A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



CONSOLIDATED
FINANCIAL STATEMENTS

AS
OF DECEMBER 31, 2021













A2Z
SMART TECHNOLOGIES CORP.



(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



CONSOLIDATED
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021



TABLE
OF CONTENTS



|                                                                         |  | Page
|------------------------------------------------------------------------ |  | ----
|                                                                         |  |     
|Independent
    Auditors’ Report                                         |  | 1-3 
|                                                                         |  |     
|Consolidated
    Statements of Financial Position                        |  | 4   
|Consolidated
    Statements of Comprehensive Loss                        |  | 5   
|Consolidated
    Statements of Changes in Shareholders’ Equity (Deficit) |  | 6-7 
|Consolidated
    Statements of Cash Flows                                |  | 8   
|Notes
    to Consolidated Financial Statements                           |  | 9-45











INDEPENDENT
AUDITORS’ REPORT

TO
THE SHAREHOLDERS OF

A2Z
SMART TECHNOLOGIES CORP.



(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



We
have audited the consolidated financial statements of A2Z Smart Technologies Corp. (Formerly A2Z TECHNOLOGIES CANADA CORP.) (the “Corporation”),
which comprise the consolidated statement of financial position as at December 31, 2021 and December 31, 2020 and the consolidated statements
of comprehensive income, (loss) changes in shareholders’ equity (deficit) and cash flows for the years then ended, and notes to
the consolidated financial statements, including a summary of significant accounting policies.



In
our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Corporation as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB).



Basis
for Opinion



We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We are independent of the Corporation in accordance with the ethical requirements relevant to the audit of the financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.



Key Audit Matters



Key audit matters are those
matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year
ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. We determined that there are no key audit matters.



Other
Information



Management
is responsible for the other information. The other information comprises:



| | ● | The
    information, other than the consolidated financial statements and our auditor’s report thereon, included in the Management’s
    Discussion and Analysis.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



Our
opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.



In
connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.



We
obtained the Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are required to
report that fact in this auditor’s report. We have nothing to report in this regard.



1







Responsibilities
of Management and Those Charged with Governance for the Consolidated Financial Statements



Management
is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.



In
preparing the consolidated financial statements, management is responsible for assessing the Corporation’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so.



Those
charged with governance are responsible for overseeing the Corporation’s financial reporting process.



Auditor’s
responsibilities for the Audit of the Consolidated Financial Statements



Our
objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.



As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:



| | ● | Identify
    and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
    perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
    for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
    as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Obtain
    an understanding of internal control relevant to the audit 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 Corporation’s internal control.                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Evaluate
    the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.                                                                                                                                                                                                                                                                                                                                                                                                     



2







| | ● | Conclude
    on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
    whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s
    ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
    auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
    to modify our opinion. Our conclusions are based on the audit evidence obtained up to the Date of our auditor’s report. However,
    future events or conditions may cause the Corporation’s to cease to continue as a going concern.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | ● | Evaluate
    the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
    the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                           
| | ● | Obtain
    sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Corporation
    to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
    of the Corporation audit. We remain solely responsible for our audit opinion.



We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.

We
also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.



From the matters communicated
with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matters or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is
Tomer Fromovich.





|Tel-Aviv,
    Israel | “Ziv
    Haft”                         
|-------------------- | ---------------------------------------
|                     |                                        
|March
    31, 2022   | Certified
    Public Accountants (Isr.)
|                     |                                        
|                     | BDO
    Member Firm                    



3







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)

CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION



(In
Thousands of US Dollars, except per share data)



|                                                           |  | December
    31 2021 |         |   | December
    31 2020 |  
|---------------------------------------------------------- |  | -------------------- | ------- | - | -------------------- | -
|ASSETS                                                     |  |                      |         |   |                      |  
|Current
    assets                                         |  |                      |         |   |                      |  
|Cash
    and cash equivalents                              |  | $                    | 8,470   |   |                      | $
|Restricted
    cash                                        |  |                      | 60      |   |                      |  
|Inventories
    (note 5)                                   |  |                      | 1,147   |   |                      |  
|Trade
    receivables                                      |  |                      | 857     |   |                      |  
|Other
    accounts receivable (note 7)                     |  |                      | 434     |   |                      |  
|Total
    current assets                                   |  |                      | 10,968  |   |                      |  
|Intangible
    asset - patent, net                         |  |                      | 2,091   |   |                      |  
|Property,
    plant and equipment, net (note 8)            |  |                      | 1,072   |   |                      |  
|Total
    non-current assets                               |  |                      | 3,163   |   |                      |  
|                                                           |  |                      |         |   |                      |  
|Total
    Assets                                           |  | $                    | 14,131  |   |                      | $
|                                                           |  |                      |         |   |                      |  
|LIABILITIES
    AND SHAREHOLDERS’ EQUITY                   |  |                      |         |   |                      |  
|Current
    liabilities                                    |  |                      |         |   |                      |  
|Short
    term loan and current portion of long term loans |  | $                    | 158     |   |                      | $
|Lease
    liability                                        |  |                      | 126     |   |                      |  
|Trade
    payables                                         |  |                      | 989     |   |                      |  
|Other
    accounts payable (note 9)                        |  |                      | 1,099   |   |                      |  
|Total
    current liabilities                              |  |                      | 2,372   |   |                      |  
|Lease
    liability                                        |  |                      | 151     |   |                      |  
|Long
    term loans (note 10)                              |  |                      | 483     |   |                      |  
|Warrant
    Liability (note 12)                            |  |                      | 51      |   |                      |  
|Severance
    payment, net (note 13)                       |  |                      | 167     |   |                      |  
|Total
    non-current liabilities                          |  |                      | 852     |   |                      |  
|Total
    liabilities                                      |  |                      | 3,224   |   |                      |  
|Shareholders’
    equity (deficit) (note 14)               |  |                      |         |   |                      |  
|Share
    capital and additional paid in capital           |  |                      | 28,297  |   |                      |  
|Warrant
    Reserve                                        |  |                      | 34,763  |   |                      |  
|Accumulated
    other comprehensive income                 |  |                      | (708    | ) |                      |  
|Accumulated
    deficit                                    |  |                      | (50,838 | ) |                      |  
|                                                           |  |                      | 11,514  |   |                      |  
|Non-controlling
    interest (note 16)                     |  |                      | (607    | ) |                      |  
|Total
    shareholders’ equity (deficit)                   |  |                      | 10,907  |   |                      |  
|Total
    liabilities and shareholders’ equity             |  | $                    | 14,131  |   |                      | $







The
accompanying notes are an integral part of the financial statements.



4







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)

CONSOLIDATED
STATEMENT OF COMPREHENSIVE LOSS



(Expressed
in Thousands of US Dollars, except per share data)



|                                                                                    |  | Year
    Ended December 31, |            |   | Year
    Ended December 31, |  
|----------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | --------------------------- | -
|                                                                                    |  | 2021                        |            |   | 2020                        |  
|                                                                                    |  |                             |            |   |                             |  
|Revenues(note 17)                                                                   |  | $                           | 2,685      |   |                             | $
|Cost
    of revenues (note 18)                                                      |  |                             | 2,029      |   |                             |  
|Gross
    profit                                                                    |  |                             | 656        |   |                             |  
|                                                                                    |  |                             |            |   |                             |  
|Expenses:                                                                           |  |                             |            |   |                             |  
|Research
    and development costs (note 19)                                        |  |                             | 3,222      |   |                             |  
|Sales
    and marketing costs                                                       |  |                             | 102        |   |                             |  
|General
    and administration expenses (note 20)                                   |  |                             | 6,494      |   |                             |  
|Operating
    loss                                                                  |  |                             | (9,162     | ) |                             |  
|                                                                                    |  |                             |            |   |                             |  
|Loss
    (gain) on revaluation of warrant liability (note 12)                       |  |                             | 30,895     |   |                             |  
|Financial
    income                                                                |  |                             | -          |   |                             |  
|Financial
    expense                                                               |  |                             | 91         |   |                             |  
|Loss
    before taxes on income                                                     |  |                             | (40,148    | ) |                             |  
|Income
    tax expense (note 22)                                                    |  |                             | (142       | ) |                             |  
|Loss
    for the year                                                               |  |                             | (40,290    | ) |                             |  
|                                                                                    |  |                             |            |   |                             |  
|Other
    comprehensive income                                                      |  |                             |            |   |                             |  
|Item
    that will not be reclassified to profit or loss:                           |  |                             |            |   |                             |  
|Adjustments
    arising from translating financial statements of foreign operations |  |                             | 555        |   |                             |  
|Remeasurement
    loss from defined benefit plans                                   |  |                             | -          |   |                             |  
|Other
    comprehensive income                                                      |  |                             | 555        |   |                             |  
|                                                                                    |  |                             |            |   |                             |  
|Total
    comprehensive loss for the year                                           |  | $                           | (39,735    | ) |                             | $
|                                                                                    |  |                             |            |   |                             |  
|Less:
    Net loss attributable to non-controlling shareholders                     |  |                             | (1,127     | ) |                             |  
|Net
    loss attributable to A2Z’s shareholders                                     |  | $                           | (38,608    | ) |                             | $
|Basic
    and diluted loss per share                                                |  | $                           | (1.70      | ) |                             | $
|Weighted
    average number of shares outstanding                                   |  |                             | 23,340,621 |   |                             |  



The
accompanying notes are an integral part of the financial statements.



5







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)

STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)



(Expressed
in Thousands of US Dollars, except per share data)







(*)
On August 13, 2021, the Board and the TSX-V approved a 1-for-3 reverse stock split, (the “Reverse Split”). Consequently,
all share numbers, share prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for
all periods presented.



The
accompanying notes are an integral part of the financial statements.



6







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)

STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)



(Expressed
in Thousands of US Dollars, except per share data)





(*)
On August 13, 2021, the Board and the TSX-V approved a 1-for-3 reverse stock split, (the “Reverse Split”). Consequently,
all share numbers, share prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for
all periods presented.



The
accompanying notes are an integral part of the financial statements.



7







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)

CONSOLIDATED
STATEMENT OF CASH FLOWS



(Expressed
in Thousands of US Dollars, except per share data)







The
accompanying notes are an integral part of the financial statements.



8







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
1 - DESCRIPTION OF BUSINESS:



A.
Overview



A2Z
SMART TECHNOLOGIES CORP. (Formerly A2Z Technologies Canada Corp.) (the “Company” or “A2ZST”) was incorporated
on January 15, 2018 under the laws of British Columbia. The head office is located at 1600 – 609 Granville Street, Vancouver, British
Columbia V7Y 1C3, and the records and registered office is located at 2200 HSBC Building 885 West Georgia Street, British Columbia, V6C
3E8.



The
Company was listed on the NASDAQ Stock Market LLC (“Nasdaq”) starting January 22, 2022, and trades under the symbol “AZ”
and on the TSX Venture Exchange (“TSX Venture”) and trades under the symbol “AZ.V”.



The
Company owns 79.49% of the common shares of Cust2Mate Ltd (“Cust2Mate”), a technology company focused on providing retail
automation solutions, in particular for large grocery stores and supermarkets. The Company’s primary product is the Cust2Mate system
which incorporates a “smart cart” which automatically calculates the value of the customers purchases in their smart cart,
without having to unload and reload their purchases at a customer checkout point.



The
Cust2Mate system offers unique features for shoppers and retailers such as product information and location, an on-cart scale to weigh
items and automatically calculate costs, bar-code scanner and on-board payment system to bypass checkout lines. In addition, the product
includes big data smart algorithms and computer vision capabilities, allowing for customer specific targeted advertising. (“The
Cust2Mate Platform”).



The
Cust2Mate Platform is being rolled out in Israel and is being marketed throughout the world, with pilots in North and South America and
the in the Middle East.



The
Company’s other activities include the provision of services in the field of advanced engineering capabilities to the military
and security markets as well as the development of related products for the civilian markets. Such services include providing maintenance
services and container leasing. The Company also provides maintenance services for complex electronic systems and products.



The
Company, through its 80% owned subsidiary, Advanced Automotive Innovations Inc., (“AAI”) continues the development of a product
for the automotive market - the FTICS or Fuel Tank Inertia Capsule System which activates automatically in the event of a vehicle collision.
This eliminates the danger of fuel tank combustion thereby saving lives and reducing damage.





These
consolidated financial statements were authorized for issue by the Board of Directors on March 31, 2022.



B.
COVID-19



Since
January 2020, the Coronavirus outbreak has dramatically expanded into a worldwide pandemic creating macro-economic uncertainty and disruption
in the business and financial markets. Many countries around the world, including Israel, have been taking measures designated to limit
the continued spread of the Coronavirus, including the closure of workplaces, restricting travel, prohibiting assembling, closing international
borders and quarantining populated areas. Such measures present concerns that may dramatically affect the Company’s ability to
conduct its business effectively, including, but not limited to, adverse effects relating to employees’ welfare, slowdown and stoppage
of manufacturing, commerce, shipping, delivery, work, travel and other activities which are essential and critical for maintaining on-going
business activities.



The
nature of the Company’s work in Israel is such that it is defined as an essential service for the industry, and therefore, it is
able to continue all of its operations in Israel with little disruption. The Company has experienced an impact on all of its business
activities, including delays in the roll out and completion of certain pilot programs and the slowed pace in research and development
projects. Given the uncertainty around the extent and timing of the future spread or mitigation of COVID-19 and around the imposition
or relaxation of protective measures, the Company cannot reasonably estimate the impact to its future results of operations, cash flows
or financial condition; infections may become more widespread and the limitation on the ability to work, travel and timely sell and distribute
products, as well as any closures or supply disruptions, may be extended for longer periods of time and to other locations, all of which
would have a negative impact on the Company’s business, financial condition and operating results. In addition, the unknown scale
and duration of these developments have macro and micro negative effects on the financial markets and global economy which could result
in an economic downturn that could affect demand for the Company’s products and have a material adverse effect on its operations
and financial results, earnings, cash flow and financial condition.





9









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES:



A.
Cash and cash equivalents



Cash
equivalents are considered by the Company to be highly liquid investments, including, inter alia, short-term deposits with banks, the
maturity of which do not exceed three months at the time of deposit and which are not restricted.



B.
Restricted cash



A
restricted deposit is cash invested in a short-term deposit (between three months and one year) or in a long-term deposit (with a maturity
of more than one year from the date of investment). Restricted deposits are designated to secure the Company’s office facilities
lease agreements and its credit cards.



C.
Loss per share



Basic
loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding
during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average number
of shares outstanding is increased to include additional shares from the assumed exercise of stock options and warrants, if dilutive.
The average number of shares is calculated by assuming that outstanding conversions were exercised and that the proceeds from such exercises
were used to acquire common shares at the average market price during the reporting period. For the years ended December 31, 2021, and
2020, potentially dilutive common shares issuable upon the exercise of warrants and options were not included in the computation of loss
per share because their effect was anti-dilutive.



D.
Provisions



Provisions
are recognized when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of
the amounts required to settle the obligation at the end of the reporting period.



E.
Fair value measurement



Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date.



The
fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:



| | 1. | In
    the principal market for the asset or liability, or                                           
| | -- | -----------------------------------------------------------------------------------------------------
| |    |                                                                                                      
| | 2. | In
    the absence of a principal market, in the most advantageous market for the asset or liability.



The
principal or the most advantageous market must be accessible to the Company.



The
fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.







10









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



E. Fair value measurement (cont.)



A
fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.





Classification
of fair value hierarchy



The
financial instruments presented in the statement of financial position at fair value are grouped into classes with similar characteristics
using the following fair value hierarchy which is determined based on the source of input used in measuring fair value:



|Level
    1 | - | Quoted
    prices (unadjusted) in active markets for identical assets or liabilities.                                                        
|----------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                              
|Level
    2 | - | Inputs
    other than quoted prices included within Level 1 that are observable either directly or indirectly.                               
|            |   |                                                                                                                                              
|Level
    3 | - | Inputs
    that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).



| | 1. | Financial
                                            assets
| | -- | ------------------------------------------------------------



The
Company classifies its financial assets into one of the following categories, based on the business model for managing the financial
asset and its contractual cash flow characteristics. The Company’s accounting policy for the relevant category is as follows:



Amortized
cost: These assets arise principally from the provision of goods and services to customers (e.g. trade accounts receivable), but also
incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and interest. They are initially recognized at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective
interest rate method, less provision for impairment. Impairment provisions for trade accounts receivable are recognized based on the
simplified approach within IFRS 9 using a provision in the determination of the lifetime expected credit losses. During this process
the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are
reported net, such provisions are recorded in a separate provision account with the loss being recognized within general and administrative
expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated provision.



11









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



E.Fair value measurement (cont.):



| | 2. | Financial
                                            Liabilities
| | -- | -----------------------------------------------------------------



The
Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
The Company’s accounting policy for each category is as follows:



Fair
value through profit or loss: Warrants are initially recognized at fair value net of any transaction costs directly attributable to the
issue of the instrument. Such liabilities are subsequently measured at fair value through profit or loss.



Other
financial liabilities include the following items: Bank borrowings are initially recognized at fair value net of any transaction costs
directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortized cost using
the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the
balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest
expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the
liability is outstanding. Trade accounts payable and other accounts payable, which are initially recognized at fair value and subsequently
carried at amortized cost using the effective interest method.



| | 3. | Issue
                                            of a unit of securities:
| | -- | --------------------------------------------------------------------------



The
issue of a unit of securities involves the allocation of the proceeds received (before issue expenses) to the securities issued in the
unit based on the following order: financial derivatives and other financial instruments measured at fair value in each period. Then
fair value is determined for financial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments
are determined to be the residual amount. Issue costs are allocated to each component pro rata to the amounts determined for each component
in the unit.



| | 4. | Derivative
                                            liability - Warrants:
| | -- | ----------------------------------------------------------------------------



Warrants
that are denominated in a currency other than the functional currency of the Company are considered a derivative liability and are classified
as financial liabilities at fair value through profit or loss. Accordingly, these warrants are measured at fair value and the changes
in fair value in each reporting period are recognized in profit or loss.



| | 5. | Derecognition
| | -- | -------------



| | ● | Financial
    assets - The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire
    or it transfers the rights to receive the contractual cash flows.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                      
| | ● | Financial
    Liabilities - The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.                                                                  



12









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



E.Fair value measurement (cont.):



| | 6. | Impairment
                                            of financial assets
| | -- | --------------------------------------------------------------------------



ECL
and their measurement



ECL
are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset.
For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability
of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information,
not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation
factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index)
and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario
analysis (base case, adverse and optimistic scenarios).



As
of December 31, 2021, and December 31, 2020, ECL for trade and other account receivables are not material, and as such are not disclosed,
in accordance IFRS 9.



Definition
of default, including reasons for selecting the definition



Prior
to commencing a business relationship, the Company will enter into an agreement with the customer. The agreement or contract typically
includes details of the terms of payment to which the customer is entitled. In most cases, the customer updates the Company if there
is a delay in the payment beyond the terms of the agreement. Any delays in payment for more than two months are subject to approval of
management. If a customer’s scheduled payment is delayed by more than two months and such delay is not approved by the Company’s
management, the CEO will typically make direct contact with the customer’s management and inform them of the overdue obligation
and that Company will pursue remedies available to collect the overdue payment. If the customer and the Company are not able to resolve
the matter at that time, the receivable is considered to be in default as the collectability is no longer certain. If the collection
effort is not successful, the Company will retain legal counsel in the applicable country to assist with collection and sends a demand
letter to that effect.



Write-off
policy



The
Company writes off its financial assets if any of the following occur:



| | ● | Inability
    to locate the debtor.                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------
| | ● | Discharge
    of the debt in a bankruptcy.                                                                          
| | ● | It
    is determined that the efforts to collect the debt are no longer cost effective given the size of receivable.



The
collections department must comply with the collection efforts outlined in the policy to collect on delinquent customer accounts before
any write-offs are made.



13









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



E.Fair value measurement (cont.):



Aging
Schedule based on due date



|                         |  | Aging
    schedule    |    
|------------------------ |  | --------------------- | ---
|                         |  | December
    31, 2020 |    
|                         |  |                       |    
|Within
    payment terms |  | $                     | 196
|                         |  |                       |    
|Total                    |  | $                     | 196



Three-level
matrix



Based
on its past experience and historical data along with a consideration of future projections of factors, such as the economic environment,
the Company has established a three-level matrix. The three-level matrix contains the following groups and balances:



|                                         |  | December
    31, 2020 |     |  | December
    31, 2021 |  
|---------------------------------------- |  | --------------------- | --- |  | --------------------- | -
|                                         |  |                       |     |  |                       |  
|Customers
    from public establishments |  | $                     | 173 |  |                       | $
|Customers
    from institutions          |  |                       | 15  |  |                       |  
|Other
    customers                      |  |                       | 8   |  |                       |  
|                                         |  |                       |     |  |                       |  
|Total                                    |  | $                     | 196 |  |                       | $



14









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



F.Operating Segment:



An
operating segment is a component of the Company that meets the following three criteria:



| | 1. | Is
    engaged in business activities from which it may earn revenues and incur expenses;                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Whose
    operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about allocated
    resources to the segment and assess its performance; and
| | 3. | For
    which separate financial information is available.                                                                                                                                       



Segment
revenue and segment costs include items that are attributable to the relevant segments and items that can be allocated to segments. Items
that cannot be allocated to segments include the Company’s financial income and expenses and income tax. The Company has two operating
segments; Advanced Engineering and Smart Carts.



G.Share-based compensation:



Where
equity settled share options are awarded to employees and service providers, the fair value of the options calculated at the grant date
is based on the market share price and is charged to the statement of comprehensive income over the vesting period. Non-market vesting
conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately,
the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Market vesting conditions
are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative expense charged is not adjusted for failure to achieve a market
vesting condition.



H.Deferred taxes



Deferred
taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements
and the amounts attributable for tax purposes. Significant judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the estimated timing and level of future taxable profits together with future tax planning strategies.



Deferred
taxes are measured at the tax rates that are expected to apply in the period when the temporary differences are reversed based on tax
laws that have been enacted or substantively enacted at the end of the reporting period. Deferred taxes are recognized in Profit or loss,
except when they relate to items recognized in other comprehensive income or directly in equity. Deferred tax assets are reviewed at
the end of each reporting period and reduced to the extent that it is not probable that they will be utilized. In addition, temporary
differences (such as carry forward losses) for which deferred tax assets have not been recognized or reassessed are recognized to the
extent that their recoverability is probable. Any resulting reduction or reversal is recognized as “income tax” within the
statement of comprehensive income. All deferred tax assets and liabilities are presented in the statement of financial position as non-current
items, respectively.



Deferred
taxes are offset in the statement of financial position if there is a legally enforceable right to offset a current tax asset against
a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.



The
current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date
as well as adjustments required in connection with the tax liability in respect of previous years.



Deferred
tax assets in respect to carryforward losses have not been recognized in respect of these items because it is not probable that future
taxable profit will be available against which the group can utilize the benefits therefrom.



15









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



I.Defined benefit schemes



The
Company contributes towards the state pension in accordance with local legislation where required. The only obligation of the Company
is to make the required contributions. Costs related to such contributions are expensed in the period in which they are incurred.



The
Company has several employee benefits plans as to its employees:



|1. | Short-term
    employee benefits: Short-term employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security
    contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing
    plan is recognized when the Company has a legal or constructive obligation to make such payment as a result of past service rendered
    by an employee and a reliable estimate of the amount can be made.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | Post-employment
    benefits: The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or
    as defined benefit plans.                                                                                                                                                                                                                                                                                                                         



This
liability is calculated based on actuary measurement.



Contributions
to the defined contribution plan in respect of severance or retirement pay are recognized as an expense simultaneously with receiving
the employee’s services and no additional provision is required in the financial statements except for the unpaid contribution.
The Company also operates for some employees an immaterial defined benefit plan in respect of severance pay pursuant to the Severance
Pay Law. The Company presents the accrued severance pay liability net from severance pay fund.



J.Property, plant and equipment



Items
of property, plant and equipment are initially recognized at cost. Cost includes directly attributable costs and the estimated present
value of any future costs of dismantling and removing items. Depreciation is computed by the straight-line method, based on the estimated
useful lives of the assets, as follows:



|                                       |  | Estimated
    useful lives |     
|-------------------------------------- |  | -------------------------- | ----
|                                       |  |                            |     
|Computers
    and electronic equipment |  |                            | 3   
|Furniture
    and equipment            |  |                            | 7   
|Vehicles                               |  |                            | 6.67
|Leasehold
    Improvement              |  |                            | 10  



16









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



J.Revenue recognition



Revenue is recognized based on the five-step model outlined in IFRS
15, Revenue from Contracts with Customers. IFRS
15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance with the said core
principle by implementing a five-step model framework:



| | 1. | Identify
    the contracts with a customer.                                       
| | -- | ----------------------------------------------------------------------------------
| |    |                                                                                   
| | 2. | Identify
    the performance obligations in the contract.                         
| |    |                                                                                   
| | 3. | Determine
    the transaction price.                                              
| |    |                                                                                   
| | 4. | Allocate
    the transaction price to the performance obligations in the contract.
| |    |                                                                                   
| | 5. | Recognize
    revenue when the entity satisfies a performance obligation.         





| | A. | Revenue
    from services is derived from contracts with customers pursuant to which the Company provides maintenance for various electronic
    systems. Revenues on these contracts are recognized using the straight-line method, based on the period of time passed.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | B. | Revenue
    from providing maintenance services to refrigeration systems is derived from on demand fixed-price contracts with customers. Revenues
    on these on demand fixed-price contracts are recognized at the point in time when the services were delivered.    
| | C. | Revenues
    from leasing soaking containers is recognized on a straight-line basis over the annual leasing period (limited to 1 year).                                                                                                                                 
| | D. | Revenues
    from the Cust2mate Platform are recognized at the time the service is transferred to the customer and measures the revenue in
    an amount that represents the consideration that the Company expects to be entitled to for the same goods or service.    



K.Share based payment transactions



The
Company’s employees and other service providers are entitled to remuneration in the form of equity-settled share-based payment.



The
cost of equity-settled transactions is recognized in profit or loss together with a corresponding increase in equity during the period
which the performance and/or service conditions are to be satisfied ending on the date on which the relevant employees become entitled
to the award (“the vesting period”). The cumulative expense recognized for equity-settled transactions at the end of each
reporting date includes the Group’s best estimate of the number of equity instruments that will ultimately vest.



The
cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The
fair value of option granted is determined using the Binomial Lattice option-pricing model (“Binomial model”). The Binomial
model takes into account variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of
dynamic assumptions and considers the contractual term of the option, the probability that the option will be exercised prior to the
end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option.



No
expense is recognized for awards that do not ultimately vest.



L.Research and development expenses



Research
expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from the development
phase of an internal project is recognized if the Company can demonstrate all of the following: the technical feasibility of completing
the intangible asset so that it will be available for use or sale; the Company’s intention to complete the intangible asset and
use or sell it; the Company’s ability to use or sell the intangible asset; how the intangible asset will generate future economic
benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company’s
ability to measure reliably the expenditure attributable to the intangible asset during its development. Through December 31, 2021, the
Company has not met all the aforementioned criteria and therefore all development costs have been recognized in profit or loss.





17







A2Z
SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):



M.Standard not yet effective



Certain
pronouncements were issued by the IASB or the IFRIC that are mandatory for future accounting periods. Many are not applicable to or do
not have a significant impact on the Company and have been excluded from the list below. The Company has not early adopted any other
standard, interpretation or amendment that has been issued but is not yet effective.



The
following have not yet been adopted and are being evaluated to determine their impact on the Company.



IAS
- 1 Presentation of Financial Statements



In
January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as
current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right
at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments
also clarify that ‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation
to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component
of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after January 1, 2022.
However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after January 1, 2023.



The
Company evaluated the expected impact of the IAS 1 amendments on its financial position as December 31, 2021, as a reclassification of
its derivative liability - warrants in the amount of $51 from Non – Current Liabilities to Current Liabilities.



18









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
3 – BASIS OF PREPARATION:



A.
Basis of preparation



The
principal accounting policies adopted in the preparation of the financial statements are set out above. These financial statements have
been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board. The financial statements have been prepared under the historical cost convention except for certain derivatives. The Company has
elected to present the statement of comprehensive income using the function of expense method.



B.
Basis of consolidation



Where
the Company has control over an investee, it is classified as a subsidiary. The financial statements of the subsidiaries are included
in the consolidated financial statements from the date that control commenced until the date control ceases. The Company controls an
investee if all three elements are present: power over the investee, exposure to variable returns from the investee, and the ability
of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any of these elements of control.



The
consolidated financial statements of the Company include the accounts of the Company and its subsidiaries as if they formed a single
entity. Any intercompany transactions were eliminated in full.



C.
Basis of Measurement



These
consolidated financial statements have been prepared on a going concern basis, under the historical cost basis, except for financial
instruments which have been measured at fair value.



D.
Functional and foreign currency



The
Company’s functional currency is the New Israeli Shekel (“NIS”), since the Company’s primary economic environment
is in Israel. However, the reporting currency is in US Dollars (“USD”) due to expected future expansion. Transactions and
balances in foreign currencies are converted into US Dollars in accordance with the principles set forth by International Accounting
Standard (IAS) 21 “The Effects of Changes in Foreign Exchange Rates”. Accordingly, transactions and balances have been converted
as follows:



|● | Monetary
    assets and liabilities - at the rate of exchange applicable at the statements of financial position date. 
|- | -----------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                        
|● | Exchange
    gains and losses from the aforementioned conversion are recognized in the statement of comprehensive loss.
|  |                                                                                                                        
|● | Expense
    items - at exchange rates applicable as of the date of recognition of those items.                         
|  |                                                                                                                        
|● | Non-monetary
    items are converted at the rate of exchange at the statements of financial position date.             



NOTE
4 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS:



The
areas requiring the use of estimates and critical judgments that may potentially have a significant impact on the Company’s earnings
and financial position are the useful life of property and equipment and income tax.



The
useful life of property, plant and equipment



Property
and equipment are amortized or depreciated over their useful lives. Useful lives are based on management’s estimates of the period
that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result
in significant variations in the amounts charged to the consolidated statement of comprehensive income in specific periods.



19









A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



Intangible
assets



Intangible
assets are tested for impairment annually or more frequently if there is an indication of impairment. The carrying value of intangibles
with definite lives is reviewed each reporting period to determine whether there is any indication of impairment. If there are indications
of impairment the impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable amount, the asset is
impaired and impairment loss is recognized.



Derivative
liability - Warrants



The
Company uses the Black-Scholes option-pricing model to estimate fair value at each reporting date. The key assumptions used in the model
are the expected future volatility in the price of the Company’s shares and the expected life of the warrants.



Determining
the fair value of share-based payment transactions:



The
fair value of share-based payment transactions is determined upon initial recognition by the Binomial model. The Binomial model is based
on share price and exercise price and assumptions regarding expected volatility, term of share option, dividend yield and risk-free interest
rate.



NOTE
5- INVENTORIES:



|                                    |  | December
    31, |       |  | December
    31, |  
|----------------------------------- |  | ---------------- | ----- |  | ---------------- | -
|                                    |  | 2021             |       |  | 2020             |  
|                                    |  |                  |       |  |                  |  
|                                    |  |                  |       |  |                  |  
|Raw
    materials                   |  | $                | 93    |  |                  | $
|Smart
    cart electrical equipment |  |                  | 908   |  |                  |  
|Smart
    cart parts                |  |                  | 145   |  |                  |  
|                                    |  | $                | 1,147 |  |                  | $



20















A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
6– BUSINESS COMBINATION UNDER COMMON CONTROL



On
November 16, 2020, the Company completed the acquisition of 79.49% of the shares of Cust2mate (“the merger”). The Cust2Mate
Shares were purchased from Mr. Bentsur Joseph, who is also the Company’s Chief Executive Officer and the controlling shareholder.
The Company paid total consideration for the Cust2Mate Shares of $1,566 (“Cust2Mate Consideration”), which included the exercise
of the Cust2Mate Option. The Cust2Mate Consideration was paid from the proceeds of the November 2020 Private Placement (see Note 13 O).
The acquisition of Cus2Mate was accounted for as a merger between entities under common control, therefore comparative financial statements
were restated to reflect the merger as of the beginning of earliest period presented, i.e. January 1, 2019, under which both entities
were under common control. The assets and liabilities of Cus2Mate were recorded based on their Carry-Over basis. The company accounted
for the difference between the Cus2Mate consideration and the net asset value as a debit to ‘Accumulated Deficit’.



Impact
of implementation of the Cust2Mate consolidation in accordance with pooling of interest method as of January 1, 2019:



|                                                           |  | A2Z |          |  | Cust2Mate |   |          | Eliminating
    entries |  |   | Total  |     
|---------------------------------------------------------- |  | --- | -------- |  | --------- | - | -------- | ----------------------- |  | - | ------ | ----
|                                                           |  |     | 31/12/19 |  |           |   | 31/12/19 |                         |  |   |        |     
|ASSETS                                                     |  |     |          |  |           |   |          |                         |  |   |        |     
|Cash
    and cash equivalents                              |  | $   | 289      |  |           | $ | 73       |                         |  | $ | -      |     
|Inventories                                                |  |     | 38       |  |           |   | -        |                         |  |   | -      |     
|Trade
    receivables                                      |  |     | 244      |  |           |   | -        |                         |  |   | -      |     
|Financial
    asset                                        |  |     | 5,624    |  |           |   | -        |                         |  |   | (5,624 | )   
|Other
    accounts receivable                              |  |     | 1,106    |  |           |   | 154      |                         |  |   | -      |     
|Intangible
    asset - patent, net                         |  |     | 2,341    |  |           |   | 15       |                         |  |   | -      |     
|Property,
    plant and equipment, net                     |  |     | 326      |  |           |   | 2        |                         |  |   | -      |     
|Long
    term deposit                                      |  |     | 30       |  |           |   | -        |                         |  |   | -      |     
|Deferred
    taxes,net                                     |  |     | 16       |  |           |   | -        |                         |  |   | -      |     
|                                                           |  |     |          |  |           |   |          |                         |  |   |        |     
|                                                           |  |     |          |  |           |   |          |                         |  |   |        |     
|LIABILITIES                                                |  |     |          |  |           |   |          |                         |  |   |        |     
|                                                           |  |     |          |  |           |   |          |                         |  |   |        |     
|Short
    term loan and current portion of long term loans |  |     | 200      |  |           |   | -        |                         |  |   | -      |     
|Lease
    liability                                        |  |     | 63       |  |           |   | -        |                         |  |   | -      |     
|Trade
    payables                                         |  |     | 471      |  |           |   | 38       |                         |  |   | -      |     
|Other
    accounts payable                                 |  |     | 422      |  |           |   | -        |                         |  |   | -      |     
|Long
    term loans                                        |  |     | 152      |  |           |   | 204      |                         |  |   | -      |     
|Severance
    payment, net                                 |  |     | 159      |  |           |   | -        |                         |  |   | -      |     
|Total
    shareholders’ equity                             |  |     | 8,547    |  |           |   | 2        |                         |  |   | (7,190 | )(*)



(*)
Including consideration paid of $1,566 which was recorded on November 16, 2020.



21













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
6– BUSINESS COMBINATION UNDER COMMON CONTROL (CONTINUED):



|                                         |  | A2Z      |        |   | Cust2Mate |  |      | Eliminating
    entries |  |  | Total    | 
|---------------------------------------- |  | -------- | ------ | - | --------- |  | ---- | ----------------------- |  |  | -------- | 
|                                         |  | 31/12/19 |        |   | 31/12/19  |  |      |                         |  |  | 31/12/19 | 
|                                         |  |          |        |   |           |  |      |                         |  |  |          | 
|Revenues                                 |  |          | 1,306  |   |           |  | 78   |                         |  |  | -        | 
|Cost
    of revenues                     |  |          | (783   | ) |           |  | -    |                         |  |  | -        | 
|General
    and administrative expenses  |  |          | (744   | ) |           |  | (10  | )                       |  |  | -        | 
|Research
    and development expenses    |  |          | (219   | ) |           |  | (195 | )                       |  |  | -        | 
|Marketing
    and selling                |  |          | (87    | ) |           |  | -    |                         |  |  | -        | 
|Listing
    Expense                      |  |          | (1,792 | ) |           |  | -    |                         |  |  | -        | 
|Financial
    expenses                   |  |          | (109   | ) |           |  | -    |                         |  |  | -        | 
|Income
    tax (expense)                 |  |          | (380   | ) |           |  | -    |                         |  |  | -        | 
|                                         |  |          |        |   |           |  |      |                         |  |  |          | 
|                                         |  |          |        |   |           |  |      |                         |  |  |          | 
|CASH
    FLOWS                           |  |          |        |   |           |  |      |                         |  |  |          | 
|Cash
    flows from operating activities |  |          | (1,410 | ) |           |  | (104 | )                       |  |  | -        | 
|Cash
    flows from investing activities |  |          | (26    | ) |           |  | (4   | )                       |  |  | -        | 
|Cash
    flows from financing activities |  |          | 1,665  |   |           |  | 170  |                         |  |  | -        | 



NOTE
7- OTHER ACCOUNTS RECEIVABLE:



|                            |  | December
    31, |     |  | December
    31, |  
|--------------------------- |  | ---------------- | --- |  | ---------------- | -
|                            |  | 2021             |     |  | 2020             |  
|                            |  |                  |     |  |                  |  
|Related
    parties         |  | $                | 126 |  |                  | $
|Advances
    to suppliers   |  |                  | -   |  |                  |  
|Prepaid
    expenses        |  |                  | 50  |  |                  |  
|Government
    institutions |  |                  | 251 |  |                  |  
|Other                       |  |                  | 7   |  |                  |  
|                            |  | $                | 434 |  |                  | $



22













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
8 -PROPERTY, PLANT AND EQUIPMENT, NET:





|                          |  | Computers and electronic equipment |     |   | Furniture and equipment |   |     | Vehicles |  |   | Leasehold Improvements |   |  | Right of use Asset |    |  | Total |  
|------------------------- |  | ---------------------------------- | --- | - | ----------------------- | - | --- | -------- |  | - | ---------------------- | - |  | ------------------ | -- |  | ----- | -
|Cost:                     |  |                                    |     |   |                         |   |     |          |  |   |                        |   |  |                    |    |  |       |  
|As of January 1, 2021     |  | $                                  | 370 |   |                         | $ | 139 |          |  | $ | 625                    |   |  | $                  | 57 |  |       | $
|Additions                 |  |                                    | 52  |   |                         |   | 62  |          |  |   | 298                    |   |  |                    | -  |  |       |  
|Translation adjustments   |  |                                    | 18  |   |                         |   | -   |          |  |   | 45                     |   |  |                    | 2  |  |       |  
|As of December 31, 2021   |  | $                                  | 440 |   |                         | $ | 201 |          |  | $ | 968                    |   |  | $                  | 59 |  |       | $
|                          |  |                                    |     |   |                         |   |     |          |  |   |                        |   |  |                    |    |  |       |  
|Accumulated depreciation: |  |                                    |     |   |                         |   |     |          |  |   |                        |   |  |                    |    |  |       |  
|As of January 1, 2021     |  | $                                  | 268 |   |                         | $ | 133 |          |  | $ | 294                    |   |  | $                  | 57 |  |       | $
|Additions                 |  |                                    | 22  |   |                         |   | 7   |          |  |   | 92                     |   |  |                    | -  |  |       |  
|Translation adjustments   |  |                                    | (2  | ) |                         |   | 2   |          |  |   | (18                    | ) |  |                    | 2  |  |       |  
|As of December 31, 2021   |  | $                                  | 288 |   |                         | $ | 142 |          |  | $ | 368                    |   |  | $                  | 59 |  |       | $
|                          |  |                                    |     |   |                         |   |     |          |  |   |                        |   |  |                    |    |  |       |  
|Net Book Value:           |  |                                    |     |   |                         |   |     |          |  |   |                        |   |  |                    |    |  |       |  
|As of December 31, 2021   |  | $                                  | 152 |   |                         | $ | 59  |          |  | $ | 600                    |   |  | $                  | -  |  |       | $
|As of December 31, 2020   |  | $                                  | 103 |   |                         | $ | 6   |          |  | $ | 331                    |   |  | $                  | -  |  |       | $





|                          |  | Computers and electronic equipment |     |  | Furniture and equipment |   |     | Vehicles |  |   | Leasehold Improvements |  |  | Right of use Asset |    |  | Total |  
|------------------------- |  | ---------------------------------- | --- |  | ----------------------- | - | --- | -------- |  | - | ---------------------- |  |  | ------------------ | -- |  | ----- | -
|Cost:                     |  |                                    |     |  |                         |   |     |          |  |   |                        |  |  |                    |    |  |       |  
|As of January 1, 2020     |  | $                                  | 342 |  |                         | $ | 123 |          |  | $ | 345                    |  |  | $                  | 53 |  |       | $
|Additions                 |  |                                    | -   |  |                         |   | 3   |          |  |   | 224                    |  |  |                    | -  |  |       |  
|Translation adjustments   |  |                                    | 28  |  |                         |   | 13  |          |  |   | 56                     |  |  |                    | 4  |  |       |  
|As of December 31, 2020   |  | $                                  | 370 |  |                         | $ | 139 |          |  | $ | 625                    |  |  | $                  | 57 |  |       | $
|                          |  |                                    |     |  |                         |   |     |          |  |   |                        |  |  |                    |    |  |       |  
|Accumulated depreciation: |  |                                    |     |  |                         |   |     |          |  |   |                        |  |  |                    |    |  |       |  
|As of January 1, 2020     |  | $                                  | 219 |  |                         | $ | 122 |          |  | $ | 204                    |  |  | $                  | 53 |  |       | $
|Additions                 |  |                                    | 16  |  |                         |   | 2   |          |  |   | 35                     |  |  |                    | -  |  |       |  
|Translation adjustments   |  |                                    | 32  |  |                         |   | 9   |          |  |   | 55                     |  |  |                    | 4  |  |       |  
|As of December 31, 2020   |  | $                                  | 267 |  |                         | $ | 133 |          |  | $ | 294                    |  |  | $                  | 57 |  |       | $
|                          |  |                                    |     |  |                         |   |     |          |  |   |                        |  |  |                    |    |  |       |  
|Net Book Value:           |  |                                    |     |  |                         |   |     |          |  |   |                        |  |  |                    |    |  |       |  
|As of December 31, 2020   |  | $                                  | 103 |  |                         | $ | 6   |          |  | $ | 331                    |  |  | $                  | -  |  |       | $
|As of December 31, 2019   |  | $                                  | 123 |  |                         | $ | 1   |          |  | $ | 141                    |  |  | $                  | -  |  |       | $









23













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
9 - OTHER ACCOUNTS PAYABLE:



|                                         |  | December
    31, |       |  | December
    31, |  
|---------------------------------------- |  | ---------------- | ----- |  | ---------------- | -
|                                         |  | 2021             |       |  | 2020             |  
|                                         |  |                  |       |  |                  |  
|Employees
    and government authorities |  | $                | 362   |  |                  | $
|Accrued
    expenses                     |  |                  | 169   |  |                  |  
|Other                                    |  |                  | 568   |  |                  |  
|                                         |  | $                | 1,099 |  |                  | $



NOTE
10 - LONG TERM LOANS:



|                          |  | Linked
    to |  | Interest
    rate |           |  | December
    31, 2021 |   |      | December
    31, 2020 | 
|------------------------- |  | ------------- |  | ----------------- | --------- |  | --------------------- | - | ---- | --------------------- | 
|                          |  |               |  |                   |           |  |                       |   |      |                       | 
|Long
    term loans       |  | NIS           |  |                   | 1.8%-6.1% |  |                       | $ | 641  |                       | 
|Less-
    Current portion |  |               |  |                   |           |  |                       |   | (158 | )                     | 
|                          |  |               |  |                   |           |  |                       |   |      |                       | 
|                          |  |               |  |                   |           |  |                       | $ | 483  |                       | 



The
loans are from leading Israeli financial institutions and bear interest of between 1.8% - 6.1%. $158 of the loans are repayable within
in one year and $877 are repayable between two to five years.



24













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
11 – SEVERANCE PAYMENT, NET:



| | a. | The
                                            plan liabilities, net:
| | -- | ----------------------------------------------------------------------



|                                                |  | Year
    ended        |      |   | Year
    ended        |  
|----------------------------------------------- |  | --------------------- | ---- | - | --------------------- | -
|                                                |  | December
    31, 2021 |      |   | December
    31, 2020 |  
|Defined
    benefit plan:                       |  |                       |      |   |                       |  
|Present
    value of defined benefit obligation |  | $                     | 541  |   |                       | $
|Fair
    value of plan assets                   |  |                       | (374 | ) |                       |  
|                                                |  |                       |      |   |                       |  
|Total                                           |  | $                     | 167  |   |                       | $
|                                                |  |                       |      |   |                       |  

Changes
in the present value of defined benefit obligation:

|                                                   |  | 2021 |     |   | 2020 |  
|-------------------------------------------------- |  | ---- | --- | - | ---- | -
|                                                   |  |      |     |   |      |  
|Balance
    at beginning of year                   |  | $    | 563 |   |      | $
|Recognized
    in statement of comprehensive loss: |  |      |     |   |      |  
|Interest
    cost                                  |  |      | 10  |   |      |  
|Current
    service cost                           |  |      | 39  |   |      |  
|Currency
    translation                           |  |      | (71 | ) |      |  
|Recognized
    in other comprehensive gain (loss): |  |      |     |   |      |  
|Net
    actuarial gain (loss)                      |  |      | -   |   |      |  
|                                                   |  |      |     |   |      |  
|Balance
    at end of year                         |  | $    | 541 |   |      | $



| | b. | The
                                            movement in the fair value of the plan assets:
| | -- | ----------------------------------------------------------------------------------------------



|                                                    |  | 2021 |      |   | 2020 |  
|--------------------------------------------------- |  | ---- | ---- | - | ---- | -
|                                                    |  |      |      |   |      |  
|Balance
    at beginning of year                    |  | $    | (376 | ) |      | $
|Recognized
    in statement of comprehensive loss:  |  |      |      |   |      |  
|Expected
    return                                 |  |      | 28   |   |      |  
|                                                    |  |      |      |   |      |  
|Recognized
    in other comprehensive loss /(gain): |  |      |      |   |      |  
|Net
    actuarial loss (gain)                       |  |      | -    |   |      |  
|Other:                                              |  |      |      |   |      |  
|Contributions
    by employer                       |  |      | (26  | ) |      |  
|                                                    |  |      |      |   |      |  
|Balance
    at end of year                          |  | $    | (374 | ) |      | $



| | c. | The
                                            principal assumptions underlying the defined benefit plan:
| | -- | ----------------------------------------------------------------------------------------------------------



|                                           |  | December
    31, 2021 |      |   | December
    31, 2020 | 
|------------------------------------------ |  | --------------------- | ---- | - | --------------------- | 
|                                           |  |                       |      |   |                       | 
|Discount
    rate of the plan liability    |  |                       | 2.24 | % |                       | 
|                                           |  |                       |      |   |                       | 
|Expected
    rate of return on plan assets |  |                       | 2.36 | % |                       | 
|                                           |  |                       |      |   |                       | 
|Future
    salary increases                |  |                       | 3.47 | % |                       | 



25













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
12 – WARRANT LIABILITY:



| | a) | January
                                            2020 Warrants
| | -- | -----------------------------------------------------------------



Certain
warrants issued in January 2020 were issued with an exercise price denominated in Canadian Dollars (CAD) rather than the functional currency
of the Company - New Israeli Shekels (NIS). These warrants were recorded at their fair value at the end of each reporting period and
classified as a derivative liability.



On
June 30, 2021, warrant holders, owning 220,589 warrants, exercisable at CAD$1.95, and the Company, agreed that the exercise price of
CAD$1.95 would be payable in New Israeli Shekels (based on a NIS 2.65 to CAD$1.00 exchange rate) and therefore the Company reclassified
the balance of the warrant liability in respect of these warrants as equity ($1,788). The Company also entered into a foreign currency
hedge contract to protect against any negative currency fluctuation against the CAD.



As
of December 31, 2021, the warrant liability was $51 and the Company recorded a loss on the revaluation of the total warrant liability
for the year ended December 31, 2021, of $1,788 in the Consolidated Statement of Comprehensive Loss. The Black-Scholes option pricing
model was used to measure the derivative warrant liability with the following assumptions: volatility of 82% using the historical prices
of the Company, risk-free interest rate of 0.064%, expected life of 0.08 years and share price of $13.72. As of December 31 ,2021, there
are 16,312 warrants classified as a liability.



The
following is the reconciliation of the fair value that are categorized within Level 3 of the fair value hierarchy in financial instruments:



|Balance
    at January 1, 2020          |  | $ | -      |  
|--------------------------------------- |  | - | ------ | -
|Issuance
    at January 30, 2020        |  |   | 214    |  
|Revaluation
    at December 31, 2020    |  |   | 71     |  
|                                        |  |   |        |  
|Balance
    at December 31, 2020        |  |   | 285    |  
|Warrants
    exercised                  |  |   | (342   | )
|Revaluations                            |  |   | 1,896  |  
|Reclassification
    to Warrant Reserve |  | $ | (1,788 | )
|                                        |  |   |        |  
|Balance
    at December 31, 2021        |  | $ | 51     |  



26













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
12 – WARRANT LIABILITY (CONTINUED):



| | b) | November
                                            2020 and December 2020 Warrants
| | -- | ------------------------------------------------------------------------------------



Certain
warrants issued in November and December 2020 were issued with an exercise price denominated in Canadian Dollars (CAD) rather than the
functional currency of the Company – New Israeli Shekels (NIS). These warrants were recorded at their fair value at the end of
each reporting period and classified as a derivative liability.



As
of March 31, 2021, the warrant liability was $35,175 and the Company recorded a loss on the revaluation of the total warrant liability
on March 31, 2021, of $26,816 in the Consolidated Statement of Comprehensive Loss. The Black-Scholes option pricing model was used to
measure the derivative warrant liability with the following assumptions: volatility of 79% using the historical prices of the Company,
risk-free interest rate of 1.002%, expected life of 4.63 years and share price of $9.30.



On
March 31, 2021, warrant holders, owning 5,816,785 warrants, exercisable at CAD$2.70, and the Company, agreed that the exercise price
of CAD$2.70 would be payable in New Israeli Shekels (based on a NIS 2.65 to CAD$1.00 exchange rate) and therefore the Company reclassified
the balance of the warrant liability in respect of these warrants as equity ($35,065). The Company also entered into a foreign currency
hedge contract to protect against any negative currency fluctuation against the CAD. As of December 31, 2021, all the November 2020 and
December 2020 warrants are classified as equity.



The
following is the reconciliation of the fair value that are categorized within Level 3 of the fair value hierarchy in financial instruments:



|Balance
    on January 1, 2020          |  | $ | -       |  
|--------------------------------------- |  | - | ------- | -
|Issuance
    at November 16, 2020       |  |   | 3,537   |  
|Issuance
    at December 29, 2020       |  |   | 1,698   |  
|Revaluation
    at December 31,2020     |  |   | 3,156   |  
|                                        |  |   |         |  
|Balance
    at December 31, 2020        |  | $ | 8,391   |  
|Revaluation
    at March 31, 2021       |  |   | 26,816  |  
|Reclassification
    to Warrant Reserve |  |   | (35,207 | )
|                                        |  |   |         |  
|Balance
    at December 31, 2021        |  | $ | -       |  



27













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
12 – WARRANT LIABILITY (CONTINUED):



| | c) | April
                                            and May 2021 Warrants
| | -- | -----------------------------------------------------------------------



Certain
warrants were issued with an exercise price denominated in Canadian Dollars (CAD) rather than the functional currency of the Company
– New Israeli Shekels (NIS). These warrants were recorded at their fair value at the end of each reporting period
and classified as a derivative liability.



As
of June 30, 2021, the warrant liability was $7,093 and the Company recorded a loss on the revaluation of the total warrant liability
for the year ended December 31, 2021 of $2,307 in the Consolidated Statement of Comprehensive Loss. The Black-Scholes option pricing
model was used to measure the derivative warrant liability with the following assumptions: volatility of 111% using the historical prices
of the Company, risk-free interest rate of 0.41%, expected life of 1.79 years and share price of $11.91.



On
June 30, 2021, warrant holders owning 583,703 warrants, exercisable at CAD$11.04, and the Company, agreed that the exercise price of
CAD$11.04 would be payable in NIS (based on a NIS 2.63 to CAD$1.00 exchange rate) and therefore the Company reclassified the balance
of the warrant liability in respect of these warrants, as equity ($6,846). The Company also entered into a foreign currency hedge contract
to protect against any negative currency fluctuation against the CAD.



As
of August 29, 2021, the warrant liability was $247 and the Company recorded a gain on the revaluation of the total warrant liability
for the year ended December 31, 2021, of $124 in the Condensed Consolidated Interim Statement of Comprehensive Loss. The Black-Scholes
option pricing model was used to measure the derivative warrant liability with the following assumptions: volatility of 134% using the
historical prices of the Company, risk-free interest rate of 0.41%, expected life of 1.62 years and share price of $6.69. As of December
31, 2021, all the April and May 2021 warrants are classified as equity.



The
following is the reconciliation of the fair value that are categorized within Level 3 of the fair value hierarchy in financial instruments:



|Balance
    at January 1, 2021          |  | $ | -      |  
|--------------------------------------- |  | - | ------ | -
|Issuance
    at June 4, 2021            |  |   | 4,786  |  
|Revaluation
    at June 30 ,2021        |  |   | 2,307  |  
|Reclassification
    to Warrant Reserve |  |   | (6,846 | )
|                                        |  |   |        |  
|Balance
    at June 30, 2021            |  |   | 247    |  
|Revaluation
    at August 29 ,2021      |  |   | (124   | )
|Reclassification
    to Warrant Reserve |  |   | (123   | )
|                                        |  |   |        |  
|Balance
    at December 31, 2021        |  | $ | -      |  



NOTE
13 – LIENS, COMMITMENTS AND CONTINGENCIES:



|A. | The
                                            Company’s Israeli subsidiary’s fixed assets (motor vehicles) are secured against
                                            bank borrowings.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | One
                                            of the Company’s Israeli subsidiaries leases its facility which expires on March 1,
                                            2024. Lease payments are approximately $11 per month ($132 annually).
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Another
one of the Company’s Israeli subsidiaries leases its facility which expires on June 30, 2022. Lease payments are approximately
$3.5 per month ($45 annually).



28













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
14 – SHAREHOLDERS’ EQUITY (DEFICIT):



On
August 13, 2021, the Board and the TSX-V approved a 1-for-3 reverse stock split, (the “Reverse Split”). Consequently, all
share numbers, share prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for all
periods presented.



|A. | On
                                            January 21, 2020, 47,619 options with an exercise price of CAD0.42 were exercised for gross
                                            proceeds of $15 (CAD20 thousand).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | On
                                            January 30, 2020, the Company completed a private placement of 277,779 units (the “Units”)
                                            at a price of CAD1.80 per Unit for gross proceeds of $ 377 (CAD500 thousand) (“January
                                            2020 Private Placement”). Each Unit consists of one share and one common share purchase
                                            warrant, with each warrant entitling the holder to acquire an additional share of the Company
                                            at a price of CAD1.95 until January 30, 2022. All securities issued in connection with the
                                            January 2020 Private Placement were subject to a hold period expiring May 31, 2020. The fair
                                            value of the warrants at issuance were $214 and were recorded as a liability – see
                                            Note 11.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|C. | On
                                            January 30, 2020, the Company issued 30,831 shares as compensation, valued at $50, for consulting
                                            services provided by a consultant.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|D. | On
                                            March 18, 2020, 75,000 options with an exercise price of CAD0.39 were exercised for gross
                                            proceeds of $23 (CAD32 thousand).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|E. | On
                                            April 27, 2020, the Company issued 76,701 Shares as compensation, valued at $71, for consulting
                                            services provided by two consultants.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|F. | During
                                            July 2020 and August 2020, 182,142 warrants with an exercise price of NIS 2.52 were exercised
                                            for gross proceeds of $98.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|G. | On
                                            October 28, 2020, 767 options with an exercise price of CAD1.14 were exercised for gross
                                            proceeds of $1.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|H. | On
                                            November 16, 2020, the Company closed a private placement (the “November 2020 Private
                                            Placement”) and issued 4,450,153 units at a price of CAD1.875 per unit for gross proceeds
                                            of $6,377 CAD 8,344. Each unit is comprised of one share and one warrant (each, a “November
                                            2020 Warrants”). Each November 2020 Warrant entitles the holder thereof to purchase
                                            one additional share at a price of CAD2.70 at any time prior to November 10, 2025. In connection
                                            with the November 2020 Private Placement, the Company paid finders’ fees of $417.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
fair value of the November 2020 Private Placement Warrants was $3,537 at the issuance date and were recorded as a liability



All
securities issued in connection with the November 2020 Private Placement are subject to a four month and one day hold period expiring
on March 11, 2021.



29













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
14 – SHAREHOLDERS’ EQUITY (DEFICIT) (CONTINUED):



|I. | On
                                            December 29, 2020, the Company closed a private placement (the “December 2020 Private
                                            Placement”) and issued 1,366,631 units at a price of CAD1.875 per unit for gross proceeds
                                            of $2,000 (CAD2,562). Each unit is comprised of one share of the Company and one warrant
                                            (each, a “December 2020 Warrant”). Each December 2020 Warrant entitles the holder
                                            thereof to purchase one share at a price of CAD2.70 at any time prior to December 24, 2025.
                                            In connection with the December 2020 Private Placement, the Company paid finders’ fees
                                            of $128, in cash and issued 100,000 finders’ warrants (“Finders’ Warrants”).
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All
securities issued in connection with the December 2020 Private Placement are subject to a four month and one day hold period expiring
on April 25, 2021.



The
December 2020 Warrants and Finders’ Warrants and have an exercise price of CAD$2.70 and expire on December 24, 2025, and April
25, 2021. The fair value of the December 2020 Warrants was $1,698 and were recorded as a liability – see note 11.



|J. | On
                                            December 24, 2020, the Company issued 20,161 shares as compensation, valued at $47, for consulting
                                            services provided by a consultant.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|K. | During
                                            the year ended December 31, 2021, the Company issued 2,514,693 shares in respect of 2,629,343
                                            warrants that were exercised. (See Note 14(a))
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|L. | On
                                            June 4, 2021, the Company completed two private placements (collectively, the “Offering”).
                                            The Offering resulted in the issuance of an aggregate of 1,305,662 units at a price of CAD$8.16
                                            per Unit, for gross proceeds of $8,590 (CAD$10.65 million). Each Unit is composed of one
                                            common share of the Company and one common share purchase warrant (a “Warrant”).
                                            Each Warrant entitles the holder thereof to acquire one additional common share of the Company
                                            at CAD$11.04 per warrant. 221,100 Warrants expire on April 14, 2023, and 1,084,562 Warrants
                                            expire on May 28, 2023. A finder’s fee of $466 (CAD$578) was paid in connection with
                                            the Offering.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
fair value of the warrants granted was $4,786 and was initially classified as a liability (see note 12(c)). The Company
accounted for the remaining $3,338 as additional paid in capital and share issue expenses.



|M. | During
                                            the year ended December 31, 2021, the Company issued 286,223 shares in respect of 286,223
                                            stock options that were exercised. (See Note 15 (b))
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
15 – WARRANTS AND OPTIONS:



a)
Warrants



| | (i) | Warrant
                                            transactions for the years ended December 31, 2021, and 2020 are as follows:
| | --- | --------------------------------------------------------------------------------------------------------------------------------









| | (ii) | As
                                            of December 31, 2021, the Company had outstanding warrants, enabling the holders to acquire
                                            common shares as follows:
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









| | (1) | On
    June 30, 2021, warrant holders and the Company, agreed that the exercise price of CAD$1.95 would be payable in New Israeli Shekels.
    The exercise price is NIS 5.124 per warrant (see also Note 11).  
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                 
| | (2) | On
    March 31, 2021, warrant holders and the Company, agreed that the exercise price of CAD$2.70 would be payable in New Israeli Shekels.
    The exercise price is NIS 7.1418 per warrant (see also Note 11).
| |     |                                                                                                                                                                                                                 
| | (3) | On
    June 30, 2021, warrant holders and the Company, agreed that the exercise price of CAD$11.04 would be payable in New Israeli Shekels.
    The exercise price is NIS 29.025 per warrant (see also Note 11).



31













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
15 – WARRANTS AND OPTIONS (CONTINUED):



a)
Warrants (continued)



| | (iii) | On
                                            December 16, 2021, 1,095,322 warrants with an exercise price of ILS2.52 were exercised in
                                            a cashless mechanism and the warrant holders were granted 980,673 shares.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



b)
Stock Options



Stock
option transactions for the years ended December 31, and 2020 are as follows:



|                                |  |  | Number   |   |  |   | Weighted
                                            Average Exercise Price (CAD) |  |  |   | Weighted
                                            Average Exercise Price (USD) | 
|------------------------------- |  |  | -------- | - |  | - | --------------------------------------------------------------------------------- |  |  | - | --------------------------------------------------------------------------------- | 
|Balance
    January 1, 2020     |  |  | 182,909  |   |  | $ | 0.42                                                                              |  |  | $ | 0.32                                                                              | 
|Options
    granted             |  |  | 100,000  |   |  |   | 2.40                                                                              |  |  |   |                                                                                   | 
|Options
    granted             |  |  | 613,333  |   |  |   | 1.50                                                                              |  |  |   |                                                                                   | 
|Options
    granted             |  |  | 116,667  |   |  |   | 2.25                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (767     | ) |  |   | 1.14                                                                              |  |  |   |                                                                                   | 
|Exercise
    of agent’s options |  |  | (47,619  | ) |  |   | 0.42                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (75,000  | ) |  |   | 0.42                                                                              |  |  |   |                                                                                   | 
|Balance
    December 31, 2020   |  |  | 889,523  |   |  | $ | 1.62                                                                              |  |  | $ | 1.27                                                                              | 
|Options
    granted (i)         |  |  | 33,333   |   |  |   | 3.00                                                                              |  |  |   |                                                                                   | 
|Options
    granted (ii)        |  |  | 116,667  |   |  |   | 3.00                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (8,333   | ) |  |   | 2.25                                                                              |  |  |   |                                                                                   | 
|Options
    granted (iii)       |  |  | 50,000   |   |  |   | 8.40                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (59,524  | ) |  |   | 0.42                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (33,333  | ) |  |   | 1.50                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (33,333  | ) |  |   | 2.25                                                                              |  |  |   |                                                                                   | 
|Options
    granted (iv)        |  |  | 116,700  |   |  |   | 6.00                                                                              |  |  |   |                                                                                   | 
|Options
    granted (v)         |  |  | 16,677   |   |  |   | 8.00                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (35,000  | ) |  |   | 2.25                                                                              |  |  |   |                                                                                   | 
|Exercise
    of options         |  |  | (116,700 | ) |  |   | 6.00                                                                              |  |  |   |                                                                                   | 
|Expiry
    of options           |  |  | (116,667 | ) |  |   | 3.00                                                                              |  |  |   |                                                                                   | 
|Balance
    December 31, 2021   |  |  | 820,010  |   |  | $ | 2.10                                                                              |  |  | $ | 1.65                                                                              | 



32













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
15 – WARRANTS AND OPTIONS (CONTINUED):



b)
Stock Options (continued)



| | (i) | On
                                            January 28, 2021, 33,333 stock options were issued to a consultant with an exercise price
                                            of CAD$3.00. The options expire on January 28, 2025. The fair value of the options granted
                                            was estimated at CAD$90 using the Black-Scholes option pricing model, using the following
                                            assumptions: Share Price: CAD$2.82; Expected option life 4 years; Volatility 209%; Risk-free
                                            interest rate 0.30%; Dividend yield 0%.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | On
                                            January 28, 2021, 116,667 stock options were issued to a consultant with an exercise price
                                            of CAD$3.00. The options expire on December 31, 2021. The fair value of the options granted
                                            was estimated at CAD$191 using the Black-Scholes option pricing model, using the following
                                            assumptions: Share Price: CAD$2.82; Expected option life 0.92 years; Volatility 173%; Risk-free
                                            interest rate 0.11%; Dividend yield 0%.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | On
                                            June 3, 2021, 50,000 stock options were issued to a consultant with an exercise price of
                                            CAD$8.40. The options expire on June 3, 2026. The fair value of the options granted was estimated
                                            at CAD$445 using the Black-Scholes option pricing model, using the following assumptions:
                                            Share Price: CAD$9.18; Expected option life 5 years; Volatility 191%; Risk-free interest
                                            rate 0.93%; Dividend yield 0%.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | On
                                            August 23, 2021, 116,700 stock options were issued to consultants with an exercise price
                                            of CAD$6.00. The options expire on April 30, 2022. The fair value of the options granted
                                            was estimated at CAD$242 using the Black-Scholes option pricing model, using the following
                                            assumptions: Share Price: CAD$6.50; Expected option life 0.68 years; Volatility 126%; Risk-free
                                            interest rate 0.19%; Dividend yield 0%.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | On
                                            October 28, 2021, 16,677 stock options were issued to a director with an exercise price of
                                            CAD$8.00. The options expire on October 28, 2026. The fair value of the options granted was
                                            estimated at CAD$242 using the Black-Scholes option pricing model, using the following assumptions:
                                            Share Price: CAD$9.37; Expected option life 5 years; Volatility 114%; Risk-free interest
                                            rate 1.43%; Dividend yield 0%.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | As
                                            at December 31, 2021, the Company had outstanding stock options, enabling the holders to
                                            acquire common shares as follows:
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









| | (vii) | Share-based
                                            compensation expense is recognized over the vesting period of options. During the year ended
                                            December 31, 2021, share-based compensation of $843 was recognized and charged to the Consolidated
                                            Statement of Comprehensive Loss (December 31, 2020 – $800).
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



33













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
16 – NON CONTROLLING INTERESTS



The
following Company subsidiaries which have non-controlling interests:



|          |  | December
    31, |        |   | December
    31, |  
|--------- |  | ---------------- | ------ | - | ---------------- | -
|          |  | 2021             |        |   | 2020             |  
|          |  |                  |        |   |                  |  
|Cust2mate |  | $                | (1,026 | ) |                  | $
|AAI       |  |                  | 419    |   |                  |  
|          |  | $                | (607   | ) |                  | $



NOTE
17 – REVENUES:



Major
customers (as percentage of total revenues):



|               |  | Year
    Ended   |   
|-------------- |  | ---------------- | --
|               |  | December
    31, |   
|               |  | 2021             |   
|               |  |                  | % 
|               |  |                  |   
|Customer
    A |  |                  | 39
|Customer
    B |  |                  | 15
|Customer
    C |  |                  | 10
|Customer
    D |  |                  | 28
|               |  |                  | 92





Revenue
streams (as percentage of total revenues):



|                                       |  | Year
    Ended   |    
|-------------------------------------- |  | ---------------- | ---
|                                       |  | December
    31, |    
|                                       |  | 2021             |    
|                                       |  | %                |    
|Revenues
    from services             |  |                  |    
|Revenues
    from services             |  |                  | 50 
|Revenues
    from leasing              |  |                  | 15 
|Revenues
    from maintenance services |  |                  | 7  
|Smart
    Carts                        |  |                  |    
|Revenues
    from smart carts project  |  |                  | 28 
|                                       |  |                  | 100



34













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
18 – COST OF REVENUES:



|                                      |  | Year
    Ended   |      
|------------------------------------- |  | ---------------- | -----
|                                      |  | December
    31, |      
|                                      |  | 2021             |      
|                                      |  |                  |      
|Payroll
    and related expenses      |  | $                | 1,096
|Subcontractor
    and outsourced work |  |                  | 162  
|Materials
    and components consumed |  |                  | 291  
|Car
    maintenance                   |  |                  | 373  
|Other                                 |  |                  | 107  
|                                      |  | $                | 2,029



NOTE
19 – RESEARCH AND DEVELOPMENT EXPENSES:



|                                      |  | Year
    Ended   |      
|------------------------------------- |  | ---------------- | -----
|                                      |  | December
    31, |      
|                                      |  | 2021             |      
|                                      |  |                  |      
|Payroll
    and related expenses      |  | $                | 510  
|Subcontractor
    and outsourced work |  |                  | 2,477
|Legal
    fees                        |  |                  | 99   
|Other                                 |  |                  | 136  
|                                      |  | $                | 3,222



NOTE
20 – GENERAL AND ADMINISTRATIVE EXPENSES:



|                                  |  | Year
    Ended   |      
|--------------------------------- |  | ---------------- | -----
|                                  |  | December
    31, |      
|                                  |  | 2021             |      
|                                  |  |                  |      
|Payroll
    and related           |  | $                | 1,027
|Professional
    fees             |  |                  | 3,417
|Share-based
    compensation      |  |                  | 842  
|Depreciation
    and amortization |  |                  | 321  
|Office
    maintenance            |  |                  | 275  
|Investor
    relations            |  |                  | 254  
|Others                            |  |                  | 358  
|                                  |  | $                | 6,494



35













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
21 - LOSS PER SHARE:



Both
the basic and diluted earnings (loss) per share have been calculated using the weighted average number of shares in issue during the
relevant financial periods, the weighted average number of equity shares in issue and loss for the period as follows:



|                                               |  | Year
    ended |                                                               |   | Year
    ended |   
|---------------------------------------------- |  | -------------- | ------------------------------------------------------------- | - | -------------- | --
|                                               |  |                | December
                                            31, 2021 |   |                |   
|Net
    loss for the year                      |  | $              | (39,735                                                       | ) |                | $ 
|Weighted
    average number of ordinary shares |  |                | 23,340,621                                                    |   |                |   
|Basic
    and diluted loss per share in USD    |  | $              | (1.70                                                         | ) |                | ($



NOTE
22 – INCOME TAX EXPENSE:



| | A. | Taxes
                                            on income:
| | -- | ------------------------------------------------------------



The
combined Canadian federal and provincial statutory income tax rate is 26.5% (2020 - 26.5%).



Israeli
corporate tax rates are 23% in 2021 and 2020.



B.
Tax reconciliation:



|                                                                                                |  | Year
    ended December 31, 2021 |         |   | Year
    ended December 31, 2020 |  
|----------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | -------------------------------- | -
|Loss
    before income tax                                                                      |  | $                                | (40,148 | ) |                                  | $
|Statutory
    tax rate                                                                          |  |                                  | 23      | % |                                  |  
|Income
    tax benefit (expense) at the statutory tax rate                                      |  |                                  | 9,234   |   |                                  |  
|Expenses
    not recognized for tax purposes                                                    |  |                                  | (9,234  | ) |                                  |  
|Recognition/Derecognition
    of deferred tax assets which were not recognized on prior periods |  |                                  | (142    | ) |                                  |  
|Income
    tax expense                                                                          |  | $                                | (142    | ) |                                  | $



C.
Income tax expense:



|                        |  | Year
    ended        |     |  | Year
    ended        |  
|----------------------- |  | --------------------- | --- |  | --------------------- | -
|                        |  | December
    31, 2021 |     |  | December
    31, 2020 |  
|                        |  |                       |     |  |                       |  
|Current                 |  | $                     | -   |  |                       | $
|Prior
    year taxes    |  |                       | 142 |  |                       |  
|Deferred
    taxes, net |  |                       | -   |  |                       |  
|Total                   |  | $                     | 142 |  |                       | $



36













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
22 – INCOME TAX EXPENSE: (CONTINUED)



D.
Deferred tax assets:



Deferred
tax assets have not been recognized in respect of carryforward losses because it is not probable that future taxable profit will be available
against which the group can utilize the benefits therefrom.



NOTE
23- RELATED PARTIES AND SHAREHOLDERS:



The
following transactions arose with related parties:



|                    |  | Year
    Ended   |      
|------------------- |  | ---------------- | -----
|                    |  | December
    31, |      
|                    |  | 2021             |      
|                    |  |                  |      
|Consulting
    fees |  | $                | 958  
|Salaries            |  |                  | 37   
|Pensions            |  |                  | 6    
|                    |  | $                | 1,001



Amounts
owing by (to) related parties:



|                                  |  | Year
    Ended   |    
|--------------------------------- |  | ---------------- | ---
|                                  |  | December
    31, |    
|                                  |  | 2021             |    
|Key
    management personnel      |  | $                | 183
|Company
    controlled by the CEO |  |                  | (57
|                                  |  | $                | 126



The
CEO has an agreement with the Company pursuant to which he received a consulting fee of NIS 150,000 per month (approximately $46 per
month). In addition, the compensation committee approved a milestone-based bonus of up to $500, of which $400 was earned during the year
ended December 31, 2021.



37













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
24 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:



The
Company is exposed to a variety of financial risks, which results from its financing, operating and investing activities. The objective
of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the
Company’s financial performance and position.



The
Company’s financial instruments are its cash, trade and other receivables, payables, other payables and loans. The main purpose
of these financial instruments is to raise finance for the Company’s operation. The Company actively measures, monitors and manages
its financial risk exposures by various functions pursuant to the segregation of duties and principals. The risks arising from the Company’s
financial instruments are mainly credit risk and currency risk. The risk rate on loans is fixed. The risk management policies employed
by the Company to manage these risks are discussed below.



NOTE
24 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED):



|A. | Credit
                                            risk:
|-- | --------------------------------------------------------



Credit
risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial
assets on hand at the balance sheet date. The Company closely monitors the activities of its counterparties and controls the access to
its intellectual property which enables it to ensure the prompt collection of customers’ balances. The Company’s main financial
assets are cash and cash equivalents as well as other receivables and represent the Company’s maximum exposure to credit risk in
connection with its financial assets.



Wherever
possible and commercially practical the Company holds cash with major financial institutions in Israel. Credit risk arises when a failure
by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the
balance sheet date. The Company closely monitors the activities of its counterparties and controls the access to its intellectual property
which enables it to ensure the prompt collection of customers’ balances.



Although
we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made
problem, or outbreaks of pandemic diseases, including COVID-19, we may be unable to continue our operations and may experience system
interruptions and reputational harm. Acts of terrorism and other geo-political unrest, including the ongoing conflict in Ukraine, could
also cause disruptions in our business or the business of our customers, partners, vendors, or the economy as a whole. All of the aforementioned
risks may be further increased if our disaster recovery plans prove to be inadequate.



The
Company’s main financial assets are cash and cash equivalents and trade accounts receivable as well as marketable securities and
represent the Company’s maximum exposure to credit risk in connection with its financial assets. Wherever possible and commercially
practical the Company holds cash with major financial institutions In Israel.



|                              |  | December
    31, |       |  | December
    31, |  
|----------------------------- |  | ---------------- | ----- |  | ---------------- | -
|                              |  | 2021             |       |  | 2020             |  
|                              |  |                  |       |  |                  |  
|Cash
    and Cash Equivalents |  | $                | 8,470 |  |                  | $
|Cash
    restricted           |  |                  | 60    |  |                  |  
|Trade
    receivables         |  |                  | 857   |  |                  |  
|Other
    Accounts Receivable |  |                  | 434   |  |                  |  
|Total                         |  | $                | 9,821 |  |                  | $



38













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
24 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED):



|B. | Liquidity
                                            risks:
|-- | ------------------------------------------------------------



Liquidity
risk is the risk that arises when the maturity of assets and the maturity of liabilities do not match. An unmatched position potentially
enhances profitability, but can also increase the risk of loss. The Company has procedures with the object of minimizing such loss by
maintaining sufficient cash and other highly liquid current assets and by having an available adequate amount of committed credit facilities.
The following tables detail the Company’s remaining contractual maturity for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay



|Contractual               
|--------------------------
|                          
|Trade
    payables        
|Other
    accounts payable
|Loans                     
|Lease
    liability       



| | C. | Market
                                            risks:
| | -- | ---------------------------------------------------------



The
Company’s’ business of maintenance services of various electronic systems is highly competitive and involves a certain degree
of risk. The Company’s business operations will depend largely upon the outcome of continued sales and services to security establishments
and the initiation of sales of their products to the civilian markets.



The
Company’s Cust2Mate business is new, and the Company is aware of competitors in the market. In addition to the regular management
oversight and skills required, success in this segment will require the Company to penetrate the market as rapidly as possible.



As
of December 31, 2021, if the Company’s functional currency (ILS) had strengthened/ weakened by 5% against the USD, with all other
variables held constant, the loss for the year would decrease /increase by approximately $240.



| | D. | Interest
                                            rate risks:
| | -- | ----------------------------------------------------------------



The
Company is exposed to cash flow interest rate risk from long-term borrowings at variable rate. It is currently Company policy that between
50% and 75% of Company borrowings are fixed rate borrowings. This policy is managed centrally. Although the board accepts that
this policy neither protects the Company entirely from the risk of paying rates in excess of current market rates nor eliminates fully
cash flow risk associated with variability in interest payments, it considers that it achieves an appropriate balance of exposure to
these risks.



During
2021 and 2020, the Company’s borrowings at variable rate were denominated in NIS.



The
Company analyses the interest rate exposure on a quarterly basis. A sensitivity analysis is performed by applying a simulation technique
to the liabilities that represent major interest-bearing positions. Various scenarios are run taking into consideration refinancing,
renewal of the existing positions, alternative financing and hedging. Based on the simulations performed, the impact on profit and loss
and net assets of a 100 basis point shift (being the maximum reasonable expectation of changes in interest rates) would be approximately
$8.



| | E. | Capital
                                            management
| | -- | --------------------------------------------------------------



The
Company considers its capital to be comprised of shareholders’ equity. The Company’s objectives in managing its capital are
to maintain its ability to continue as a going concern and to further develop its business. To effectively manage the Company’s
capital requirements, the Company has a planning and budgeting process in place to meet its strategic goals. In order to facilitate the
management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors,
including successful capital deployment and general industry conditions. Management reviews the capital structure on a regular basis
to ensure the above objectives are met. There have been no changes to the Company’s approach to capital management during the year
ended December 31, 2021. There are no externally imposed restrictions on the Company’s capital.



39













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
25 – OPERATING SEGMENTS:



The
Company and its subsidiaries are engaged in the following two segments:



|a. | Advanced
                                            engineering capabilities to the military/security markets as well as development of related
                                            products for the civilian and retail markets. (“Advanced Engineering”)
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b. | Retail
                                            automation solutions – Smart Carts (“Smart Carts”)
|-- | -----------------------------------------------------------------------------------------------------



|                         |  | For
    the year ended  December 31, 2021 |       
|------------------------ |  | ----------------------------------------- | ------
|                         |  | Advanced
    Engineering                  |       
|Revenues                 |  |                                           |       
|External                 |  | $                                         | 1,935 
|Inter-segment            |  |                                           | -     
|                         |  |                                           |       
|Total                    |  |                                           | 1,935 
|                         |  |                                           |       
|Segment
    loss         |  |                                           | 35,095
|                         |  |                                           |       
|Finance
    expense, net |  |                                           |       
|Tax
    expenses         |  |                                           |       
|Loss                     |  |                                           |       
|                         |  |                                           |       



|                         |  | For
    the year ended December 31, 2020 |      
|------------------------ |  | ---------------------------------------- | -----
|                         |  | Advanced
    Engineering                 |      
|Revenues                 |  |                                          |      
|External                 |  | $                                        | 1,068
|Inter-segment            |  |                                          | -    
|                         |  |                                          |      
|Total                    |  |                                          | 1,068
|                         |  |                                          |      
|Segment
    loss         |  |                                          | 5,770
|                         |  |                                          |      
|Finance
    expense, net |  |                                          |      
|Tax
    expenses         |  |                                          |      
|Loss                     |  |                                          |      



40













A2Z
                                            SMART TECHNOLOGIES CORP.

(Formerly
A2Z TECHNOLOGIES CANADA CORP.)



NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed
in Thousands of US Dollars, except per share data)



NOTE
25 – OPERATING SEGMENTS (CONTINUED):



|                        |  | As
    of December 31, 2021 |       
|----------------------- |  | --------------------------- | ------
|                        |  | Advanced
    Engineering    |       
|                        |  |                             |       
|Segment
    assets      |  | $                           | 12,118
|                        |  |                             |       
|Segment
    liabilities |  | $                           | 1,786 



|                        |  | As
    of December 31, 2020 |       
|----------------------- |  | --------------------------- | ------
|                        |  | Advanced
    Engineering    |       
|                        |  |                             |       
|Segment
    assets      |  | $                           | 8,598 
|                        |  |                             |       
|Segment
    liabilities |  | $                           | 10,418



NOTE
26 – SUBSEQUENT EVENTS:



| | a. | Between
                                            January 1, 2022, and March 31, 2022, 474,207 warrants with an exercise price between NIS5.124-NIS7.1418
                                            were exercised for gross proceeds of $956 and the Company issued 474,207 shares.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On
                                            January 31, 2022, 5,437 warrants with an exercise price of CAD1.95 expired.
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | c. | On
                                            February 3, 2022, the Company announced it has completed the acquisition of all of the outstanding
                                            shares of Isramat Ltd (“Isramat”), an Israeli manufacturer of precision metal
                                            parts. In connection with closing of the acquisition, the Company will pay NIS 2,800 (approximately
                                            $900) in cash and issue the shareholders of Isramat 273,774 common shares in the capital
                                            of the Company at a deemed price per share of $7.6311.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
purchase consideration is being allocated between the acquired tangible assets and intangible assets, based on their fair values. Fair
values were estimated with the assistance of an independent third party.



Management
is fully responsible for the valuation of the assets. An initial valuation has been completed and a final assessment will be made within
one year. The fair value assigned to identifiable intangible assets acquired has been determined by using valuation methods that accounts
for replacement costs, using estimates and assumptions determined by management.



Based
on the above, the Company has initially determined that the purchase price exceeds the fair values of assets acquired by approximately
$312, which is recognized as goodwill. Upon the purchase price allocation, an amount of $312 will be allocated to goodwill to be amortized
over a 20 year period.



NOTE
26 – SUBSEQUENT EVENTS (CONTINUED):



The
table below summarizes the preliminary fair value of assets acquired at the purchase date:



|                                             |  | February
    3, 2022 |      
|-------------------------------------------- |  | -------------------- | -----
|                                             |  |                      |      
|Total
    assets                             |  |                      | 2,649
|Benefit
    shareholder consulting agreement |  |                      | 28   
|Goodwill(*)                                  |  |                      | 312  
|                                             |  |                      |      
|Total
    net assets acquired                |  |                      | 2,989



(*)
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.
The goodwill is attributed to the expected benefits arising from the synergies of the combination of the activities of the Company and
acquired company.



The
pro forma financial information presented below is for informational purposes only, is subject to a number of estimates, assumptions
and other uncertainties, and is not indicative of the results of operations that would have been achieved if the transaction had taken
place at January 1, 2021. The pro forma financial information is as follows:



|                                                |  | For
    the year ended December 31, 2021 |       
|----------------------------------------------- |  | ---------------------------------------- | ------
|                                                |  | Pro
    forma                            |       
|                                                |  | Unaudited                                |       
|                                                |  |                                          |       
|Total
    revenues                              |  | $                                        | 7,915 
|Net
    loss attributable to A2Z’s shareholders |  | $                                        | 37,698



| | d. | On
                                            February 11, 2022, the Company issued 74,985 shares to a trustee in respect of a crowd funding
                                            transaction that was completed in 2019, for which shares were not immediately issued until
                                            the completion of an Israeli tax ruling which was only finalized in late 2021.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41