CBD Global Sciences Inc. — Annual Report 2021

Sep 16, 2021

CBD Global Sciences Inc.

Consolidated Financial Statements For the Years Ended December 31, 2020 and 2019

(Expressed in United States dollars)

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of CBD Global Sciences Inc.

Opinion

We have audited the consolidated financial statements of CBD Global Sciences Inc. (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency) and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

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 Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our 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.

Material Uncertainty Related to Going Concern

Without qualifying our opinion, we draw attention to Note 1 in the financial statements, which describes events and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the 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 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 financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

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

In preparing the financial statements, management is responsible for assessing the Company'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 Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• 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 Company’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 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 Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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.

The engagement partner on the audit resulting in this independent auditor's report is Steven Reichert.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, BC

September 16, 2021

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CBD Global Sciences Inc.

Consolidated Statements of Financial Position As at December 31, 2020 and 2019 (Expressed in United States dollars)

Notes	December 31, 2020 December 31, 2019
ASSETS Cash $ Trade and other receivables 7 Prepaid expenses 8 Inventory 10	541 $ 21,598 2,845 358,401 304,719 18,261 - 3,373,628
Total current assets Deposits 8 Deferred financing fees 16,17 Property and equipment 11	308,105 3,771,888 - 38,510 84,372 139,930 80,000 2,198,052
Total assets $	472,477 $ 6,148,380
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) Accounts payable and other liabilities 12 $ Customer deposit Due to related parties 17 Notes payable 13 Lease liabilities 14 Obligation to issue shares 16 Derivative liability 15 Convertible debt 15	1,878,496 $ 1,585,406 25,000 25,000 43,012 53,256 394,271 335,477 834,847 165,336 218,515 - 154,160 - - 3,610,386
Total current liabilities Due to related parties 17 Convertible debt 15 Lease liabilities 14 Notes payable 13	3,548,301 5,774,861 1,212,135 400,636 3,884,070 - 71,801 641,108 31,578 490,000
Total liabilities	8,747,885 7,306,605
Shareholders’ equity (deficiency) Share capital 16 Obligation to issue shares 16 Preferred shares 16 Capital reserves 16 Deficit	6,560,587 5,128,884 131,705 944,842 2,079,237 2,079,237 4,120,815 2,928,862 (21,167,752) (12,240,050)
Total shareholders’deficiency	(8,275,408) (1,158,225)
Total liabilities and shareholders’ equity (deficiency) $	472,477 $ 6,148,380
Nature of operations and going concern (Note 1) Subsequent events (Note 25) Approved and authorized by the Board of Directors on September 16, 2021: “Brad Wyatt” Director “Glenn Dooley” Director

The accompanying notes form an integral part of these consolidated financial statements

CBD Global Sciences Inc.

Consolidated Statements of Loss and Comprehensive Loss For the years ended December 31, 2020 and 2019

(Expressed in United States dollars)

			2020		2019
Sales	18	$	305,400	$	2,317,138
Cost of sales	10		481,534		1,579,188
Gross profit (loss), excluding fair value items			(176,134)		737,950
Unrealized gain on changes in fair value of
biological assets	9		-		2,188,895
Realized fair value amounts included in inventory
sold	10		(10,927)		(1,493,599)
Gross profit (loss)			(187,061)		1,433,246
Accretion expense	13,15,17		554,705		1,491,341
Change in fair value of derivative liability	15		(5,704)		(16,876)
Consulting fees			362,431		221,667
Depreciation	11		34,917		175,885
Finance fees			73,170		60,989
Foreign exchange loss			209		445
Gain on settlement of debt	16		(16,146)		(259,044)
General and administrative expenses	19		1,381,869		3,134,557
Government assistance	13		(165,034)		-
Impairment of inventory	10		3,400,862		1,975,512
Impairment of property and equipment	11		1,231,322		-
Interest expense			586,720		519,061
Interest income			(584)		(1,773)
Listing expense	6		-		2,410,796
Loss on debt extinguishment	15		216,841		81,875
Loss on disposal of property and equipment	11		88,265		-
Loss on lease modification	14		159,973		-
Marketing, sales and distribution			377,153		639,048
Research and development			35,917		71,985
Share-based payments	16		423,755		-
Total operating expenses			(8,740,641)		10,505,468
Loss before income taxes			(8,927,702)		(9,072,222)
Income tax recovery	22		-		116,000
Net loss and comprehensive loss		$	**(8,927,702) **	$	(8,956,222)
Weighted average number of shares – basic and
diluted			31,501,446		16,839,241
Loss per share–basic and diluted		$	(0.28)	$	(0.53)

The accompanying notes form an integral part of these consolidated financial statements

CBD Global Sciences Inc.

Consolidated Statement of Changes in Shareholders’ Equity (Deficiency) For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

Notes	Share capital Number of common shares Common shares amount Number of preferred shares Preferred shares amount Obligation to issue shares Capital reserves Deficit Total shareholders’ equity (deficiency)
Balance, December 31, 2018 Shares issued pursuant to merger 6 Preferred shares issued pursuant to merger 6 Conversion of preferred shares 16 Shares issued for cash 16 Share issue costs 16 Units issued for cash 16 Shares issued for debt settlement 16 Conversion of debentures 15,16 Exercise of warrants 16 Discount to related party notes 17 Issuance of convertible debt 15 Issuance of investor warrants 16 Share-based payments 16 Net loss for the year	13,451,521 $ 3,532,850 - $ - $ - $ 1,783,295 $ (3,283,828) $ 2,032,317 2,500,000 2,367,657 - - - - - 2,367,657 - (3,023,697) 415,733 3,023,697 - - - - 9,894,935 944,460 (98,949) (944,460) - - - - 527,946 500,000 - - 786,015 - - 1,286,015 - (3,889) - - - - - (3,889) 105,590 72,225 - - - 27,775 - 100,000 598,438 361,759 - - - - - 361,759 230,977 187,696 - - - (46,925) - 140,771 133,723 102,323 - - - (100,302) - 2,021 - - - - - 589,767 - 589,767 - - - - - 382,161 - 382,161 - - - - - 227,743 - 227,743 162,542 87,500 - - 158,827 65,348 - 311,675 - - - - - - (8,956,222) (8,956,222)
Balance, December 31, 2019 Private placement 16 Shares issued for debt settlement 16 Conversion of debentures 15,16 Exercise of warrants 16 Share-based payments 16 Share subscription receipts 16 Issuance of warrants for debt 16 Equity portion of convertible debenture 15 Discount to related party notes 17 Issuance of warrants for debt extinguishment 15 Modification of warrants 15 Net loss for the year	27,605,672 $ 5,128,884 316,784 $ 2,079,237 $ 944,842 $ 2,928,862 $ (12,240,050) $ (1,158,225) 2,620,000 610,760 - - (542,500) 44,240 - 112,500 341,915 70,692 - - - - - 70,692 248,508 34,493 - - - (8,325) - 26,168 32,996 27,118 - - (25,000) (2,118) - - 3,676,667 688,640 - - (27,122) 461,485 - 1,123,003 - - - - (218,515) - - (218,515) - - - - - 3,498 - 3,498 - - - - - 52,334 - 52,334 - - - - - 213,739 - 213,739 - - - - - 187,868 - 187,868 - - - - - 239,232 - 239,232 - - - - - - (8,927,702) (8,927,702)
Balance, December 31, 2020	34,525,758 $ 6,560,587 316,784 $ 2,079,237 $ 131,705 $ 4,120,815 $ (21,167,752) $ (8,275,408)

The accompanying notes form an integral part of these consolidated financial statements

CBD Global Sciences Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

	2020 2019
Operating activities Net loss Items not affecting cash: Unrealized changes in fair value of biological assets Realized fair value amounts included in inventory sold Accretion Change in fair value of derivative Depreciation Income tax recovery Finance fees Impairment of inventory Impairment of property and equipment Impairment of trade receivables Interest expense Listing expense Loss on debt extinguishment Gain on settlement of debt Share-based payments Loss on disposal of property and equipment Loss on lease modification Government assistance Non-cash working capital items: Trade accounts receivable Prepaid expenses Biological assets Inventory Accounts payable and other liabilities Customer deposit	$ (8,927,702)$ (8,956,222) - (2,188,895) - 1,493,599 554,705 1,491,341 (5,704) (16,876) 159,961 301,234 - (116,000) 68,719 43,410 3,400,862 1,975,512 1,231,322 - 58,179 501,137 362,513 313,575 - 2,410,796 216,841 81,875 (16,146) (259,044) 815,229 328,551 88,265 - 159,973 - (165,034) - 297,377 (784,538) 8,156 103,116 - 2,188,895 (27,234) (2,725,370) 379,928 1,851,431 - 25,000
Net cash used in operating activities	(1,339,790) (1,937,473)
Investing activities Proceeds on sale of land Acquisition of property and equipment	55,273 - - (210,331)
Net cash provided by (used in) investing activities	55,273 (210,331)
Financing activities Repayment of notes payable Proceeds from issuance of convertible debentures Proceeds from issuance of notes payable Proceeds from issuance of shares Proceeds from exercise of warrants Proceeds from shares to be issued Share issuance costs Loans from related parties Payments on lease liability Government assistance	(226,629) (561,151) 50,000 250,000 375,000 680,314 112,500 600,000 - 2,021 - 786,015 - (3,889) 815,582 333,195 (27,788) (237,434) 164,795 -
Net cash provided by financing activities	1,263,460 1,849,071
Change in cash Cash, beginning	(21,057) (298,733) 21,598 320,331
Cash, end	$ 541$ 21,598

Supplemental cash flow information (Note 20)

The accompanying notes form an integral part of these consolidated financial statements

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

CBD Global Sciences Inc. (the “Company” or “CBD Global”) is in the business of producing and selling industrial hemp derived cannabidiol (“CBD”) infused consumable and topical products. The Company’s head office, principal address and records office is located at 225 Union Boulevard, Suite 350, Lakewood, Colorado, 80228. The registered office in Nevada is located at 1085 Pleasure Lane, Henderson, Nevada, 89002 and 2754 Rockbridge Dr., Highlands Ranch, CO 80126 for Colorado.

Subsequent to the year ended December 31, 2020, two of the Company’s subsidiaries, Global NV Corp. (“Global NV”) and Strasburg Pharms, LLC, filed for protection under Chapter 7 of the Bankruptcy Code as a result of claims filed against Global NV by a former landlord during the year ended December 31, 2020 (Note 25). Prior to filing for bankruptcy, the Company’s position was to defend these claims; however the landlord became an aggressive creditor. As at December 31, 2020, the balance of lease liabilities includes the amounts claimed by the landlord pursuant to a terminated lease agreement (Note 14). In connection with the bankruptcy, a trustee has been appointed on behalf of the Company to liquidate assets and discharge the outstanding liabilities of Global NV and Strasburg Pharms LLC. This liquidation process is ongoing. The bankruptcy process will potentially allow the Company to implement operational and commercial plans to reposition the Company for future growth.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. To date, the Company has incurred losses and will incur further losses in the development of its business. As at December 31, 2020, the Company had a working capital deficit of $3,240,196 and an accumulated deficit of $21,167,752.

These factors, including the Company’s financial position, liquidity and the uncertain outcome of the matters arising from the bankruptcy proceedings, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue its operations and to realize assets at their carrying values is dependent upon its ability to raise financing and generate profits and positive cash flows from operations in order to cover its operating costs. From time to time, the Company generates working capital to fund its operations by raising additional capital through equity or debt financing. However, there is no assurance it will be able to continue to do so in the future. These consolidated financial statements do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

The outbreak of the coronavirus, also known as "COVID-19", has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time.

2. BASIS OF PRESENTATION

• a) Basis of presentation and measurement, functional currency and basis of consolidation

These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

2. BASIS OF PRESENTATION (Continued)

• a) Basis of presentation and measurement, functional currency and basis of consolidation (continued)

The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs except for certain financial instruments which are measured at fair value. The consolidated financial statements are presented in United States dollars, unless otherwise noted, which is the functional currency of the Company and its subsidiaries.

These consolidated financial statements include the financial statements of the Company and entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the Company’s subsidiaries are included in these consolidated financial statements. All intercompany balances and transactions, income and expenses have been eliminated upon consolidation. The Company’s subsidiaries are:

Name of subsidiary	Place of incorporation	Proportion of ownership	Principal activity
Strasburg Pharms, LLC	CO	100%	Farming operations
Global NV Corp.	CO	100%	CBD oil product sales
CannaOil, Inc.	CO	100%	CBD oil product sales
SMBT, LLC	CO	100%	CBD oil product sales
Global Sciences IP,LLC	Nevada	100%	Intellectualproperty

Subsequent to the year ended December 31, 2020, Global NV Corp. and Strasburg Pharms, LLC filed for protection under Chapter 7 of the Bankruptcy Code (Note 25).

Subsequent to the year ended December 31, 2020, the Company incorporated the following wholly-owned subsidiaries: Global Sciences Holdings Inc., Dog Unleashed CBD, LLC, Legacy Distribution Group LLC, and Energy Unleashed LLC.

3. SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, net of estimated returns and discounts. The Company considers the terms of the sales contracts as well as industry practices, taking into consideration the type of customer, the nature of the transaction and the specific circumstances of each arrangement.

The Company’s revenue is comprised of sales of Cannabidiol products including hemp biomass, oil and oil products. Revenue from the sale of goods is recognized when control of the goods has been transferred to the customer under the terms of an enforceable contract. The Company satisfies its performance obligation and transfers control to the customer upon shipment. Anticipated product returns are provided for at the time of sale. Billings rendered in advance of performance under contracts are recorded as deferred revenue.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Biological assets

The Company’s biological assets consist of hemp plants and are valued using the income approach. Production costs are capitalized to biological assets and include all direct and indirect costs relating to biological transformation. While the Company’s biological assets are within scope of IAS 41, Agriculture , the direct and indirect costs of biological assets are determined using an approach similar to the capitalization criteria outlined in IAS 2, Inventories . They include direct cost of seeds and growing materials, and indirect costs such as utilities, supplies and equipment rentals used in the growing and harvesting process. Direct labor costs include harvesting, planting and propagation. Indirect labor relates to quality control processes. All production costs are capitalized as they are incurred and subsequently recorded within cost of goods sold on the consolidated statements of comprehensive loss in the period that the related product is sold.

The Company measures biological assets at fair value less cost to sell up to the point of harvest, which becomes the basis for the cost of biomass inventories after harvest. Net unrealized gains or losses arising from the changes in fair value less cost to sell during the period are included in the results of operations for the related period.

Inventory

Inventories of biomass are initially valued at cost or deemed cost and subsequently at the lower of cost and net realizable value on the consolidated statements of financial position. Inventories of harvested hemp biomass and hemp flower are transferred from biological assets at their fair value less costs to sell at harvest which becomes the deemed cost. Any subsequent post-harvest production costs or cost of conversion to CBD Oil and CBD oil products are capitalized to inventory to the extent that the cost is less than net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the average cost basis. Products for resale and supplies and consumables are valued at lower of cost and net realizable value.

The Company reviews inventory for obsolete, redundant and slow-moving goods and any such inventory are written-down to net realizable value.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation and impairment losses. The Company provides for depreciation using the following methods at rates designed to depreciate the cost of the equipment over their period of expected useful life. No depreciation is recorded in the year of disposal or on assets under construction. The estimated useful lives of assets are reviewed by management and adjusted if necessary. The annual depreciation rates and methods are as follows:

Asset	Rate	Basis
Equipment	30%	Declining balance
Greenhouses	15 years	Straight-line
Leasehold improvements	5 years	Straight-line
Machinery	5 years	Straight-line
	Over the remaining
Leased right-of-use asset	term at recognition	Straight-line

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and equipment (continued)

Cost includes expenditures that are directly attributable to the acquisition of the asset or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably.

The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to profit or loss during the period they are incurred.

Financial instruments

Recognition, classification and measurement

Financial assets are classified and measured based on the business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. IFRS 9, Financial Instruments contains three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income (“FVTOCI”) and fair value through profit and loss (“FVTPL”). Financial assets are recognized in the statements of financial position if the Company has a contractual right to receive cash or other financial assets from another entity. Financial assets are derecognized when the rights to receive cash flows from the asset have expired or were transferred and the Company has transferred substantially all risks and rewards of ownership.

All financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instruments. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial instruments are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

The Company has classified its trade and other receivables, accounts payable and other liabilities, due to related parties, notes payable, convertible debt and long-term debt as financial assets and financial liabilities measured at amortized cost. Such assets and liabilities are recognized initially at fair value inclusive of any directly attributable transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment losses. The Company has classified its cash as a financial asset measured at fair value through profit and loss. Derivative financial instruments entered into by the Company that do not meet hedge accounting criteria are classified as FVTPL.

Financial assets and financial liabilities are offset and the net amount presented in the consolidated statements of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (continued)

Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. Loss allowances for accounts receivables are always measured at an amount equal to lifetime expected credit losses if the amount is not considered fully recoverable. A financial asset carried at amortized cost is considered credit-impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Individually significant financial assets are tested for credit-impairment on an individual basis. The remaining financial assets are assessed collectively.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

Losses are recognized in the consolidated statements of comprehensive loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the consolidated statements of comprehensive loss.

Share capital

Instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s shares, stock options and warrants are classified as equity instruments. Incremental costs directly attributable to the issue of new equity instruments are shown in equity as a deduction, net of tax, from the proceeds. In the event that the financing is not completed, these costs are expensed to profit or loss.

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The fair value of the warrants issued is first measured using the BlackScholes Option Pricing Model and then the residual value of the proceeds is allocated to the shares.

In situations where share capital is issued, or received, as non-monetary consideration and the fair value of the asset or services received, or given up is not readily determinable, the fair market value of the shares is used to record the transaction. The fair market value of the shares issued, or received, is based on the trading price of those shares on the appropriate security exchange on the date of the agreement to issue shares.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-based payments

Where equity-settled compensation arrangements are awarded to employees, the fair value of the equity instruments at the date of grant is charged to profit or loss over the vesting period. Where equity instruments are awarded to employees, the fair value of the benefit (fair value of the equity instrument less consideration received) at the date of grant is charged to profit or loss over the vesting period. Performance 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 equity instruments that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the equity instruments granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of the equity instruments are modified before they vest, the increase in the fair value of the equity instruments, measured immediately before and after the modification, is also charged to the consolidated statement of loss and comprehensive loss over the remaining vesting period.

When equity instruments are granted to non-employees, they are recorded at the fair value of the goods and services received, unless the fair value of the goods and services received cannot be reasonably measured, in which case they are measured using the fair value of the equity instruments issued. Expenses are recorded in the consolidated statement of loss and comprehensive loss. Amounts related to the cost of issuing shares are recorded as a reduction of share capital.

When the value of goods or services received in exchange for the share-based compensation cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

All equity-settled share-based compensation are reflected in reserves, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in reserves is credited to share capital, adjusted for any consideration paid.

Where a grant of equity-settled share-based compensation is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

Loss per share

Loss per share is computed by dividing net loss available to shareholders by the weighted average number of shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding options and warrants were exercised and that the proceeds from such exercises were used to acquire shares at the average market price during the reporting periods.

6

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of loss and comprehensive loss, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In this case the income tax is also recognized in other comprehensive loss or directly in equity, respectively.

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is recognized on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that future taxable income will be available to allow all or part of the temporary differences to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted and are expected to apply by the end of the reporting period. Deferred tax assets and deferred income tax liabilities are offset if a legally enforceable right exist to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Leases

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to use an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for leases with a lease term of 12 months or less and leases of low value assets. For these leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments and expected payments at the end of the lease, discounted using the rate implicit in the lease. If the rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability using the effective interest method and by reducing the carrying amount to reflect the lease payments made.

7

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Leases (continued)

The right-of-use asset is measured at a cost that includes the lease liability, adjusted for any initial direct costs; prepaid lease payments; estimated costs to dismantle, remove or restore; and lease incentives received. The right-of use asset is subsequently measured at cost less accumulated depreciation and impairment losses.

The Company re-measures the lease liability and makes a corresponding adjustment to the related right-ofuse asset whenever the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is re-measured by discounting the revised lease payments using a revised discount rate.

Under IFRS 16, the Company is required to assess the classification of a sublease with reference to the rightof-use asset, not the underlying asset. The Company does not have any subleases.

Government assistance

Government assistance is recognized when there is reasonable assurance that the Company has met the requirements of the approved grant or loan program and the Company is reasonably certain based on management’s judgment that the government grant will be received or the loan will be forgiven.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of these consolidated financial statements requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the financial position reporting date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, related to, but are not limited to, the following:

Useful life of property and equipment

Property and equipment is depreciated over its estimated useful life. Estimated useful lives are determined based on current facts and past experience and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence and regulations.

Incremental borrowing rate

Under IFRS 16, the Company assesses whether a contract contains a lease and, if so, recognizes a lease liability by discounting the future lease payments over the non-cancelable term of the lease, using the Company’s estimated incremental borrowing rate. Differences in the estimated incremental borrowing rate could result in materially different lease liabilities and right-of-use assets.

8

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

Biological assets

The Company measures biological assets consisting of hemp biomass at fair value less cost to sell up to the point of harvest, which becomes the basis for the cost of finished goods inventories after harvest. The transfer of the fair value of biological assets to inventory may increase or decrease the deemed cost of ending inventory. In calculating the fair value of biological assets, management is required to make a number of estimates including wastage, expected yields, selling price and costs to sell at the point of harvest, and percentage of costs incurred for each stage of plant growth (Note 9).

Inventory

In calculating final inventory values, management is required to determine an estimate of spoiled or expired inventory and compares the inventory cost to estimated net realizable value. The valuation of cannabidiol oil and products also requires the estimate of conversion costs incurred, which become part of the carrying amount for the inventory. The Company must determine if the cost of any inventory exceeds its net realizable value, such as cases where prices have decreased or inventory has spoiled or has otherwise been damaged.

Carrying value and recoverability of property and equipment

The Company has determined that property and equipment that are capitalized may have future economic benefits and may be economically recoverable. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and useful lives of the assets.

Judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements are as follows:

Going concern

The Company’s ability to execute its strategy by funding future working capital requirements requires significant judgment (Note 1). Estimates and assumptions are continually evaluated and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances.

Determining non-cancellable lease term

The non-cancellable lease term depends on the terms of the lease agreement and management’s plans for the leased asset in question. The management must evaluate whether or not the Company shall exercise renewal options, the result of which could extend the non-cancellable term of the lease. Extending the lease term can have a material impact on the recorded value of lease liabilities and right-of-use assets.

5. BASIS OF FAIR VALUE

Financial instruments that are measured subsequent to initial recognition at fair value are grouped in levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

9

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

5. BASIS OF FAIR VALUE (Continued)

The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.

The Company’s financial instruments consist of cash, trade and other receivables, accounts payable and other liabilities, due to related parties, notes payable, convertible debt, lease liabilities, derivate liability and long-term debt. With the exception of convertible debt, lease liabilities and notes payable, the carrying value of the Company’s financial instruments approximate their fair values due to their short-term maturities. The fair value of convertible debt and notes payable approximate their carrying value, excluding discounts, due to minimal changes in interest rates and the Company’s credit risk since issuance of the instruments. Cash is measured at fair value on a recurring basis using level 1 inputs. Derivative liability is measured at fair value at each reporting period end using level 2 inputs.

6. REVERSE TAKEOVER

On October 17, 2019, CBD Global completed a merger agreement with Global NV for a three-cornered merger transaction which constituted a reverse take-over (“RTO”) of the Company by Global NV (the “Acquisition”). Pursuant to the terms of the merger agreement, Global NV amalgamated with a wholly owned subsidiary of CBD Global, pursuant to a statutory procedure of the Nevada Revised Statutes, and in connection with such merger each holder of Global NV’s shares received 1.31987 common shares and 0.036801 preferred shares of CBD Global (the “CBD Global Unit”) in exchange for each Global NV’s common share held.

At the time of the RTO, the Company did not constitute a business as defined under IFRS 3, Business Combinations ; therefore, the RTO has been accounted for under IFRS 2, Share-based Payment , where the difference between the consideration given to acquire the Company and the net asset value of the Company is recorded as a listing expense to net loss.

As a result of the Acquisition, Global NV is deemed the acquirer for accounting purposes and therefore its assets, liabilities and operations are included in the consolidated financial statements at their historical carrying value. Global NV’s operations were considered to be a continuance of the business and operations of Global NV. The Company’s results of operations are those of Global NV, with CBD Global’s operations included from October 17, 2019, the closing date of the Acquisition, onwards. These consolidated financial statements present the historical financial information of Global NV up to the date of the RTO.

The fair value of the consideration issued for the net assets of the Company is as follows:

Consideration:
Fair value of shares issued (2,500,000 shares)	$	2,367,657
Settlement of debt		(30,328)
Total consideration		2,337,329
Fair value of net assets of the Company:
Prepaid expenses		3,906
Accounts payable		(77,373)
Total net assets		(73,467)
Listing expense	$	2,410,796

10

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

6. REVERSE TAKEOVER (Continued)

In connection with the RTO, the Company issued 415,733 preferred shares to the shareholders’ of Global NV shares with a fair value of $3,023,697. The value of the preferred shares of $3,023,697 was reclassed from share capital to preferred shares on the issuance date. Each preferred share is convertible to 100 common shares.

7. TRADE AND OTHER RECIVABLES

The Company’s trade and other receivables consists of the following:

		December		December
		31, 2020		31, 2019
Trade accounts receivable	$	-	$	648,338
Provision for doubtful accounts		-	$	(289,937)
Sales tax receivable		2,845		-
	$	2,845	$	358,401

During the year ended December 31, 2020, the Company recorded a provision for doubtful accounts of $Nil for expected credit losses (2019 – $289,937) and directly wrote off $58,179 (2019 – $211,200) in accounts receivable to bad debt expense. Bad debt expense is included in general and administrative expense in the consolidated statements of loss and comprehensive loss.

8. PREPAID EXPENSES

The Company’s prepaid expenses consist of the following:

		December 31,		December
		2020		31, 2019
Current:
Consulting services (Note 16)	$	294,614	$	-
Other		10,105		18,261
		304,719		18,261
Non-current deposits		-		38,510
	$	304,719	$	56,771

During the year ended December 31, 2020, deposits of $38,510 were withheld by a landlord in connection with the termination of a lease contract (Note 14).

9. BIOLOGICAL ASSETS

The Company’s biological assets consist of hemp plants. The continuity of biological assets is as follows:

		December		December
		31, 2020		31, 2019
Biological assets, beginning	$	-	$	-
Production of biological assets		-		1,237,953
Unrealized changes in fair value less costs
to sell of biological assets		-		2,188,895
Transfers to inventory upon harvest		-		(3,426,848)
Biological assets, ending	$	-	$	-

11

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

9. BIOLOGICAL ASSETS (Continued)

During the year ended December 31, 2020, the Company determined that the germination of crops planted did not yield significant results. As a result, the Company did not recognize any changes in fair value of biological assets or capitalize production costs.

As at December 31, 2019, all hemp plants had been harvested and converted into biomass; and all production costs had been capitalized.

10. INVENTORY

The following is a breakdown of inventory at December 31, 2020 and 2019:

		December		December
		31, 2020		31, 2019
Hemp biomass	$	-	$	2,424,806
Cannabidiol oil		-		752,825
Cannabidiol oil products		-		35,997
Hemp seeds		-		160,000
Balance	$	-	$	3,373,628

During the year ended December 31, 2020:

• The Company recognized $492,461 of inventory expensed to cost of goods sold including $10,927 non-cash expense relating to the changes in fair value of inventory sold.

• The Company determined that the germination of crops did not yield significant results. As a result, the Company recorded an impairment loss related to the hemp seed inventory of $160,000.

• The Company identified certain bags of processed biomass that were considered to be spoiled and as a result total inventory of $358,578, or 29,401 pounds of biomass, was recorded as an impairment of inventory.

• The Company recorded a further impairment of inventory of $2,882,284 due to concerns and uncertainty with the Company’s ability to realize sales as a result of pending bankruptcy proceedings (Notes 1 and 25).

During the year ended December 31, 2019:

• The Company recognized $3,072,787 of inventory expensed to cost of goods sold including $1,493,599 non-cash expense relating to the changes in fair value of inventory sold.

• The Company identified certain bags of processed biomass that may be spoiled and as a result segregated 9,152 pounds of biomass for inspection. As at December 31, 2019, it was uncertain of the total amount of segregated biomass could be salvaged and the Company recorded an inventory provision of $463,670.

• The Company recorded a further impairment of inventory of $1,511,842 related to hemp biomass to the net realizable value.

12

CBD Global Sciences Inc.

Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

11. PROPERTY AND EQUIPMENT

		Farm tools				Assets
		&				under		Leasehold		Lease
		equipment		Greenhouses		construction		improvements	Land	assets	Total
Cost
Balance, December 31, 2018	$	323,351	$	230,477	$	185,575	$	- $	726,519 $	- $	1,465,922
Additions		194,453		-		-		15,628	250	956,653	1,166,984
Balance, December 31, 2019		517,804		230,477		185,575		15,628	726,769	956,653	2,632,906
Impairment of assets		(517,804)		(230,477)		(105,575)		(15,628)	-	(956,653)	(1,826,137)
Disposals		-		-		-		-	(726,769)	-	(726,769)
Balance, December 31, 2020	$	-	$	-	$	80,000	$	-$	-$	-$	80,000
Accumulated Depreciation
Balance, December 31, 2018	$	90,419	$	43,201	$	-	$	- $	- $	- $	133,620
Depreciation		104,188		16,285		-		2,970	-	177,791	301,234
Balance, December 31, 2019		194,607		59,486		-		2,970	-	177,791	434,854
Depreciation		70,049		16,285		-		2,531	-	71,096	159,961
Impairment of assets		(264,656)		(75,771)		-		(5,501)	-	(248,887)	(594,815)
Balance, December 31, 2020	$	-	$	-	$	-	$	-$	-$	-$	-
Net Book Value
At December 31,2019	$	323,197	$	170,991	$	185,575	$	12,658$	726,769$	778,862$	2,198,052
At December 31, 2020	$	-	$	-	$	80,000	$	-$	-$	-$	80,000

During the year ended December 31, 2020, depreciation of $125,044 (2019 - $125,349) was included in cost of sales.

During the year ended December 31, 2020, the Company entered into an agreement to sell two parcels of land for a total of 140 acres with a carrying value of $638,504 for a sale price of $700,000. Outstanding notes payable which were secured by these land parcels and totaled $583,232 were repaid from the sale proceeds (Note 13). The Company received net cash proceeds of $55,273 after deducting $61,495 in commissions and taxes. As a result of the sale, the Company recorded a loss on disposal of $88,265.

13

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

11. PROPERTY AND EQUIPMENT (Continued)

During the year ended December 31, 2020, the Company recorded an impairment loss in the amount of $707,766 related to leased assets that were abandoned (Note 14).

During the year ended December 31, 2020, the Company recorded further impairment of $523,556 due to concerns and uncertainty with respect to pending bankruptcy proceedings (Notes 1 and 25).

Subsequent to the year ended December 31, 2020, the Company sold assets under construction for proceeds of $80,000 (Note 25).

12. ACCOUNTS PAYABLE AND OTHER LIABILITIES

		December		December
		31, 2020		31, 2019
Trade payables	$	1,059,411	$	817,423
Accrued liabilities		771,112		763,890
Accrued interest		47,973		4,093
	$	1,878,496	$	1,585,406

13. NOTES PAYABLE

					December	December	31, 2020	December	December	31, 2019
	Nominal
	interest	Date of					Carrying	Face		Carrying
	rate	maturity			Face value		amount	value		amount
Promissory note	12.0%	12/31/2020	(a)	$	-	$	-$	92,939	$	92,939
Promissory note	12.5%	5/19/2019	(b)		-		-	210,000		210,000
Promissory note	12.5%	3/1/2019	(c)		-		-	280,000		280,000
Promissory note	-	8/31/2020	(d)		18,173		18,173	68,028		66,458
Promissory note	-	12/27/2019	(e)		101,098		101,098	176,080		176,080
Promissory note	8.0%	10/1/2020	(f)		100,000		100,000	-		-
Promissory note	45.0%	4/23/2020	(g)		175,000		175,000	-		-
Promissory note	3.75%	6/3/2050	(h)		18,073		5,329	-		-
Promissory note	8.0%	9/1/2023	(i)		26,249		26,249	-		-
Total				$	438,593	$	425,849$	827,047	$	825,477
Current					(394,271)		(394,271)	(337,047)		(335,477)
Long-term				$	44,322	$	31,578$	(490,000)	$	(490,000)

14

CBD Global Sciences Inc.

Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

13. NOTES PAYABLE (Continued)

	Face value Carrying value
Balance, December 31, 2018 Issued during the year Transaction costs Accretion Repayment of principal	$ 725,698 $ 699,213 662,500 662,500 - (60,006) - 84,921 (561,151) (561,151)
Balance, December 31, 2019 Issued during the year Transaction costs Government assistance Accretion Interest Repayment of principal Proceeds on sale of land applied to repay principal	$ 827,047 $ 825,477 421,030 421,030 - (3,498) - (12,989) - 5,313 377 377 (226,629) (226,629) (583,232) (583,232)
Balance, December 31, 2020	438,593 425,849

• The difference between the face value and the carrying amount is attributed to the discount to approximate fair value using the assumptions described below.

• a) On May 25, 2017, an investor advanced $100,000 to the Company in exchange for a one-year promissory note and a 1.5% unit in the gross sales amount of the 2017 outdoor harvest due when sold in 2018. The note was secured by land owned by a company controlled by the President of the Company at the time, bore an interest rate of 10% per annum, required monthly interest payments, and a lump sum payment at the maturity date of May 25, 2018. On May 15, 2018, the terms of this note were renegotiated as follows: interest rate of 12% per annum from May 25, 2018, monthly payments of interest and principal starting August 1, 2018, maturing on June 30, 2019. The maturity date may be extended year to year upon written agreement between the parties. The note was secured by the 60-acre parcel of land acquired by the Company on May 10, 2018.

During the year ended December 31, 2020, the Company issued 40,172 common shares to settle $10,043 of accrued interest on the note (Note 16).

During the year ended December 31, 2020, the Company sold the parcel of land secured by this promissory note and repaid the promissory note from the sale proceeds (Note 11).

• b) On May 10, 2018, the Company acquired a 60-acre parcel of farmland. In consideration for the land, the Company assumed a $210,000 note payable from a company controlled by the President and the Chief Operating Officer of the Company. The note was secured by the 60-acre parcel of land and bore interest at a rate of 12.5% per annum, with payments of interest only due monthly and maturing on May 19, 2019. On March 15, 2019, the Company entered into an agreement to extend the maturity date of the note to March 15, 2021. In connection with this agreement, the Company issued 1,715 common shares for consideration of the extension.

During the year ended December 31, 2020, the Company sold the parcel of land secured by this promissory note and repaid the promissory note from the sale proceeds (Note 11).

15

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

13. NOTES PAYABLE (Continued)

• c) On May 10, 2018, the Company acquired an 80-acre parcel of farmland. In consideration for the land, the Company assumed a $280,000 note payable from a company controlled by the President of the Company and the Chief Operating Officer of the Company. The note was secured by the 80-acre parcel of land and bore interest at a rate of 12.5% per annum, with payments of interest only due monthly and maturing on March 1, 2019. On March 15, 2019, the Company entered into an agreement to extend the maturity date of the note to March 15, 2021. In connection with this agreement, the Company issued 2,285 common shares for consideration of the extension.

During the year ended December 31, 2020, the Company sold the parcel of land secured by this promissory note and repaid the promissory note from the sale proceeds (Note 11).

• d) On July 18, 2019, an investor advanced $200,000 in exchange for a promissory note. The principal and a lump sum interest payment of $41,600 were due on August 31, 2020. The note is secured against the Company’s biomass inventory and proceeds from the sale of biomass through a Biomass Processing Agreement. In connection with the promissory note, the Company incurred a financing fee of $8,000. As at December 31, 2020, the loan was in default; and as a result of the default the outstanding principal balance accrues interest at a rate of 36% per annum effective September 5, 2020.

As at December 31, 2020, accrued interest payable of $3,623 (2019 - $406) is included in accounts payable and accrued liabilities.

During the year ended December 31, 2020, the Company paid principal and interest of $49,855 (2019 - $131,972) and $25,163 (2019 - $16,437), respectively.

• e) On October 24, 2019, an investor advanced $200,000 in exchange for a promissory note. The principal and a lump sum interest payment of $20,848 were due at maturity on December 27, 2019. The note is secured against the Company’s biomass inventory and proceeds from the sale of biomass through a Biomass Processing Agreement. In connection with the promissory note, the Company incurred a financing fee of $4,000. As at December 31, 2020, the loan was in default; and as a result of the default the outstanding principal balance accrues interest at a rate of 20% per annum effective January 1, 2020.

As at December 31, 2020, accrued interest payable of $29,765 (2019 - $Nil) is included in accounts payable and accrued liabilities.

During the year ended December 31, 2020, the Company paid principal and interest of $75,000 (2019 - $23,902) and $Nil (2019 - $20,848), respectively.

• f) On February 6, 2020, an investor advanced $100,000 in exchange for a promissory note. The note is unsecured, and the principal and interest at a rate of 8% per annum were originally due at maturity on April 30, 2020. In connection with the promissory note, the Company issued 25,000 warrants with a fair value of $3,498 (Note 16). During the year ended December 31, 2020, the Company entered into a loan modification agreement to extend the maturity date to October 1, 2020. The loan modification provided for the issuance of an additional 100,000 warrants which had not been issued as at December 31, 2020 (Note 16). As at December 31, 2020, accrued interest payable of $7,211 (2019 - $Nil) is included in accounts payable and accrued liabilities. As at December 31, 2020, the loan was in default.

• g) On March 24, 2020, an investor advanced $175,000 in exchange for a promissory note. The principal and interest at a rate of 45% per annum were due at maturity on April 23, 2020. The note is secured by the assets of the Company and has been personally guaranteed by the President of the Company. As at December 31, 2020, accrued interest payable of $4,153 (2019 - $Nil) is included in accounts payable and accrued liabilities. As at December 31, 2020, the loan was in default.

During the year ended December 31, 2020, the Company paid interest of $62,515 (2019 - $Nil).

16

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

13. NOTES PAYABLE (Continued)

• h) During the year ended December 31, 2020, the Company was granted a secured disaster loan from the U.S. Small Business Administration with a principal of $17,700. Interest accrues on the principal at a rate of 3.75% per annum. The Company may repay the loan in part or in full at any time without interest or penalty. The Company is required to pay principal and interest payments of $87 per month beginning in June 2021 with each payment being first applied to accrued interest and then principal. All remaining principal and accrued interest is due and payable on June 3, 2050. During the year ended December 31, 2020, the Company recorded government assistance income of $12,989 to discount the loan to present value at an effective interest rate of 20%.

• i) During the year ended December 31, 2020, the Company entered into a promissory note with a principal of $28,330 which was applied to lease payments and accrued late fees of $20,830 and $7,500, respectively (Note 14). The principal balance accrues interest at a rate of 8% per annum. The promissory note requires monthly payments of $888 beginning on October 1, 2020 which will continue until the promissory note is repaid in full. If not repaid in full sooner, all remaining principal and accrued interest is due on September 1, 2023. The promissory note is secured by certain capital assets of the Company.

• j) During the year ended December 31, 2020, the Company was granted a loan under the Paycheck Protection Program (the “PPP Loan”) totaling $135,095. The PPP Loan which was in the form of a Promissory Note matures in May 2022 and accrues interest at a rate of 0.98% per annum. The PPP Loan could be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the PPP Loan, certain amounts of the PPP Loan could be forgiven if the proceeds are used for qualifying expenses as described in the CARES Act.

During the year ended December 31, 2020, the requirements to forgive the PPP Loan were met and the Company recorded government assistance income of $140,045 consisting of the principal of $135,095, interest of $226 and accretion of $4,724.

• k) During the year ended December 31, 2020, the Company was granted Economic Injury Disaster Loan advances (the “Advances”) from the U.S. Small Business Administration totaling $12,000 which were forgiven upon receipt. As a result, the Company recorded government assistance income of $12,000.

• l) On February 25, 2020, an investor advanced $100,000 in exchange for a promissory note. The principal and interest at a rate of 45% per annum were due at maturity on March 26, 2020. During the year ended December 31, 2020, the principal balance of $100,000 and accrued interest of $4,153 were repaid in full.

14. LEASE LIABILITY

The Company leases certain assets under lease agreements. The lease liability consists of various leases for farmland and equipment. The leases are calculated using an incremental borrowing rate of 12% per annum.

The Company’s lease liability related to leases is as follows:

Lease liability	December 31, 2020	December	31, 2019
Current portion	$ 834,847	$	165,336
Long-term portion	71,801		641,108
Total lease liability	$ 906,648	$	806,444

17

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

14. LEASE LIABILITY (Continued)

At December 31, 2020, the Company is committed to minimum lease payments as follows:

Maturity analysis		December 31, 2020
Less than one year	$	849,543
One to five years		79,418
More than five years		-
Total undiscounted lease liabilities	$	928,961
Changes in the balance of lease liabilities are summarized in the table below.
Balance, December 31, 2018	$	-
Adoption of IFRS 16		776,136
Additions		180,517
Interest expense		87,225
Lease payments		(237,434)
Balance, December 31, 2019	$	806,444
Additions		159,973
Interest expense		27,359
Lease payments		(87,128)
Balance, December 31, 2020	$	906,648

During the year ended December 31, 2020, the Company applied total payments of $87,128 (2020 - $237,434) against lease liabilities including cash of $27,788 (2020 - $237,434), a security deposit of $38,510 (2020 - $Nil) (Note 8) and a promissory note payable of $20,830 (2020 - $Nil) (Note 13).

During the year ended December 31, 2020, the Company terminated a lease with respect to commercial real estate (Note 1). As a result, the Company revised the lease liability to reflect the remaining amounts due under the contract. During the year ended December 31, 2020, the Company recorded a loss on lease modification and increase to lease liabilities of $159,973 as a result of terminating the lease.

15. CONVERTIBLE DEBT

A continuity of convertible debt for the years ended December 31, 2020 and 2019 is as follows:

		Face value		Carrying value
Balance, December 31, 2018	$	3,600,000	$	2,436,109
Issued during the period		3,726,245		3,372,860
Settled with the issuance of common shares		(175,000)		(140,771)
Debt extinguished		(3,473,523)		(3,473,523)
Interest expense		266,639		266,639
Accretion		-		1,219,023
Repayment of interest		(69,951)		(69,951)
Balance, December 31, 2019	$	3,874,410	$	3,610,386
Issued during the period		4,040,422		3,049,766
Debt extinguished		(3,156,720)		(3,419,889)
Settled with the issuance of common shares		(33,953)		(26,168)
Interest expense		-		260,589
Accretion		-		409,386
Balance, December 31, 2020	$	4,724,159	$	3,884,070

18

CBD Global Sciences Inc.

Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

15. CONVERTIBLE DEBT (Continued)

Brokered convertible debentures

During the year ended December 31, 2018, the Company closed brokered private placements of convertible debt (the “Debentures”) issuing $3,600,000 in Debentures. During the year ended December 31, 2019, the Company entered into an agreement to modify the terms of the convertible debentures as follows:

• Increased the principal amount of the convertible debt by 2.5%;

• Extended the maturity date of the convertible debt from October 2, 2019 to October 2, 2020;

• Modified the conversion terms of the convertible notes so that on conversion, the holder will receive CBD Global common shares rather than common shares of Global NV;

• Modified the exercise terms of warrants to provide that upon exercise, the holder will receive CBD Global common shares rather than common shares of Global NV; and

• Modified the conversion terms of the convertible debt and exercise terms of the warrants to prohibit the conversion of the debt or exercise of the warrants if the conversion or exercise, as the case may be, would result in CBD Global no longer qualifying as a foreign private issuer.

In consideration for the modification, the Company incurred a fee of 2% of the principal amount of the convertible debt of $65,500.

Of the outstanding convertible debt of $3,425,000, convertible notes in the principal amount of $3,275,000 were modified, and the remaining $150,000 were not modified.

The modification resulted in a change in cashflows of greater than 10% resulting in the extinguishment of the original debt and as such the Company recorded a loss on modification of $81,875. Upon the modification of the loans, the residual value assigned to equity of $200,894 was allocated to capital reserves.

During the year ended December 31, 2019, $175,000 of convertible debt was converted into 230,977 common shares. On the conversion date, the carrying value of the converted portion was $187,696 which was allocated to share capital.

Brokered convertible debentures – Second modification

During the year ended December 31, 2020, the Company entered into an agreement to further modify the terms of the convertible debentures as follows:

• Increased the principal amount of the convertible debt by 32.5%;

• Extended the maturity date of the convertible debt to October 2, 2022;

• The accrual of interest payable on the convertible debt will commence on January 1, 2022 with the first interest payment due on March 1, 2022;

• Extended the expiry date of the Investor Warrant to October 2, 2023; and

• Additional warrants shall be issued equal to 25% of the warrants initially issued at the inception of the convertible debentures at an exercise price equal to the lesser of 25% discount to the market price of the common shares of the Company or the lowest exercise price allowance in accordance with the policies of the Canadian Securities Exchange.

In addition, if the Company completes a private placement at a price lower than the current conversion price within 12 months of the second modification, the Company shall seek the approval of the Canadian Securities Exchange to reprice the conversion price at the lowest price allowable by the Canadian Securities Exchange.

Convertible notes in the principal amount of $3,049,375 were modified. The modification resulted in a change in cashflows of greater than 10% resulting in the extinguishment of the original debt and as such the Company recorded a loss on extinguishment of $216,841.

19

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

15. CONVERTIBLE DEBT (Continued)

Brokered convertible debentures – Second modification (continued)

As the conversion price of the convertible debenture is subject to change in the event that the Company completes a private placement of equity at a price less than $0.70, it does not meet the fixed for fixed criteria and is classified as a derivative liability. The estimated fair value of the derivative liability as at October 31, 2020 was $159,864 using the Black-Scholes Option Pricing Model with the following assumptions: exercise price of $0.70; share price of $0.18; an annualized volatility of 125%; a forfeiture rate of 0%, an expected life of 1.0 year; a dividend yield of 0%; and a risk-free rate of 0.24%.

The derivative liability is remeasured at fair value through profit and loss at each reporting period end using the Black-Scholes Option Pricing Model. The estimated fair value of the derivative liability as at December 31, 2020 was $154,160 using the Black-Scholes Option Pricing Model with the following assumptions: exercise price of $0.70; share price of $0.21; an annualized volatility of 120%; a forfeiture rate of 0%, an expected life of 0.8 years; a dividend yield of 0%; and a risk-free rate of 0.20%. The Company recorded an unrealized gain related to the fair value of the derivative liability in the amount of $5,704 during the year ended December 31, 2020.

The expiry date of 7,633,764 warrants with an exercise price of $0.20 were extended to October 2, 2022. The incremental increase in the fair value of the warrants in the amount of $239,232 was included in the loss on debt extinguishment with a corresponding increase to capital reserves during the year ended December 31, 2020.

The Company is required to issue 1,916,690 additional warrants with an estimated fair value of $187,868 using the Black-Scholes Option Pricing Model with the following assumptions: exercise price of $0.14; share price of $0.18; an annualized volatility of 125%; a forfeiture rate of 0%, an expected life of 1.0 year; a dividend yield of 0%; and a risk-free rate of 0.24%. The fair value of the warrants to be issued was included in the loss on debt extinguishment with a corresponding increase to capital reserves during the year ended December 31, 2020. As at December 31, 2020, the warrants had not been issued.

The loss on debt extinguishment recorded in the amount of $216,841 includes the fair value of warrants modified ($239,232) and additional warrants issued ($187,868), less the difference between the carrying value of the debt and deemed reissued debt ($210,259).

During the year ended December 31, 2020, convertible debt with a principal balance of $33,953 and carrying value of $25,628 was converted into 248,508 common shares (Note 16).

Subsequent to the year ended December 31, 2020, the Company entered into debt settlement agreements related to convertible debentures with total principal balances of $4,287,412 and accrued interest balances of $65,872 which are to be converted to 310,928 preferred shares of the Company.

Other convertible debt

During the year ended December 31, 2019, an investor advanced $250,000 to the Company in exchange for a convertible promissory note and 50,000 warrants. The note is convertible at the option of the holder into units at a price of $0.37 per unit with each unit consisting of 0.25 common share and 0.0075 preferred shares of the Company. The note is secured by a personal guarantee from two directors of the Company. The note bears interest at a rate of 8% per annum and matured on June 30, 2020. As at December 31, 2020, the loan is in default.

20

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

15. CONVERTIBLE DEBT (Continued)

Other convertible debt (continued)

During the year ended December 31, 2020, the Company issued a convertible debenture in the amount of $50,000. The debenture matures on August 11, 2022, bears interest at 12% per annum and is secured against the Company’s biomass inventory. The principal is convertible into units of the Company at $0.25 per unit and will automatically convert on the maturity date. Each unit consists of 0.5 common share and 0.005 preferred share of the Company. Accrued interest is payable quarterly, and at the option of the Company payable in common shares on the maturity date. As the convertible note converts automatically at the end of the term, the convertible debt of $50,000 and accrued interest of $2,334 have been classified as an equity instrument.

16. SHARE CAPITAL

a. Authorized capital

The Company is authorized to issue an unlimited number of common shares and preferred shares without par value.

Common share holders are entitled to one vote at each meeting of the shareholders of the Company.

Preferred share holders are entitled to one vote at each meeting of the shareholders of the Company in respect of each common share into which such preferred share could ultimately then be converted. In connection with the exercise of the voting rights relating to any proposed alteration of rights, each preferred share holder has one vote in respect of each preferred share held. Each preferred share is convertible, at the option of the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and non-assessable common shares as is determined by multiplying the number of preferred shares by the conversion ratio applicable to such share in effect on the date the preferred share is surrendered for conversion. The conversion ratio for preferred shares is 100 common shares for each preferred share, subject to adjustment in certain events. To maintain its status as a foreign private issuer, the Company shall not affect any conversion of preferred shares and preferred share holders may not convert to the extent that the aggregate number of common shares and preferred shares held of record, directly or indirectly, by US Residents would exceed 40% of the aggregate number of common shares and preferred shares issued and outstanding after giving effect to such conversions. The Company may require preferred share holders to convert all the preferred shares at the applicable conversion ratio if the Company is subject to certain regulatory and reporting requirements that require the Company to do so.

b. Issued capital

During the year ended December 31, 2020, the Company completed the following transactions:

• a) On February 26, 2020, the Company closed a private placement for 340,000 units and 2,220,000 common shares for proceeds of $640,000 of which $527,500 were received during the year ended December 31, 2019 and included in the balance of obligation to issue shares.

Each unit consists of one common share and one warrant. Each warrant is exercisable into one common share of the Company at an exercise price of $0.26 per share until August 31, 2020. The warrants have a fair value of $44,240 determined using the Black-Scholes Option Pricing Model with the following assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.25%; and expected life of 2 years.

• b) On February 26, 2020, the Company issued 475,000 common shares pursuant to consulting agreements. The common shares were valued at $172,691 of which $153,152 was previously recorded in the balance of obligation to issue shares.

21

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

b. Issued capital (continued)

• c) On April 13, 2020, the Company issued 40,172 common shares to settle $10,043 of accrued interest on a promissory note (Note 13). The common shares were valued at $7,783 resulting in a gain on debt settlement of $2,260.

• d) On April 13, 2020, the Company issued 160,580 common shares to settle debt of $10,945 and prepay consulting fees of $29,200 for total consideration of $40,145. The common shares were valued at $31,111 resulting in a gain on debt settlement of $9,034.

• e) On June 5, 2020, the Company issued 60,000 common shares pursuant to an advisory agreement. The fair value of the common shares of $8,936 are included in consulting fees.

• f) On June 5, 2020, the Company issued 60,000 common shares for proceeds of $15,000 which were received during the year ended December 31, 2019 and included in the balance of obligation to issue shares.

• g) On September 4, 2020, the Company issued 3,141,667 common shares in pursuant to several service agreements. The fair value of the common shares of $507,014 was recorded as investor relations expense of $166,667, consulting expense of $45,733 and prepaid expenses of $294,614 (Note 8).

• h) On September 4, 2020, the Company issued 141,163 common shares at a fair value of $31,780 pursuant to a debt settlement agreement to settle $36,650 in outstanding trade accounts payable. In connection with the agreement, the Company recorded a gain on debt settlement of $4,852.

• i) On October 15, 2020, the Company issued 32,996 common shares pursuant to the exercise of warrants for proceeds of $25,000 which were received during the year ended December 31, 2019 and included in the balance of obligation to issue shares. The fair value of the warrants of $2,118 was reclassified to share capital from capital reserves.

• j) On December 22, 2020, the Company issued 248,508 common shares pursuant to the conversion of convertible debentures with a principal balance of $33,953 and carrying value of $26,168 (Note 14). The fair value of the conversion feature of $8,325 was reclassified to share capital from capital reserves.

During the year ended December 31, 2019, the Company completed the following transactions:

• a) On October 24, 2018, the Company entered into an agreement with a consultant to issue shares for services. On each of October 31, 2018 and January 30, 2019, 79,192 common shares of the Company were issued for a total of 157,384 common shares. The services were valued at $60,000. During the year ended December 31, 2019, the Company recorded consulting expenses of $10,000 for services received during the year related to the share-based payment.

• b) During March 2019, convertible debentures of $175,000 were converted to 230,977 common shares of the Company at $1.00 per share at a fair value of $140,771.

• c) On February 15, 2019, the Company entered into a debt settlement agreement to issue 131,987 common shares at a fair value of $100,000 for the settlement of $41,000 in an outstanding accounts payable balance. The common shares were issued at a fair value of $1.00 per share and the Company recognized a loss of $59,000 on the settlement.

22

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

• b. Issued capital (continued)

• d) On March 15, 2019, the Company issued 5,279 common shares for consideration of the extension of notes payable. The fair value of the common shares of $4,000 was recorded as a share-based payment and included in finance fees.

• e) During April 2019, the Company issued 133,723 common shares pursuant to warrant exercises for proceeds of $2,021.

• f) On May 8, 2019, the Company entered into a debt settlement agreement to issue 34,464 common shares with a fair value of 0.768 per share for the settlement of $26,112 in an outstanding accounts payable balance.

• g) On May 15, 2019, the Company issued 26,397 common shares for gross proceeds of $25,000.

• h) On May 29, 2019, the Company entered into a debt settlement agreement to issue 131,987 common shares with a fair value of $125,000 for the settlement of $45,000 in an outstanding accounts payable balance. The Company recorded a loss on settlement of debt of $80,000.

• i) On July 1, 2019, the Company issued 26,397 common shares for gross proceeds of $25,000.

• j) On July 1, 2019, the Company entered into an agreement with a consultant to issue 39,596 shares for services. During the year ended December 31, 2019, the Company recorded consulting expenses of $37,500 for services received during the year related to the share-based payment.

• k) On July 15, 2019, the Company issued 52,795 common shares for gross proceeds of $50,000.

• l) On August 20, 2019, the Company issued 52,795 units for gross proceeds of $50,000. Each unit consists of one common share and one half of one warrant. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 per share until August 31, 2020. The warrants have a fair value of $13,932 determined using the Black-Scholes Option Pricing Model with the following assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.40%; and expected life of 1.03 years.

• m) On August 26, 2019, the Company issued 52,795 units for gross proceeds of $50,000. Each unit consists of one common share and one half of one warrant. Each warrant is exercisable into one common share of the Company at an exercise price of $0.25 per share until August 31, 2020. The warrants have a fair value of $13,843 determined using the Black-Scholes Option Pricing Model with the following assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.45%; and expected life of 1.02 years.

• n) On September 19, 2019, the Company issued 52,795 common shares for gross proceeds of $50,000.

• o) On September 20, 2019, the Company issued 13,199 common shares for gross proceeds of $12,500.

• p) On September 24, 2019, the Company issued 5,279 common shares for gross proceeds of $5,000.

• q) On September 25, 2019, the Company issued 26,397 common shares for gross proceeds of $25,000.

• r) On September 26, 2019, the Company entered into an agreement with a consultant to issue 38,012 shares for services. During the year ended December 31, 2019, the Company recorded consulting expenses of $36,000 for services received during the year related to the share-based payment.

23

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

b. Issued capital (continued)

• s) On September 30, 2019, the Company issued 324,688 common shares for gross proceeds of $307,500.

• t) On October 17, 2019, the Company completed a three-cornered merger transaction with CBD Global and issued a total of 2,500,000 shares pursuant to the Merger Agreement (Note 6).

• u) On October 17, 2019, the Company issued 9,894,935 common shares as a conversion of 98,939 preferred shares pursuant to the Merger Agreement (Note 6). As a result, $944,460 was reclassed from preferred shares to share capital.

• v) On April 15, 2019, the Company entered into an agreement to issue 500,000 common shares for services at a fair value of $500,000. The shares were not issued. On November 28, 2019, the Company entered into a debt settlement agreement to issue 300,000 common shares with a fair value of $99,334 and a cash payment of $36,650 for the settlement of $545,340 in an outstanding accounts payable balance and shares to be issued. A gain on settlement of the debt of $398,044 was recorded. As of December 31, 2019, the Company had not made the cash payment, as such $36,650 has been included in accounts payable and other liabilities.

c. Warrants

A summary of warrant activity for the years ended December 31, 2020 and 2019 is as follows:

				Weighted average
			Number of warrants	exercise price
Outstanding, December	31,	2018	16,595,955	$ 0.21
Issued			2,310,000	0.40
Exercised			(506,575)	0.01
Outstanding, December	31,	2019	18,399,380	$ 0.22
Issued			365,000	0.26
Exercised			(32,996)	0.20
Expired			(1,860,000)	0.27
Outstanding,December	31,	2020	16,871,384	$0.22

During the year ended December 31, 2020, the Company completed the following transactions:

• a) On February 6, 2020, the Company issued 25,000 warrants in connection with a loan modification (Note 13). The warrants are exercisable for one common share at an exercise price of $0.25 on or before March 31, 2022. The warrants have a fair value of $3,498 using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.53%; and expected life of 2.15 years.

• b) On February 26, 2020, the Company issued 340,000 warrants pursuant to a private placement. The warrants are exercisable into one common share of the Company at an exercise price of $0.26 per share until February 5, 2022. The warrants have a fair value of $44,240 using the Black-Scholes Option Pricing Model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.25%; and expected life of 1.95 years.

24

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

c. Warrants (continued)

During the year ended December 31, 2019, the Company completed the following transactions:

• a) On May 13, 2019, the Company issued 100,000 warrants in connection with a note payable (Note 13). The warrants are exercisable for one common share at an exercise price of $0.25 on or before May 31, 2020. The warrants have a fair value of $10,245 using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.52%; and expected life of 0.86 years.

• b) On May 14, 2019, the Company issued 200,000 warrants to a consultant for services provided to the Company recorded as consulting expenses. The warrants are exercisable for one common share at an exercise price of $0.35 on or before May 31, 2020. The warrants have a fair value of $16,876 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.62%; and expected life of 1.05 years.

• c) On June 10, 2019, the Company issued 10,000 warrants to a consultant for services provided to the Company recorded as consulting expenses. The warrants are exercisable for one common share at an exercise price of $1.50 on or before June 30, 2020. The warrants have a fair value of $310 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.50%; and expected life of 1.06 years.

• d) On July 1, 2019, the Company issued 400,000 warrants to a consultant for services provided to the Company recorded as consulting expenses. The warrants are exercisable for one common share at an exercise price of $1.00 on or before June 30, 2022. The warrants have a fair value of $65,348 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.53%; and expected life of 3.00 years.

• e) On July 1, 2019, the Company issued 1,250,000 warrants in connection with a financing agreement with a company jointly controlled by the President and the Vice President (Note 17). The warrants are exercisable for one common share at an exercise price of $0.25 on or before August 31, 2020. The warrants have a fair value of $183,270 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.53%; and expected life of 1.17 years.

• f) On November 9, 2019, the Company issued 100,000 warrants in connection with a financing agreement (Note 13). The warrants are exercisable for one common share at an exercise price of $0.25 on or before May 31, 2020. The warrants have a fair value of $29,886 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.60%; and expected life of 0.97 years.

• g) On December 13, 2019, the Company issued 50,000 warrants to an investor. The warrants are exercisable for one common share at an exercise price of $0.37 on or before December 31, 2021. The warrants have a fair value of $10,014 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.67%; and expected life of 2.05 years.

25

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

c. Warrants (continued)

• h) On December 31, 2019, the Company issued 50,000 warrants in connection with a convertible debt financing (Note 15). The warrants entitle the holder to acquire one common share of the Company at a price of $0.37 per share until December 31, 2021 and are transferable. The estimated relative fair value of the warrants granted was $4,324 using the Black-Scholes Option Pricing Model with the following assumptions: exercise price of $0.37; an annualized volatility of 150%; a forfeiture rate of 0%, an expected life of 2.0 years; a dividend yield of 0%; and a risk-free rate of 1.61%.

As at December	31,	2020,the Companyhad outstanding	sharepurchase	warrants as follows:
		Number of warrants	Exerciseprice	Expiry date
		3,039,380	$0.20	July 31, 2021
		1,182,943	$0.20	September 20, 2021
		150,298	$0.20	October 1, 2021
		2,700,000	$0.20	October 2, 2023
		1,350,000	$0.20	October 2, 2023
		400,000	$1.00	June 30, 2022
		50,000	$0.37	December 31, 2021
		25,000	$0.25	March 31, 2022
		340,000	$0.26	February 5, 2022
		7,633,763	$0.20	October 2, 2022
		16,871,384

The weighted-average remaining contractual life of warrants outstanding at December 31, 2020 was 1.68 years.

As at December 31, 2020, the Company was obligated to issue 100,000 warrants pursuant to a modification of a promissory note payable (Note 13). The warrants have a fair value of $13,161 determined using the Black-Scholes option pricing model with the following assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 0.25%; and expected life of 2 years. The fair value of the warrants of $13,161 was recorded as finance fees during the year ended December 31, 2020.

As at December 31, 2020, the Company was obligated to issue 1,916,690 warrants pursuant to a modification of convertible debt (Note 15). The warrants have a fair value of $187,868 determined using the Black-Scholes option pricing model with the following assumptions: exercise price of $0.14; share price of $0.18; an annualized volatility of 125%; a forfeiture rate of 0%, an expected life of 1.0 year; a dividend yield of 0%; and a risk-free rate of 0.24%. The fair value of the warrants of $187,868 was included in the loss on debt extinguishment during the year ended December 31, 2020.

d. Options

On May 14, 2020, the Company granted 5,700,000 stock options to officers, directors and consultants of the Company. The stock options are exercisable at $0.20 per share until May 15, 2023. One-third of the options will vest immediately, one-third of the options on May 14, 2021 and the remaining one-third on May 14, 2022.

26

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

d. Options (continued)

Continuity of the Company’s stock options is as follows:

Number of options	Weighted average exercise price ($CAD) Weighted average exercise price ($USD)
Outstanding, December 31, 2018 and 2019 - Granted 5,700,000	$ - $ - 0.20 0.15
Outstanding, December 31, 2020 5,700,000	$ 0.20 $ 0.15
Exercisable, December 31, 2020 1,900,000	$ 0.20 $ 0.15

The above options have an exercise price of $0.15 ($0.20 CAD) and expire on May 15, 2023. As at December 31, 2020, the weighted average remaining contractual life of outstanding options is 2.37 years.

Employee options were measured at fair value on the grant date and recognized over the vesting period from the date of grant. Nonemployee options were measured indirectly with reference to the fair value of the equity instruments granted as the fair value of goods and services received cannot be measured reliably. Nonemployee options are measured at the end of each reporting period over the term that goods and services are received.

During the year ended December 31, 2020, the grant date fair value of stock options of $653,537 was determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 0.26%; and expected life of 3.00 years.

For the year ended December 31, 2020, the Company recognized share-based payments of $423,755 (2019 - $Nil) related to the fair value of stock options vested.

e. Cashless Options

On August 11, 2020, the Company entered into an agreement for advisory services. In connection with this agreement, the Company granted 250,000 cashless options in exchange for services. The cashless options are exercisable into common shares at $0.25 per share until August 11, 2023. The number of shares is determined by the number of options outstanding multiplied by the difference between the “Current Market Price” and the exercise price, divided by the “Current Market Price”. “Current Market Price” is defined as the volume weighted average price of such security on the ten (10) consecutive trading days immediately preceding such date.

The cashless options have a fair value of $24,569 and were valued using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 0.25%; and expected life of 2.00 years. The fair value of the cashless options of $24,569 was recorded as investor relations expense within general and administrative expenses during the year ended December 31, 2020.

27

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

16. SHARE CAPITAL (Continued)

f. Escrowed shares

As at December 31, 2020, the Company had 3,635,484 common shares and 101,344 preferred shares held in escrow pursuant to the RTO (Note 6). Of the total remaining securities, 908,871 common shares and 25,341 preferred shares will be released every six months until April 7, 2022.

g. Obligation to issue shares, options and warrants

As at December 31, 2020, the Company was obligated to issue 515,000 common shares in exchange for services at a fair value of $95,278 included in consulting fees.

As at December 31, 2019, the Company was obligated to issue 250,000 common shares in exchange for services at a fair value of $122,500 included in professional fees in general and administrative expense. The common shares were issued during the year ended December 31, 2020.

As at December 31, 2019, the Company was obligated to issue options in exchange for investor relations services recorded as share-based compensation during the year ended December 31, 2019. The options have a fair value of $36,427 determined using the Black-Scholes option pricing model with the following weighted average assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 1.71%; and expected life of 0.84 years. The stock options had not been issued as of December 31, 2020.

During the year ended December 31, 2019, the Company received $786,015 in share subscriptions for a private placement which had not yet closed, and which is included in obligation to issue shares presented within equity. During the year ended December 31, 2020, share subscriptions of $567,500 were applied to share issuances and reclassified from obligation to issue shares to common shares. As at December 31, 2020, there remains a balance of $218,515 related to share subscriptions received and included in obligation to issue shares presented within current liabilities.

Pursuant to consulting agreements entered into during the year ended December 31, 2020, the Company is obligated to issue a further 1,445,000 common shares during the year ending December 31, 2021 for services to be rendered.

17. RELATED PARTY TRANSACTIONS AND BALANCES

Related parties and related party transactions impacting the consolidated financial statements not disclosed elsewhere in these consolidated financial statements are summarized below.

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Key management personnel comprise officers and directors of the Company.

Remuneration attributed to key management personnel for the years ended December 31, 2020 and 2019 are summarized as follows:

		December		December
		31, 2020		31, 2019
Salaries (Note 19)	$	300,000	$	376,263
Share based payments (Note 16)		278,786		66,065
	$	578,786	$	442,328

28

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

Other related party transactions and balances

The carrying values of loans payable to related parties as at December 31, 2020 and 2019 are summarized in the table below.

		December 31,		December 31,
		2020		2019
Beginning balance	$	453,892	$	483,587
Increase to principal amount		815,582		333,195
Discount to amortized cost, effective interest rate of 20%		(213,739)		(589,767)
Accretion		135,273		177,914
Interest		64,139		15,227
Reclassification from accounts payable and other liabilities		-		33,736
Ending balance	$	1,255,147	$	453,892
Current		(43,012)		(53,256)
Long-term	$	1,212,135	$	400,636

• a) As at December 31, 2020, a revolving promissory note due to a company jointly controlled by the President and the Vice President had a carrying value of $509,321 (2019 - $395,638) and was included in due to related parties. As at December 31, 2020, the note had principal and accrued interest balances of $873,685 (2019 - $806,185) and $57,125 (2019 - $14,905), respectively. Accrued interest is included in the balance of due to related parties. The note is unsecured and, bears interest at 5% per annum.

The Company recorded the promissory note at amortized cost using an effective interest rate of 20% which caused the carrying amount to be lower than the principal and accrued interest with the difference recognized as a related party contribution in capital reserve. During the year ended December 31, 2020, the Company recognized an additional $41,067 (2019 - $461,770) as related party contributions pursuant to proceeds received during the year and recorded accretion expense of $87,123 (2019 - $51,340).

The interest was due monthly with the principal balance due on demand. On January 1, 2019, the Company entered into a modification agreement to amend the maturity date of the principal balance to December 31, 2024.

• b) On September 1, 2018, a company jointly controlled by the President of the Company and the Chief Operating Officer of the Company advanced $7,500 to the Company in exchange for a promissory note. The note is unsecured and bears interest at 6% per annum. Payments of interest only are due monthly on the first day of every calendar month starting January 1, 2018 with payment in full at maturity on December 31, 2019. Should the Company default on an interest payment, the interest rate shall increase to 12% per annum. On January 1, 2019, the Company entered into an agreement amending the maturity date of the note to December 31, 2021.

As of December 31, 2020, the balance due on this note was $8,177 (2019 - $7,838), including the principal balance of $7,500 and accrued interest of $677 (2019 - $338), which has been included in due to related parties.

29

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

Other related party transactions and balances (continued)

• c) On April 1, 2019, the Company entered into an unsecured promissory note with a company jointly controlled by the President and the Chief Operating Officer (the “Related Entity”) whereby the Related Entity loaned a balance up to $500,000 to the Company. As at December 31, 2020, the promissory note had a carrying value of $623,560 (2019 - $4,999) which was included in due to related parties. As at December 31, 2020, the note had principal and accrued interest balances of $749,505 (2019 - $6,312) and $21,580 (2019 - $Nil), respectively. Accrued interest is included in the balance of due to related parties. The note is unsecured, bears interest at 8% per annum, has payments of interest only due monthly with the principal balance due on June 30, 2022.

The Company recorded the promissory note at amortized cost using an effective interest rate of 20% which caused the carrying amount to be lower than the principal and accrued interest with the difference recognized as a related party contribution in capital reserve. During the year ended December 31, 2020, the Company recognized an additional $172,672 (2019 - $127,997) as related party contributions pursuant to proceeds received during the year and recorded accretion expense of $48,150 (2019 - $3,665).

During the year ended December 31, 2019, the Company issued 1,250,000 warrants in connection with this promissory note (Note 16). The fair value of the warrants of $183,270 was initially recognized as deferred financing fees in the consolidated statements of financial position and is subsequently expensed to finance fees in the consolidated statements of loss and comprehensive loss on a straight-line basis to the maturity date of the promissory note. As at December 31, 2020, the balance of deferred financing fees amounted to $84,372 (2019 - $139,930) and relates to the remaining fair value of the warrants to be expensed in future periods. During the year ended December 31, 2020, finance fees recorded in the consolidated statements of loss and comprehensive loss include $55,558 (2019 - $43,340) related to these warrants.

• d) On December 31, 2018, the Company entered into an unsecured promissory note with a company controlled by a director (the “Related Entity”) whereby the Related Entity loaned $33,736 to the Company. As at December 31, 2020, the promissory note had a balance of $33,736 (2019 - $33,736) which was included in due to related parties. The note is unsecured, bears interest at 6% per annum. Interest and principal are due and payable on the maturity date of December 31, 2020. As at December 31, 2020, there was accrued interest payable of $2,024 (2019 - $1,011) included in accounts payable and accrued liabilities. As at December 31, 2020, the loan was in default.

• e) During the year ended December 31, 2020, the Company incurred $100,885 (2019 - $14,012) in professional fees to a company controlled by the Chief Financial Officer of the Company recorded in general and administrative expenses.

• f) During the year ended December 31, 2020, the Company incurred $88,026 (2019 - $nil) in professional fees to a company controlled by a director of the Company recorded in general and administrative expenses.

• g) As at December 31, 2020 accounts payable and other liabilities included rental fees and expense reimbursements of $41,923 (2019 - $48,469) due to a company jointly controlled by the President and Chief Operating Officer.

• h) As at December 31, 2020, accounts payable and other liabilities included salaries and wages of $46,452 (2019 - $66,048) due to the President of the Company.

• i) As at December 31, 2020, accounts payable and other liabilities included professional fees of $126,029 (2019 - $37,913) due to a company controlled by Chief Financial Officer of the Company.

30

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

Other related party transactions and balances (continued)

• j) As at December 31, 2020, accounts payable and other liabilities included professional fees of $170,478 (2019 - $97,868) due to a company controlled by a director of the Company.

• k) As at December 31, 2020, accounts payable and other liabilities included consulting fees of $412,943 (2019 - $411,930) due to a company controlled by a director of the Company.

• l) As at December 31, 2020, the Company owed $1,776 (2019 – was owed ) from a company jointly controlled by the President and the Chief Operating Officer related to expense reimbursements included in due to related parties.

18. REVENUE

The following table presents the Company’s sales disaggregated by revenue source:

Year ended December 31,	2020 2019
Biomass $ CBD Oil CBD Oil products Process and extraction	- $ 1,360,000 - 437,275 305,400 285,809 - 234,054
Total revenue $	305,400 $ 2,317,138

For the years ended December 31, 2020 and 2019 the following revenue was recorded from customers that comprise 10% or more of revenue:

Amount of revenue from major customers		2020		2019
Customer A	$	115,680	$	-
Customer B	$	93,432	$	-
Customer C	$	-	$	236,000
Customer D	$	-	$	262,500
Customer E	$	-	$	1,313,828

19. GENERAL AND ADMINISTRATIVE EXPENSES

Year ended December 31,		2020	2019
Bad debt expense	$	58,179 $	501,137
Investor relations		209,116	4,916
Office expenses		98,537	241,456
Professional fees		338,790	262,503
Rent		82,369	76,195
Salaries (Note 17)		522,540	1,947,056
Small tools and equipment		4,389	49,953
Travel		23,013	51,341
Utilities and services		44,936	-
	$	1,381,869$	3,134,557

31

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

20. SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash transactions during the years ended December 31, 2020 and 2019 affecting cash flows from investing and financing activities included:

		2020		2019
Notes payable converted into shares (Note 16)	$	26,168	$	775,000
Trade payables settled for issuance of shares (Note 16)	$	70,692	$	-
Notes payable repaid from sale of land (Notes 11 and 13)	$	583,232		-
Initial recognition of IFRS 16	$	-	$	956,653
		2020		2019
Cash paid for interest	$	153,297	$	95,167
Cashpaid for income taxes	$	-	$	-

21. SEGMENTED INFORMATION

The Company has a single reportable segment, the production and sale of CBD products. The Company has three revenue streams related to the sale of CBD products: biomass, CBD oil and CBD oil products. All assets are domiciled in the United States.

22. INCOME TAX

The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

		December		December
		31, 2020		31, 2019
Net loss for the year before taxes	$	(8,927,702)	$	(8,956,222)
Expected income tax recovery at statutory rate		(1,984,000)		(1,881,000)
Permanent differences and other		1,984,000		681,000
Income tax expense	$	-	$	1,084,000
Current income tax expense	$	-	$	-
Deferred income tax expense	$	-	$	(116,000)

32

Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

CBD Global Sciences Inc.

22. INCOME TAX (Continued)

Deferred income taxes result primarily from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes. Significant components of the future tax assets and liabilities are as follow:

		December 31,		December 31,
		2020		2019
Non-capital loss carry forwards	$	3,331,000	$	1,925,000
Share issue costs		1,000		2,000
Property, plant and equipment		130,000		(289,000)
Inventory		-		(554,000)
Unrecognized deferred tax assets		3,462,000		1,084,000
Deferred income tax liability	$	-	$	-

As at December 31, 2020, the Company had net operating tax loss carryforwards in the United States of $15,458,000 which can be applied to reduce future United States taxable income and will expire between 2029 and 2037.

23. CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern to support its business plan, as well as to ensure that the Company is able to meet its financial obligations as they become due. The capital structure consists of notes payable and owners’ equity comprising of owners’ capital, capital reserve and retained earnings.

The basis for the Company’s capital structure is dependent on the Company’s expected business growth and changes in business environment. To maintain or adjust the capital structure, the Company may issue new shares through private placement, incur debt or return capital to shareholders.

The Company does not presently utilize any quantitative measures to monitor its capital, but rather relies on the expertise of the Company’s management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable.

The Company is not subject to externally imposed capital requirements. There were no changes to the Company’s approach to capital management during the year ended December 31, 2020.

24. RISK MANAGEMENT AND LIQUIDITY

The Company is exposed, through its operations, to the following financial risks:

• a) Market risk

• b) Credit risk

• c) Liquidity risk

The Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies, and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these consolidated financial statements.

33

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

24. RISK MANAGEMENT AND LIQUIDITY (Continued)

a) Market risk

Market risk is the risk of loss that may arise from changes in market factors such as foreign currency exchange, interest rates and equity price risk.

(i) Foreign currency risk:

The Company’s functional and reporting currency is the United States dollar and major purchases are transacted in United States dollars. As a result, the Company’s exposure to the foreign currency risk is minimal.

(ii) Interest rate risk:

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. The interest earned on cash is insignificant and the Company does not rely on interest income to fund its operations. The Company has significant debt facilities, including convertible debt and promissory notes payable. As the debt facilities are incurring a fixed rate of interest, the Company is not significantly exposed to interest rate risk.

(iii) Other price risk:

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company does not hold equity investments in other entities and therefore is not exposed to a significant risk.

b) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company is subject to credit risk on its cash and accounts receivable. The Company limits its exposure to credit loss on cash by placing its cash with a high-quality financial institution. The Company has concentrations of credit risk with respect to accounts receivable as large amounts of its accounts receivable are concentrated amongst a small number of customers. The Company performs credit evaluations of its customers but generally does not require collateral to support accounts receivable.

c) Liquidity risk

Liquidity risk arises from the Company’s general and capital financing needs. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities, when feasible.

Subsequent to the year ended December 31, 2020, two of the Company’s subsidiaries, Global NV and Strasburg Pharms, LLC, filed for protection under Chapter 7 of the Bankruptcy Code as a result of claims against Global NV by a former landlord (Note 25). A trustee has been appointed on behalf of the Company to liquidate assets and discharge the outstanding liabilities of Global NV and Strasburg Pharms LLC. This liquidation process is ongoing.

34

Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

CBD Global Sciences Inc.

24. RISK MANAGEMENT AND LIQUIDITY (Continued)

The table below summarizes the maturity profile of the Company’s undiscounted contractual cash flows with respect to financial liabilities.

As at December 31, 2020 On demand Less than 1 year	1-2 years Later than 2 years Total
Trade payables $ 1,059,411 $ - $ - $ - $ 1,059,411 Loans payable to related parties and accrued interest 37,536 8,177 771,085 930,810 1,747,608 Lease liabilities 795,000 54,543 48,536 30,882 928,961 Notes payable and accrued interest 440,763 11,262 11,697 36,222 499,944 Convertible debt and accrued interest 795,241 - 4,254,686 - 5,049,927 Obligation to issue shares 218,515 - - - 218,515
Total liabilities $ 3,346,466 $ 73,982 $ 5,086,004 $ 997,914 $ 9,504,366

25. SUBSEQUENT EVENTS

• a) The Company sold assets under construction for proceeds of $80,000 pursuant to an asset purchase agreement (Note 11).

• b) The Company received a further PPP Loan in the amount of $135,095.

• c) The Company received subscription receipts of $30,000 for the purchase of 100,000 units with each unit consisting of one common share and one-half of one warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.60 for a period of 24 months from issuance.

• d) The Company received subscription receipts of $25,000 for the purchase of 83,333 units with each unit consisting of one common share and one-half of one warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.60 for a period of 24 months from issuance.

• e) Two of the Company’s subsidiaries, Global NV and Strasburg Pharms, LLC, filed for protection under Chapter 7 of the Bankruptcy Code as a result of claims against Global NV by a former landlord (Note 1). In connection with the bankruptcy, a trustee has been appointed on behalf of the Company to liquidate assets and discharge the outstanding liabilities of Global NV and Strasburg Pharms LLC. This liquidation process is ongoing.

Assets controlled by the subsidiaries include cash balances, trade receivables, property and equipment, biological assets and finished goods inventory. The net realizable value of these assets is negligible as reflected in the carrying values of the assets presented in the consolidated statement of financial position as at December 31, 2020.

35

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in United States dollars)

25. SUBSEQUENT EVENTS (Continued)

The carrying value of lease liabilities, amounts due to related parties and customer deposit and approximately 70% of the carrying value of accounts payable and other liabilities presented in the consolidated statement of financial position represent obligations of Global NV and Strasburg Pharms, LLC to be discharged pursuant to Chapter 7 of the Bankruptcy Code . The Company has agreed to settle substantially all convertible debentures outstanding with preferred shares of the Company to be issued (Note 15). Notes payable are not subject to discharge on the basis that these financial instruments are the obligation of CBD Global Sciences Inc.

36