ITASCA
CAPITAL LTD.



Consolidated
Financial Statements

(Expressed
in Canadian dollars, unless indicated otherwise)



For
the years ended December 31, 2017 and 2016













Independent
Auditor’s Report



Board
of Directors and Shareholders

Itasca
Capital Ltd. (formerly Kobex Capital Corp.)

Vancouver,
BC

Canada



We
have audited the accompanying consolidated financial statements Itasca Capital Ltd. (formerly Kobex Capital Corp.) (the Company)
and subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2017 and 2016, and the related
consolidated statements of profit or loss and other comprehensive income, changes in shareholders’ equity, and cash flows
for the years then ended, and the related notes to the consolidated financial statements.



Management’s
Responsibility for the Financial Statements



Management
is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.



Auditor’s
Responsibility



Our
responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.



An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.



We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.



Opinion



In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Itasca Capital Ltd. (formerly Kobex Capital Corp.) and subsidiaries as of December 31, 2017 and 2016, and the results of their
operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board.



/s/
BDO USA, LLP



March
15, 2018











ITASCA
CAPITAL LTD.

Consolidated
Statements of Financial Position

Expressed
in Canadian dollars





|                                               |  | December
    31, 2017 |             |   | December
    31, 2016 | 
|---------------------------------------------- |  | --------------------- | ----------- | - | --------------------- | 
|                                               |  | $                     |             |   | $                     | 
|Assets                                         |  |                       |             |   |                       | 
|Current
    assets                             |  |                       |             |   |                       | 
|Cash                                           |  |                       | 87,800      |   |                       | 
|Amounts
    receivable and prepaid expenses    |  |                       | 6,575       |   |                       | 
|Total
    current assets                       |  |                       | 94,375      |   |                       | 
|Non-current
    assets                         |  |                       |             |   |                       | 
|Investment
    in associate (note 5)           |  |                       | 22,856,626  |   |                       | 
|Total
    assets                               |  |                       | 22,951,001  |   |                       | 
|Liabilities                                    |  |                       |             |   |                       | 
|Current
    liabilities                        |  |                       |             |   |                       | 
|Accounts
    payable and accrued liabilities   |  |                       | 127,395     |   |                       | 
|Total
    liabilities                          |  |                       | 127,395     |   |                       | 
|Shareholders’
    equity (note 6)              |  |                       |             |   |                       | 
|Share
    capital                              |  |                       | 37,589,569  |   |                       | 
|Equity
    reserves                            |  |                       | 65,000      |   |                       | 
|Deficit                                        |  |                       | (14,830,963 | ) |                       | 
|Total
    shareholders’ equity                 |  |                       | 22,823,606  |   |                       | 
|Total
    liabilities and shareholders’ equity |  |                       | 22,951,001  |   |                       | 







|On
    behalf of the Board:       | 
|--------------------------------- | 
|                                  | 
|Signed:
    “Larry G. Swets, Jr.” | 
|                                  | 
|Signed:
    “John T. Fitzgerald”  | 



The
notes to the consolidated financial statements are an integral part of these statements.



















ITASCA
CAPITAL LTD

Consolidated
Statements of Profit or Loss and Other Comprehensive Income

Expressed
in Canadian dollars





|                                                                                   |  | Year
    Ended        |            |   | Year
    Ended        | 
|---------------------------------------------------------------------------------- |  | --------------------- | ---------- | - | --------------------- | 
|                                                                                   |  | December
    31, 2017 |            |   | December
    31, 2016 | 
|                                                                                   |  | $                     |            |   | $                     | 
|                                                                                   |  |                       |            |   |                       | 
|General
    and administrative expenses                                            |  |                       |            |   |                       | 
|Professional
    fees                                                              |  |                       | 158,264    |   |                       | 
|Directors’
    fees and benefits                                                   |  |                       | 60,000     |   |                       | 
|Transfer
    agent, exchange listing and shareholder information                   |  |                       | 35,970     |   |                       | 
|Office
    and corporate administration (note 7)                                   |  |                       | 20,169     |   |                       | 
|Consulting
    fees (note 7)                                                       |  |                       | -          |   |                       | 
|Other                                                                              |  |                       | 46,177     |   |                       | 
|Total
    general and administrative expenses                                      |  |                       | (320,580   | ) |                       | 
|Other
    income ( expenses)                                                       |  |                       |            |   |                       | 
|Change
    in unrealized gain ( note 5)                                            |  |                       | 611,421    |   |                       | 
|Foreign
    exchange (loss) gain                                                   |  |                       | (1,283,572 | ) |                       | 
|Realized
    gain on sale of marketable securities (note 4)                        |  |                       | -          |   |                       | 
|Investment
    income                                                              |  |                       | -          |   |                       | 
|Total
    other (expense) income                                                   |  |                       | (672,151   | ) |                       | 
|Net
    (loss) income for the period                                               |  |                       | (992,731   | ) |                       | 
|Other
    comprehensive income                                                     |  |                       |            |   |                       | 
|Items
    that may be reclassified to income (loss)                                |  |                       |            |   |                       | 
|Change
    in fair value of marketable securities designated as available-for-sale |  |                       | -          |   |                       | 
|Total
    other comprehensive income                                               |  |                       | -          |   |                       | 
|Total
    comprehensive (loss) income for the period                               |  |                       | (992,731   | ) |                       | 
|Basic
    and diluted (loss) earnings per share (note 6)                           |  |                       | (0.05      | ) |                       | 







The
notes to the consolidated financial statements are an integral part of these statements.













ITASCA
CAPITAL LTD.

Consolidated
Statements of Changes in Shareholders’ Equity

Expressed
in Canadian dollars



|                                              |  | Share

    Capital |             |   | Equity

    Reserves |  |            | Accumulated
    Other Comprehensive (loss) Income |  |  | Accumulated

    Deficit |   |  | Total |            
|--------------------------------------------- |  | ------------------ | ----------- | - | -------------------- |  | ---------- | ------------------------------------------------- |  |  | ------------------------ | - |  | ----- | -----------
|                                              |  | $                  |             |   | $                    |  |            | $                                                 |  |  | $                        |   |  | $     |            
|December
    31, 2015                         |  |                    | 80,309,132  |   |                      |  | 10,538,358 |                                                   |  |  | (1,680                   | ) |  |       | (59,891,854
|Net
    income and other comprehensive income |  |                    | -           |   |                      |  | -          |                                                   |  |  | 1,680                    |   |  |       | 8,945,390  
|Options
    exercise                          |  |                    | 1,781,279   |   |                      |  | (578,779   | )                                                 |  |  | -                        |   |  |       | -          
|Substantial
    issuer bid                    |  |                    | (44,500,842 | ) |                      |  | -          |                                                   |  |  | -                        |   |  |       | 27,148,653 
|Reclassification
    for expired options      |  |                    | -           |   |                      |  | (9,959,579 | )                                                 |  |  | -                        |   |  |       | 9,959,579  
|December
    31, 2016                         |  |                    | 37,589,569  |   |                      |  | -          |                                                   |  |  | -                        |   |  |       | (13,838,232
|Net
    loss and other comprehensive loss     |  |                    | -           |   |                      |  | -          |                                                   |  |  | -                        |   |  |       | (992,731   
|Options
    issued                            |  |                    | -           |   |                      |  | 65,000     |                                                   |  |  | -                        |   |  |       | -          
|December
    31, 2017                         |  |                    | 37,589,569  |   |                      |  | 65,000     |                                                   |  |  | -                        |   |  |       | (14,830,963



The
notes to the consolidated financial statements are an integral part of these statements.















ITASCA
CAPITAL LTD.

Consolidated
Statements of Cash Flows

Expressed
in Canadian dollars







|                                                         |  | Year
    Ended        |           |   | Year
    Ended        | 
|-------------------------------------------------------- |  | --------------------- | --------- | - | --------------------- | 
|                                                         |  | December
    31, 2017 |           |   | December
    31, 2016 | 
|                                                         |  | $                     |           |   | $                     | 
|                                                         |  |                       |           |   |                       | 
|Cash
    (used in) provided by:                          |  |                       |           |   |                       | 
|Operating
    activities:                                |  |                       |           |   |                       | 
|Net
    (loss) income                                    |  |                       | (992,731  | ) |                       | 
|Adjustments
    for:                                     |  |                       |           |   |                       | 
|Change
    in unrealized gain                            |  |                       | (611,421  | ) |                       | 
|Foreign
    exchange loss (gain)                         |  |                       | 1,283,061 |   |                       | 
|Option
    grant in lieu of cash payment of director fee |  |                       | 65,000    |   |                       | 
|Realized
    gains on sale of marketable securities      |  |                       | -         |   |                       | 
|Investment
    income                                    |  |                       | -         |   |                       | 
|Other                                                    |  |                       | -         |   |                       | 
|Changes
    in working capital:                          |  |                       |           |   |                       | 
|Accounts
    payable and accrued liabilities             |  |                       | 50,115    |   |                       | 
|Amounts
    receivable and prepaid expenses              |  |                       | 152       |   |                       | 
|Provision
    for onerous leasing contract               |  |                       | -         |   |                       | 
|Total
    cash used in operating activities              |  |                       | (205,824  | ) |                       | 
|Investing
    activities                                 |  |                       |           |   |                       | 
|Investment
    in associate                              |  |                       | -         |   |                       | 
|Sale
    of marketable securities                        |  |                       | -         |   |                       | 
|Investment
    income received                           |  |                       | -         |   |                       | 
|Total
    cash used in investing activities              |  |                       | -         |   |                       | 
|Financing
    activities                                 |  |                       |           |   |                       | 
|Stock
    repurchased per substantial issuer bid         |  |                       | -         |   |                       | 
|Proceeds
    from exercise of stock options              |  |                       | -         |   |                       | 
|Substantial
    issuer bid expenses                      |  |                       | -         |   |                       | 
|Total
    cash used in financing activities              |  |                       | -         |   |                       | 
|Change
    in cash                                       |  |                       | (205,824  | ) |                       | 
|Cash,
    beginning of the period                        |  |                       | 293,624   |   |                       | 
|Cash,
    end of the period                              |  |                       | 87,800    |   |                       | 



The
notes to the consolidated financial statements are an integral part of these statements.











ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





|1. | NATURE
    OF OPERATIONS
|-- | ------------------------



Itasca
Capital Ltd. (the “Company” or “Itasca”) is an entity with no current operations and holds an investment
in 1347 Investors LLC. During second quarter of 2016, the Company returned capital to participating shareholders by way of a Substantial
Issuer Bid (“SIB”) whereby the Company repurchased and cancelled approximately 54.2% of its outstanding shares. Additional
information regarding the SIB and the change in strategic direction is available at www.sedar.com.



On
June 9, 2016, Itasca held its 2016 Annual General and Special Meeting of Shareholders (the “Meeting”). All resolutions
put to shareholders at the Meeting were duly passed, including; the election of the Company’s new directors: Edward H. Benford,
John T. Fitzgerald, Andrew McIntyre, R. Michael Powell and Larry G. Swets, Jr.; a special resolution authorizing the amendment
to the Company’s articles to change its name from “Kobex Capital Corp.” to “Itasca Capital Ltd.”;
and an ordinary resolution approving the management services agreement between the Company and Kingsway Financial Services Inc.
(“MSA”). On June 23, 2016, the Company announced appointment of Kyle Cerminara as a director of the Company. Pursuant
to the MSA, Kingsway Financial Services Inc. (“KFS”) provides, for an annual service fee of $1.00, management and
administrative services to Itasca, including services of Chief Executive Officer, Chief Financial Officer and Corporate Secretary
and is entitled to expense reimbursement of up to $40,000 per annum for use of KFS’s other staff and resources. The former
directors did not stand for re-election at the Meeting and the previous management resigned effective June 9, 2016.



In
July 2016, Itasca completed an investment in 1347 Investors LLC in the amount of USD$10,000,000. For detailed discussion regarding
this investment, see Note 5 – Investment in Associate.



The
Company is registered in British Columbia, and the address of its principal place of business is 1800 – 510 West Georgia
Street, Vancouver, British Columbia, V6B 0M3. The Company’s shares are listed on the TSX Venture Exchange (the “TSXV”)
under the symbol “ICL”.



|2. | BASIS
    OF PREPARATION
|-- | ------------------------



Statement
of compliance



These
financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively IFRSs as issued by IASB).



These
consolidated financial statements were authorized by the Board of Directors on March 15, 2018.



Basis
of consolidation



These
consolidated financial statements include the balances and results of the Company and those entities over which the Company exercises
control:





|Subsidiary               |  | Jurisdiction                 |  | Direct
    or Indirect Ownership
|------------------------ |  | ---------------------------- |  | --------------------------------
|Kobex
    Resources Ltd. |  | British
    Columbia, Canada |  | 100%                            
|Kobex
    Colorado       |  | Colorado,
    USA            |  | 100%                            



Control
is achieved where the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity
so as to obtain the benefits from its operations. All subsidiaries were dormant during the years ended December 31, 2017 and 2016.



All
transactions between consolidated entities are eliminated in the consolidation of these financial statements.











ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





Basis
of measurement



These
consolidated financial statements have been prepared on a historical cost basis, except for marketable securities and investment
in 1347 Investors LLC, which are stated at their estimated fair values. In addition, these financial statements have been prepared
using the accrual basis of accounting.



Use
of estimates and judgments



The
preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amount of assets, liabilities and provisions,
income and expenses and the disclosure of contingent assets and liabilities at the date of these financial statements.



An
area requiring the use of management estimates is issuance of stock options as payment of directors’ fee in lieu of cash
payment (Note 6) which is valued using inputs to the Black-Scholes option pricing model that include estimates for volatility
and the risk-free interest rate.



The
Company’s management exercises judgment to determine whether its marketable securities (Note 4) and investment in 1347 Investors
LLC (Note 5) have been impaired and, if so, the value of the impairments and whether these impairments are temporary. In exercising
such judgment, management considers factors such as its intentions and ability to hold or dispose of such securities, prevailing
market prices and general market conditions. For establishing the value of investment in 1347 Investors LLC, management exercises
judgement in preparing the Model (as defined below). For detailed discussion, see Note 5 – Investment in Associate –
1347 Investors LLC.



The
Company’s management also exercises judgment regarding the valuation of deferred income tax assets. Specifically, judgments
are made as to whether objective evidence exists that the Company will have sufficient future taxable income to realize any benefit
from these assets.



Actual
results may differ from these estimates and judgments made by the Company’s management.



Functional
and foreign currency



These
consolidated financial statements are presented in Canadian dollars, the functional currency of the Company and all of its subsidiaries.
All financial information is presented in Canadian dollars (unless indicated otherwise) and is rounded to the nearest dollar.



Transactions
in currencies other than the Canadian dollar are recorded at the rates of exchange prevailing on the dates of the transactions.
At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated
at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in the foreign currency
are only translated at the date of the transaction and not re-translated at subsequent period end. Investment in 1347 Investors
LLC held by the Company is considered a monetary asset under IFRS. Company translates the investment from U.S dollar to Canadian
dollar using the closing foreign exchange rate at end of the reporting period. The foreign exchange gains and losses are recorded
through profit and loss in accordance with IAS 21 – The Effect of Changes in Foreign Exchange Rates.



Continuance
of operations



These
consolidated financial statements have been prepared in accordance with IFRS on the assumption that the Company will realize its
assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation and
do not reflect adjustments that would be necessary if the going concern assumption was not appropriate.















ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





The
Company has no source of revenue and its ability to continue as a going concern in the long term depends upon whether it develops
profitable operations, successfully liquidate its investment in 1347 Investors LLC or raise adequate financing. Management has
concluded that the Company has sufficient liquidity resources to continue as a going concern for at least the next twelve months
from the statement of financial position date.



|3. | SIGNIFICANT
                                         ACCOUNTING POLICIES AND ESTIMATES
|-- | --------------------------------------------------------------------------------------



Marketable
securities



Marketable
securities comprise investments with quoted values on a public stock exchange and are carried at their estimated fair values measured
using market prices at the reporting date. The Company held no marketable securities as of December 31, 2017 and 2016. All marketable
securities were sold during 2016.



Income
taxes



Current
tax comprises of the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax
payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting
date. Current tax assets and liabilities are offset only if certain criteria are met.



The
Company follows the asset and liability method of accounting for deferred income taxes. Under this method deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, and losses carried forward.



Deferred
tax assets and liabilities are measured using substantively enacted or enacted tax rates that are expected to apply to taxable
income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the substantive enactment
date. Potential deferred income tax assets are not recognized to the extent that they are not considered probable to be realized.



Earnings
per share



Earnings
per share is calculated by dividing the net income (loss) for the year attributable to the common shareholders by the weighted
average number of common shares issued and outstanding during the year. In years in which a net loss is incurred, the effect of
potential issuances of shares under options and warrants would be anti-dilutive and therefore basic and diluted losses per share
are the same. As of December 31, 2017, the Company has 480,000 options outstanding that could potentially dilute basic earnings
per share in the future (Note 6).



Provisions



Provisions
are recognized for liabilities of uncertain timing or amount that have arisen as a result of past transactions. The provision
is measured at the best estimate of the expenditure required to settle the obligation at the reporting date.



Financial
instruments – recognition and measurement



The
Company classifies all financial instruments as either held to maturity, available-for-sale, or fair value through profit and
loss. Available-for-sale financial assets are measured at estimated fair value with temporary unrealized gains and losses recorded
in other comprehensive income (loss). Realized losses and other than temporary unrealized losses on available-for-sale financial
assets are recognized in profit or loss. Instruments classified as fair value through profit or loss (“FVTPL”) are
measured at estimated fair value with unrealized gains and losses recognized in profit or loss. As of December 31, 2017, the investment
in 1347 Investors LLC is reported on the basis of FVTPL.











ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





New
accounting pronouncements adopted in 2017



Itasca
has adopted Disclosure Initiative (amendments to IAS 7) effective January 1, 2017, but it did not have any impact on the Company’s
consolidated financials statements.



Future
changes in accounting policies:



IFRS
9 – Financial Instruments (“IFRS 9”) will replace the multiple classification and measurement models in IAS
39 Financial Instruments: Recognition and Measurement, with a single model that has only two classification categories: amortized
cost and fair value. The new standard also requires a single impairment method to be used, provides additional guidance on the
classification and measurement of financial liabilities, and provides a new general hedge accounting standard. The mandatory effective
date has been set for January 1, 2018, however early adoption of the new standard is permitted. The Company does not intend to
early adopt IFRS 9. The adoption of IFRS 9 is not expected to have a material impact on the consolidated financial statements
given the nature of the Company’s operations and the types of financial instruments that it currently holds.



|4. | MARKETABLE
                                         SECURITIES
|-- | --------------------------------------------------------------



The
Company did not hold any marketable securities as of December 31, 2017 and 2016. Temporary changes in fair value of marketable
securities are reported in other comprehensive income, while realized fair value gains or losses, or changes in fair value that
are considered other than temporary are recorded in profit or loss. Changes to the balance of marketable securities are summarized
as follows:



|                                                                              |  | Estimated
    Fair Value |            |   | Accumulated Other Comprehensive Loss | 
|----------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ------------------------------------ | 
|                                                                              |  | $                        |            |   | $                                    | 
|December
    31, 2015                                                         |  |                          | 4,658,875  |   |                                      | 
|Realized
    gain on sale of marketable securities1                           |  |                          | 408,529    |   |                                      | 
|Proceeds
    from sale of marketable securities1                              |  |                          | (5,067,404 | ) |                                      | 
|Reclassification
    of accumulated other comprehensive loss to realized loss |  |                          | -          |   |                                      | 
|December
    31, 2016 & 2017                                                  |  |                          | -          |   |                                      | 





| | 1 | In
    February 2016, the Company sold its entire holdings in Mountain Province for total proceeds of $5,062,164 and recorded a $406,206
    fair value gain, recorded in net loss, to reflect the fair value of these shares at the time of disposal. In June, 2016, the
    Company sold its entire holdings in Blue Sky for total proceeds of $5,240 and recorded a $2,323 fair value gain, recorded
    in net loss, to reflect the fair value of these shares at the time of disposal.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | INVESTMENT
                                         IN ASSOCIATE – 1347 INVESTORS LLC
|-- | -------------------------------------------------------------------------------------



In
July, 2016, the Company entered into a subscription agreement with 1347 Investors LLC (“1347 LLC”) to subscribe for
up to 10,000,000 Class A Preference Interests of 1347 LLC (the “Class A Interests”) for a purchase price of USD$1.00
per Class A Interest, for an aggregate total of up to USD$10,000,000 (the “Investment”). 1347 LLC is a privately held
limited liability company formed under the laws of state of Delaware, USA. 1347 LLC currently holds securities of Limbach Holdings
Inc. (“Limbach”), a publicly traded entity on the Nasdaq Capital Market under the symbol “LMB”. In connection
with the Investment, the Board of Directors of Itasca amended the investment policy of the Company to include investments in both
the natural resource and industrial sectors.















ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016







Terms



The
Class A Interests in 1347 LLC (100% of which are held by Itasca) rank senior to all classes and series of interests in 1347 LLC
outstanding. 1347 LLC shall not issue any other interests or securities convertible into interests of 1347 LLC that rank senior
to or pari passu with the Class A Interests without consent of the holders of a majority of the Class A Interests. For so long
as any Class A Interests are outstanding, 1347 LLC will not repurchase, redeem or retire any interests of 1347 LLC other than
the Class A Interests. Commencing on the date that is five years from the date of issuance of the Class A Interests and on each
one-year anniversary of such date thereafter, holders of at least a majority of the then issued and outstanding Class A Interests
may request 1347 LLC to redeem their interests at a price equal to USD$1.00 per Class A Interest, plus an accrued amount equal
to 1% per month (non-compounding) on capital balance, whether declared or not (the “Preferential Accrual”). The holders
of Class A Interests shall have a preference upon liquidation over all holders of interests of any other class of 1347 LLC ranking
junior for an amount equal to USD$1.00 per Class A Interest plus the Preferential Accrual, and such amount shall be paid before
any amount shall be paid or any assets distributed to holders of interests of 1347 LLC ranking junior as to the return of capital
to the Class A Interests. After such distribution first to Class A Interest holder(s), 1347 LLC shall make distributions in the
following order: i) an aggregate of USD$3,000,000 plus Preferential Accrual to Class B Interest holders, ii) USD$2,326,500 to
Class C Interest Holders and iii) USD$5,173,500 to Class D Interest holders and thereafter, once such distributions have been
made, 44.44% of any balance to the holders of Class A Interests, 22.22% of any balance to holders of Class B Interests, 10.34%
of any balance to holders of Class C Interests, and 23% of any balance to holders of Class D Interests. Each interest across all
classes of interests in 1347 LLC represents one vote. Based on a total 20,998,019 interests outstanding, Itasca owns 47.62% of
the total outstanding voting interests of 1347 LLC.



In
connection with the Investment, Itasca entered into an amended and restated limited liability company agreement (the “Operating
Agreement”) by and among the existing members of 1347 LLC, which governs, among other things, the rights of the members
of 1347 LLC and the management and governance of 1347 LLC. The managers of 1347 LLC are Larry Swets and Kyle Cerminara, both directors
of the Company. A manager of 1347 LLC may be removed or replaced at any time, with or without cause, upon the approval of holders
of 2/3 of the outstanding interests in 1347 LLC.



Accounting



Itasca
owns 47.62% of the total outstanding voting interests of 1347 LLC. Since Itasca owns greater than 20% but less than 50% of the
outstanding voting interests of 1347 LLC, it exerts significant influence over 1347 LLC but does not control 1347 LLC. The Company
has also considered the provisions of IFRS 10 - Consolidated Financial Statements in order to assess whether control exists even
though it owns less than majority of 1347 LLC’s outstanding voting interests and has concluded that it does not exert control
over 1347 LLC. Under the provisions of IAS 28 – Investment in Associates and Joint Ventures (“IAS 28”), 1347
LLC is an associate of Itasca (thereby making 1347 LLC a related party to the Company). Itasca does not account for its Investment
in 1347 LLC on an equity accounting basis. Instead, the Investment is recorded by the Company at its fair value through profit
and loss under the provisions of IAS 28 pertaining to investments in associates held by or held through entities similar to venture
capital organizations, mutual fund or unit trusts.



The
fair value of the Investment is calculated based on an internally developed valuation model (“Model”) that takes the
net equity of 1347 LLC (based on fair valuing the Limbach securities held by 1347 LLC) and distributes that net equity to all
classes of membership interests based on the distribution waterfall in the Operating Agreement of 1347 LLC. In other words, this
fair value calculated by the Model represents the amount that Itasca and other investors of 1347 LLC would receive if 1347 LLC
were to settle all its assets (Limbach securities) and liabilities (external debt) at the given fair value and then distribute
the net proceeds to investors in accordance with its Operating Agreement. Management considers such distribution estimate at any
given point in time a proxy for the value at which unrelated and willing parties would trade such an investment, hence such distribution
estimate represents the fair value of the Investment in 1347 LLC.













ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016







|                                                                         |  | December
                                         31, 2017 |           
|------------------------------------------------------------------------ |  | ---------------------------------------------------------- | ----------
|Investment
    in Class A Interest of 1347 Investors LLC – at cost       |  | $                                                          | 12,233,302
|Unrealized
    gain                                                      |  |                                                            | 10,623,324
|Investment
    in Class A Interest of 1347 Investors LLC – at fair value |  | $                                                          | 22,856,626



Itasca
has not received any distributions from 1347 LLC during 2017.



Pursuant
to IFRS 12 – Disclosure of Interests in Other Entities, below is the summarized financial information of 1347 LLC as of
December 31, 2017 in US dollars:



|1347
    Investors LLC                                              |  | December 31, 2017 |           
|------------------------------------------------------------------- |  | ----------------- | ----------
|                                                                    |  |                   |           
|Total
    current assets                                            |  | USD
    $         | 45,123,213
|Total
    non-current assets                                        |  |                   | -         
|Total
    current liabilities                                       |  | USD
    $         | 189,530   
|Total
    non-current liabilities                                   |  | USD
    $         | 6,250,000 
|Total
    Shareholder equity                                        |  | USD
    $         | 38,683,683
|                                                                    |  |                   |           
|Total
    comprehensive income for the year ended December 31, 2017 |  | USD
    $         | 203,686   



The
current assets of 1347 LLC stated in the table above include value of securities of Limbach amounting to USD$43,389,158 and cash
amounting to $862,656. The Limbach securities held by 1347 LLC include 280,000 shares of Limbach 8% cumulative preferred stock
with USD$25 principal value per share, 2,343,515 common shares of Limbach, 198,000 USD$11.50 strike warrants of Limbach and 500,000
USD$15.00 strike warrants of Limbach. The non-current liabilities of 1347 LLC stated in table above represents USD$6,250,000 external
debt that incurs interest at the rate of 13% per annum. Subsequent to December 31, 2017, $6,250,000 external debt was repaid by
1347 LLC. Additional terms of Limbach securities and debt of 1347 LLC are available in the public filings made by Limbach and
1347 LLC.



|6. | SHAREHOLDERS’
                                         EQUITY
|-- | -------------------------------------------------------------



Share
capital



Authorized

-
Unlimited number of common voting shares with no par value.

-
100,000,000 preferred shares with no par value.



Issued
and outstanding



Changes
to common shares and share capital issued and outstanding are as follows:



|                                                                 |  | Number
                                         of
                                                                   Common
                                         Shares |             |   | Amount | 
|---------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | - | ------ | 
|                                                                 |  |                                                                                                                                                                              |             |   | $      | 
|Outstanding,
    December 31, 2015                               |  |                                                                                                                                                                              | 45,481,387  |   |        | 
|Options
    exercise                                             |  |                                                                                                                                                                              | 2,150,000   |   |        | 
|Repurchased
    and cancelled pursuant to substantial issuer bid |  |                                                                                                                                                                              | (25,820,761 | ) |        | 
|Outstanding,
    December 31, 2016 and 2017                      |  |                                                                                                                                                                              | 21,810,626  |   |        | 













ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





There
were no changes to issued and outstanding common shares of the Company during 2017.



Substantial
Issuer Bid



On
March 31, 2016, the Company announced it would pursue a SIB. On April 29, 2016, the Company filed an Offer to Purchase and Bid
Circular in connection with the SIB to purchase for cash and cancellation up to 40,809,178 common shares, which number represented
approximately 85% of the then issued and outstanding 45,481,387 common shares and 2,150,000 vested and in-the-money options to
acquire common shares at a price of $0.655 per share (the “Offer”). The Offer expired at 5:00 p.m. (Toronto time)
on June 6, 2016. Pursuant to the Offer, 25,820,761 common shares had been deposited as at the expiration of the Offer, which were
taken up by the Company for purchase and cancellation at a price of $0.655 per share for an aggregate consideration of $16,912,598.
The Company also incurred SIB related expenses amounting to $439,590. The shares purchased and cancelled pursuant to SIB represented
approximately 54.2% of the total issued and outstanding common shares as of June 6, 2016. As of December 31, 2017, 21,810,626
shares remain outstanding



During
2016 and prior to the expiry of SIB, 2,150,000 stock options were exercised for aggregate exercise price of $1,202,500.



Equity
reserves and share-based compensation



The
Company established a rolling stock option plan (the “Plan”) effective on June 2, 2003, which was amended June 20,
2012 to reflect the TSX Venture Exchange policies and practices. The maximum number of common shares which can be reserved for
issuance under the Plan is 10% of the prevailing issued and outstanding shares of the Company. Stock options granted under the
Plan are exercisable for a period no longer than ten years, although the vesting terms, if any and expiry period are at the discretion
of the Company’s Board of Directors.



Changes
to the stock options outstanding are as follows:



|                                                          |  | Number
                                         of Stock
                                         Options |            |   | Weighted
    Average Exercise Price | 
|--------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- | ---------- | - | ----------------------------------- | 
|                                                          |  |                                                                                                           |            |   | $                                   | 
|Outstanding,
    December 31, 2015                        |  |                                                                                                           | 2,185,000  |   |                                     | 
|Options
    exercised                                     |  |                                                                                                           | (2,150,000 | ) |                                     | 
|Options
    expired                                       |  |                                                                                                           | (35,000    | ) |                                     | 
|Outstanding,
    December 31, 2016                        |  |                                                                                                           | -          |   |                                     | 
|Options
    grant in lieu of cash payment of director fee |  |                                                                                                           | 480,000    |   |                                     | 
|Outstanding
    December 31, 2017                         |  |                                                                                                           | 480,000    |   |                                     | 



On
August 19, 2015, 750,000 stock options were granted to previous Directors and Officers with an exercise price of $0.55 for a period
of five years. These 750,000 options vested immediately. No options were issued during 2016. Of all the outstanding stock options
at December 31, 2015, all but 35,000 were exercised in second quarter 2016. The remaining 35,000 options expired on November 8,
2016.



During
2016 and prior to the expiry of SIB, 2,150,000 stock options were exercised for aggregate exercise price of $1,202,500.

















ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





On
September 7, 2017, the Board of Directors granted 80,000 options to each director, for a total of 480,000 options, under the Company’s
stock option plan for a term of 10 years with an exercise price of $1.00 per option. The stock options granted to directors are
in lieu of the directors’ cash fee that has been accrued and unpaid since the current directors were elected in June 2016
and vested immediately. The Company uses Black-Scholes model to calculate the estimated fair value of the options as of the grant
date. An aggregate value of $65,000 was estimated for the 480,000 options granted on September 7, 2017 using the following inputs:



|Option
    Valuation                                   |  |   |                                                  
|------------------------------------------------------ |  | - | -------------------------------------------------
|Expected
    life                                      |  |   | 10
                                         years
|Exercise
    price                                     |  | $ | 1.00                                             
|Volatility                                             |  |   | 20.5                                             
|Underlying
    price of common share on the grant date |  | $ | 0.68                                             
|Option
    price                                       |  | $ | 0.13                                             





Loss
per share



The
numerators and denominators of basic and diluted loss per share for the years ended December 31, 2017 and 2016 are as follows:



|                                                                                      |  | Year
    Ended       |            |   | Year
    Ended       | 
|------------------------------------------------------------------------------------- |  | -------------------- | ---------- | - | -------------------- | 
|                                                                                      |  | December
    31,2017 |            |   | December
    31,2016 | 
|                                                                                      |  | $                    |            |   | $                    | 
|(Loss)
    Income - numerator                                                         |  |                      | (992,731   | ) |                      | 
|Basic
    & diluted weighted average number of common share outstanding - denominator |  |                      | 21,810,626 |   |                      | 
|Basic
                                         and diluted (loss) income per share    |  |                      | (0.05      | ) |                      | 



In
the periods when net losses are incurred, no impact of dilutive securities is included in the calculation of diluted weighted
average number of common shares outstanding.



|7. | RELATED
                                         PARTY TRANSACTIONS
|-- | -------------------------------------------------------------------



The
Company was party to a corporate service agreement with Earlston Management Corp. (“Earlston”), a company related
by virtue of providing key management services to the Company. Earlston agreement was discontinued in June 2016. Per the Earlston
agreement, the Company was paying a fee of $10,000 per month and reimbursing Earlston for expenses incurred in the performance
of its services. For the year ended December 31, 2017, the Company incurred no such costs compared to $68,807 incurred for the
same period in 2016.



Key
management compensation



Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director
members.



The
Company incurred the following remuneration for key management personnel:



|                                                     |  | Year
    Ended        |        |  | Year
    Ended        | 
|---------------------------------------------------- |  | --------------------- | ------ |  | --------------------- | 
|                                                     |  | December
    31, 2017 |        |  | December
    31, 2016 | 
|                                                     |  | $                     |        |  | $                     | 
|Consulting
    fee to former Chief Executive Officer |  |                       | -      |  |                       | 
|Fees
    paid to former Directors                    |  |                       | -      |  |                       | 
|Fees
    incurred for current Directors              |  |                       | 60,000 |  |                       | 











ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016







On
September 7, 2017, the Board of Directors granted 80,000 options to each director, for a total of 480,000 options, under the Company’s
stock option plan for a term of 10 years with an exercise price of $1.00 per option. The stock options granted to directors are
in lieu of the directors’ cash fee that had been accrued and unpaid since the current directors were elected in June 2016.
The Company uses Black-Scholes model to calculate the estimated fair value of the options as of the grant date. An aggregate value
of $65,000 was estimated for the 480,000 options granted on September 7, 2017. The issuance of options in lieu of cash payment
of Board fee was done to preserve the Company’s liquidity.



Management
Services Agreement



The
Company entered into an MSA with KFS on June 10, 2016. Pursuant to the MSA, KFS will provide, for an annual service fee of $1.00,
management and administrative services to Itasca, including services of Chief Executive Officer, Chief Financial Officer and Corporate
Secretary and is entitled to expense reimbursement of up to $40,000 per annum for use of KFS’s other staff and resources.
KFS is a related entity by virtue of providing key management personnel services to Itasca as well as a significant shareholder
of Itasca whereby Itasca is an associate of KFS.



In
June 2016, the Company reimbursed to KFS $800,000 of expenses incurred by KFS pertaining to costs and expenses incurred by KFS
in connection with the proxy contest that led to the change in composition of the Board of Directors at the Meeting.



| | 8. | CAPITAL
                                         RISK MANAGEMENT
| | -- | ----------------------------------------------------------------



The
Company defines capital as the items included in shareholders’ equity. The Company’s objectives in managing capital
are to safeguard its ability to continue as a going concern and to provide returns for shareholders and benefits for other stakeholders.
To meet these objectives, the Company will ensure it has sufficient cash resources and financial flexibility to pursue future
investments or fund potential business acquisitions.



To
support these objectives, the Company manages its capital structure and makes any necessary adjustments to it in light of changes
in economic conditions and risk characteristics of underlying assets. To maintain or adjust its capital structure, the Company
may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents.
The Company does not currently pay dividend.



The
Company is not subject to any externally imposed capital requirements.



| | 9. | FINANCIAL
                                         INSTRUMENTS AND RISK MANAGEMENT
| | -- | ----------------------------------------------------------------------------------



As
of December 31, 2017, the Company held investment in an associate amounting to $22,856,626 and cash in the amount of $87,800.
For a detailed discussion regarding Investment in 1347 LLC, see Note 5 – Investment in Associate. In addition to the Investment
in 1347 LLC and cash stated above, the financial instruments of the Company comprise of accounts payable & accrued liabilities
in the amount of $127,395 as of December 31, 2017. With the exception of the Investment, all financial instruments are measured
at amortized cost. The fair values of these financial instruments approximate their carrying value due to their short-term maturities.



The
levels of the fair value hierarchy are as follows:





| | Level
    1 – | Unadjusted
    quoted prices in active markets for identical assets or liabilities;                                                                                  
| | ------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level
    2 – | Inputs
    other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e.
    derived from prices); and
| | Level
    3 – | Inputs
    that are not based on observable market data (unobservable inputs).                                                                                       























ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





Financial
instruments measured at fair value on the balance sheet as of December 31, 2017 are summarized in levels of fair value hierarchy
as follows:



|                                            |  | Level
    1 |   |  | Level
    2 |  |            | Level
    3 | 
|------------------------------------------- |  | ----------- | - |  | ----------- |  | ---------- | ----------- | 
|                                            |  | $           |   |  | $           |  |            | $           | 
|Investment
    in associate – at fair value |  |             | - |  |             |  | 22,856,626 |             | 





Financial
instruments measured at fair value on the balance sheet as of December 31, 2016 are summarized in levels of fair value hierarchy
as follows:



|                                            |  | Level
    1 |   |  | Level
    2 |   |            | Level
    3 | 
|------------------------------------------- |  | ----------- | - |  | ----------- | - | ---------- | ----------- | 
|                                            |  | $           |   |  | $           |   |            | $           | 
|Investment
    in associate – at fair value |  |             | - |  |             | $ | 23,528,266 |             | 



Credit
risk



Credit
risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
The Company’s maximum exposure to credit risk is attributed to the following:



|                                            |  | December
    31, 2017 |        |  | December
    31, 2016 | 
|------------------------------------------- |  | --------------------- | ------ |  | --------------------- | 
|                                            |  | $                     |        |  | $                     | 
|Cash                                        |  |                       | 87,800 |  |                       | 
|Amounts
    receivable and prepaid expenses |  |                       | 6,575  |  |                       | 
|Total                                       |  |                       | 94,375 |  |                       | 



Liquidity
risk



Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. As of December 31, 2017,
and considering the cash distribution received from 1347 LLC in February 2018 (see Note 12 – Subsequent Events), the Company’s
liquidity resources are sufficient to meet its financial obligations and current operating requirements for the next 12 months.



Interest
rate risk



Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. As of December 31, 2017, the Company does not hold any financial instruments that have material exposure
to interest rate risk.



Concentration
risk



As
of December 31, 2017, the Company’s Investment in associate amounted to $22,856,626, which represents 99.59% of the Company’s
total assets and 100.14% of the Company’s total shareholders’ equity. Given this concentration, Itasca’s results
are directly correlated with the performance of the Investment in 1347 LLC. 1347 LLC holds securities of Limbach, hence the performance
of Limbach impacts value of the Investment. Limbach is a publicly traded entity and details regarding its business and risk factors
are available in its public filings.













ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016







Currency
risk



The
Investment in 1347 LLC is denominated in U.S. dollars while the Company reports its financial results in its functional currency
Canadian dollars. There is currently no currency hedge in place. Given the concentration described above, the Company has exposure
to foreign exchange translation gains and losses. For the year ended December 31, 2017, the Company incurred $1,283,572 in net
foreign exchange translation loss. A 1% change in the U.S. dollar foreign exchange rate would result in a change of $228,566 in
carrying value of the Investment.





|10. | SEGMENTED
    INFORMATION
|--- | -------------------------









The
Company has one reportable operating segment, being the direct or indirect investment in the natural resource and industrial sectors.





|11. | INCOME
    TAXES
|--- | ----------------







The
difference between tax expense or recovery for the year and the expected income taxes based on the statutory tax rate arises as
follows:



|                                                                          |  | 2017 |           |   | 2016 |  
|------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | -
|                                                                          |  | $    |           |   | $    |  
|Profit/(loss)
    before income taxes                                     |  |      | (992,731  | ) |      |  
|                                                                          |  |      |           |   |      |  
|Tax
    (recovery)/incurred based on statutory rate of 26% (PY: 26%)      |  |      | (258,110  | ) |      |  
|                                                                          |  |      |           |   |      |  
|Impacts
    of the change in deferred tax rate from 26% to 27%            |  |      | (254,161  | ) |      |  
|Non-deductible
    expenses                                               |  |      | -         |   |      |  
|Non-deductible
    / (non-taxable) portion of capital gain / capital loss |  |      | 37,715    |   |      |  
|Over/under
    provision in previous years                                |  |      | (882,267  | ) |      |  
|Change
    in unrecognized deferred tax assets                            |  |      | 1,356,823 |   |      |  
|Deferred
    income tax expenses / (recovery)                             |  | $    | -         |   |      | $



Deferred
Tax Assets and Liabilities



The
significant components of Company’s net deferred tax assets and liabilities as of December 31 are as follows:



|                                                     |  | 2017 |            |   | 2016 | 
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | 
|                                                     |  | $    |            |   | $    | 
|Non-capital
    losses                               |  |      | 5,754,168  |   |      | 
|Capital
    losses                                   |  |      | 2,050,048  |   |      | 
|Resource
    pool                                    |  |      | 1,457,166  |   |      | 
|Capital
    assets                                   |  |      | 208,052    |   |      | 
|SIB
    costs                                        |  |      | 71,214     |   |      | 
|Other                                                |  |      | -          |   |      | 
|Deferred
    tax assets                              |  |      | 9,540,648  |   |      | 
|Deferred
    tax liability - investment in associate |  |      | (1,339,149 | ) |      | 
|Unrecognized
    net deferred tax assets             |  |      | (8,201,499 | ) |      | 
|Net
    deferred tax assets                          |  |      | -          |   |      | 













ITASCA
CAPITAL LTD.



Notes
to the Consolidated Financial Statements

Expressed
in Canadian dollars

For
the years ended December 31, 2017 and 2016





The
Company has the following expiry dates for its non-capital Canadian tax losses:



|Year
    of Expiry |  | Taxable
    Losses |           
|------------------ |  | ------------------ | ----------
|                   |  | $                  |           
|2028               |  |                    | 7,795,633 
|2029               |  |                    | 3,169,594 
|2030               |  |                    | 1,473,319 
|2031               |  |                    | 1,861,875 
|2032               |  |                    | 1,461,987 
|2033               |  |                    | 1,736,113 
|2034               |  |                    | 329,564   
|2035               |  |                    | 1,698,805 
|2036               |  |                    | 1,375,834 
|2037               |  |                    | 409,010   
|                   |  |                    | 21,311,734





|12. | SUBSEQUENT
    EVENTS
|--- | ---------------------









On
February 16, 2018, the Company received a distribution of USD$4,000,000 from 1347 LLC as a partial return of capital distribution
per the terms of the Investment.