Devonian Health Group Inc — Interim / Quarterly Report 2021

Jun 30, 2021

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Devonian Health Group Inc.

Interim Condensed Consolidated Financial Statements For the three-month and nine-month periods ended April 30, 2021, and 2020

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIODS ENDED APRIL 30, 2021 AND APRIL 30, 2020

Statement regarding interim consolidated financial statements

Management has prepared the accompanying interim consolidated financial statements of Devonian Health Group Inc. which include the interim consolidated statement of financial position as at April 30, 2021, and the interim consolidated statements of the net income and comprehensive income, changes in equity and cash flows for the nine-month period ended April 30, 2021 and April 30, 2020. The auditors have not examined or audited these interim consolidated financial statements.

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

Devonian Health Group Inc.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME

For the three-month period ended April 30, For the nine-month period ended April 30, (unaudited) (unaudited) 2021 2020 2021 2020 DISTRIBUTION REVENUES $ 255,109 $ 379,362$ 1,139,995 $ 1,819,040	For the three-month period ended April 30, For the nine-month period ended April 30, (unaudited) (unaudited) 2021 2020 2021 2020 DISTRIBUTION REVENUES $ 255,109 $ 379,362$ 1,139,995 $ 1,819,040
OPERATING EXPENSES Research and development expenses Cost of sales Administrative expenses Financial expenses (Note 18)	118,054 258,931 524,361 1,286,821 360,675 359,010 1,301,813 1,566,404 358,272 453,028 1,184,101 1,577,885 224,979 299,287 633,489 517,727
	1,061,980 1,370,256 3,643,764 4,948,837
LOSSBEFOREOTHER ITEMS	(806,871) (990,894) (2,503,769 ) (3,129,797)
OTHER ITEMS Government loan grant - - 45,816 - NET LOSS AND COMPREHENSIVE LOSS $ (806,871) $ (990,894) $ (2,457,953) $ (3,129,797) Net loss per share (Note 19) Basis $ (0.009) $ (0.013) $ (0.028 ) $ (0.045 ) Diluted $ (0.009) $ (0.013) $ (0.028 ) $ (0.045 )	- - 45,816 -

Additional information to the statements of income (Note 4)

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

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Devonian Health Group Inc.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE-MONTH PERIODS ENDED APRIL 30, 2021 AND APRIL 30, 2020

(unaudited)

BALANCE,as at July31,2020	Number Shares Stock options Warrants Total 82,522,541 6,228,355 12,689,699 101,440,595 10,738,147 - 5,654,315, 16,392,462 - - - (8,403,361 ) (8,403,361) - 861,645 - 861,645 - - - - 10,738,147 861,645 (2,749,046) 8,850,746	Number Shares Stock options Warrants Total 82,522,541 6,228,355 12,689,699 101,440,595 10,738,147 - 5,654,315, 16,392,462 - - - (8,403,361 ) (8,403,361) - 861,645 - 861,645 - - - - 10,738,147 861,645 (2,749,046) 8,850,746
	Shares Stock options		Share capital Stock options Warrants Contributed surplus Deficiti Totall
	82,522,541 6,228,355		$ 19,021,908$ 697,085 $ 2,139,324 $ 1,557,978 $ (14,032,065) $ 9,384,230
Issuance of shares and warrants (Note 13) Share issuance costs In cash Warrants expired Stock-based compensation (Note 14) Net loss and comprehensive loss for the three- month period BALANCE, as at April 30, 2021	10,738,147 - - - 861,645 - -		1,158,968 - 229,618 - - 1,388,588 (35,671 ) - - - - (35,671) (1,815,126) 1,815,126 - 76,918 - - - 76,918 - - - - (2,457,953) (2,457,953)
	10,738,147 861,645		1,123,297 76,918 (1,585,508) 1,815,126 (2,457,953) ) (1,028,120)
	93,260,698 7,090,000,	9,940,653 110,291,341	$ 20,145,205 $ 774,003 $ 553,816 $ 3,373,105 $ (16,490,018 ) $ 8,356,110
		8,672,692 79,352,271	2020
BALANCE,as at July31,2019	67,634,579 3,045,000		16,766,738 421,231 1,863,940 1,489,728 (9,657,289) 10,884,349
Issuance of shares and warrants (Note 13) Share issuance costs In cash In warrants Options expired (Note 13) Stock-based compensation (Note 14) Net loss and comprehensive loss for the three- month period BALANCE, as at April 30, 2020	14,444,385 - - - - - (375,000) - 625,000 - -	3,474,379 17,918,764 - - 63,600 63,600 - (375,000) - 625,000 - -	2,218,695 - 236,358 - - 2,455,053 (23,548 ) - (23,548) (3,180 ) - 3,180 - - - - (68,250) - 68,250 - - - 140,624 - - - 140,624 - - - - (3,129,797 ) (3,129,797)
	14,444,385 250,000	3,537,979 18,232,364	2,191,967 72,374 239,538 68,250 (3,129,797) (557,668)
	82,078,964 3,295,000	12,210,671 97,584,635	18,958,705 493,605 2,103,478 1,557,978 (12,787,085 ) 10,326,681

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

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Devonian Health Group Inc.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at,	April 30, 2021 July 31, 2020 (unaudited) (audited ) $ 555,367 $ 913,017 197,029 510,384 - 164,773 47,390 86,575 39,561 61,749
ASSETS CURRENT ASSETS Cash Account receivable (Note 5) Tax credit receivable (Note 6) Inventories (Note 7) Prepaid expenses PROPERTY, PLANT, EQUIPMENT AND RIGHT-OF-USE ASSETS (Note 8) INTANGIBLE ASSETS (Note 9) GOODWILL (Note 9)
	839,347 1,736,498 3,133,361 3,317,043 6,431,588 6,999,622 4,643,084 4,643,084
	$ 15,047,380 $ 16,696,247

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

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Devonian Health Group Inc.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

As at,	April 30, 2021 July 31, 2020 (unaudited) (audited ) $ 1,726,301 $ 2,627,659 4,598 7,257 1,730,899 2,634,916 3,569,346 3,509,855 1,377,265 1,152,075 13,761 15,171	April 30, 2021 July 31, 2020 (unaudited) (audited ) $ 1,726,301 $ 2,627,659 4,598 7,257 1,730,899 2,634,916 3,569,346 3,509,855 1,377,265 1,152,075 13,761 15,171
LIABILITIES CURRENT LIABILITIES Accounts payable (Note 10) Current portion of lease liability LONG-TERM DEBT (Note 11) CONVERTIBLE DEBENTURES (Note 12) LEASE LIABILITY
	6,691,270	7,312,017
SHAREHOLDERS’ EQUITY Share capital (Note 13) Stock options (Note 14) Warrants (Note 15) Contributed surplus Deficit	20,145,205 774,003 553,816 3,373,105 (16,490,018)	19,021,908 697,085 2,139,324 1,557,978 (14,032,065 )
	8,356,110	9,384,230
	$ 15,047,380 $ 16,696,247

Statutes of incorporation and nature of activities (Note 1)

Going concern assumption (Note 2)

Commitments (Note 17)

On behalf of the Board,

(s) Tarique Saiyed

, President of the Audit Committee

(s) André Boulet , President & Chief Executive Officer

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

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Devonian Health Group Inc.

Devonian Health Group Inc.	Devonian Health Group Inc.	Devonian Health Group Inc.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW For the nine-month periods ended April 30, 2021 2020 (unaudited) (unaudited) OPERATING ACTIVITIES Net loss and comprehensive loss $ (2,457,953) $ (3,129,797, ) Items not affecting cash Amortization of fixed assets 197,783 201,355 Amortization of intangible assets 568,034 562,181 Amortization of discount on convertible debentures 176,419 119,781 Interest on convertible debentures 180,626 200,163 Interest on lease liability 550 Amortization of discount on government loan 1,476 Stock-based compensation 76,918 140,624 Unrealized loss (gain) on derivatives- convertible debentures 48,770 (56,687) (1,207,377) (1,962,380 ) Net change in non-cash working capital items (361,371) 1,103,871 (1,568,748) (858,509 )
OPERATING ACTIVITIES Net loss and comprehensive loss Items not affecting cash Amortization of fixed assets Amortization of intangible assets Amortization of discount on convertible debentures Interest on convertible debentures Interest on lease liability Amortization of discount on government loan Stock-based compensation Unrealized loss (gain) on derivatives- convertible debentures Net change in non-cash working capital items
		(1,207,377) (1,962,380 ) (361,371) 1,103,871
		(1,568,748) (858,509 )
INVESTING ACTIVITIES Acquisition of right-of-use asset		(23,312)
		(23,312)
FINANCING ACTIVITIES Variation of lease liability Government loan Variation of long-term debt Issuance of shares and warrants		(1,410) - 59,491 - - 500,000 1,176,329 2,221,452 1,234,410 2,721,452
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of year CASH AND CASH EQUIVALENTS, end of period		(357,650) 1,862,943 913,017 244,590
	$ 555,367 $ 2,107,533

For the nine-month period ended April 30, 2021, cash flows from operating activities include interest paid of $221,202 (2020 - $252,273) and do not include any tax paid.

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

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Devonian Health Group Inc. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

1. STATUTES OF INCORPORATION AND NATURE OF ACTIVITIES

The company. was incorporated under the Québec Business Corporations Act on March 27, 2015. On May 12, 2017, the Company was extended under the Canada Business Corporations Act.

Its main activity is the development of botanical drugs. It is also involved in the development of value-added products for dermo-cosmetics and the distribution of pharmaceutical products through its subsidiary. The Company has established a research focussed towards the anticipation of new solutions in the medical sector as well as in the cosmetic sector. The Company’s head office is located at 360, rue des Entrepreneurs, Montmagny (Québec).

2. MATERIAL UNCERTAINTY RELATED TO GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which assumes that assets will be realized, and liabilities discharged in the normal course of business for the foreseeable future. Accordingly, these consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or on the discharge or classification of liabilities, should the Company be unable to continue its business in the normal course. The Company has incurred losses since its inception and anticipates that losses will continue for the foreseeable future. However, management believes that the business combination that occurred last year will enable the Company to generate the necessary sales volume to enable it to continue its operations. The Company’s liquidities are limited considering its ongoing projects. Consequently, the Company’s ability to continue as a going concern depends also on its ability to source from its pharmaceutical suppliers, its ability to distribute its products while generating positive cash flows and to obtain, in a timely matter, further financing to complete research and development projects, and to market its developed products, as to which no assurance can be given.

Further financing will continue to be required since it is impossible to estimate when the Company will achieve profitability. Management continues to negotiate further financing and different agreements that could create positive cash flows. The success of these negotiations is contingent on many factors outside Company’s control and its ability to successfully complete such financings and agreements is tinged with material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

3. SIGNIFICANT ACCOUNTING POLICIES

Declaration of compliance

These unaudited interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting . As a result, certain information and notes normally included in annual financial statements prepared in accordance with IFRS have been omitted or summarized. These interim financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended July 31, 2020

These financial statements were approved by the Board of Directors on June 29, 2021.

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

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Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of measurement

The financial statements have been prepared on the historical cost basis.

Functional and presentation currency

These interim consolidated financial statements are presented in Canadian dollars, which is the Company's functional currency.

Consolidation

Subsidiary

These consolidated financial statements include the accounts of the Company and the accounts of its subsidiary, Altius Healthcare Inc. since February 1, 2018. Intercompany balances, income, expenses and cash flows are fully eliminated upon consolidation. When necessary, adjustments are made to the subsidiary’s financial statements to align its accounting policies with those of the Company.

Significant accounting policies

The condensed consolidated interim financial statements have been prepared in accordance with the significant accounting policies as described in the Company's consolidated financial statements for the year ended July 31, 2020. The annual consolidated financial statements are available on SEDAR at www.sedar.com. These methods have been applied throughout the periods presented except as the following elements:

Use of estimates and judgments

The preparation of financial statements in compliance with IFRS requires management to use judgment and make estimates and assumptions that affect the application of accounting policies and the carrying value of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognized in the period in which the estimates are revised and in any future periods affected by these revisions. The Company's significant comparable judgments and estimates are presented in the consolidated financial statements for the year ended July 31, 2020 and remain unchanged.

4. ADDITIONAL INFORMATION TO THE INTERIM CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

The statements of income include the following items:

Research and development expenses - amortization of fixed assets Cost of sales - amortization of intangible assets Administrative expenses - salaries and employer’s contributions Administrative expenses - stock-based compensation Research and development expenses - salaries and employer’s contributions	April 30, 2021 April 30, 2020
	$ 197,783 $ 201,355 $ 568,034 $ 562,181 $ 206,327 $ 252,389 $ 76,918 $ 140,624 $ 47,342 $ 63,137

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

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Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

5. ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE
		April 30,	July 31,
		2021	2020
		(unaudited)	(audited)
Trade	$	154,785 $	282,615
Commodity taxes		42,244	227,769
	$	197,029 $	510,384

6. TAX CREDIT AND GRANT RECEIVING

TAX CREDIT AND GRANT RECEIVING
		April 30,		July 31,
		2021		2020
BALANCE, beginning of year	$	164,773	$	114,383
Tax credit for research & development accounted for		-		164,773
Tax credit for research & development received		164,773		(114,383 )
BALANCE, end ofperiod	$	-$	$	164,773

Tax credits receivable consist of tax credits for research and development receivable from the governments of Quebec and Canada, which relate to eligible research and development expenses under applicable tax legislation. The amounts in the receivable are subject to a tax audit by the government and the final amounts received may be different from those recorded.

7. INVENTORIES

Raw materials Finished goods	April 30, 2021 July 31, 2020
	$ 4,236 $ 4,236 43,154 82,339
	$ 47,390 $ 86,575

8. PROPERTY, PLANT, EQUIPMENT AND RIGHT-OF-USE ASSET

Property, plant, and equipment include directly owned assets and assets under rights-of- use:

	April 30,	July 31,
	2021	2020
	$	$
Owned assets	3,102,871	3,294,937
Right-of-use asset	30,490	22,106
	3,133 361	3,317,043

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

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Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

8. PROPERTY, PLANT EQUIPMENT AND RIGHT OF USE ASSET (continued)

8.1 Owned assets

8.1.1 Reconciliation table

Cost Balance, July 31,2020 Acquisitions Balance,April30,2021	Building Land Leasehold improve- ments Production and laboratory equipment Computer equipment	Furniture and equipment Total $ 62,100 $ 4,725,758 - - 62,100 4,728,758 62,100 1,433,821 192,066 62,100 1,625,887 $ - $ 3,102,871
	$ 2,537,676 $ 562,324 $ 2,100 $ 1,543,990 $ 20,568 - - - - -
	2,537,676 562,324 2,100 1,543,990 20,568
Accumulated amortization Balance, July 31, 2020 Amortization expenses Balance,April30 ,2021	539,216 - 2,100 809,837 20,568 76,748 - - 115,318 -
	615,964 - 2,100 925,155 20,568
Carrying value, April 30, 2021	$ 1,921,712 $ 562,324 $ - $ 618,835 $ -

8.2 Right-of-use asset

The following table shows the changes in the right-of-use asset during the nine-month period.

Net carrying value as at July 31, 2020	$ 22,106
Addition	32,523
Reduction	(18,422)
Amortization	(5,717)
Net carrying value as at April 30, 2021	$ 30,490

9. INTANGIBLE ASSETS AND GOODWILL

Licenses, trademarks, and distribution rights

The licenses, trademarks and distribution rights valued in the statements of financial position are: Pantoprazole, Cléo-35 and PurGenesis.

Impairment test

Goodwill arising from the business combination is allocated to groups of cash-generating units (CGU) likely to benefit from the business combination.

For the goodwill, there is one CGU and the assessment was performed by comparing the Company’s net assets to the market capitalization as at July 31, 2020, which is considered a Level 1 measurement. Since the market capitalization of the Company is higher than its net assets, no impairment has been recognized.

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

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Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

9. INTANGIBLE ASSETS AND GOODWILL (continued)

Intellectual property Patents Website Licences, trademarks and distribution rights Total Cost Balance, July 31, 2020 $ 4,888,000 $ 136,693 $ 49,833 $ 3,812,822 $ 8,887,348 Acquisitions Separate - - - - - Through business combination - - - - - Balance,April30,2021 4,888,000 136,693 49,833 3,812,822 8,887,348	Intellectual property Patents Website Licences, trademarks and distribution rights Total
	4,888,000 136,693 49,833 3,812,822 8,887,348
Accumulated amortization Balance, July 31, 2020 Amortization Balance,April30,2021	- 59,830 22,405 1,805,491 1,887,726 - 17,040 9,345 541,649 568,034
	- 76,870 31,750 2,347,140 2,455,760
Carrying value April 30, 2021 $ 4,888,000 $ $ 59,823 $ 18 083 $ 1,465,683, $ $ 6,431,588

10. ACCOUNTS PAYABLE

Suppliers Accrued expenses Salaries, payroll deductions and contributions	April 30, 2021 July 31, 2020
	$ 422,503 $ 1,540,240 1,295,998 1,052,772 7,800 34,647
	$ 1,726 ,301 $ 2,627,659

11. LONG-TERM DEBT

Loan, secured by the universality of movable and immovable property, tangible, and intangible, present and future of the Company, for a carrying value of $9,534,459, interest payable monthly at the Toronto Dominion Bank’s prime rate plus 6% (8.45%) principal repayable at maturity in January 2024* $ Canada Emergency Business Account Loan $	April 30, 2021 July 31, 2020
	3,500,000 $ 3,000,000 69,346 9,855 3,569,346 $ 3,509,855

*In the event of a change of control by acquisition or dilution at 50%, the principal and the interest payable until maturity of the term are payable within 30 days of the date of the change of control.

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

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Devonian Health Group Inc. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

12. CONVERTIBLE DEBENTURES

The principal amount of the debentures ($1,697,000 as at April 30, 2021 and July 31,2020) will be convertible into units of the Company at a price of $0.75 per unit and mature in July and August 2022. Each unit consists of one subordinate voting share in the capital of the Company and one subordinate voting share purchase warrant. Each warrant will entitle the holder to acquire one subordinate voting share in the capital of the Company at a price of $0.95 until 48 months after the closing date.

Interest on the convertible debentures is payable in units semi-annually based on an annual rate of 10%. Each unit will comprise one common share and one share purchase warrant having a four-year contractual life. The number of units to be issued will be calculated as follows according to the situation:

▪ If the subordinate voting shares comprised in the units are not subject to resale restrictions by a recognized stock exchange immediately following the issuance, the five-day average of the VWAP (volume-weighted average share price) immediately prior to the interest payment date will be applicable and will be used to settle the 10% interest. The exercise price of the warrants included in the units will be equal to the one obtained for the price of the shares used to settle the interest plus 30%. ▪ If the subordinate voting shares are subject to resale restrictions after they are issued, 90% of the five-day average of the VWAP immediately prior to the interest payment date will be applicable and the exercise price of the warrants will be equal to the one obtained for the price of the shares based on the conversion rate of interest plus 30%.

In its sole discretion, the Company may prepay any portion of the principal amount of the debentures with accrued and unpaid interest.

Convertible debentures are compound financial instruments within the meaning of IAS 32 and have a liability component and an embedded derivative component. The derivative is measured at fair value through profit or loss, and its fair value must be measured at each statement of financial position date. Subsequent changes in fair value are recognized in the consolidated statement of net loss and comprehensive loss. The change in fair value is included in finance costs (note 18).

The fair market value of the debentures was established according to the discounted cash flow method, and using the following average assumptions:

Expected life Risk-free interest rate Expected volatility Balance as of July 31, 2019 Accretion Change in fair value of derivative Balance as of July 31, 2020 Balance as of July 31, 2020 Accretion Change in fair value of derivative Balance as of April 30, 2021			1.5 year 0.43% 85% Year ended July 31, 2020 Host Derivative Total $ $ $ 920,910 312,370 1,233,280 162,758 162,758 (243,963) (243,963)	1.5 year 0.43% 85% Year ended July 31, 2020 Host Derivative Total $ $ $ 920,910 312,370 1,233,280 162,758 162,758 (243,963) (243,963)
			Host $ 920,910 162,758
			1,083,668	68,407 1,152,075
			Nine-month period ended April 30, 2021
		Host Derivative Total
		$ $ $ 1,083,668 68,407 1,152,075 176,419 176,419 48,770 48,770
		1,260,087 117,177 1,377,264

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

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Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

13. SHARE CAPITAL

Description of authorized share capital

An unlimited number of subordinate voting shares, exchangeable subordinate voting shares and multiple voting shares, participating, without par value, non-cumulative dividend.

The subordinate voting shares, exchangeable subordinate voting shares and multiple voting shares are handled as if they were of one and the same category.

The holders of subordinate voting shares and exchangeable subordinate voting shares are entitled to receive notice, and to attend and vote at all meetings of the shareholders, except those at which holders of a specific class are entitled to vote separately as a class under the CBCA. Each subordinate voting share and each exchangeable subordinate voting share confers the right to one vote per share.

The holders of multiple voting shares are entitled to receive notice and to attend and vote, at all meetings of the shareholders, except those at which holders of a specific class are entitled to vote separately as a class under the CBCA. Each multiple voting share confers the right to six votes per share. Each multiple voting share may, at any time, be exchanged for one subordinate voting share. In May 2027, ten years after the Qualifying Transaction, the authorized holder, without any further action, shall automatically be deemed to have exercised their right to exchange all of the multiple voting shares held by such holder, into fully paid and non-assessable subordinate voting shares of the Company, on a share for share basis.

		April 30, 2021	July 31, 2020	July 31, 2020
Share capital includes:
93,260,688 shares issued (July 31, 2020 – 82,522,540)	$	20,145,205	$	19,021,908

The 93,260,688 outstanding shares as at April 30, 2021 are classified into 73,294,165 subordinate voting shares and 19,966,524 multiple voting shares (July 31, 2020- 82,522,540 outstanding shares are classified into 62,556,017 subordinate voting shares and 19,966,523 multiple voting shares).

Issuance

a) Interest on convertible debentures

During the nine-month period ended April 30, 2021, the Company issued 604,315 units and 33,832 shares to holders of debentures issued on July 19, 2018 and August 31, 2018, at a unit price ranging from $ 0.15 to $ 0.23. These units and shares were issued for interest that was due for a total amount of $ 120,111. Each unit is made up of one subordinate voting share and one warrant. Each warrant grants its holder the right to subscribe for one subordinate voting share of the Company's share capital at a price ranging from $ 0.19 to $ 0.30, for a period of 48 months.

The 33,832 shares were issued to a director, holder of debentures issued during the second tranche of the private placement closed on August 31, 2018.

The fair value of the 638,147 shares and 604,315 warrants was estimated at $ 120,111 and $ 56,475 respectively, based on the Black & Scholes valuation model and using the following weighted average assumptions:

Risk-free interest rate 0.62% Average expected life 2.5 years Expected volatility 85% Share price $0.155 to $0,23 Expected dividends Nil

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

12

Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

13. SHARE CAPITAL (continued) Issuance

b) Private placement

On December 29, 2020, the Company completed a private financing, by issuing 10,100,000 units at a price of $ 0.12 per unit, for gross proceeds of $ 1,212,000. Each unit is made up of one subordinate voting share and one-half share purchase warrant. Each warrant will confer on its holder the right to acquire one subordinate voting share at a price of $ 0.15 until December 29, 2022.

The Company paid finder's fees for a cash amount of $ 22,100 and related costs for an amount of $13,571.

The fair value of the 10,100,000 shares issued and the 5,050,000 warrants issued was estimated at $ 1,038,857 and $ 173,143 respectively, according to the Black & Scholes valuation model and using the following assumptions:

Risk-free interest rate 0.43% Average expected life 1.5 year Expected volatility 85% Share price $0.12 Expected dividends Nil

14. STOCK OPTIONS PLAN

Stock options

Under the stock option plan put in place in May 2017, the members of the Board of Directors can attribute stock options allowing the directors, executives, employees, and consultants of the Company to acquire number of options that can be granted according to the stock option plan is equal to a maximum of 10% of the outstanding subordinate voting shares.

The options to be granted according to the stock option plan will not exceed a duration of ten years and will be granted at the price and conditions that the directors will consider necessary to reach the goal of the stock option plan, and according to the applicable regulations. The exercise price of the option cannot be lower than the market price.

During the nine-month period ended April 30, 2021, the Company granted 801,645 stock options to an officer as well as 60,000 stock options to a director. These options are exercisable from their grant date at a price of $ 0.12 and $ 0.20 respectively, for a period of ten years. The fair value of these options has been estimated at $ 59,509 according to the Black & Scholes valuation model and using the following weighted average assumptions:

Risk-free interest rate 0.43 % Average expected life 2.5 years Expected volatility 95% Share price $ 0.12 Expected dividends Nil

The Company recorded an expense of $76,918 during the nine-month period ended April 30, 2021 (April 30, 2020 – 140,624). This charge includes an amount of $ 17,409 (April 30, 2020 – 49,917) attributable to options granted in 2018 and 2019.

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

13

Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

14. STOCK OPTIONS PLAN (Continued)

The following table summarizes the situation of the Company’s stock option plan and the changes incurred during the year 2020 and the nine-month period ended April 30, 2021:

Outstanding, beginning of period Options expired Options granted to directors and consultants Options granted to members of management and employees Outstanding, end of year	April 30, 2021 July 31, 2020
	Number Weighted average exercise price Number Weighted average exercise price
	6,228,355 $ 0.37 3,045,000 $ 0.66 - - (375,000) 0.60 60,000 0.20 2,560,000 0.16 801,645 0.12 998,355 0.15
	7,090,000 0.34 6,228,355 0.37
Options exercisable, end of period

The following table summarizes information about options outstanding and exercisable as at April 30, 2021:

Exercise price	Options outstanding	Options exercisable
	Number of options outstanding Weighted average remaining contractual life	Number of options exercisable
$0.12 $0.15 $0.20 $0.21 $0,60 $1.20	801,645 9.66 years 2,933,355 9.15 years 60,000 9.89 years 625,000 8.98 years 2,420,000 5.32 years 250,000 1.87 year	801,645 2,933,355 60,000 625,000 2,092,500 250,000

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

14

Devonian Health Group Inc. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

15 . Warrants

The following table summarizes information about the Company’s warrants and the changes during the year 2020 and the nine-month period ended April 30, 2021:

Outstanding, beginning of year Granted Expired Outstanding, end of year	April30,2021 July 31,2020
	Number Weighted average exercise price Number Weighted average exercise price
	12,689,699 $ 0.89 8,672,692 $ 1.16 5,654,315 0.16 4,017,007 0.32 (8,403,361) 1.19
	9,940,653 $ 0.23 12,689,699 $ 0.89
Warrants exercisable, end ofperiod	9,940,653 $ 0.23 4,286,338 $ 0.37

The following table summarizes information about warrants outstanding and exercisable as at April 30, 2021:

	Number of warrants	Weighted average
Exercise price	outstanding	remaining contractual life
$ 0,15	5,050,000	1.66 year
$ 0.194	201,982	3.50 years
$ 0.218	179,137	2.75 years
$ 0.225	291,393	2.75 years
$ 0.237	272,467	3.25 years
$ 0.25	1,993,122	1 year
$ 0.26	252 055	3.76 years
$ 0.263	146,561	3 years
$ 0.30	150 278	3.88 years
$ 0.338	190,727	2.75 years
$ 0.38	173,831	1.98 year
$ 0.40	95,500	1.98 year
$ 0.50	880,000	0.38 year
$1.00	63,600	0.33year

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

15

Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

16. CAPITAL MANAGEMENT

The Company includes all components of equity in its capital definition: share capital, stock options, warrants, contributed surplus and deficit. In terms of capital management, the Company’s objectives are to preserve its ability to continue as a going concern to ensure its sustainability by obtaining the necessary funding to realize its development activities and to provide in the future an adequate return to its shareholders.

The Company finances its operations by issuing shares and debentures as well as operating income. The Company’s objectives and policies in terms of capital management have not changed since July 31, 2020. The Company has committed to the private lender not to redeem preferred or common shares without its prior written consent.

17. COMMITMENTS

The Company has committed to pay a total amount of $80,000 over a four-year period to a research project entitled “ The Next Generation Agriculture: Botanical extracts and essential oils as the new antimicrobials against microbial contaminants and diseases of Cannabis ”. As at April 30, 2021, the balance of this commitment was $40,000.

18. FINANCIAL EXPENSES

Financial expenses are as follows:

Interest expenses and bank charges Interest on long-term debt Interest on lease liability Amortization of discount on convertible debentures Amortization of discount long term debt Interest on convertible debentures Embeded derivative convertible debentures – Change in fair value	April 30 2021 April 30 2020 5,184 2,097 221,202 252,373 550 176,420 119,781 738 180,626 200,163 48,770 (56,687)
	$633,489 $ 517,727

19. INCOME PER SHARE

The following table provides the weighted average number of shares used to calculate the basic income per share:

used to calculate the basic income per share: Weighted average number of shares used to calculate the basic incomeper share	April 30 2021 April 30 2020
	84,524,694 69,328,985
Items excluded from the calculation of diluted income: Stock options Warrants Convertible debentures	April 30 2021 April 30 2020
	7,090,000 3,045,000 9,940,653 10,277,549 4,525,334 4,525,334

For the nine-month period ended April 30, 2021 and 2020, the impacts of the warrants, stock options as well a the convertible debentures were excluded from the calculation of diluted loss per share as they would have an anti-dilutive effect.

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

16

Devonian Health Group Inc.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at April 301, 2021

(Unaudited)

20. RELATED PARTY TRANSACTIONS

The principal executives are the President of the Company, the President of the subsidiary, the interim Chief Financial Officer and the Directors. During the nine-month period ended April 30, 2021, the Company has paid them a total remuneration of $ 459,194 (April 30,2020 – $ 493,247) of which the main components are:

Salaries and advantages Stock-based compensation Management fees	April 30, 2021 April 30, 2020
	$ 233,158 $ 207,000 $ 76,036 $ 136,247 $ 150,000 $ 150,000

These transactions were carried out under terms equivalent to those that prevail in arm’s length transactions.

21. RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES

The table below shows the changes in liabilities arising from the Corporation's financing activities, which includes changes in cash flow and non-cash changes:

					Changes without cash
					consideration
		Balance, as		Cash flows			Balance,
		at July 31		from financing	Other		as at April 30,
		2020		activities	changes1		2021
Convertibles debentures
(note 12)	$	1,152,075	$	-	$ 225,189	$	1,377,264
Long-term debt (note 11)		3,509,855		59,491	-		3,569,346
	$	4,661,930	$	59,491	$ 225,189	$	4946,610

(1) Other changes include amortization of the discount on convertible debentures and changes in fair value of the embedded derivative of convertible debentures.

22. SUBSEQUENT EVENTS

On May 27, 2021, 200,000 warrants were exercised to acquire 200,000 subordinate voting shares, at a unit price of $ 0.25 per share, for a total consideration of $ 50,000.

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

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