corporation. See Section 3.2 “Significant Acquisitions” for more information.

2.2 Intercorporate Relationships The Company has one subsidiary, being Respect Your Universe, Inc., a company incorporated in Nevada, USA. The Company owns all of the outstanding shares of Respect Your Universe, Inc.

PART 3 GENERAL DEVELOPMENT OF THE BUSINESS

3.1 Three Year History 2013 to 2014

Prior to 2015, the Company sold products through three primary channels: wholesale, retail and e‐commerce. The initial product line was launched in February 2012, which coincided with the roll out of the online store at ryu.com. In October 2012, the Company opened the first retail store located at The Shoppes at the Palazzo in Las Vegas, Nevada, and in December 2013, it opened a second retail store located at Westlake Center in downtown Seattle, Washington. The Company elected not to enter into a long‐term lease with the Las Vegas landlord and subsequently closed that location in February 2014. The Company also elected to terminate the lease at Westlake Center in December 2014.

2015

In December 2014, the Company commenced a rebranding process. As part of this process, the Company identified a gap in the market for male training apparel and bags or what we call “carry systems”. The Company saw a market to make wearable and technical training apparel. The Company initiated a program to work with athletes from Vancouver to understand what was missing in their apparel and their gear. The result was the creation of products that worked for them specifically, including clothing to wear 24/7 in and out of the gym.

The Company also identified opportunities in the female athletic space for apparel. With so many brands chasing the female yoga space, the Company turned away from that single focus. The Company identified the “Urban Athletic” space to create new demand in the market.

During 2015, the Company sold off old product, closed down its two US stores and its US office location. Concurrently, the Company expanded its team and designed a new line and launched it on November 27, 2015 at the opening of our flagship store at 1745 W 4th Avenue, in Vancouver, BC.

2016

2016 marks the first year of operations for the new brand of RYU since going live on November 27, 2015. Canadian revenue includes sales from our flagship retail store, our Canadian e‐commerce platform, and local team sales while our US revenue represents sales from our sole US e‐commerce platform.

By June 30, 2016, our ratio of sales of apparel between men and women was 45% to 55%, indicating that the RYU brand appeals to men and women almost equally.

During 2016, the Company secured leases for our second, third, and fourth retail store locations in BC:

Our second location is slated to open in October 2016 at 805 Thurlow Street in downtown Vancouver, BC;

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Our third location is in West Vancouver, BC at the newly renovated Park Royal South and is expected to open in late fall 2016; and

Our fourth location is in Metropolis at Metrotown Mall in Burnaby, BC and it is expected to open in summer 2017. This store is expected to be RYU’s first enclosed mall location.

We anticipate that the addition of our second and third stores will allow us to deliver our product to a much broader demographic and accomplish our first year goal of having three retail stores in Canada by the end of 2016. In addition, for the rest of 2016, we intend to continue upgrading our e‐commerce platform.

3.2 Significant Acquisitions

On February 20, 2015, the Company closed a plan of arrangement pursuant to an arrangement and exchange agreement (the “Arrangement Agreement”) with Respect Your Universe, Inc., a company incorporated in Nevada. Under the Arrangement Agreement, and on such date, the shareholders of Respect Your Universe, Inc. became the shareholders of the Company by exchanging 100% of their outstanding common shares of Respect Your Universe, Inc. for common shares of the Company on a one to one basis. Upon the completion of the Arrangement Agreement, Respect Your Universe, Inc. became a wholly‐owned subsidiary of the Company. The transaction was accounted for as a capital transaction using the continuity of interest method.

PART 4 DESCRIBE THE BUSINESS

4.1 General General description

RYU (Respect Your Universe) is a tailored urban athletic apparel brand that engages in the development, marketing, and distribution of apparel, bags and accessories. Our products are engineered for the fitness, training and performance of the multi‐discipline athlete. Our products are designed, developed and tested at our corporate headquarters in Vancouver, BC, Canada, and our Beta 37.5 design lab in Squamish, BC, Canada. Production takes place in factories located in North America and Asia.

The RYU brand was created by a team of industry experts in 2015 that found a gap in the apparel market whereby the male athlete was underserved and the female athletic market was dominated by yoga‐inspired brands. This team transformed the RYU brand to focus on the new Urban Athletic category. This is defined by the following key words that set the core pillars of our brand: tailored, innovation, and urban athletic. Sales channels

The Company has two reportable segments based on geographical location: Canada and the United States. Revenue in each of these market segments over the past two years are provided below:

For the year ended December 31, (audited) 2015 2014

Canada $ 245,167 28% $ ‐ ‐United States 624,750 72% 1,070,579 100%Total $ 869,917 100% $ 1,070,579 100%

In Canada, we sell our products at our retail stores, through wholesale accounts, and online via our e‐commerce site that can be reached at www.ryu.com. In the United States we sell our products online via our e‐commerce site at www.ryu.com. Retail:

On November 27, 2015, our first retail store opened at West 4th Avenue, in Vancouver, BC. This is our flagship store for Vancouver and it is designed as a community hub, where we host daily athletic, charity, and business events, most of which are free to the public. To enhance retail sales, we participate at community and industry events and we also sell our products to local teams.

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As of the date of this AIF, we have secured the following additional retail store leases:

805 Thurlow Street, Vancouver, BC: expected opening October 2016;

Park Royal South, West Vancouver, BC: expected opening late fall 2016; and

Metropolis at Metrotown, Burnaby, BC: expected opening summer 2017.

Our retail store expansion plan is based on clusters so we target one urban community at a time. We anticipate that our next cluster will be Toronto, ON and then we intend to enter the United States, with a focus in New York City and Los Angeles. E‐commerce:

As of the date of this AIF, our e‐commerce platform currently represents about 15% of our revenues. The sales have been organic, the outcome of word of mouth, our marketing efforts, and our online presence in social media channels. We have one e‐commerce site for Canada and one for the United States. Each website order is fulfilled by its corresponding warehouse in Canada or the United States. Our intent is to invest heavily in e‐commerce as it is more cost effective, it reaches a broader market than retail stores, and we want our customers to have a great experience while shopping from their computers and mobile devices. Wholesale:

During 2015, our revenue in the United States represented mostly wholesale transactions to liquidate the old RYU inventory. The new RYU focuses mostly on the retail and e‐commerce sales channels but we also intend to have corporate sales at wholesale prices. Marketing strategy:

In addition to the advertising and marketing of our retail store and www.ryu.com, we are heavily involved in social media, community strategy and public relations. The overall strategy is to be involved at the community level in key cities across North America and build the RYU brand with key influencers who are intended to build a strong following for RYU. Social Media: We utilize several well‐known social media platforms to market our products. We are a very visually focussed brand that is intended to invoke a strong positive emotion towards our overall message and reflect the RYU brand. We aim for a high engagement rate across all channels that is intended to build brand awareness and funnel customers to our website and retail stores for an ultimate conversion to sales. Community: The RYU Connectors Program is building a community of influential leaders that represent and live the values of RYU: freedom, curiosity, discipline, vitality and respect. Our goal is to facilitate human performance for one million athletes around the globe. RYU Connector’s objectives are, first and foremost, to continue being leaders in the athletic community, to support others in their health, fitness and performance goals, to respect others at all times, and to be actively engaged in community events, charities and volunteer efforts. Facility owners, trainers, nutritionists, physiotherapists and competitive athletes are enrolled in the RYU Connectors Program from across Canada and the United States in key cities. They actively promote the RYU brand and ethos at a grass roots level to build a very strong foundation for RYU. Since opening our Flagship store we have been consistently running daily community events as well as participating at off site events. As of the date of this AIF, these have been the main events that we have participated at:

Concord Pacific Vancouver Dragon Boat Festival, Vancouver, BC;

Vancouver Sun Harry Jerome International Track Classic, Vancouver, BC;

CanWest Games, Coquitlam, BC;

Monster Energy Center of Gravity, Kelowna, BC;

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West 4th Avenue Khatsahlano Street Party, Vancouver, BC;

IDEA World Convention, Los Angeles, CA;

IRONMAN Whistler, Whistler, BC;

KitsFest, Vancouver, BC;

canfitpro World Fitness Expo, Toronto, ON;

Equinox Pop Up, Toronto, ON; and

Americas Masters Games, Vancouver, BC.

Public Relations: We actively use public relations to be regularly featured in all key influencer magazines, bloggers posts, national newspapers, website reviews and social media influencers. We have been awarded “best new store in the world” from WGSN (London, England) and received awards and reviews on our products from Carryology, A Design, Muscle and Fitness and Men’s Health among many others. Supply chain and production Products designed in house are outsourced to manufacturing with leading factories in our industry. We manufacture our products in Canada, the United States, and Asia. We use accredited bluesign® textile mills which produce textile materials with environmentally friendly standards. These textile mills use sustainable textile production methods to eliminate harmful substances.

Domestically, we selected factories with a quick turnaround time. These factories serve the highly technical apparel brands in North America that require attention to construction details and quality with advanced production technologies.

In general, the Company’s contract manufacturers are responsible for full package service. Based on RYU’s bulk purchase order, the factories are expected to provide consumption reports and material quality and/or testing reports for RYU’s approval before they purchase raw materials to fulfill the bulk production order. RYU is financially responsible for all finished inventory purchased, as well as the raw materials inventory held by the contract manufacturers. Materials and trims for our product lines are widely available to the Company through a large number of vendors both in North America, Europe, and Asia. Pricing is generally competitive. In addition to manufacturing apparel and bags, we also buy accessories at wholesale to resell through our retail stores. Intellectual property

RYU currently has 15 applications and registrations for utility and design patents to protect functional and aesthetic aspects of our wares. We develop many of our own proprietary knit constructions and woven constructions, which include our tech‐layer and core‐layer fabrics. We also use branded leading textiles such as Polartec, Polygiene, and Transdry.

RYU owns applications and registrations for the trademarks RYU and Respect Your Universe in Canada, the United States, and the People’s Republic of China. The Company considers that its trademarks have material value in the marketing of its merchandise. Competitive/Market Conditions

Competition is fierce in our marketplace. The marketplace has fairly low barriers to entry, opening the opportunity for small players to participate, but it is dominated by a handful of powerful multinationals. Global revenues in 2015 were US$152.0 billion, up from US$132.0 billion in 2011 and revenues are projected to reach US$181.0 billion by 2018 and up to US$206.0 billion by 2022 (Statista, 2016). This represents a projected increase of 56% over a decade. In Canada, where RYU is based, the value of the sports apparel market grew by 7.4% from $2.2 billion in 2014 to $2.4 billion in 2015 (StatCan, IpsosReid 2016). Our omni‐channel sales strategy with a focus on e‐commerce supported by clusters of retail stores in urban communities is aligned with trends in the Canadian marketplace. RYU competes in the brick and mortar front with

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dedicated stores as well as sport retailers such as retail specialty chains and department stores, many of which have strong online presence in addition to their physical stores. In 2015, 56% of Canadian consumers purchased at sports specialty stores, ahead of major department stores and other sales channels. Surprisingly, e‐commerce only accounted for 3% of sports apparel sales in 2015 but this is expected to change soon; the Canadian consumer is increasingly adopting digitized shopping experiences (Statista, 2016). The seasonality that impacts our sales is common in the retail industry. In 2015, the monthly distribution of annual average sports apparel unit sales in a Canada showed that the months of May, June, September and especially December are accountable for 48% of units sold. These peaks depict the spring weather, the return to school and the holiday rush. Meanwhile January, February, April and November only account for 21% due to the troughs that come before and after the peaks in sales. The rest of the months are fairly steady, representing 31% of units sold (Ipsos Reid, 2015). Employees/Specialized Skills and Knowledge As of December 31, 2015, the Company employed a total of 35 employees of which 22 were full time and 13 were part time. The bulk of our employees are in our corporate office in Vancouver. The Company believes that its success is dependent on the performance of its management and key employees, all of whom have specialized knowledge and skills relating to the retail apparel industry. The Company believes its relations with employees are strong and it will be able to continue to retain and attract adequate personnel with the specialized skills required to successfully carry out its operations.

4.2 Reorganizations See Section 3.2 “Significant Acquisitions” for more information.

4.3 Risk Factors

If we do not obtain additional financing our business may fail.

We will require additional financing to sustain our business operations. We currently do not have any arrangements for such financing and we may not be able to obtain financing when required. A decline in the price of our shares may impact our ability to obtain future financing. Obtaining additional financing would be subject to a number of factors, including our ability to initially attract investments prior to substantial revenue generation, and thereafter our ability to grow our brand. We can provide investors with no assurance that we will ever achieve profitable operations, and thus we face a high risk of business failure. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

∙ our ability to market and sell our products to the levels anticipated;

our ability to generate profits from the sale of those products; and

our ability to create a successful brand.

We have a history of operating losses and negative cash flow that will continue into the foreseeable future. If we fail to execute our strategy to achieve and maintain profitability in the future, investors could lose confidence in the value of our common shares, which could cause our stock price to further decline and adversely affect our ability to raise additional capital. If we fail to obtain additional short‐term financing, we would not have adequate liquidity to fund our operations, would not be able to continue as a going concern.

Because of the unique difficulties and uncertainties inherent in the apparel business, we face a high risk of business failure.

Potential investors should be aware of the difficulties normally encountered by apparel companies and the high rate of failure of such enterprises. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the design, manufacture and sale of the products that we

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plan to offer, as well as the highly competitive landscape of the apparel industry. These potential problems include, but are not limited to, unanticipated problems relating to manufacturing and sales, lack of branding and marketing traction with consumers, and additional costs and expenses that may exceed current estimates.

Our success depends on our ability to maintain the value and reputation of our brand.

Our success depends on the value and reputation of our brand. Our brand is integral to our business as well as to the implementation of our strategies for expanding our business. We have repositioned and will continue to reposition our brand from primarily targeting a mixed martial arts consumer to a broader performance and lifestyle consumer. The market’s acceptance of our repositioned brand is a key factor to our success. Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality guest experience. We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Negative publicity regarding the production methods of any of our suppliers or manufacturers could adversely affect our reputation and sales and force us to locate alternative suppliers or manufacturing sources.

An economic downturn or economic uncertainty in our key markets may adversely affect consumer discretionary spending and demand for our products.

Many of our products may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, particularly those in North America and other factors such as consumer confidence in future economic conditions, fears of recession, the availability of consumer credit, level of unemployment, tax rates and the cost of consumer credit. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remains unpredictable and subject to reductions due to credit constraints and uncertainties about the future. The current volatility in the North America economy in particular has resulted in an overall slowing in growth in the retail sector because of decreased consumer spending, which may remain depressed for the foreseeable future. These unfavorable economic conditions may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may not reach our sales targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets, particularly in North America. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.

Our sales and profitability may decline as a result of increasing product costs and decreasing selling prices.

Our business is subject to significant pressure on pricing and costs caused by many factors, including intense competition, constrained sourcing capacity and related inflationary pressure, pressure from consumers to reduce the prices we charge for our products and changes in consumer demand. These factors may cause us to experience increased costs, reduce our sales prices to consumers or experience reduced sales in response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could have a material adverse effect on our financial conditions, operating results and cash flows.

If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, we may not be able to achieve profitability.

Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new products or novel technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce similar products in a more timely fashion, which could hurt our goal to be viewed as a leader in apparel innovation. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of apparel or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower sales, excess inventory levels, and further deterioration of operating results. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high‐quality products. Our failure to effectively introduce new products that are accepted by consumers could result in a

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decrease in net revenue and excess inventory levels, which could have a material adverse effect on our financial condition.

Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our products could be affected by many factors, including our ability to raise sufficient equity or debt capital in a timely manner, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions, and weakening of economic conditions or consumer confidence in future economic conditions. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products available for sale in our stores or for delivery to customers.

Inventory levels in excess of customer demand or purchased in excess quantities, may result in inventory write‐downs or write‐offs and the sale of excess inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and exclusivity of our brand. Conversely, if we underestimate customer demand for our products, our manufacturers may not be able to deliver products to meet our requirements, and this could result in damage to our reputation and customer relationships.

The fluctuating cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.

Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials or the prices we pay for our cotton yarn and cotton‐based textiles, could have a material adverse effect on our cost of goods sold, results of operations, financial condition and cash flows.

We rely on third‐party suppliers to provide fabrics for and to produce our products, and we have limited control over them and may not be able to obtain quality products on a timely basis or in sufficient quantity.

We do not manufacture our products or the raw materials for them and rely instead on third‐party suppliers. Due to our financial condition, we have delayed payments to our manufactures or agreed to revise contractual terms, which has had a negative impact on our relationships with them. If we fail to make or delay payments to our manufactures, those manufactures may refuse to work for us and we may have difficulties finding other manufactures that are willing to make our products on terms acceptable to us, or which are competitive in the marketplace.

Many of the specialty fabrics used in our products are technically advanced textile products developed and manufactured by third parties and may be available, in the short‐term, from only one or a very limited number of sources. We have no long‐term contracts with our suppliers or manufacturing sources, and we compete with other companies for fabrics, raw materials, production and import quota capacity.

We have occasionally received, and may in the future continue to receive, shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future continue to receive, products that meet our technical specifications but that are nonetheless unacceptable to us. Under these circumstances, unless we are able to obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if defects in the manufacture of our products are not discovered until after such products are purchased by our customers, our customers could lose confidence in the technical attributes of our products and our results of operations could suffer and our business could be harmed.

We may in the future experience a significant disruption in the supply of fabrics or raw materials from current sources and we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. In addition, if we experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient

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capacity to meet our requirements or to fill our orders in a timely manner. Identifying a suitable supplier is an involved process that requires us to become satisfied with its quality control, responsiveness and service, financial stability and labor and other ethical practices. Even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Delays related to supplier changes could also arise due to an increase in shipping times if new suppliers are located farther away from our markets or from other participants in our supply chain. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and could result in lower net revenue and income from operations both in the short and long term.

Our reliance on third party providers for all warehouse and fulfillment functions reduces our ability to control the warehousing and fulfillment processes, which could harm our sales, reputation, and overall business.

We have entered into an agreement to outsource most of our warehouse and fulfillment functions to third party providers where our inventory is held at sites managed by an independent contractor who will then perform most of our warehousing, packaging and fulfillment services. We depend on independent contractor fulfillers to properly fulfill customer orders in a timely manner and to properly protect our inventories. The contractor's failure to ship products to customers in a timely manner, to meet the required quality standards, to correctly fulfill orders, to maintain appropriate levels of inventory, or to provide adequate security measures and protections against excess shrinkage could cause us to miss delivery date requirements of our customers or incur increased expense to replace or replenish lost or damaged inventory or inventory shortfall. The failure to make timely and proper deliveries may cause our customers to cancel orders, refuse to accept deliveries, impose non‐compliance charges through invoice deductions or other charge‐backs, demand reduced prices or reduce future orders, any of which could harm our sales, reputation and overall profitability. Our excess inventory held at these facilities may be damaged due to the length of time that they are at the facility, which may not be covered by the contractor or our insurance.

We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a decrease in our net revenue.

The market for apparel is highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share or a failure to grow our market share, any of which could substantially harm our business and results of operations. We compete directly against wholesalers and direct retailers of athletic apparel, including large, diversified apparel companies with substantial market share and established companies expanding their production and marketing of technical athletic apparel, as well as against retailers specifically focused on athletic, active, lifestyle, and other categories of apparel. We also face competition from wholesalers and direct retailers of traditional commodity athletic apparel, such as cotton T‐shirts and sweatshirts. Many of our competitors are large apparel and sporting goods companies with strong worldwide brand recognition, such as Nike, Inc., Lululemon Athletica Inc., Adidas AG, which includes the Adidas and Reebok brands, and The Gap, Inc., which includes the Athleta brand. Because of the fragmented nature of the industry, we also compete with other apparel sellers. Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, store development, marketing, distribution and other resources than we do. In addition, our athletic and other categories of apparel are sold at a price premium to comparable apparel.

Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors promote their brands through traditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have substantial resources to devote to such efforts. Our competitors may also create and maintain brand awareness using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we do by emphasizing different distribution channels than we do, such as catalog sales or an extensive franchise network, as opposed to distribution through retail stores, wholesale or internet, and many of our competitors have substantial resources to devote toward increasing sales in such ways.

In addition, because we own no patents or exclusive intellectual property rights in the technology, fabrics or processes underlying our products, our current and future competitors are able to manufacture and sell products with performance characteristics, fabrication techniques and styling similar to our products.

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Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive position.

We currently rely on a combination of copyright, trademark, trade dress and unfair competition laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our intellectual property rights. We cannot assure you that the steps taken by us to protect our intellectual property rights will be adequate to prevent infringement of such rights by others, including imitation of our products and misappropriation of our brand. In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States or Canada, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries. If we fail to protect and maintain our intellectual property rights, the value of our brand could be diminished and our competitive position may suffer.

We may not be able to successfully open profitable new store locations in a timely manner, if at all, which could harm our results of operations.

Our growth will depend on our ability to successfully open and operate new stores. Sales at these stores are derived, in part, from the volume of foot traffic in these locations. Our ability to successfully open and operate new stores depends on many factors, including, among others, our ability to:

• identify suitable store locations, the availability of which is outside of our control;

• negotiate acceptable lease terms, including desired tenant improvement allowances;

• hire, train and retain store personnel and field management;

• immerse new store personnel and field management into our corporate culture;

• source sufficient inventory levels; and

• successfully integrate new stores into our existing operations and information technology systems.

Successful new store openings may also be affected by our ability to initiate our marketing efforts in advance of opening additional stores in new markets. We typically rely on our marketing efforts to build awareness of our brand and demand for our products. There can be no assurance that we will be able to successfully implement our marketing efforts in a particular market in a timely manner, if at all. Additionally, we may be unsuccessful in identifying new markets where our apparel and other products and brand image will be accepted or the performance of our stores will be considered successful.

Our ability to source our merchandise profitably or at all could be hurt if new trade restrictions are imposed or existing trade restrictions become more burdensome.

Canada and the countries in which our products are produced or sold internationally have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty or tariff levels. Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the supply of products available to us or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations.

Our employees are critical to our success, and the loss of key personnel could harm our business.

Our performance is substantially dependent on the continued services and performance of our executive officers and other key personnel. We have employment agreements in place for our Chief Executive Officer, Chief Financial Officer, our Vice President of Product and Brand, our Vice President of Sales and Marketing, and our Vice President of Retail. No key man life insurance has been purchased on any of our executive officers. Our performance also depends

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on our ability to retain and motivate our officers. The loss of the services of any of our officers could have a material adverse effect on our business, prospects, financial condition and results of operations.

Competition for key personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such personnel. The failure to attract and retain the necessary technical, managerial and marketing personnel could have a material adverse effect on our business, prospects, financial condition and results of operations. Our future success also depends on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial and marketing personnel.

We are dependent on our information technology systems and third‐party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.

Our business is dependent on the successful and uninterrupted functioning of our information technology systems setup by third‐party providers, as we outsource many of our major systems. We rely on the controls of these providers in lieu of controls setup by us. The failure of these systems, or the termination of a third‐party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third‐party systems, we could experience service denials if demand for such services exceeds capacity or such third‐party systems fail or experience interruptions.

The exercise of outstanding options and warrants may have a dilutive effect on the price of our common shares.

To the extent that outstanding stock options and warrants are exercised, dilution to our shareholders will occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of the outstanding options and warrants can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise terms provided by the outstanding options and warrants.

We do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common shares.

We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common shares will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that our company will ever have sufficient earnings to declare and pay dividends to the holders of our common shares, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors. If we do not pay dividends, our common shares may be less valuable because a return on your investment will only occur if its stock price appreciates.

PART 5 DIVIDENDS AND DISTRIBUTIONS

The Company has not declared any cash dividends on its common shares since its inception and intends to retain its earnings to finance growth and expand its operations. It does not anticipate paying any dividends on its common shares or on any other classes of its securities in the foreseeable future. Under the BCBCA, the Company may declare or pay a dividend in property, including in money, unless there are reasonable grounds for believing that the Company is insolvent, or the payment of the dividend would render the Company insolvent.

PART 6 DESCRIPTION OF CAPITAL STRUCTURE

The authorized capital of the Company consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.

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Common Shares Holders of common shares of the Company are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders of the Company, and each common share confers the right to one vote, provided that the shareholder is a holder on the applicable record date declared by the board of directors of the Company. The common shares are, subject to the prior rights of the preferred shares, entitled to any dividend declared by the board of directors of the Company and confer upon the holders thereof rights in a winding‐up. Preferred Shares There are currently no preferred shares issued and outstanding. The preferred shares may include one or more series and, subject to the BCBCA, the directors may, by resolution, if none of the shares of that particular series are issued, alter the Articles of the Company and authorize the alteration of the Notice of Articles of the Company, as the case may be, to do one or more of the following: (a) determine the maximum number of shares of that series that the Company is authorized to issue, determine

that there is no such maximum number, or alter any such determination; (b) create an identifying name for the shares of that series, or alter any such identifying name; and (c) attach special rights or restrictions to the shares of that series, or alter any such special rights or restrictions.

PART 7 MARKET FOR SECURITIES 7.1 Trading Price and Volume The Company’s common shares are listed on the TSX Venture Exchange (“TSX‐V”) under the symbol “RYU” and on the Frankfurt Stock Exchange under the symbol “RYA”. The following table provides the high and low prices and the volume of shares traded through the TSX‐V on a monthly basis for the year ended December 31, 2015 and to September 14, 2016.

Month High

($)

Low

($) Volume Traded

September 1 ~ 14, 2016 0.12 0.095 4,258,257

August, 2016 0.16 0.11 3,761,067

July, 2016 0.17 0.15 4,420,355

June, 2016 0.19 0.13 5,127,346

May, 2016 0.23 0.16 3,346,583

April, 2016 0.20 0.17 3,847,165

March, 2016 0.22 0.15 4,374,505

February, 2016 0.25 0.16 3,581,682

January, 2016 0.26 0.18 1,543,041

December, 2015 0.33 0.23 3,019,744

November, 2015 0.35 0.24 4,311,613

October, 2015 0.37 0.22 2,478,191

September, 2015 0.46 0.36 2,620,464

August, 2015 0.55 0.35 2,726,365

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July, 2015 0.50 0.38 1,688,515

June, 2015 0.82 0.41 4,400,217

May, 2015 0.87 0.30 2,282,650

April, 2015 0.34 0.28 1,254,609

March, 2015 0.41 0.31 571,733

February, 2015 0.35 0.22 436,850

January, 2015 0.26 0.20 231,633

7.2 Prior Sales During the most recently completed fiscal year ended December 31, 2015 and up to the date of this AIF, the Company did not issue any class of securities other than the common shares that are listed on the TSX‐V, or that are convertible or exercisable into such common shares.

PART 8 DIRECTORS AND EXECUTIVE OFFICERS

8.1 Name, Occupation and Security Holding

The table below sets out certain information regarding the directors and executive officers of the Company as at the date of this AIF:

Name Province/State

Country of Residence and Position(s)

with the Company(1)

Principal Occupation Business or Employment for Last Five Years(1)

Periods during which

Director has Served

Number and Percentage of Common Shares

Owned(1)(2)

Marcello Leone(3)

British Columbia, Canada

President, CEO and Director

From December 4, 2014 until present, Mr. Leone has been a director and CEO of the Company. From March 26, 2012 until present, Mr. Leone has been a director and CEO of Naturo Group Investments Inc., a private British Columbia corporation that holds the Trace and Blackwater brands of nutritional water beverages. Mr. Leone is also the founder of Naturo Group. From 2009 to 2015, Mr. Leone served as VP Operations and President with LEONE, an independent specialty store. LEONE is located in Vancouver, British Columbia, representing over 30,000 square feet of luxury brands. LEONE’S contemporary division known as L2 represented contemporary designers. Mr. Leone was responsible for the development of new product lines, guiding the buying team, and daily operational duties for LEONE and L2.

December 4, 2014 to present

9,526,223(4)

8.5%(4)

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Name Province/State


with the Company(1)



Director has Served


Owned(1)(2)

Bill Marcus(3)

Illinois, USA

Director

Mr. Marcus has served as Senior Managing Director of HedgeCoVest LLC since February 2016 and as Vice Chairman of the Federal Enforcement Homeland Security Foundation since July 2012. He served as Senior Managing Director of both Asset Alliance Corporation and its affiliate Hedgeharbor, Inc. from October 2010 to October 2015. Prior to this, Mr. Marcus was Executive Vice‐President, Head of Sales North America for Newedge Group since 2001. At Newedge, Mr. Marcus led sales, business development and coordination between the global offices, as well as between several of its parent banking groups. Mr. Marcus directly managed top global relationships and business development with financial institutions including: asset managers, hedge funds, CTAs, investors, professional trading groups, corporations, governments and family offices.


735,000(5)

0.7%(5)

Martino Ciambrelli(3)


Director

Mr. Ciambrelli has over 30 years’ experience in sales development and management of consumer brands with a focus on the food and beverage industry. Since March 2013, he has been President of Naturo Group Investments Inc., a nutritional beverage and food company. From July 2011 to February 2013, he was Director of Business Development, Pacific at AirSprint Inc., a company that specializes in private aviation solutions. From March 2001 to July 2011, he was Regional Manager, Western Canada at Johnvince Foods, which owns the right to the “Mr. Peanut” brand in Canada.


30,000(6)

0.03%(6)

Maria Leone


Director

Mrs. Leone was the former Vice President Merchandising of LEONE from 1987 to 2015. In the early 1970s, in partnership with her husband, Mrs. Leone played an integral part in opening a chain of successful boutiques in Vancouver’s most prestigious shopping malls. In 1987, they consolidated all the individual boutiques to open “LEONE”, a 30,000 square foot high‐end fashion retail store in downtown Vancouver at the historic Sinclair Centre. As the former Vice President of LEONE, she was instrumental in the fashion, operation and growth of the well‐known retailer for 27 years until 2015.


791,666(7)

0.7%(7)

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Name Province/State


with the Company(1)



Director has Served


Owned(1)(2)

Pedro Villa


CFO

Mr. Villa has been the CFO of the Company from February 1, 2016 until present. Mr. Villa is a Chartered Professional Accountant (CPA, CA) with six years of post‐designation professional experience. Prior to joining the Company, Mr. Villa held controllership and financial reporting roles in three Vancouver based mining companies with operations in North America. He was Operations Controller for Huckleberry Mines Ltd. (2013‐2015), Interim Manager of Financial Reporting for Minera Boleo of Baja Mining Corp. (2012‐2013), Assistant Controller of Timmins Gold Corp (2012), and Senior Accountant for Baja Mining Corp. (2011‐2012). Mr. Villa began his professional career at Deloitte in the audit and assurance practice serving notable Canadian public companies in the IT and mining industries for four years (2007‐2011). Mr. Villa has a Bachelor of Science in Business Management with concentrations in entrepreneurship and marketing from Babson College in the United States.

‐ Nil(8)

Directors and Officers as a Group

11,082,889(9)

9.8%(9)

(1) Information has been furnished by the respective directors and officers individually and percentage is calculated on a non‐diluted basis based on 112,657,758 common shares issued and outstanding as of September 14, 2016.

(2) The information as to common shares beneficially owned, or over which a director or executive officer exercises control or direction, directly or indirectly, not being within the knowledge of the Company, has been furnished by the respective director or executive officer as at September 15, 2016.

(3) Member of the Audit Committee of the Company.

(4) Consists of 8,362,627 common shares held directly and 1,163,596 common shares indirectly through Naturo Group Investments Inc. (“Naturo”), a company controlled by Mr. Leone. Does not include (i) warrants held directly to purchase 6,470,057 common shares of the Company, each of which has an exercise price of $0.50 per share, (ii) warrants held indirectly through Naturo to purchase 784,000 shares at $0.20 per share (ii) options to purchase 3,800,000 common shares of the Company, and (iii) options to purchase 250,000 indirectly through Naturo. The 3,800,000 stock options held directly by Mr. Leone vest upon the Company generating net income and positive cash from operations and they are exercisable at $0.30 per share. 1,600,000 stock options expire on August 18, 2024 and 2,200,000 stock options expire on March 16, 2025. The 250,000 stock options held by Naturo are fully vested, they are exercisable at $0.30 per share, and expire on August 18, 2024.

(5) Does not include options to purchase 75,000 common shares of the Company. The stock options are fully vested, they are exercisable at $0.30 per share, and expire on August 18, 2024.

(6) Does not include options to purchase 200,000 common shares of the Company. The stock options are fully vested, they are exercisable at $0.30 per share, and expire on August 18, 2024.

(7) Does not include options to purchase 150,000 common shares of the Company. The stock options are fully vested, they are exercisable at $0.30 per share, and expire on August 18, 2024. Also does not include common shares convertible under a $350,000 secured convertible note. The note is convertible by Mrs. Leone at any point during the term into common shares of the Company. The number of shares issuable upon conversion is based on the

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greater of $0.40 per share or a 20% discount to the closing price on the TSX‐V on the previous business before the holder requests conversion.

(8) Does not include options to purchase 250,000 common shares of the Company. 25% of the stock options vested upon grant, 25% after one year, 25% after two years, and 25% after three years. They are exercisable at $0.25 per share, and expire on June 16, 2021.

(9) Does not include the securities of the directors that are exercisable or convertible into common shares as set out in footnotes 4‐8 above.

8.2 Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Corporate Cease Trade Orders

To the best of management’s knowledge, no director or executive officer of the Company is, or within the ten years before the date of this AIF has been, a director, chief executive officer or chief financial officer of any company that:

was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or

was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Bankruptcies

To the best of management’s knowledge, no director or executive officer of the Company has; (i) within ten years before the date of this AIF, been a director or officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets; or (ii) within ten years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver manager or trustee appointed to hold the assets of the director or executive officer.

Penalties and Sanctions

To the best of management’s knowledge, no director or executive officer of the Company has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a director or executive officer.

8.3 Conflicts of Interest Except as set out below, to the best of management’s knowledge, there are no other existing or potential material conflicts of interest between RYU or its wholly‐owned subsidiary and any director or officer of RYU or of its wholly‐owned subsidiary.

As at December 31, 2015, included in short term loans payable is $777,000 (2014 ‐ $Nil) owing to the following related parties of the Company: Maria Leone, a director of the Company; Marcello Leone, a director and the CEO of the Company; the sister of Marcello Leone; and Naturo. Amounts owing are non‐interest bearing, unsecured and due on demand. As of the date of this AIF, $707,000 of the balance remains outstanding.

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As at December 31, 2015, included in loans payable is $651,865 (2014 – Nil) owning to Marcello Leone, a director and the CEO of the Company. This loan bears an interest rate of 8.95% and is due on June 1, 2017. In the first quarter 2016, an additional $60,000 was advanced to the Company and as of the date of this AIF, $757,298 remains outstanding.

As at December 31, 2015, included in notes payable is $361,526 (2014 – Nil) owning to Maria Leone, a

director of the Company. This note bears an interest rate of 10% and was due on November 9, 2015. As of the date of this AIF, $386,895 remains outstanding. The note is convertible by Mrs. Leone at any point during the term into common shares of the Company. The number of shares issuable upon conversion is based on the greater of $0.40 per share or a 20% discount to the closing price on the TSX‐V on the previous business before the holder requests conversion.

As at December 31, 2015, included in accrued liabilities is $51,000 (2014 ‐ $Nil) commitment fee owing to Marcello Leone in relation to the loan issued during the year then ended. As of the date of this AIF, the $51,000 commitment fee remains outstanding.

As at December 31, 2015, the following was included in accounts payable in transactions with related parties, which are non‐interest bearing, unsecured and due on demand:

o $6,000 (2014 ‐ $Nil) to Robert Payment, the former CFO of the Company. o $69,749 (2014 ‐ $48,161) in amounts owing for products and services provided by Naturo.

As of the date of this AIF, no amounts are owed to Robert Payment and $34,966 is owing to Naturo for products and services.

On June 29, 2015, the Company entered into a cobranding agreement with Naturo. Under the agreement, the Company is required to make an upfront payment of $125,000 for a 3 years lease. Shortly after the execution of the agreement, both parties mutually terminated the agreement and the Company issued a loan receivable for the said amount. During the year ended December 31, 2015, the entire payment was received and the outstanding balance is $Nil.

On November 1, 2014, the Company entered into a sublease agreement with Naturo for our corporate office

at 1672 W 2nd Avenue in Vancouver, BC. Under the agreement, the Company is required to make the lease payments for a term of 5 years. During the year ended December 31, 2015, the Company recorded rent expense of $126,116 (2014 ‐ $23,197) to Naturo. As of the date of this AIF, the Company has recorded rent expense of $98,745 to Naturo.

PART 9 LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Neither the Company nor any of its property was a party to, or the subject of, any material legal proceeding since January 1, 2015, nor is the Company currently party to any material legal proceeding or contemplating any legal proceedings which are material to its business. From time to time, however, the Company may be subject to various claims and legal actions arising in the course of its business.

PART 10 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Except as otherwise disclosed below or as set out in Section 8.3 “Conflicts of Interest”, no: (a) director or executive officer of the Company; (b) person or company who beneficially owns directly or indirectly, common shares, or who exercises control or direction of common shares, or a combination of both, carrying more than ten percent of the voting rights attached to the common shares outstanding (an “Insider”); (c) director or executive officer of an Insider; or (d) an associate or affiliate of any of the directors, executive officers or Insiders, has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year which has materially affected or is reasonably expected to materially affect the Company, other than an interest arising solely from the ownership of common shares where such person or company will receive no extra or special benefit or advantage not shared on a pro rata basis by all shareholders.

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2013 ‐ 2014

On July 18, 2013, Respect Your Universe, Inc. (the “Subsidiary”), the Company’s wholly‐owned subsidiary, signed an employment agreement with Craig Brod, Ph.D., its former chief executive officer, effective as of May 1, 2013. The Subsidiary agreed to pay the sum of $168,000 per year and a lump sum of $36,000 to Dr. Brod, which lump sum was payable on or before January 6, 2014. The Subsidiary also agreed to grant options to purchase up to 900,000 shares of our common stock at an exercise price of $0.35 per share. The Subsidiary also granted the executive a housing allowance up to a maximum of $1,800 a month and standard benefits. The agreement was terminated upon Mr. Brod’s resignation on August 1, 2014. Pursuant to the agreement, the Subsidiary paid Dr. Brod $39,000 in severance.

The Subsidiary agreed to pay Jim Nowodworski, the Subsidiary’s former chief financial officer, a base salary of $150,000 on an annual basis and deferred compensation of $30,000 payable annually on January 31 (for 2013, the amount was prorated to $15,000 and payable on January 31, 2014). In addition, the Subsidiary granted him options to purchase 450,000 shares of our common stock at an exercise price of $0.21 with an expiration date of September 5, 2023. The employment agreement with Mr. Nowodworski was terminated on September 1, 2014. Mr. Nowodworski was retained in a consultant capacity until December 31, 2014.

On August 1, 2014, the Subsidiary entered into a consulting agreement with Carla Gabriela Leone, the spouse of Marcello Leone, to serve as Director of Sales in Latin America in exchange for a monthly retainer of $4,500.

On September 23, 2014, the Subsidiary entered into an executive employment agreement with Marcello Leone to serve as CEO and President of the Subsidiary in exchange for a base salary of $170,000 per year, to be adjusted at the end of each year of employment at the sole discretion of the board of directors and the granting of up to 3.9 million options to purchase common shares with vesting to occur upon the Company generating net income and positive cash flow from operations.

On September 2, 2014, the Subsidiary entered into an executive employment agreement with Jameel Vaghela to serve as Chief Financial Officer of the Subsidiary in exchange for a base salary of $108,000 per year and granted 300,000 options to purchase common shares.

2015

As of April 2015, with retroactive effect to January 1, 2015, the Subsidiary and Mr. Leone agreed to increase Mr. Leone’s base salary to $210,000 per year.

As of January 1, 2015, the Subsidiary and Mr. Vaghela agreed to increase Mr. Vaghela’s base salary to $130,000 per year. As of April 1, 2015, the Subsidiary and Mr. Vaghela agreed to increase Mr. Vaghela’s base salary to $135,000 per year.

Mr. Vaghela resigned as CFO of the Company effective October 13, 2015. As part of his departure, the vesting conditions of the stock options previously granted to him were amended to allow 150,000 stock options to vest immediately. All vested options will be exercisable until October 13, 2016.

On October 14, 2015 the Company entered into an executive employment agreement with Robert Payment to serve as Chief Financial Officer of the Company in exchange for a base salary of $110,000 per year. Mr. Payment resigned on January 31, 2016. As part of his departure, the Company agreed to issue Mr. Payment $12,000 in the Company’s common shares. These were issued on March 3, 2016.

PART 11 TRANSFER AGENTS AND REGISTRARS

Computershare Investor Services Inc., with its Vancouver office located at 510 Burrard Street, 2nd Floor, Vancouver, British Columbia, V6C 3B9, acts as the Company’s transfer agent and registrar.

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PART 12 MATERIAL CONTRACTS

Other than those listed below and those entered into in the ordinary course of the Company’s business, there are no material contracts of the Company which were entered into in the most recently completed financial year or which were entered into before the most recently completed financial year but are still in effect as of the date of this AIF:

The Executive Employment Agreement with Marcello Leone (See “Interest of Management and Others in Material Transactions”).

The Executive Employment Agreement with Jameel Vaghela (See “Interest of Management and Others in Material Transactions”).

The Executive Employment Agreement with Robert Payment (See “Interest of Management and Others in Material Transactions”).

On February 1, 2016 the Company entered into an executive employment agreement with Pedro Villa to serve as Chief Financial Officer of the Company in exchange for a base salary of $110,000 per year.

The Sublease Agreement of 1672 W 2nd Avenue corporate office with Naturo (See “Conflicts of Interest”).

On December 7, 2015, the Company entered into a Grid Note Agreement with Marcello Leone for a running account of up to $800,000. The grid note bears interest at 8.95% per annum. As part of the agreement, the Company agreed to pay $51,000 as a commitment fee and partial consideration for the Grid Note (see “Conflicts of Interest”.

On December 7, 2015, the Company entered into a Security Agreement with Marcello Leone in connection with the Grid Note, whereby the Company granted a security interest in all of the Company’s property (see “Conflicts of Interest”.

During the year ended December 31, 2015, the Company entered into three term notes (“Notes”) with principal amounts totaling $600,000.

a. On July 24, 2015 the Company entered into a term note with an employee of the Company for a principal amount of $50,000;

b. On July 31, 2015 the Company entered into a term note with an employee of the Company for a principal amount of $200,000; and

c. On August 11, 2015 the Company entered into a term note with Maria Leone for a principal amount of $350,000 (See “Conflicts of Interest”).

The Notes bear interest at 10% per annum, which became payable on the maturity date and is secured by all the assets of the Company. The Notes are convertible by the holder at any point during the ninety day term into common shares of the Company provided a minimum of $20,000 of the principal was converted, unless there was less than $20,000 of the principal amount outstanding. The number of shares issuable upon conversion is based on the greater of $0.40 per share or a 20% discount to the closing price on the TSX‐V on the previous business before the holder requested conversion. Due to the short maturity of the Notes the fair value of the conversion feature was nominal. The Notes matured in October 2015. These notes are secured against inventory acquired after the issuance of the loan, and all proceeds therefrom. As of the date of this AIF, the $50,000 term note with one employee has been repaid in full, $140,814 of the $200,000 term note with an employee is outstanding, and $386,895 of the term note with Maria Leone is outstanding.

On August 11, 2015, the Company entered into a Security Agreement with Maria Leone, a director of the Company, in connection with the Notes, whereby the Company granted a security interest in all of the Company’s inventory and proceeds therefrom (see “Conflicts of Interest” for more information).

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PART 13 NAMES AND INTERESTS OF EXPERTS

Dale Matheson Carr‐Hilton LaBonte LLP audited the financial statements of the Company for the year ended December 31, 2015. As of April 29, 2016, the date of Dale Matheson Carr‐Hilton LaBonte LLP auditors’ report on the Company’s audited financial statements for the year ended December 31, 2015, the partners of Dale Matheson Carr‐Hilton LaBonte LLP did not own any of the Company’s outstanding common shares.

PART 14 AUDIT COMMITTEE INFORMATION

Pursuant to National Instrument 52‐110 – Audit Committees (“NI 52‐110”), the disclosure of the Company’s Audit Committee is summarized below and will be set out in the Company’s Management Information Circular in connection with its 2016 annual general meeting under the heading “Audit Committee Disclosure”, which will be available on SEDAR at www.sedar.com. Audit Committee Oversight

At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the directors. Reliance on Certain Exemptions Since the commencement of the Company’s most recently completed financial year, the Company has not relied on the exemptions contained in section 2.4 or section 8 of NI 52‐110. Section 2.4 provides an exemption from the requirement that the Audit Committee must pre‐approve all non‐audit services to be provided by the auditor, where the total amount of fees related to the non‐audit services are not expected to exceed 5% of the total fees payable to the auditor in the fiscal year in which the non‐audit services were provided. Section 8 of NI 52‐110 permits a company to apply to a securities regulatory authority for an exemption from the requirements of NI 52‐110 in whole or in part.

PART 15 ADDITIONAL INFORMATION

Additional information relating to the Company may be found on SEDAR at www.sedar.com. Additional information including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans are contained in the Company’s information circular for the Company’s most recent annual meeting of shareholders that involved the election of directors. Additional information regarding directors’ and officers’ remuneration for the fiscal year ended December 31, 2015 is contained in the Statement of Executive Compensation filed on SEDAR at www.sedar.com on June 21, 2016. The information circular is available on SEDAR at www.sedar.com. Additional financial information is provided in the Company’s financial statements and MD&A for the financial year ended December 31, 2015.

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