CBD Global Sciences Inc. — Interim / Quarterly Report 2022

Oct 13, 2022

CBD Global Sciences Inc.

Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2022 and 2021

(Expressed in United States dollars)

(Unaudited)

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed interim consolidated financial statements of CBD Global Sciences Inc. (the “Company”) have been prepared by management in accordance with International Financing Reporting Standards (“IFRS”). These condensed interim consolidated financial statements, which are the responsibility of management, are unaudited and have not been reviewed by the Company’s auditors. The Company’s Audit Committee and Board of Directors have reviewed and approved these condensed interim consolidated financial statements. In accordance with the disclosure requirements of National Instrument 51-102 released by the Canadian Securities Administrators, the Company’s independent auditors have not performed a review of these condensed interim consolidated financial statements .

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CBD Global Sciences Inc. Condensed Interim Consolidated Statements of Financial Position As at (Expressed in United States dollars) (Unaudited)

	Notes		June 30, 2022		December 31, 2021
ASSETS
Cash		$	59,921	$	93,400
Amounts receivable	7		16,593		23,549
Prepaid expenses			16,151		13,928
Inventory	8		159,439		189,112
Total current assets			252,104		319,989
Deferred financing fees	17		42,868		64,126
Property and equipment	9		1,298,503		1,375,119
Intangible assets	6,10		297,944		332,359
Total assets		$	1,891,419	$	2,091,593
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
Accounts payable and other liabilities	12,17	$	1,522,650	$	1,075,353
Due to related parties	17		199,290		43,165
Notes payable	13		181,098		184,245
Lease liabilities	14		158,215		102,254
Obligation to issue shares	16		193,515		273,515
Convertible debt	15		389,678		377,168
Total current liabilities			2,644,446		2,055,700
Convertible debt	15		1,380,290		1,282,536
Contingent liability	6		10,000		10,000
Lease liabilities	14		355,714		383,718
Notes payable	13		58,722		55,500
Total liabilities			4,449,172		3,787,454
Shareholders’ deficiency
Share capital	16		9,068,542		8,900,805
Obligation to issue shares	16		599,759		571,221
Preferred shares	16		9,765,758		9,765,758
Capital reserves	16		5,532,323		5,486,808
Deficit			(27,524,135)		(26,420,453)
Total shareholders’deficiency			(2,557,753)		(1,695,861)
Total liabilities and shareholders’ deficiency		$	1,891,419	$	2,091,593

Nature of operations and going concern (Note 1) Subsequent events (Note 21)

Approved and authorized by the Board of Directors on October 12, 2022: “Brad Wyatt” Director “Glenn Dooley” Director

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

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CBD Global Sciences Inc.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Expressed in United States dollars) (Unaudited)

			For the three	months ended	months ended		For the	six	months ended
					June 30,				June 30,
	Notes		2022		2021		2022		2021
Sales	18	$	181,189	$	40,378	$	390,776	$	55,763
Cost of sales	8		52,891		26,140		115,312		70,303
Gross profit (loss)			128,298		14,238		275,464		(14,540)
Accretion expense	13,15,17		21,731		186,344		42,495		357,356
Change in fair value of derivative
liability	15		-		(265,648)		-		(132,616)
Consulting fees			-		104,062		1,114		241,421
Depreciation	9, 10		75,854		-		147,037		-
Finance fees			10,688		15,315		21,258		31,068
Foreign exchange loss			90		271		70		716
General and administrative
expenses	19		394,217		307,341		731,866		670,072
Interest expense	13, 14, 15,17		78,310		43,644		147,276		121,724
Interest income			-		(499)		-		(992)
Marketing, sales and distribution			122,038		228,577		249,424		404,634
Research and development			299		-		758		6,400
Share-based payments	16,17		12,617		54,014		37,848		134,587
Total operating expenses			715,844		673,421		1,379,146		1,834,370
Loss from continuing operations			(587,546)		(659,183)		(1,103,682)		(1,848,910)
Loss from discontinued operations	5		-		(10,017)		-		(51,553)
Net loss and comprehensive loss		$	(587,546)	$	(669,200)	$	(1,103,682)	$	(1,900,463)
Weighted average number of
shares–basic and diluted			49,456,624		34,525,758		49,222,038		34,525,758
Loss per share–basic and diluted		$	(0.01)	$	(0.02)	$	(0.02)	$	(0.06)
Loss from continuing operations per
share–basic and diluted		$	(0.01)	$	(0.02)	$	(0.02)	$	(0.05)
Loss from discontinued operations
per share–basic and diluted		$	-	$	(0.00)	$	-	$	(0.00)

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

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CBD Global Sciences Inc.

Condensed Interim Consolidated Statement of Changes in Shareholders’ Deficiency

For the six months ended June 30, 2022 and 2021

(Expressed in United States dollars) (Unaudited)

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, 2020 Share-based payments 16 Equity portion of convertible debenture 15 Discount to related party notes Net loss for the period	34,525,758 $ 6,560,587 316,784 $ 2,079,237 $ 131,705 $ 4,120,815 $ (21,167,752) $ (8,275,408) - - - - 316,359 134,587 - 450,946 - - - - - 2,974 - 2,974 - - - - - 63,609 - 63,609 - - - - - - (1,900,463) (1,900,463)
Balance, June 30, 2021	34,525,758 $ 6,560,587 316,784 $ 2,079,237 $ 448,064 $ 4,321,985 $ (23,068,215) $ (9,658,342)
Balance, December 31, 2021 Common shares issued 16 Share-based payments 16 Equity portion of convertible debenture 15 Contribution – related party notes Net loss for the period	48,813,291 $ 8,900,805 735,361 $ 9,765,758 $ 571,221 $ 5,486,808 $ (26,420,453) $ (1,695,861) 643,333 167,737 - - (87,737) - - 80,000 - - - - 116,275 37,848 - 154,123 - - - - - 2,975 - 2,975 - - - - - 4,692 - 4,692 - - - - - - (1,103,682) (1,103,682)
Balance, June 30, 2022	49,456,624 $ 9,068,542 735,361 $ 9,765,758 $ 599,759 $ 5,532,323 $ (27,524,135) $ (2,557,753)

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

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CBD Global Sciences Inc.

Condensed Interim Consolidated Statements of Cash Flows For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

	2022 2021
Operating activities Net loss for the period $ Items not affecting cash: Change in fair value of derivative liability Accretion Bad debt expense (recovery) Depreciation Finance fees Interest expense Share-based payments Non-cash working capital items: Amounts receivable Prepaid expenses Inventory Accounts payable and other liabilities	(1,103,682)$ (1,900,463) - (132,616) 42,495 357,356 (31,086) - 147,037 - 21,258 27,969 141,390 84,066 154,123 450,946 38,042 (687) (2,223) 252,636 29,673 (41,291) 418,557 229,699
Net cash used in operating activities	(144,416) (672,385)
Investing activities Purchase of property and equipment Proceeds on sales of assets under construction	(36,006) - - 80,000
Net cash provided by (used in) investing activities	(36,006) 80,000
Financing activities Repayment of notes payable Payments on lease liability Proceeds from shares to be issued Loans from related parties Government assistance	- (40,587) (9,182) (14,252) - 55,000 156,125 473,800 - 135,095
Net cash provided by financing activities	146,943 609,056
Change in cash Cash, beginning of the period	(33,479) 16,671 93,400 541
Cash, end of theperiod $	59,921$ 17,212

Supplemental cash flow information (Note 20)

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

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

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 4). 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 provided the Company with the opportunity to implement operational and commercial plans to re-position the Company for future growth. These plans included the internal development of a distribution division via Legacy Distribution Group LLC, a wholly-owned subsidiary, and a manufacturing division via the acquisition of Resinosa, LLC (Note 6) during the year ended December 31, 2021. In addition, subsequent to period end, the Company entered into an asset purchase agreement for a direct store distribution operation (Note 21).

These condensed interim 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 June 30, 2022, the Company had working capital deficit of $2,392,342 and an accumulated deficit of $27,524,135.

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 condensed interim 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 condensed interim 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 Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

2. BASIS OF PRESENTATION

These unaudited condensed interim consolidated financial statements have been prepared by management of the Company in accordance with International Accounting Standards (“IAS”) 34, “Interim Financial Reporting”, following the same accounting principles and methods of computation as outlined in the Company’s consolidated financial statements for the year ended December 31, 2021. A description of accounting standards and interpretations that have been adopted by the Company can be found in the notes to the consolidated financial statements for the year ended December 31, 2021. These unaudited condensed interim consolidated financial statements include all necessary disclosures required for interim financial statements but do not include all disclosures required for annual financial statements. Therefore, these unaudited condensed interim consolidated financial statements should be read in conjunction with the most recent audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2021.

The condensed interim 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 condensed interim consolidated financial statements are presented in United States dollars, unless otherwise noted, which is the functional currency of the Company and its subsidiaries.

These condensed interim 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 condensed interim consolidated financial statements. All intercompany balances and transactions, income and expenses have been eliminated upon consolidation. As at June 30, 2022, 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

Certain comparative figures have been reclassified to conform with the basis of presentation applied for the six months ended June 30, 2022.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of these condensed interim 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 condensed interim consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These condensed interim 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.

The critical accounting estimates and judgements applied in these condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2021.

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

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

5. DISCONTINUED OPERATIONS

As a result of the bankruptcy proceedings and other related challenges (Note 4), the Company discontinued its farming and processing operations which were primarily performed by Strasburg Pharms, LLC.

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 six months ended June 30, 2022 2021
Revenue Cost of sales Gross profit (loss) General and administrative expenses Total operating expenses	$ - $ - - 19,376
	- (19,376)
	- 32,177
	- (32,177)
Total loss from discontinued operations	$ - $ (51,553)

Cash flows from discontinued operations are summarized in the table below.

		For the six months	ended June 30,
		2022	2021
Cash flows used in operating activities	$	- $	(89,863)
Cash flows from investing activities		-	-
Cash flows used in financing activities		-	(14,296)
Cash flows from discontinued operations	$	-$	(104,159)

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

6. 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 16). 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 16).

• 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 15). 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 9) and a general security agreement. The fair value of the Resinosa Note was determined as $2,342,000 on initial recognition and comprised of the debt component of $1,329,300 and the conversion feature of $1,012,700.

• Contingent consideration: o 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.

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

6. BUSINESS COMBINATION (Continued)

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

The unallocated consideration of $3,824,207 was recognized as goodwill (Note 11). 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.

7. TRADE AND OTHER RECEIVABLES

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

		June 30, 2022		December 31, 2021
Trade accounts receivable	$	5,226	$	16,769
Sales tax receivable		11,367		6,780
	$	16,593	$	23,549

8. INVENTORY

The following is a breakdown of inventory:

		June 30, 2022		December 31, 2021
Raw materials	$	74,707	$	71,630
Finished goods		84,732		117,482
Balance	$	159,439	$	189,112

During the six months ended June 30, 2022, the Company recognized $115,312 (June 30, 2021 - $70,303) of inventory expensed to cost of goods sold.

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CBD Global Sciences Inc.

Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

9. PROPERTY AND EQUIPMENT

		Machinery				Assets
		&				under						Lease
		equipment		Building		construction		Land		Vehicles		assets		Total
Cost
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
Additions		36,006		-		-		-		-		-		36,006
Balance,
June 30, 2022	$	542,833	$	565,500	$	-	$	112,500	$	16,126	$	464,593	$	1,701,552
Accumulated Depreciation		and Impairment
Balance,
December 31, 2020	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Depreciation		21,086		7,953		-		-		680		21,734		51,453
Impairment		-		-		-		-		-		238,974		238,974
Balance,
December 31, 2021		21,086		7,953		-		-		680		260,708		290,427
Depreciation		66,963		18,695		-		-		1,599		25,365		112,622
Balance,
June 30, 2022	$	88,049	$	26,648	$	-	$	-	$	2,279	$	286,073	$	403,049
Net Book Value as at
December 31, 2021	$	485,741	$	557,547	$	-	$	112,500	$	15,446	$	203,885	$	1,375,119
June 30, 2022	$	454,784	$	538,852	$	-	$	112,500	$	13,847	$	178,520	$	1,298,503

During the six months ended June 30, 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, the Company acquired land and building of $678,000 and equipment totaling $519,953 from the Acquisition (Note 6). The Resinosa Note is secured by this land and building by a first deed of trust (Note 15).

10. INTANGIBLE ASSETS

		Intellectual Property
Cost
Balance, December 31, 2020	$	-
Additions (Note 6)		347,000
Balance, December 31, 2021 and June 30, 2022	$	347,000
Accumulated Depreciation and Impairment
Balance, December 31, 2020	$	-
Depreciation		14,641
Balance, December 31, 2021		14,641
Depreciation		34,415
Balance, June 30, 2022	$	49,056
Net Book Value
At December 31, 2021	$	332,359
At June 30, 2022	$	297,944

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

11. GOODWILL

As a result of the purchase price allocation of the Acquisition, the Company recognized goodwill in the amount of $3,824,207 (Note 6). 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 and June 30, 2022.

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 cashgenerating unit (“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.

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 and June 30, 2022.

12. ACCOUNTS PAYABLES AND OTHER LIABILITIES

		June 30, 2022		December 31, 2021
Trade payables	$	381,792	$	327,083
Accrued liabilities		321,062		302,821
Accrued salaries and benefits		668,826		344,897
Accrued interest		127,748		99,007
Customer deposit		23,222		1,545
	$	1,522,650	$	1,075,353

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CBD Global Sciences Inc.

Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

13. NOTES PAYABLE

					June	**30, **	2022		December	31,2021
	Nominal
	interest	Date of			Face		Carrying		Face	Carrying
	rate	maturity			value		amount		value	amount
Promissory note	-	12/27/2019	(b)	$	81,098	$	81,098	$	81,098$	81,098
Promissory note	8.0%	10/1/2020	(c)		100,000		100,000		100,000	100,000
Promissory note	3.75%	7/2/2050	(g)		152,016		58,722		153,597	58,647
Total				$	333,114	$	239,820	$	334,695 $	239,745
Current					(181,098)		(181,098)		(189,870)	(184,245)
Long-term				$	152,016	$	58,722	$	144,825 $	55,500

		Face value		Carrying value
Balance, December 31, 2020	$	438,593	$	425,849
Issued during the year		135,095		135,095
Deconsolidation of subsidiaries’ loans (Note 4)		(179,834)		(167,185)
Acquisition of Resinosa (Note 6)		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
Accretion		-		1,656
Interest		2,805		2,805
Repayment of interest		(4,386)		(4,386)
Balance, June 30, 2022	$	333,114	$	239,820

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

• a) On 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.

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 4).

• b) 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 June 30, 2022, 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 June 30, 2022, accrued interest payable of $68,028 (December 31, 2021 - $54,269) is included in accounts payable and accrued liabilities.

13

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

13. NOTES PAYABLE (Continued)

• c) 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. 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 June 30, 2022 (Note 16). As at June 30, 2022, accrued interest payable of $19,178 (December 31, 2021 – $15,211) is included in accounts payable and accrued liabilities. As at June 30, 2022, the loan was in default.

• d) 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, the loan was repaid in full.

• e) 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.

As at December 31, 2021, the principal and accrued interest balances were deconsolidated on the basis that SMBT, LLC is the borrower (Note 4).

• f) 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. 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.

As at December 31, 2021, the principal and accrued interest balances were deconsolidated on the basis that Strasburg is the borrower (Note 4).

• g) 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 6).

During the six months ended June 30, 2022, the Company recorded accretion and interest expense of $1,656 and $2,805, respectively, and paid interest of $4,386.

• h) During the year ended December 31, 2021, Global NV was granted a loan under the Paycheck Protection Program (the “Second Draw PPP Loan”) totaling $135,095. The Second Draw PPP Loan which was in the form of a promissory note accrues interest at a rate of 0.98% per annum. The Second Draw PPP Loan could be prepaid by Global NV at any time prior to maturity with no prepayment penalties. Under the terms of the Second Draw PPP Loan, certain amounts of the Second Draw PPP Loan could be forgiven if the proceeds are used for qualifying expenses as described in the CARES Act.

As at December 31, 2021, the carrying value of the Second Draw PPP Loan was deconsolidated on the basis that Global NV was the borrower (Note 4).

14

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

14. LEASE LIABILITIES

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	June 30, 2022 December 31, 2021
Current portion Long-term portion	$ 158,215 $ 102,254 355,714 383,718
Total lease liabilities	$ 513,929 $ 485,972

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

Balance, December 31, 2020	$	906,648
Additions		464,593
Interest expense		38,897
Lease payments		(28,570)
Deconsolidation of subsidiaries (Note 4)		(895,596)
Balance, December 31, 2021		485,972
Interest expense		37,139
Lease payments		(9,182)
Balance, June 30, 2022	$	513,929

Lease payments for the six months ended June 30, 2022 include cash payments of $9,182 (June 30, 2021 - $14,252) and prepayments applied of $Nil (June 30, 2021 - $2,081).

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 9). As at June 30, 2022, the balances of lease liabilities and accounts payable and accrued liabilities include $468,128 (December 31, 2021 - $434,507) and $5,551 (December 31, 2021 - $1,575), respectively, payable to this related party (Note 17).

15. CONVERTIBLE DEBT

A continuity of convertible debt for six months ended June 30, 2022 and the year ended December 31, 2021 is as follows:

		Face value		Carrying value
Balance, December 31, 2020	$	4,724,159	$	3,884,070
Acquisition of Resinosa (Note 6)		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
Interest expense		-		69,425
Accretion		-		40,839
Balance, June 30, 2022	$	1,750,000	$	1,769,968
Current		(300,000)		(389,678)
Long-term	$	1,450,000	$	1,380,290

15

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

15. CONVERTIBLE DEBT (Continued)

Brokered convertible debentures

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

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

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

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

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

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

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

Of the 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 Company is required to issue 1,916,690 additional warrants with an estimated fair value of $187,868 (Note 16). As at June 30, 2022, the warrants have not been issued.

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.

During the year ended December 31, 2021, 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 16).

16

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

15. CONVERTIBLE DEBT (Continued)

As the conversion price of the convertible debenture was subject to change in the event that the Company completes a private placement of equity at a price less than $0.70, it did not meet the fixed for fixed criteria and is classified as a derivative liability. 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 BlackScholes 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%.

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 6). 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 9) 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 six months ended June 30, 2022, the Company accrued interest of $59,507 and accretion expense of $40,839.

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 June 30, 2022, the loan is in default.

During the six months ended June 30, 2022, the Company accrued interest of $9,918 (June 30, 2021 - $9,918) related to this convertible promissory note.

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 $11,310 have been classified as an equity instrument.

During the six months ended June 30, 2022, the Company accrued interest of $2,975 (June 30, 2021 - $2,974) that was recorded in capital reserves.

17

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

16. SHARE CAPITAL

a. Authorized capital

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

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

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

b. Issued capital

During the six months ended June 30, 2022, the Company completed the following transactions:

• i. 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.

• ii. 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.

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

• i. 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 6).

• ii. 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 15).

• iii. 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 17).

• iv. 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 17).

18

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

16. SHARE CAPITAL (Continued)

• v. 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 17).

• vi. 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.

c. Warrants

A summary of warrant activity is as follows:

A summaryof warrant activityis as follows:
	Number of	Weighted average
	warrants	exercise price
Outstanding, December 31, 2020	16,871,384	$ 0.22
Expired	(4,422,621)	0.20
Outstanding, December 31, 2021	12,448,763	$ 0.23
Expired	(765,000)	0.65
Outstanding,June 30,2022	11,683,763	$0.20

As at June 30, 2022, 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
7,633,763	$0.20	October 2, 2022
11,683,763

The weighted-average remaining contractual life of warrants outstanding at June 30, 2022 was 0.60 years.

As at June 30, 2022 and December 31, 2021, the Company was obligated to issue 100,000 warrants pursuant to a modification of a promissory note payable (Note 13). The warrants have a fair value of $13,161 determined using the Black-Scholes option pricing model with the following assumptions: no expected dividends to be paid; volatility of 150%; risk-free interest rate of 0.25%; and expected life of 2 years.

As at June 30, 2022 and December 31, 2021, the Company was obligated to issue 1,916,690 warrants pursuant to a modification of convertible debt (Note 15). The warrants have a fair value of $187,868 determined using the Black-Scholes option pricing model with the following assumptions: exercise price of $0.14; share price of $0.18; an annualized volatility of 125%; a forfeiture rate of 0%, an expected life of 1.0 year; a dividend yield of 0%; and a risk-free rate of 0.24%.

As at June 30, 2022 and December 31, 2021, the Company was obligated to issue 500,000 warrants pursuant to a revolving promissory note (Note 17). 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%.

19

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

16. SHARE CAPITAL (Continued)

d. Options

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

Number of options	Weighted average exercise price ($CAD) Weighted average exercise price ($USD)
Outstanding, December 31, 2020 5,700,000 Forfeited (345,000)	$ 0.20 $ 0.15 0.20 0.15
Outstanding, December 31, 2021 5,355,000 Forfeited (400,000)	$ 0.20 $ 0.15 0.20 0.15
Outstanding, June 30, 2022 4,955,000	$ 0.20 $ 0.15
Exercisable, June 30, 2022 4,955,000	$ 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 June 30, 2022, the weighted average remaining contractual life of outstanding options is 0.87 years.

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

For the six months ended June 30, 2022, the Company recognized share-based payments of $37,848 (June 30, 2021 - $134,587) 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. As at June 30, 2022 and December 31, 2021, 250,000 cashless options remain outstanding.

f. Escrowed shares

As at June 30, 2022, the Company had 1,154,391 common shares and 31,642 preferred shares held in escrow pursuant to a reverse takeover transaction which closed on October 17, 2019. The securities will be released on December 20, 2022.

g. Obligation to issue shares

As at June 30, 2022, the Company was obligated to issue common shares for proceeds received of $193,515 (December 31, 2021 - $273,515). Share subscription receipts have been presented as obligation to issue shares within current liabilities in the consolidated statements of financial position. During the six months ended June 30, 2022, 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.

20

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

16. SHARE CAPITAL (Continued)

As at June 30, 2022, the Company was obligated to issue 2,615,000 common shares (December 31, 2021 – 2,225,000 common shares) with a cumulative fair value of $563,332 (December 31, 2021 - $534,794) for services received from consultants which are to be paid by the issuance of common shares of the Company. During the six months ended June 30, 2022, 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.

As at June 30, 2022 and December 31, 2021, 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 625,000 common shares during the year ending December 31, 2022 for services to be rendered.

17. 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 six months ended June 30, 2022 and 2021 are summarized as follows:

		June 30, 2022		June 30, 2021
Salaries (Note 19)	$	348,973	$	150,000
Share-based payments (Note 16)		25,444	$	88,544
	$	374,417	$	238,544

Other related party transactions and balances

The carrying values of loans payable to related parties as at June 30, 2022 and December 31, 2021 are summarized in the table below.

		June 30,		December 31,
		2022		2021
Beginning balance	$	43,165	$	1,255,147
Increase to principal amount		156,125		1,053,574
Discount to amortized cost, effective interest rate of 20%		-		(63,609)
Accretion		-		83,334
Interest		-		31,095
Finance fee		-		10,000
Prior period accrued interest from accounts payable		-		(38,266)
Debt settlement (Note 16)		-		(710,963)
Deconsolidation of subsidiaries (Note 4)		-		(1,577,147)
Ending balance	$	199,290	$	43,165

21

CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

• 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 4).

• 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, including principal balance of $7,500 and accrued interest of $760 on the date which these balances were deconsolidated (Note 4).

• 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.

As at May 7, 2021, the carrying value of $921,898, accrued interest of $40,277, and deferred financing fees of $64,747 related to this promissory note were deconsolidated (Note 4).

• d) On December 31, 2018, Global NV entered into an unsecured promissory note with a company controlled by a former 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 balances of $33,736 and $3,036, respectively, were deconsolidated on the basis that the borrower is Global NV (Note 4).

• e) As at June 30, 2022, 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 $197,611 (December 31, 2021 - $42,611) which is included in amounts due to related parties. The balance of accrued interest of $34,991 (December 31, 2021 - $27,940) is included in accounts payable and accrued liabilities.

During the six months ended June 30, 2022, the Company recognized an additional $155,000 as related party contributions pursuant to proceeds received during the period.

During the year ended December 31, 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 16).

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 16). 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. As at June 30, 2022, the balance of deferred financing fees was $42,868 (December 31, 2021 - $64,126).

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CBD Global Sciences Inc. Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

17. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

• f) During the six months ended June 30, 2022, the Company incurred $61,021 (June 30, 2021 - $14,418) 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 six months ended June 30, 2022, the Company incurred $16,405 (June 30, 2021 - $14,133) in professional fees to a company controlled by a director of the Company recorded in general and administrative expenses.

• h) As at June 30, 2022, accounts payable and accrued liabilities and amounts due to related parties include $25,680 (December 31, 2021 - $11,790) and $329 (December 31, 2021 - $329), respectively, due to a company jointly controlled by the President and Chief Operating Officer for expense reimbursement.

• i) As at June 30, 2022, accounts payable and accrued liabilities include $350,170 (December 31, 2021 - $200,170) due to the President of the Company for salaries and wages and expense reimbursement.

• j) As at June 30, 2022, accounts payable and accrued liabilities and amounts due to related parties include $108,552 (December 31, 2021 - $45,423) and $1,350 (December 31, 2021 - $225), respectively, due to a director and his spouse for salaries and wages and expense reimbursement, respectively.

• k) As at June 30, 2022, accounts payable and other liabilities includes $64,990 (December 31, 2021 - $864) 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 16).

• l) As at June 30, 2022, accounts payable and other liabilities includes $120,020 (December 31, 2021 - $98,539) 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 16).

• m) 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 June 30, 2022, the balances of lease liabilities and accounts payable and accrued liabilities include $468,128 (December 31, 2021 - $434,507) and $5,551 (December 31, 2021 - $1,575), respectively, payable to this related party (Note 14). The lease liabilities include $85,135 of unpaid lease payments owing and on demand as at June 30, 2022.

• n) 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 6 and 15). As at June 30, 2022, the Resinosa Note had a carrying value of $1,471,474 (December 31, 2021 - $1,371,129). During the six months ended June 30, 2022, the Company accrued interest and recorded accretion expense of $59,507 (June 30, 2021 - $Nil) and $40,839 (June 30, 2021 - $Nil), respectively, related to the Resinosa Note.

18. REVENUE

During the three and six months ended June 30, 2022 and 2021, sales related to CBD Oil products.

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CBD Global Sciences Inc.

Notes to Condensed Interim Consolidated Financial Statements For the six months ended June 30, 2022 and 2021 (Expressed in United States dollars) (Unaudited)

19. GENERAL AND ADMINISTRATIVE EXPENSES

	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the six months ended June 30,	For the six months ended June 30,	For the six months ended June 30,	For the six months ended June 30,
		2022		2021		2022		2021
Bad debt expense
(recovery)	$	(31,086)	$	-	$	(31,086)	$	-
Investor relations		2,310		102,000		3,521		202,895
Office expenses		83,423		30,841		135,000		110,174
Professional fees		83,174		47,037		119,704		104,350
Salaries		253,002		124,313		494,139		248,514
Repairs and maintenance		2,744		224		8,144		224
Travel		650		2,926		2,444		3,915
	$	394,217	$	307,341	$	731,866	$	670,072

20. SUPPLEMENTAL CASH FLOW INFORMATION

	For	the six months ended June 30,	the six months ended June 30,	the six months ended June 30,
		2022		2021
Cash paid for interest	$	6,225	$	20,233
Cashpaid for income taxes	$	-	$	-

21. SUBSEQUENT EVENTS

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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