CBD Global Sciences Inc. — Audit Report / Information 2022

Oct 6, 2022

CBD Global Sciences Inc.

Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020

(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, 2021 and 2020 and the consolidated statements of loss and comprehensive loss, 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 referred to as 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, 2021 and 2020 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

We draw attention to Note 1 to the financial statements, which describes events or conditions that indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. 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 October 5, 2022

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CBD Global Sciences Inc. Consolidated Statements of Financial Position (Expressed in United States dollars)

	Notes	December 31, 2021	December 31, 2021		December 31, 2020
ASSETS
Cash		$	93,400	$	541
Amounts receivable	9		23,549		2,845
Prepaid expenses	10		13,928		304,719
Inventory	11		189,112		-
Total current assets			319,989		308,105
Deferred financing fees	20		64,126		84,372
Property and equipment	12		1,375,119		80,000
Intangible assets	8,13		332,359		-
Goodwill	8,14		-		-
Total assets		$	2,091,593	$	472,477
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Accounts payable and other liabilities	15,20	$	1,073,808	$	1,878,496
Customer deposit			1,545		25,000
Due to related parties	20		43,165		43,012
Notes payable	16		184,245		394,271
Lease liabilities	17		102,254		834,847
Obligation to issue shares	19		273,515		218,515
Convertible debt	18		377,168		-
Derivative liability	18		-		154,160
Total current liabilities			2,055,700		3,548,301
Due to related parties	20		-		1,212,135
Convertible debt	18		1,282,536		3,884,070
Contingent liability	8		10,000		-
Lease liabilities	17		383,718		71,801
Notes payable	16		55,500		31,578
Total liabilities			3,787,454		8,747,885
Shareholders’ deficiency
Share capital	19		8,900,805		6,560,587
Obligation to issue shares	19		571,221		131,705
Preferred shares	19		9,765,758		2,079,237
Capital reserves	19		5,486,808		4,120,815
Deficit			(26,420,453)		(21,167,752)
Total shareholders’deficiency			(1,695,861)		(8,275,408)
Total liabilities and shareholders’ deficiency		$	2,091,593	$	472,477
Nature of operations and going concern (Note 1)
Subsequent events (Note 28)
Approved and authorized by the Board of Directors on October 5, 2022:
“Brad Wyatt”	Director	“Glenn Dooley”		Director

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

4

CBD Global Sciences Inc. Consolidated Statements of Loss and Comprehensive Loss For the years ended December 31, 2021 and 2020

(Expressed in United States dollars)

	Notes		2021		2020
					(Restated – Note 7)
Sales	21	$	166,947	$	289,481
Cost of sales	11		125,948		350,019
Gross profit (loss)			40,999		(60,538)
Accretion expense	16,18,20		254,157		554,705
Change in fair value of derivative liability	18		287,583		(5,704)
Consulting fees			329,881		362,431
Depreciation	12		66,094		34,917
Finance fees	20		56,267		73,170
Loss (gain) on settlement of debt	18, 19		1,444,408		(16,146)
General and administrative expenses	9, 22		1,438,366		1,283,442
Government assistance income	16		-		(165,034)
Impairment of inventory	11		37,387		-
Impairment of property and equipment	12		238,974		1,231,322
Impairment of goodwill	14		3,824,207		-
Interest expense			285,200		586,720
Interest income			(1,004)		(584)
Loss on debt extinguishment	18		-		216,841
Loss on disposal of property and equipment	12		-		88,265
Loss on lease modification	17		-		159,973
Marketing, sales and distribution			741,702		377,153
Research and development			7,137		35,917
Share-based payments	19,20		178,748		423,755
Total operating expenses			(9,189,107)		(5,241,143)
Gain on deconsolidation of subsidiaries	6		3,946,960		-
Loss from continuing operations			(5,201,148)		(5,301,681)
Loss from discontinued operations	7		(51,553)		(3,626,021)
Net and comprehensive loss		$	(5,252,701)	$	(8,927,702)
Weighted average number of shares–basic and diluted			35,684,841		31,501,446
Loss per share–basic and diluted		$	(0.15)	$	(0.28)
Loss from continuing operations per share–basic and diluted		$	(0.15)	$	(0.17)
Loss from discontinued operations per share–basic and diluted		$	(0.00)	$	(0.12)

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

5

CBD Global Sciences Inc.

Consolidated Statement of Changes in Shareholders’ Deficiency For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

Notes	Share capital Number of common shares Amount Number of preferred shares Preferred shares amount Obligation to issue shares Capital reserves Deficit Total shareholders’ deficiency
Balance, December 31, 2019 Shares issued pursuant to private placement 19 Shares issued for debt settlement 19 Conversion of debentures 18,19 Exercise of warrants 19 Share-based payments 19 Share subscription receipts 19 Issuance of warrants for debt 19 Equity portion of convertible debenture – principal and accrued interest 18 Discount to related party notes 20 Issuance of warrants for debt extinguishment 18 Modification of warrants 18 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 Share-based payments 19 Obligation to issue shares 19 Shares issued for debt settlement 18,19 Acquisition of Resinosa LLC 8,19 Discount to related party notes 20 Issuance of convertible note 18 Equity portion of convertible debenture – accrued interest 18 Net loss for the year	34,525,758 $ 6,560,587 316,784 $ 2,079,237 $ 131,705 $ 4,120,815 $ (21,167,752) $ (8,275,408) - - - - 498,690 265,055 - 763,745 420,000 69,036 - - (59,174) - - 9,862 8,488,876 1,395,322 318,688 5,239,231 - - - 6,634,553 5,378,657 875,860 99,889 2,447,290 - - - 3,323,150 - - - - - 82,239 - 82,239 - - - - - 1,012,700 - 1,012,700 - - - - - 5,999 - 5,999 - - - - - - (5,252,701) (5,252,701)
Balance, December 31, 2021	48,813,291 $ 8,900,805 735,361 $ 9,765,758 $ 571,221 $ 5,486,808 $ (26,420,453) $ (1,695,861)

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

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CBD Global Sciences Inc.

Consolidated Statements of Cash Flows For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

		2021	2020
Operating activities
Net loss for the year	$	(5,252,701)$	(8,927,702)
Items not affecting cash:
Change in fair value of derivative liability		287,583	(5,704)
Accretion		254,157	554,705
Depreciation		66,094	159,961
Finance fees		51,806	68,719
Gain on deconsolidation of subsidiaries		(3,946,960)	-
Loss (gain) on settlement of debt		1,444,408	(16,146)
Government assistance		-	(165,034)
Impairment of goodwill		3,824,207	-
Impairment of inventory		37,387	3,400,862
Impairment of property and equipment		238,974	1,231,322
Impairment of trade receivables		31,086	58,179
Interest expense		229,024	362,513
Loss on debt extinguishment		-	216,841
Loss on disposal of property and equipment		-	88,265
Loss on lease modification		-	159,973
Share-based payments		687,300	815,229
Non-cash working capital items:
Amounts receivable		12,682	297,377
Prepaid expenses		302,851	8,156
Inventory		(83,950)	(27,234)
Accounts payable and other liabilities		675,897	379,928
Deferred revenue		1,545	-
Net cash used in operating activities		(1,138,610)	(1,339,790)
Investing activities
Cash acquired from Resinosa LLC acquisition		143,545	-
Purchase of property and equipment		(3,000)	-
Proceeds on sale of land		-	55,273
Proceeds on sales of assets under construction		80,000	-
Net cash provided by investing activities		220,545	55,273
Financing activities
Proceeds from issuance of notes payable		-	375,000
Proceeds from issuance of convertible debentures		-	50,000
Repayment of notes payable		(206,256)	(226,629)
Payments on lease liability		(26,489)	(27,788)
Proceeds from issuance of shares		-	112,500
Proceeds from shares to be issued		55,000	-
Loans from related parties		1,053,574	815,582
Government assistance		135,095	164,795
Net cash provided by financing activities		1,010,924	1,263,460
Change in cash		92,859	(21,057)
Cash, beginning of the year		541	21,598
Cash, end of theyear	$	93,400$	541

Cash flows from discontinued operations (Note 7) Supplemental cash flow information (Note 23)

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

7

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (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.

During the year ended December 31, 2021, two of the Company’s subsidiaries, Global NV Corp. (“Global NV”) and Strasburg Pharms, LLC (“Strasburg”) filed for protection under the Bankruptcy Code as a result of claims filed against Global NV by a former landlord during the year ended December 31, 2020 (Note 6). Prior to filing for bankruptcy, the Company’s position was to defend these claims; however the landlord became an aggressive creditor. In connection with the bankruptcy, a trustee was appointed to liquidate assets and discharge the outstanding liabilities of Global NV and Strasburg. The bankruptcy process has provided the Company with the opportunity to implement operational and commercial plans to re-position the Company for future growth. These plans have included the internal development of a distribution division via Legacy Distribution Group LLC, a wholly-owned subsidiary, (Note 2) and a manufacturing division via the acquisition of Resinosa, LLC (Note 8) during the year ended December 31, 2021. In addition, subsequent to the year ended December 31, 2021, the Company entered into an asset purchase agreement for a direct store distribution operation (Note 28).

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, 2021, the Company had working capital deficit of $1,735,711 and an accumulated deficit of $26,420,453.

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 that 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. Such adjustments could be material.

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.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

2. BASIS OF PRESENTATION

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”).

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. As at December 31, 2021, the Company’s subsidiaries were:

Name of subsidiary	Place of incorporation	Proportion of ownership	Principal activity
Global Sciences Holdings, Inc.	Colorado	100%	Holding company
Resinosa, LLC	Colorado	100%	Manufacturing and sales of CBD oil products
Dog Unleashed CBD, LLC	Colorado	100%	CBD oil product sales
Legacy Distribution Group LLC	Colorado	100%	Distribution services
Energy Unleashed LLC	Colorado	100%	CBD oil product sales
Bam Bam Productions LLC	Colorado	100%	CBD oilproduct sales

As a result of Global NV and Strasburg converting from Chapter 11 to Chapter 7 of the Bankruptcy Code during the year ended December 31, 2021, the Company no longer maintains control of these entities and these entities’ subsidiaries, SMBT, LLC CannaOil, Inc., and Global Sciences IP, LLC. The Company deconsolidated these entities upon the loss of control (Note 6).

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 and distribution and processing services related thereto. Revenue from the sale of goods and provision of distribution and processing services 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, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 and building	15 years	Straight-line
Leasehold improvements	5 years	Straight-line
Machinery	5 years	Straight-line
Vehicles	5 years	Straight-line
Leased right-of-use asset	Over the remaining term at recognition	Straight-line

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.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in an asset acquisition is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. A change in the expected useful life of the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Finite lived tangible assets are amortized on a straight-line basis over the period of their expected future economic benefit.

The expected useful life of the Company’s intellectual property is 5 years.

Infinite lived intangible assets are not amortized and are subject to impairment testing annually. The useful life for each asset is reviewed each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. If they do not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate.

Goodwill

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently whenever events or circumstances indicate that it may have lost value.

Goodwill is allocated to the Company’s subsidiary, i.e. the cash-generating unit (“CGU”), that benefits from the synergies of the business combination. The Company looks for impairment by determining whether the carrying amount of the CGU to which the goodwill is related exceeds its recoverable amount. If impairment is identified, the impairment loss is initially attributed to goodwill and any excess amount is attributed proportionally to the carrying amount of the CGU’s assets.

Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

Any impairment of goodwill is recognized in profit and loss in the period in which it is identified. Goodwill impairment losses are not reversed in subsequent periods.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset or CGU may be impaired. If any indication of impairment exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset or CGU’s recoverable amount is the higher of its fair value less costs of disposal and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, an appropriate valuation model is used. The Company has CGUs against which impairment can be tested.

Impairment losses in respect of continuing operations are recognized in the consolidated statements of loss and comprehensive loss in those expense categories consistent with the function and nature of the impaired asset.

For non-financial assets, an assessment is made at each reporting date as to whether there is any indication that previously-recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the non-financial asset’s or CGU’s recoverable amount.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

A previously-recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the non-financial asset’s recoverable amount since the last impairment loss was recognized. Any such reversal is limited so that the carrying amount of the non-financial asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the non-financial asset in prior periods. Such reversal is recognized in the consolidated statements of loss and comprehensive loss.

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, lease liabilities, 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.

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.

12

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 judgement 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.

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.

13

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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.

14

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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 judgement that the government grant will be received or the loan will be forgiven.

Standards Issued But Not Yet Effective

The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective. The Company has not early adopted any new standards and determined that there are no standards that are relevant to the Company.

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.

15

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

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.

Fair value adjustments for business combinations

In accordance with IFRS 3, Business Combinations , the Company remeasures the assets, liabilities and contingent liabilities acquired through a business combination relative to fair value. Similarly, consideration given, including shares issued, is also measured at fair value. Where possible, fair value adjustments are based on external appraisals or valuation models (e.g. where intangible assets were not recognized by an acquiree). These valuation methods rely on various assumptions such as estimated future cash flows, remaining useful economic life, etc.

Intangible assets - impairment

The application of the Company’s accounting policy for intangible assets requires judgement in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.

Goodwill - impairment

Management conducts an annual test for impairment of goodwill in the fourth quarter of each fiscal year and at any other time of the year if an indicator of impairment is identified. Calculating the estimated recoverable amount (fair value less cost to dispose) of CGUs for non-current asset impairment tests and CGUs or groups of CGUs for goodwill impairment tests requires management to make estimates and assumptions with respect to discount rates, future revenue and gross margin, operating and capital costs, working capital requirements and income taxes. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis.

Share-based payments

• Estimating fair value for share based payment transactions, including stock options and compensatory warrants, requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about the most - appropriate inputs to the valuation model including the expected life, volatility, risk free interest rate, expected forfeiture rate and dividend yield of the equity instruments.

16

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

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.

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

Business combinations

From time to time, the Company acquires subsidiaries. At the time of acquisition, the Company considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Company accounts for an acquisition as a business combination where an integrated set of activities and assets, is acquired. More specifically, consideration is given to the extent to which significant processes are acquired.

When the acquisition of subsidiaries does not represent a business combination, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognised.

Going concern

The Company’s ability to execute its strategy by funding future working capital requirements requires significant judgement (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.

Recoverability of trade account receivables

The Company’s assessment of collectability of its trade receivable requires judgement. In assessing whether an allowance is necessary, the Company uses historical trends to determine the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement 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.

17

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

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).

The Company uses judgement 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 judgement 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 liabilities 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 liabilities are measured at fair value at each reporting period end using level 2 inputs.

6. BANKRUPTCY PROCEEDINGS

During the year ended December 31, 2021, Global NV and Strasburg filed for protection under the Bankruptcy Code as a result of claims against Global NV by a former landlord. The subsidiaries initially filed for protection under Chapter 11 of the Bankruptcy Code and subsequently converted the case to Chapter 7 of the Bankruptcy Code . In connection with the bankruptcy, a trustee was appointed to liquidate assets and make distributions on account of the outstanding liabilities of Global NV and Strasburg. This process is ongoing.

Once the bankruptcy proceedings converted to Chapter 7 of the Bankruptcy Code and the court appointed trustee obtained control of Global NV and Strasburg, the Company lost control of the entities. Global NV, Strasburg, SMBT, LLC, CannaOil, Inc., and Global Sciences IP, LLC have been deconsolidated from these consolidated financial statements.

During the year ended December 31, 2021, the Company recorded a gain on deconsolidation of $3,946,960 representing the net liabilities of subsidiaries of which the Company lost control.

18

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

7. DISCONTINUED OPERATIONS

As a result of the bankruptcy proceedings and other related challenges, the Company discontinued its farming and processing operations which were primarily performed by Strasburg Pharms, LLC.

The farming and processing operations were not previously classified as a discontinued operation. The comparative consolidated statement of loss and comprehensive loss has been restated to show the discontinued operation separately from continuing operations. The impact of the discontinued operations relating to farming and processing operations on the consolidated statement of loss and comprehensive loss is summarized in the table below.

	For the year ended December 31, 2021 2020
Revenue Cost of sales Gross profit (loss), excluding fair value items Realized fair value amounts included in inventory sold Gross profit (loss) General and administrative expenses Impairment of inventory Total operating expenses	$ - $ 15,919 19,376 131,515
	(19,376) (115,596) - (10,927)
	(19,376) (126,523)
	32,177 98,636 - 3,400,862
	(32,177) (3,499,498)
Total loss from discontinued operations	$ (51,553) $ (3,626,021)

Cash flows from discontinued operations for the years ended December 31, 2021 and 2020 are summarized in the table below.

	For	the year ended	December 31,
		2021	2020
Cash flows used in operating activities	$	(89,740) $	(299,283)
Cash flows from investing activities		-	55,272
Cash flows from (used in) financing activities		(14,800)	37,591
Cash flows from discontinued operations	$	(104,540) $	(206,420)

8. BUSINESS COMBINATION

On October 15, 2021, the Company, through its wholly-owned subsidiary, Global Sciences Holdings, Inc., closed an acquisition pursuant to an Asset and Limited Liability Company Interest Purchase Agreement (the “Purchase Agreement”) dated September 29, 2021 (the “Acquisition”). The Acquisition included real property and 100% interest in Resinosa, LLC (“Resinosa”). Resinosa is a vertically integrated company with expertise in hemp genetics, cloning, farming, harvesting, processing and manufacturing of CBD-based finished goods.

The Purchase Agreement provided for consideration as follows:

• 5,378,657 common shares of the Company with a fair value of $875,860 determined based on the closing price of the Company’s common shares on October 15, 2021 ($0.245 per common share) less a discount for lack of marketability of $441,911 to reflect that the common shares are restricted and not freely tradeable immediately upon issuance (Note 19). The discount for lack of marketability was calculated based on commonly used option price models for each restriction period applicable to the common shares issued.

• 99,889 preferred shares of the Company with a fair value of $2,447,290 determined based on the closing price of the Company’s common shares on October 15, 2021 ($0.245 per common share) and the conversion ratio of one preferred share to 100 common shares (Note 19).

19

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

8. BUSINESS COMBINATION (Continued)

• A secured convertible promissory note in the principal amount of $1,500,000 which bears interest at 8% per annum on the outstanding principal amount (the “Resinosa Note”) (Note 18). Accrued interest is payable annually and the principal becomes due at maturity on October 15, 2023. The Resinosa Note is convertible into units of the Company (“Units”), with each Unit consisting of 0.35 common shares and 0.0065 preferred shares, at a conversion price of $0.228 per Unit. The Resinosa Note is secured by the real property purchased in the Acquisition (Note 12) and a general security agreement. The fair value of the Resinosa Note was determined as $2,342,000 and comprised of the debt component of $1,329,300 and the conversion feature of $1,012,700.

• Contingent consideration:

• If greater than $500,000 of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is achieved by Resinosa in the year ending December 31, 2022, 4,388,906 shares of the Company will be issued no later than April 30, 2023;

• If greater than $1,000,000 of EBITDA is achieved by Resinosa in the year ending December 31, 2023, 4,388,906 shares of the Company will be issued no later than April 30, 2024;

• Both performance incentives above can achieve 50% of the 4,388,906 shares if EBITDA is greater than $250,000 but less than $375,000; and,

• Both performance incentives above can achieve 75% of the 4,388,906 shares if EBITDA is greater than $375,000 but less than $500,000 (collectively the “Contingent Consideration”).

• The fair value of the Contingent Consideration was determined as $10,000 based on probability weighted expected future cash flows and is recorded in the balance of derivative liability on the statement of financial position.

Included in the identifiable assets and liabilities acquired at the date of acquisition of Resinosa are inputs (manufacturing and processing facilities, technology, inventories and customer relationships), production processes and an organized workforce. The Company has determined that together the acquired inputs and processes significantly contribute to the ability to create revenue. The Acquisition was determined to be a business combination as substantive processes and assets were acquired as part of the transaction. The Company also retained the services of Resinosa’s former employees and management.

ompany also retained the services of Resinosa’s former employees and management.
Consideration paid: 99,889 preferred shares of the Company at $24.50 per preferred share 5,378,657 common shares of the Company at $0.245 per common share Less: discount for lack of marketability Fair value of equity consideration Fair value of convertible debt Fair value of contingent consideration Net identifiable assets acquired: Goodwill Intellectual property Land and building Equipment Cash Inventory Amounts receivable Prepaid expenses Amounts payable Notes payable	$ 2,447,290 1,317,772 (441,911)
	3,323,151 2,342,000 10,000
	$ 5,675,151
	$ 3,824,207 347,000 678,000 519,953 143,545 142,549 64,472 14,577 (538) (58,614)
	$ 5,675,151

20

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

8. BUSINESS COMBINATION (Continued)

The unallocated consideration of $3,824,207 was recognized as goodwill (Note 14). Goodwill is comprised of synergies that are expected to be achieved from integrating Resinosa into the Company, including the Company’s distribution and marketing and achieving new contracts, the elimination of redundant costs, achieving economies of scale and access to financing to grow the operations. These benefits were not recognized separately from goodwill on the basis that they do not meet the recognition criteria for identifiable intangible assets.

From the date of acquisition on October 15, 2021, Resinosa contributed $59,899 of revenue to consolidated net loss of the Company. If the Acquisition had occurred at the beginning of the year on January 1, 2021, the Company’s consolidated revenue would have been $616,700 and consolidated net loss would have been $5,144,675 for the year ended December 31, 2021.

9. TRADE AND OTHER RECEIVABLES

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

		December 31, 2021		December 31, 2020
Trade accounts receivable	$	16,769	$	-
Sales tax receivable		6,780		2,845
	$	23,549	$	2,845

During the year ended December 31, 2021, the Company wrote off $31,086 (2020 – $58,179) 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.

10. PREPAID EXPENSES

The Company’s prepaid expenses consist of the following:

			December	31, 2021		December 31, 2020
Current:
Consulting services (Note	19)	$		-	$	294,614
Other				13,928		10,105
		$		13,928	$	304,719

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 17).

21

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

11. INVENTORY

The following is a breakdown of inventory at December 31, 2021 and 2020:

		December 31, 2021		December 31, 2020
Raw materials	$	71,630	$	-
Finished goods		117,482		-
Balance	$	189,112	$	-

During the year ended December 31, 2021:

• The Company recognized $125,948 of inventory expensed to cost of goods sold.

• The Company recorded an impairment loss related to certain labelled inventory totaling $37,387 due to a litigation.

During the year ended December 31, 2020:

• The Company recognized $350,019 of inventory expensed to cost of goods 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 which is included in the loss from discontinued operations (Note 7).

• 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 which is included in the loss from discontinued operations (Note 7).

• The Company recorded a further impairment of inventory of $2,882,284 which is included in the loss from discontinued operations due to concerns and uncertainty with the Company’s ability to realize sales as a result of pending bankruptcy proceedings (Notes 1, 6 and 7).

22

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

12. PROPERTY AND EQUIPMENT

		Machinery &		Greenhouses		Assets under		Leasehold						Lease
		equipment		& Building		construction		improvements		Land		Vehicles		assets		Total
Cost
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
Additions		506,827		565,500		-		-		112,500		16,126		464,593		1,665,546
Disposals		-		-		(80,000)		-		-		-		-		(80,000)
Balance, December 31, 2021	$	506,827	$	565,500	$	-	$	-	$	112,500	$	16,126	$	464,593	$	1,665,546
Accumulated Depreciation and	Impairment
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		-		-		-		-		-		-		-		-
Depreciation		21,086		7,953		-		-		-		680		21,734		51,453
Impairment of assets		-		-		-		-		-		-		238,974		238,974
Balance, December 31, 2021	$	21,086	$	7,953	$	-	$	-	$	-	$	680	$	260,708	$	290,427
Net Book Value
At December 31, 2020	$	-	$	-	$	80,000	$	-	$	-	$	-	$	-	$	80,000
At December 31, 2021	$	485,741	$	557,547	$	-	$	-	$	112,500	$	15,446	$	203,885	$	1,375,119

During the year ended December 31, 2021, the Company sold assets under construction for proceeds of $80,000 pursuant to an asset purchase agreement.

During the year ended December 31, 2021, depreciation of $nil (2020 - $125,044) was included in cost of sales.

During the year ended December 31, 2021, the Company acquired land and building of $678,000 and equipment totaling $519,953 from the Acquisition (Note 8). The Resinosa Note is secured by this land and building by a first deed of trust (Note 18).

23

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

12. PROPERTY AND EQUIPMENT (Continued)

During the year ended December 31, 2021, the Company recorded an impairment loss in the amount of $238,974 related to leased assets on the basis that the carrying amount exceeded the recoverable amount upon initial recognition (Note 17).

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 17).

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 16). 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.

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 (Note 6).

13. INTANGIBLE ASSETS

NTANGIBLE ASSETS
		Intellectual Property
Cost
Balance, December 31, 2019 and 2020	$	-
Additions (Note 8)		347,000
Balance, December 31, 2021	$	347,000
Accumulated Depreciation and Impairment
Balance, December 31, 2019 and 2020	$	-
Depreciation		14,641
Balance, December 31, 2021	$	14,641
Net Book Value
At December 31, 2020	$	-
At December 31, 2021	$	332,359

14. GOODWILL

As a result of the purchase price allocation of the Acquisition, the Company recognized goodwill in the amount of $3,824,207 (Note 8). Further to the Company’s impairment assessment as at December 31, 2021, the Company recognized an impairment of $3,824,207 on goodwill, resulting in a carrying value of goodwill of $Nil as at December 31, 2021.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may not be recoverable. Impairment is determined for goodwill by assessing the recoverable amount of each CGU or group of CGUs to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount including goodwill, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

The Company determined that all of the assets purchased and liabilities assumed in the Acquisition represent one CGU (the “Resinosa CGU”). The recoverable amount for the Resinosa CGU is determined using the discounted cash flow approach, which discounts the earnings projections derived from the business plans prepared by the Company. The projections reflect management’s expectations of revenue, profit margin, capital expenditures, working capital, and operating cash flows, which are based on past experience and future expectations of performance.

24

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

14. GOODWILL (Continued)

As at December 31, 2021, the Company completed its annual impairment test using the following key assumptions of its recoverable amount analysis using the value in use method:

• Management prepared a standard 5-year period projection using an average growth rate of 20% based on management’s assessment of future industry trends, internal and external resources and historical data.

• The present value of expected cash flows of the Resinosa CGU was determined by applying a suitable discount rate. The discount rate was derived based on the weighted average cost of capital factoring the cost of equity, debt-to-equity structure, and interest rates on corporate borrowing. The discount rate reflects appropriate adjustments related to market risk and specific risk factors of the Company and has been determined to be 16%.

• A terminal growth rate of 3% was applied due to the potential entrance of new products and competitors.

• Future cash flows are based on various judgements and estimates including actual performance of the business, management’s estimates of future performance, and indicators of future industry activity levels.

As at December 31, 2021, the recoverable amount of the Resinosa CGU was less than its carrying value and as a result the Company recorded an impairment loss in the amount of $3,824,207 which was allocated to goodwill resulting in a carrying value of $Nil as at December 31, 2021.

15. ACCOUNTS PAYABLES AND OTHER LIABILITIES

		December 31, 2021		December 31, 2020
Trade payables	$	327,083	$	1,059,411
Accrued liabilities		302,821		618,505
Accrued salaries and benefits		344,897		152,607
Accrued interest		99,007		47,973
	$	1,073,808	$	1,878,496

25

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

16. NOTES PAYABLE

						December	December	31, 2021	December	December	31,2020
	Nominal
	interest		Date of			Face		Carrying	Face		Carrying
	rate		maturity			value		amount	value		amount
Promissory note	-		8/31/2020	(d)	$	-	$	- $	18,173	$	18,173
Promissory note	-	12/27/2019		(e)		81,098		81,098	101,098		101,098
Promissory note	8.0%		10/1/2020	(f)		100,000		100,000	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
Promissory note	3.75%		7/2/2050	(j)		153,597		58,647	-		-
Total					$	334,695	$	239,745 $	438,593	$	425,849
Current						(189,870)		(184,245)	(394,271)		(394,271)
Long-term					$	144,825	$	55,500 $	44,322	$	31,578
								Face value		Carrying value
Balance, December 31, 2019						$		827,047	$		825,477
Issued during the	year							421,030			421,030
Transaction costs								-			(3,498)
Government assistance								-			(12,989)
Accretion								-			5,313
Interest								377			377
Repayment of principal								(226,629)			(226,629)
Proceeds on sale	of land applied to repay			principal				(583,232)			(583,232)
Balance, December 31, 2020								438,593			425,849
Issued during the	year							135,095			135,095
Deconsolidation of subsidiaries’ loans (Note 6)								(179,834)			(167,185)
Acquisition of Resinosa (Note			8)					154,119			58,614
Accretion								-			650
Interest								1,231			1,231
Recovery of interest expense								(6,933)			(6,933)
Repayment of principal and		interest						(207,576)			(207,576)
Balance, December 31, 2021						$		334,695	$		239,745

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

26

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

16. NOTES PAYABLE (Continued)

• a) On May 25, 2017, an investor advanced $100,000 to the Company in exchange for 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 19).

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 12).

• 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 12).

• 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 12).

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

During the year ended December 31, 2021, the Company paid principal and interest of $15,000 (2020 – $49,855) and $Nil (2020 – $25,163), respectively.

As at December 31, 2021, the principal and accrued interest balances were deconsolidated on the basis that Global NV was the borrower of the promissory note (Note 6).

27

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

16. NOTES PAYABLE (Continued)

• 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, 2021, this 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, 2021, accrued interest payable of $54,269 (2020 - $29,765) is included in accounts payable and accrued liabilities.

During the year ended December 31, 2021, the Company paid principal of $20,000 (2020 – $75,000).

• 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 19). 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, 2021 (Note 19). As at December 31, 2021, accrued interest payable of $15,211 (2020 – $7,211) is included in accounts payable and accrued liabilities. As at December 31, 2021, 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 was secured by the assets of the Company and had been personally guaranteed by the President of the Company. As at December 31, 2021, accrued interest payable of $Nil (2020 - $4,153) is included in accounts payable and accrued liabilities.

During the year ended December 31, 2021, the Company paid principal and interest of $168,210 (2020 - $Nil) and $72,415 (2020 - $62,515), respectively and recovered $6,933 (2020 - $Nil) in interest expense. As at December 31, 2021, the loan was repaid in full.

• h) During the year ended December 31, 2020, SMBT, LLC 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. SMBT, LLC may repay the loan in part or in full at any time without interest or penalty. SMBT, LLC 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%.

During the year ended December 31, 2021, the Company recorded accretion and interest expense of $95 (2020 - $245) and $145 (2020 - $377), respectively. As at December 31, 2021, the principal and accrued interest balances were deconsolidated on the basis that SMBT, LLC is the borrower (Note 6).

• i) During the year ended December 31, 2020, Strasburg 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 17). 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 Strasburg.

During the year ended December 31, 2021, the Company paid principal and interest of $3,046 (2020 - $2,081) and $504 (2020 - $584), respectively. As at December 31, 2021, the principal and accrued interest balances were deconsolidated on the basis that Strasburg is the borrower (Note 6).

28

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

16. NOTES PAYABLE (Continued)

• j) On July 2, 2020, Resinosa, LLC was granted a secured disaster loan from the U.S. Small Business Administration with a principal of $150,000. Interest accrues on the principal at a rate of 3.75% per annum. Resinosa, LLC may repay the loan in part or in full at any time without interest or penalty. Resinosa, LLC is required to pay principal and interest payments of $731 per month beginning in July 2021 with each payment being first applied to accrued interest and then principal. All remaining principal and accrued interest is due and payable on July 2, 2050. The carrying value of the principal and interest of $54,495 and $4,119, respectively, were assumed in the Acquisition (Note 8).

During the year ended December 31, 2021, the Company recorded accretion and interest expense of $555 (2020 - $nil) and $940 (2020 - $377), respectively.

• k) During the year ended December 31, 2020, Global NV 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 Global NV 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.

During the year ended December 31, 2021, Global NV was granted a further loan under the Paycheck Protection Program (the “Second Draw PPP Loan”) totaling $135,095. The Second Draw PPP Loan has the same terms as the PPP Loan. On May 7, 2021, the carrying value of the Second Draw PPP Loan was deconsolidated on the basis that Global NV was the borrower (Note 6).

• l) During the year ended December 31, 2020, the Company was granted Economic Injury Disaster Loan 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.

• m) 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.

17. LEASE LIABILITY

The Company leased certain assets under lease agreements. The lease liability consisted of various leases for vehicles and office space. The leases were calculated using an incremental borrowing rate of 12% per annum.

Lease liabilities	December 31, 2021	December 31, 2020
Current portion	$ 102,254	$ 834,847
Long-term portion	383,718	71,801
Total lease liabilities	$ 485,972	$ 906,648

29

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

17. LEASE LIABILITY (Continued)

Changes in the balance of lease liabilities are summarized in the table below.

Balance, December 31, 2019	$	806,444
Additions		159,973
Interest expense		27,359
Lease payments		(87,128)
Balance, December 31, 2020	$	906,648
Additions		464,593
Interest expense		38,897
Lease payments		(28,570)
Deconsolidation of subsidiaries (Note 6)		(895,596)
Balance, December 31, 2021	$	485,972

Lease payments for the year ended December 31, 2021 include cash payments of $26,489 (2020 - $27,788), prepayments applied of $2,081 (2020 - $38,510) and a promissory note payable of $Nil (2020 - $20,830) (Note 16).

During the year ended December 31, 2021, the Company entered into vehicle and equipment leases with a company jointly controlled by the President and Chief Operating Officer. As a result of the carrying amount of these leased assets exceeding the recoverable amount at initial recognition, the Company recorded an impairment loss in the amount of $238,974 during the year ended December 31, 2021 (Note 12). As at December 31, 2021, the balances of lease liabilities and accounts payable and accrued liabilities include $434,507 (2020 - $Nil) and $1,575 (2020 - $Nil), respectively, payable to this related party (Note 20).

During the year ended December 31, 2020, the Company terminated a lease with respect to commercial real estate (Note 6). 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.

18. CONVERTIBLE DEBT

A continuity of convertible debt for the year ended December 31, 2021 and year ended December 31, 2020 is as follows:

		Face value		Carrying value
Balance, December 31, 2019	$	3,874,410	$	3,610,386
Issued during the year		4,040,422		3,049,766
Settled with the issuance of common shares		(33,953)		(26,168)
Debt extinguished		(3,156,720)		(3,419,889)
Interest expense		-		260,589
Accretion		-		409,386
Balance, December 31, 2020	$	4,724,159	$	3,884,070
Acquisition of Resinosa (Note 8)		1,500,000		1,329,301
Debt settlement		(4,474,159)		(3,781,189)
Interest expense		-		57,349
Accretion		-		170,173
Balance, December 31, 2021	$	1,750,000	$	1,659,704
Current		(300,000)		(377,168)
Long-term	$	1,450,000	$	1,282,536

30

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

18. 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 original principal amount of $3,600,000, $175,000 was converted into common shares, $3,275,000 was modified, and the remaining $150,000 was not modified.

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; and

• 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 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 (Note 19) which 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, 2021, the warrants have not been issued.

31

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

18. CONVERTIBLE DEBT (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 on the modification date 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 was remeasured at fair value through profit and loss as at December 31, 2020 and the estimated fair value of the derivative liability on 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.

During the year ended December 31, 2020, convertible debt with a principal balance of $33,953 and carrying value of $26,168 was converted into 248,508 common shares (Note 19).

The Company entered into debt settlement agreements related to convertible debentures with total principal balances of $4,396,063 and accrued interest balances of $65,872 in exchange for 318,688 preferred shares of the Company (Note 19).

The derivative liability was remeasured at fair value through profit and loss at the settlement date and the estimated fair value of the derivative liability was $441,744 using the Black-Scholes Option Pricing Model with the following assumptions: exercise price of $0.70; share price of $0.28; an annualized volatility of 185%; a forfeiture rate of 0%, an expected life of 0.5 years; a dividend yield of 0%; and a risk-free rate of 0.29%. The Company recorded an unrealized loss related to the fair value of the derivative liability in the amount of $287,584 during the year ended December 31, 2021.

During the year ended December 31, 2021, the Company recorded a loss on settlement of debt in the amount of $1,016,299 comprised of the fair value of 318,688 preferred shares of the Company of $5,239,231, less the carrying value of the convertible debt of $3,781,189 and the carrying value of the derivative liability of $441,743.

The Resinosa Note

On October 15, 2021, the Company issued a secured promissory note in the principal amount of $1,500,000 as consideration for the Acquisition (Note 8). The Resinosa Note bears interest at 8% per annum on the outstanding principal amount with accrued interest payable annually. The Resinosa Note matures on October 15, 2023.

The Resinosa Note is convertible into Units, with each Unit consisting of 0.35 common shares and 0.0065 preferred shares, at a conversion price of $0.228 per Unit. The Resinosa Note is secured by a deed of trust related to the real property purchased in the Acquisition (Note 12) and a general security agreement granted by the Company in favour of the lenders. The fair value of the Resinosa Note was determined as $2,342,000 and comprised of the debt component of $1,329,300 and the conversion feature of $1,012,700.

The estimated fair value of the conversion feature as at October 15, 2021 was $1,012,700 using the BlackScholes Option Pricing Model with the following assumptions: exercise price of $0.2278; share price of $0.245; an annualized volatility of 122%; a forfeiture rate of 0%, an expected life of 2.0 years; a dividend yield of 0%; and a risk-free rate of 0.41%. The fair value of the conversion feature was credited to reserves.

During the year ended December 31, 2021, the Company accrued interest of $25,315 (2020 - $Nil) and accretion expense of $16,513 (2020 - $Nil).

32

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

18. CONVERTIBLE DEBT (Continued)

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 September 30, 2020. As at December 31, 2021, the loan is in default.

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 $8,333 have been classified as an equity instrument.

During the year ended December 31, 2021, the Company accrued interest of $5,999 (2020 - $2,334) that was recorded in capital reserves.

19. 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.

33

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

19. SHARE CAPITAL (Continued)

b. Issued capital

During the year ended December 31, 2021, the Company completed the following transactions:

• a) On October 15, 2021, the Company issued 5,378,657 common shares and 99,889 preferred shares with a fair value of $875,860 and $2,447,290, respectively, for the Acquisition (Note 8).

• b) On December 30, 2021, the Company issued 318,688 preferred shares with a fair value of $5,239,231 to settle convertible debentures and derivative liabilities with carrying values of $3,781,189 and $441,743, respectively, resulting in a loss on debt settlement of $1,016,299 (Note 18).

• c) On December 30, 2021, the Company issued 2,086,800 common shares with a fair value of $343,009 to a company controlled by the former Chief Financial Officer to settle accounts payable in the amount of $177,978, resulting in a loss on debt settlement of $165,031 (Note 20).

• d) On December 30, 2021, the Company issued 5,767,155 common shares with a fair value of $947,951 to a company jointly controlled by the President and the Chief Operating Officer to settle a revolving promissory note with a carrying value of $710,963, resulting in a loss on debt settlement of $236,988 (Note 20).

• e) On December 30, 2021, the Company issued 634,921 common shares with a fair value of $104,362 to a company controlled by a director of the Company to settle accounts payable in the amount of $78,272, resulting in a loss on debt settlement of $26,090 (Note 20).

• f) On December 30, 2021, the Company issued 420,000 common shares pursuant to consulting agreements. The common shares were valued at $69,036 of which $59,174 was previously recorded in the balance of obligation to issue shares.

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.

• c) On April 13, 2020, the Company issued 40,172 common shares to settle $10,043 of accrued interest on a promissory note (Note 16). 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.

34

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

19. SHARE CAPITAL (Continued)

• 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 10).

• 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 18). The fair value of the conversion feature of $8,325 was reclassified to share capital from capital reserves.

c. Warrants

A summary of warrant activity is as follows:

			Number of	Weighted average
			warrants	exercise price
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
Expired			(4,422,621)	0.20
Outstanding,December	31,	2021	12,448,763	$0.23

During the year ended December 31, 2021, no warrants were issued or exercised.

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 16). 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.

35

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

19. SHARE CAPITAL (Continued)

As at December 31, 2021, the Company had outstanding share purchase warrants as follows:

Number of warrants	Exerciseprice	Expiry date
2,700,000	$0.20	October 2, 2023
1,350,000	$0.20	October 2, 2023
400,000	$1.00	June 30, 2022
25,000	$0.25	March 31, 2022
340,000	$0.26	February 5, 2022
7,633,763	$0.20	October 2, 2022
12,448,763

The weighted-average remaining contractual life of warrants outstanding at December 31, 2021 was 1.05 years.

As at December 31, 2021 and 2020, the Company was obligated to issue 100,000 warrants pursuant to a modification of a promissory note payable (Note 16). 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.

As at December 31, 2021 and 2020, the Company was obligated to issue 1,916,690 warrants pursuant to a modification of convertible debt (Note 18). 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%.

As at December 31, 2021, the Company was obligated to issue 500,000 warrants pursuant to a revolving promissory note (Note 20). The warrants have a fair value of $86,307 determined using the Black-Scholes option pricing model with the following assumptions: exercise price of $0.20; share price of $0.30; an annualized volatility of 122%; a forfeiture rate of 0%, an expected life of 1.0 year; a dividend yield of 0%; and a risk-free rate of 0.27%.

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 CAD$0.20 per share until May 15, 2023. One-third of the options vested immediately upon grant, one-third of the options vested on May 14, 2021 and the remaining one-third will vest on May 14, 2022.

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

			Weighted		Weighted
			average		average
	Number		exercise		exercise
	of options	price ($CAD)		price ($USD)
Outstanding, December 31, 2019	-	$	-	$	-
Granted	5,700,000		0.20		0.15
Outstanding, December 31, 2020	5,700,000		0.20		0.15
Forfeited	(345,000)		0.20		0.15
Outstanding, December 31, 2021	5,355,000	$	0.20	$	0.15
Exercisable, December 31, 2021	3,570,000	$	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, 2021, the weighted average remaining contractual life of outstanding options is 1.37 years.

36

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

19. SHARE CAPITAL (Continued)

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, 2021, the Company recognized share-based payments of $178,748 (2020 - $423,755) 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.

f. Escrowed shares

As at December 31, 2021, the Company had 2,308,781 common shares and 63,283 preferred shares held in escrow pursuant to a reverse takeover transaction which closed on October 17, 2019. Of the total remaining securities, 908,871 common shares and 25,341 preferred shares will be released every six months until April 17, 2022.

g. Obligation to issue shares

As at December 31, 2021, the Company was obligated to issue common shares for proceeds received of $273,515 (2020 - $218,515). During the year ended December 31, 2021, the Company received additional share subscription receipts of $55,000 for which common shares have not yet been issued. Share subscription receipts have been presented as obligation to issue shares within current liabilities in the consolidated statements of financial position. Subsequent to the year ended December 31, 2021, the Company issued 283,333 common shares for which $80,000 was included in this balance of obligation to issue shares as at December 31, 2021 (Note 28).

As at December 31, 2021, the Company was obligated to issue 2,225,000 common shares (2020 - 515,000 common shares) with a cumulative fair value of $534,794 (2020 - $95,278) for services received from consultants which are to be paid by the issuance of common shares of the Company. Subsequent to the year ended December 31, 2021, the Company issued 360,000 common shares for which services with a fair value of $87,737 were included in this balance of obligation to issue shares as at December 31, 2021 (Note 28).

37

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

19. SHARE CAPITAL (Continued)

As at December 31, 2021 and 2020, the Company was obligated to issue stock options with a fair value of $36,427 for services received during the year ended December 31, 2019.

Pursuant to consulting agreements, the Company is obligated to issue a further 1,375,000 common shares during the year ending December 31, 2022 for services to be rendered.

20. RELATED PARTY TRANSACTIONS AND BALANCES

Related parties and related party transactions impacting the financial statements not disclosed elsewhere in these 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, 2021 and 2020 are summarized as follows:

re summarized as follows:
		December 31,		December 31,
		2021		2020
Salaries (Note 22)	$	363,462	$	300,000
Share-based payments (Note 19)		119,996	$	278,786
	$	483,458	$	578,786

Other related party transactions and balances

The carrying values of loans payable to related parties as at December 31, 2021 and 2020 are summarized in the table below.

n the table below.
		December 31,		December 31,
		2021		2020
Beginning balance	$	1,255,147	$	453,892
Increase to principal amount		1,053,574		815,582
Discount to amortized cost, effective interest rate of 20%		(63,609)		(213,739)
Accretion		83,334		135,273
Interest		31,095		64,139
Finance fee		10,000		-
Prior period accrued interest from accounts payable		(38,266)		-
Debt settlement (Note 19)		(710,963)		-
Deconsolidation of subsidiaries (Note 6)		(1,577,147)		-
Ending balance	$	43,165	$	1,255,147
Current		(43,165)		(43,012)
Long-term	$	-	$	1,212,135

a) Strasburg had a revolving promissory note due to a company jointly controlled by the President and the Chief Operating Officer. The note was unsecured and, bears interest at 5% per annum. 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.

The note had a carrying value of $548,588, principal balance of $876,565 and accrued interest balance of $68,649 as at May 7, 2021 on which date these balances were deconsolidated (Note 6).

38

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

20. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

As at December 31, 2020, the promissory note had a carrying value of $509,321, principal balance of $873,685 and accrued interest balance of $57,125.

Strasburg 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, 2021, Strasburg recognized an additional $3,000 (2020 - $41,067) as related party contributions pursuant to proceeds received during the year and recorded accretion expense of $36,387 (2020 - $87,123).

• 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 Strasburg in exchange for a promissory note. The note was unsecured and bears interest at 6% per annum. Payments of interest only were 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 Strasburg default on an interest payment, the interest rate shall increase to 12% per annum. On January 1, 2019, Strasburg entered into an agreement amending the maturity date of the note to December 31, 2021.

The balance due on this note was $8,260 (2020 - $8,177), including principal balance of $7,500 (2020 - $7,500) and accrued interest of $760 (2020 - $677), as at May 7, 2021 on which date these balances were deconsolidated (Note 6).

• c) On April 1, 2019, Global NV 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 Global NV. The note was unsecured, bears interest at 8% per annum, had payments of interest only due monthly with the principal balance due on June 30, 2022.

Global NV 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, 2021, Global NV recognized an additional $315,000 (2020 - $172,672) as related party contributions pursuant to proceeds received during the year and recorded accretion expense of $46,947 (2020 - $48,150).

During the year ended December 31, 2019, the Company issued 1,250,000 warrants in connection with this promissory note. The fair value of the warrants of $183,270 was recorded as deferred financing fees. As at December 31, 2020, the balance of deferred financing fees was $84,372 and related to the remaining fair value of the warrants to be expensed in future periods. During the years ended December 31, 2021 and 2020, the Company recorded finance fees of $19,625 and $55,558, respectively, in the consolidated statements of loss and comprehensive loss related to these warrants.

As at May 7, 2021, the carrying value, accrued interest, and deferred financing fees balances were deconsolidated (Note 6).

• d) On December 31, 2018, Global NV entered into an unsecured promissory note with a company controlled by a director in the amount of $33,736. The note was unsecured and bore interest at 6% per annum. Interest and principal were due and payable on the maturity date of December 31, 2020. The loan was in default; and as a result of the default the outstanding principal balance accrued interest at a rate of 12% per annum effective January 1, 2021.

As at May 7, 2021, the carrying value and accrued interest balance were deconsolidated on the basis that the borrower is Global NV (Note 6).

39

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

20. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

• e) As at December 31, 2021, a revolving promissory note due to a company jointly controlled by the President and the Chief Operating Officer had a carrying value and principal balance of $42,611 (2020 - $Nil) which is included in amounts due to related parties. The balance of accrued interest of $27,940 (2020 - $Nil) is included in accounts payable and accrued liabilities.

During the year ended December 31, 2021, the Company recognized an additional $738,574 (2020 - $Nil) as related party contributions pursuant to proceeds received during the year.

On December 30, 2021, the Company issued 5,767,155 common shares with a fair value of $947,951 to settle $710,963 of this note, resulting in a loss on debt settlement of $236,988 (Note 19).

The note is unsecured and bears interest at 12% per annum. The principal and interest are due on or before June 30, 2023. The Company was charged a loan fee of $10,000 and is obligated to issue 500,000 warrants of the Company (Note 19). The loan fee of $10,000 and fair value of the warrants of $86,307 were capitalized as deferred financing fees and will be amortized over the life of the promissory loan. The Company amortized finance fees of $32,181 during the year ended December 31, 2021.

The Company recorded the promissory note at an effective interest rate of 20% and as a result recognized additional interest expense of $18,629 (2020 - $nil) as a related party contribution in capital reserve during the year ended December 31, 2021.

• f) During the year ended December 31, 2021, the Company incurred $85,354 (2020 - $100,885) in professional fees to a company controlled by the former Chief Financial Officer of the Company recorded in general and administrative expenses.

• g) During the year ended December 31, 2021, the Company incurred $36,074 (2020 - $88,026) in professional fees to a company controlled by a director of the Company recorded in general and administrative expenses.

• h) As at December 31, 2021, accounts payable and accrued liabilities and amounts due to related parties include $11,790 (2020 - $41,923) and $329 (2020 - $Nil), respectively, due to a company jointly controlled by the President and Chief Operating Officer for expense reimbursement.

• i) As at December 31, 2021, accounts payable and accrued liabilities include $200,170 (2020 - $46,452) due to the President of the Company for salaries and wages and expense reimbursement.

• j) As at December 31, 2021, accounts payable and accrued liabilities and amounts due to related parties include $45,423 (2020 - $Nil) and $225 (2020 - $Nil), respectively, due to a director and his spouse for salaries and wages and expense reimbursement.

• k) As at December 31, 2021, accounts payable and other liabilities includes $864 (2020 - $126,029) payable to a company controlled by the former Chief Financial Officer of the Company for professional fees. During the year ended December 31, 2021, the Company issued 2,086,800 common shares with a fair value of $343,009 to settle accounts payable in the amount of $177,978, resulting in a loss on debt settlement of $165,031 (Note 19).

• l) As at December 31, 2021, accounts payable and other liabilities includes $98,539 (2020 - $170,478) for professional fees to a company controlled by a director of the Company. During the year ended December 31, 2021, the Company issued 634,921 common shares with a fair value of $104,362 to settle accounts payable in the amount of $78,272, resulting in a loss on debt settlement of $26,090 (Note 19).

• m) As at December 31, 2021, Global NV owed $Nil (2020 - $412,943) for consulting fees to a company controlled by a director of the Company. As at May 7, 2021, the balance was deconsolidated (Note 6).

40

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

20. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

• n) During the year ended December 31, 2021, the Company entered into vehicle and equipment leases with a company jointly controlled by the President and Chief Operating Officer. As at December 31, 2021, the balances of lease liabilities and accounts payable and accrued liabilities include $434,507 (2020 - $Nil) and $1,575 (2020 - $Nil), respectively, payable to this related party (Note 17). The lease liabilities includes $41,581 of unpaid lease payments owing and on demand as at December 31, 2021.

• o) During the year ended December 31, 2021, the Company issued the Resinosa Note to a director and his spouse in connection with the Acquisition (Notes 8 and 18). As at December 31, 2021, the Resinosa Note had a carrying value of $1,371,129 (2020 - $Nil). During the year ended December 31, 2021, the Company accrued interest and recorded accretion expense of $25,315 (2020 - $Nil) and $16,513 (2020 - $Nil), respectively, related to the Resinosa Note.

21. REVENUE

During the year ended December 31, 2021 and 2020, sales related to CBD Oil products.

For the years ended December 31, 2021 and 2020, the following revenue was recorded from customers that comprise 10% or more of revenue:

	For	the year ended	December 31,
		2021	2020
Customer A	$	- $	115,680
Customer B		-	93,432

22. GENERAL AND ADMINISTRATIVE EXPENSES

	For	the year ended	December 31,
		2021	2020
Bad debt expense (Note 9)	$	31,086 $	58,179
Foreign exchange loss		5,162	209
Investor relations		240,827	209,116
Office expenses		224,976	98,537
Professional fees		352,210	338,790
Rent		21,166	28,672
Salaries (Note 20)		540,221	522,540
Small tools and equipment		2,171	4,389
Travel		11,454	23,010
Vehicle expense		9,093	-
	$	1,438,366$	1,283,442

41

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

23. SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash transactions during the years ended December 31, 2021 and 2020 affecting cash flows from investing and financing activities included:

from investingand financingactivities included:
		2021		2020
Notes payable settled for issuance of shares (Note 19)	$	710,963	$	26,168
Trade payables settled for issuance of shares (Note 19)	$	256,250	$	70,692
Notes payable repaid from sale of land (Notes 12 and 16)	$	-	$	583,232
Acquisition of Resinosa, LLC (Note 8)	$	5,675,151	$	-
Initial recognition of lease liability and right of use assets (Notes 12
and 17)	$	464,593	$	-
Convertible debt settled for issuance of shares(Note 19)	$	3,781,189	$	-
		2021		2020
Cash paid for interest	$	76,278	$	153,297
Cashpaid for income taxes	$	-	$	-

24. SEGMENTED INFORMATION

The Company has a single reportable segment, the production, sale and distribution of CBD products. All assets are domiciled in the United States.

25. 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, 2021		31, 2020
				(Restated)
Net loss for the year before taxes from continuing
operations	$	(5,201,148)	$	(5,301,681)
Expected income tax recovery at statutory rate		(1,413,000)		(1,210,000)
Permanent differences and other		(1,209,000)		(73,000)
Change in unrecognized deductible temporary
differences		2,622,000		1,283,000
Incometaxexpense	$	-	$	-

42

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

25. 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,
		2021		2020
				(Restated)
Non-capital loss carry forwards	$	1,499,000	$	2,254,000
Intangible assets		864,000		-
Share issue costs		1,000		1,000
Property, plant and equipment		116,000		130,000
Capital losses		581,000		-
Unrecognized deferred tax assets		(3,061,000)		(2,385,000)
	$	-	$	-

As at December 31, 2021, the Company had net operating tax loss carryforwards in the United States of $195,000 and $1,304,000 in Canada which can be applied to reduce future taxable income and will expire between 2029 and 2041.

26. 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, 2021.

27. 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.

43

CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

27. 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.

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CBD Global Sciences Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2021 and 2020 (Expressed in United States dollars)

27. 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.

				Less than			Later than
As at December 31, 2021		On demand		1 year		1-2 years	2 years		Total
Trade payables	$	327,083	$	-	$	- $	-	$	327,083
Loans payable to related
parties and accrued
interest		554		-		70,551	-		71,105
Lease liabilities		41,581		123,828		108,528	481,067		755,004
Notes payable and
accrued interest		250,578		8,772		8,772	232,792		500,914
Convertible debt and
accrued interest		-		115,068		1,624,932	-		1,740,000
Obligation to issue shares		273,515		-		-	-		273,515
Total liabilities	$	893,311	$	247,668	$	1,812,783 $	713,859	$	3,667,621

28. SUBSEQUENT EVENTS

• a) On March 7, 2022, the Company issued 283,333 common shares for which gross proceeds of $80,000 were previously received and included in the balance of obligation to issue shares as at December 31, 2021 (Note 19).

• b) On March 7, 2022, the Company issued 360,000 common shares for which services with a fair value of $87,737 were previously received and included in the balance of obligation to issue shares as at December 31, 2021 (Note 19).

• c) On September 8, 2022, the Company entered into an asset purchase agreement with New Age Beverage Corporation and NABC Properties, LLC to acquire a direct store distribution (“DSD”) operation, including the acquisition of certain specified tangible and intangible assets used in the DSD operation and the assumption of certain specified liabilities. The Company is required to secure a debt facility to finance the purchase price of $4,500,000.

Completion of the transaction is subject to a number of conditions customary for a transaction of this nature. These conditions include but are not limited to: fulfilling all exchange as well as any other necessary regulatory or shareholder approvals; securing sufficient financing on terms acceptable to the Company; completing due diligence procedures by all parties; and obtaining required court approvals. There can be no assurance that the transaction will be completed as proposed or at all.

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