EXMceuticals Inc. — Audit Report / Information 2020

Dec 29, 2020

Consolidated Financial Statements

For the Years Ended July 31, 2020 and 2019

(Expressed in Canadian dollars)

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Eastwest Bioscience Inc.

Opinion

We have audited the consolidated financial statements of Eastwest Bioscience Inc. (the "Company"), which comprise the consolidated statement of financial position as at July 31, 2020, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity (deficiency) and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

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

Basis for Opinion

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

Material Uncertainty Related to Going Concern

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

Other Matter

The financial statements of the Company for the year ended July 31, 2019 were audited by another auditor who expressed an unmodified opinion on those statements on January 29, 2020.

Other Information

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

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

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

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

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

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

Auditor's Responsibilities for the Audit of the Financial Statements

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

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

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

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

December 28, 2020

Consolidated Statements of Financial Position As at July 31, 2020 and 2019 (Expressed in Canadian dollars)

	July 31, 2020	July 31, 2019
	$	$
ASSETS
Current
Cash	107,084	54,808
Accounts receivable (Note 6)	89,000	352,037
Inventory (Note 7)	211,112	609,521
Due from related parties (Note 21)	222,922	102,027
Prepaid expenses and deposits (Notes 8, 21)	60,442	112,125
	690,560	1,230,518
Property, plant and equipment (Note 9)	2,241,981	2,347,769
Investment in joint ventures (Note 11)	26,434	90,395
Long‐term deposits (Notes 8)	‐	7,246
Intangible assets (Note 10)	224,782	91,080
Total Assets	3,183,757	3,767,008
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
Current
Accounts payables and accrued liabilities (Notes 12)	769,780	607,123
Deposits	53,118	2,311
Deferred revenue	62,300	86,255
Due to related parties (Note 21)	75,778	170,840
Other liabilities (Note 13)	‐	364,783
Promissory note payable – current portion (Note 14)	112,689	150,000
Mortgage payable (Note 15)	1,795,200	1,600,000
Loans payable – current portion (Note 16)	140,829	16,200
	3,009,694	2,997,512
Promissory note payable (Note 14)	218,242	150,000
Loans payable (Note 16)	1,498	20,087
Total Liabilities	3,229,434	3,167,599
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital (Note 17)	8,673,419	8,279,908
Share subscription received (receivable), net (Note 17)	14,719	(5,081)
Reserves (Note 17)	582,741	508,979
Deficit	(9,316,556)	(8,184,397)
	(45,677)	599,409
Total Liabilities and Shareholders' Equity (Deficiency)	3,183,757	3,767,008
Nature and Continuance of Operations (Note 1)

Commitments (Note 5, 17, 25) Subsequent Events (Note 27)

Approved and authorized for issue by the Board of Directors on December 28, 2020:

"Jeffrey Bierman" "Rodney Gelineau"

Jeffrey Bierman, Director Rodney Gelineau, Director

Consolidated Statements of Loss and Comprehensive Loss For the Years Ended July 31, 2020 and 2019 (Expressed in Canadian dollars)

	July 31, 2020	July 31, 2019
	$	$
SALES
Distribution (Note 24)	760,259	1,230,724
Manufacturing (Note 24)	162,573	159,440
Total Sales	922,832	1,390,164
COST OF GOODS SOLD
Distribution (Note 7)	511,059	796,738
Manufacturing (Note 7)	183,695	133,833
Total Cost of Goods Sold	(694,754)	(930,571)
Gross Profit	228,078	459,593
Other Operating Revenue (Note 18, 24)	383,418	361,861
Gross Profit and Other Operating Revenue	611,496	821,454
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising and promotion	50,351	109,900
Amortization (Note 9)	126,707	135,563
Bad debt expense	1,756	8,765
Bank charges and short‐term interest	29,780	28,920
Business development and marketing	54,581	239,280
Consulting fees (Note 17)	399,098	926,343
Insurance	14,966	16,157
Office and miscellaneous	80,748	93,735
Professional fees	225,185	287,816
Property taxes	14,422	31,283
Rent and utilities	347,001	417,328
Repairs and maintenance	15,427	42,976
Research and development	2,661	7,255
Share‐based payments (Note 17)	73,762	334,959
Subcontractor	‐	13,566
Transfer agent	23,740	134,817
Travel	43,701	49,136
Wages and benefits (Note 23)	546,973	849,686
Website, software and internet	17,642	15,594
Total General and Administrative Expenses	(2,068,501)	(3,743,079)
Loss before Other Income (Expenses)	(1,457,005)	(2,921,625)
OTHER INCOME (EXPENSES)
Accretion expense (Note 14, 16)	(21,225)	‐
Interest expense and finance fees (Note 14, 15)	(172,434)	(229,112)
Gain on settlement of debt (Note 5, 12, 13, 17, 26)	477,213	‐
Gain (loss) on disposal of equipment (Note 9)	13,527	(4,629)
Share of loss of joint ventures (Note 11)	(23,067)	(9,595)
Reversal of impairment on investment in joint ventures (Note 5, 11)	21,373	‐
Government grants (Note 23)	29,459	‐
Goodwill impairment (Notes 5)	‐	(420,153)
Impairment on intangible asset (Notes 5, 10)	‐	(63,952)
Net Loss and Comprehensive Loss	(1,132,159)	(3,649,066)
Basic and diluted loss per share	(0.01)	(0.05)
Weighted average number of common shares outstanding	83,770,859	79,089,071

Consolidated Statements of Cash Flows For the Years Ended July 31, 2020 and 2019 (Expressed in Canadian dollars)

	July 31, 2020	July 31, 2019
	$	$
Cash flows used in operating activities
Net loss for the year	(1,132,159)	(3,649,066)
Amounts not affecting cash
Amortization	126,707	135,563
Share‐based payments	73,762	334,959
Bad debt expense	(1,756)	‐
Accretion expense	21,225	‐
Write‐down of inventory	79,585	‐
Loss (gain) on disposal of equipment	(13,527)	4,629
Gain on settlement of debt	(477,213)	‐
Share of loss from joint ventures	23,067	9,595
Reversal of impairment on investment in joint ventures	(21,373)	‐
Impairment of intangible assets	‐	63,952
Impairment of goodwill	‐	420,153
Changes in non‐cash working capital items
Accounts receivable	264,793	(64,695)
Prepaid expenses and deposits	57,736	(22,509)
Inventory	318,824	168,314
Accounts payable and accrued liabilities	589,517	185,179
Deposits	50,807	(1,557)
Other liabilities	10,505	‐
Due to (from) related parties	(270,978)	147,028
Deferred Revenue	(23,955)	(28,952)
	(324,433)	(2,297,407)
Cash flows from financing activities
Shares issued for cash, net of issuance cost	86,984	954,949
Proceeds from bridge loan	60,000	‐
Repayment of bridge loan	(60,000)	‐
Repayment of promissory note	(70,000)	‐
Proceeds from renewal of mortgage payable (Note 22)	160,000	1,600,000
Repayment of mortgage payable	‐	(1,230,000)
Repayment of loans payable	(37,330)	(15,408)
Proceeds from loans payable	169,894	‐
	309,548	1,309,541
Cash flows from investing activities
Repayment from related parties	‐	154,575
Cash payments on acquisition of Sangster's	‐	(375,000)
Deposits on long‐term operating leases	‐	(2,134)
Proceeds of disposition of property, plant and equipment	94,169	‐
Acquisition of property, plant and equipment	(1,252)	(27,266)
Investment in joint ventures	(25,756)	‐
	67,161	(249,825)
Net change in cash	52,276	(1,237,691)
Cash, beginning of year	54,808	1,292,499
Cash, end of year	107,084	54,808
Supplemental cash flow information
Cash paid for interest	102,395	141,992
Non‐cash transactions (Note 22)

Consolidated Statement of Changes in Shareholders' Equity (Deficiency) For the Years Ended July 31, 2020 and 2019 (Expressed in Canadian dollars)

			Share			lTota
			bscritioSupn			haholde'Srers
	Nubefmor		ivedRece			uitEqy
	hadSIresssue	haitalSCarep	(ivable)Rece	*Reserves	ficitDe	(ficien)Decy
		$	$	$	$	$
lanlyBat J312018ceau,	75218,207,	7,022,090	()20081,	185,889	()4,535,331	2,652,567
f sAdjuhastmt oenres	()100,000	()15000	15000	‐
hadf a's wSissisenttonttsresuepursuaexercogearran	149,667	,22450	,‐		‐	‐22450
f oShaissdisetionttoresuepursuaexercopns	533,368	,53337	‐	‐	‐	,53337
hadlacSissivanttotetresuepursuaprpemen	4,282,896	,892,425	‐	‐‐	‐‐	,892,425
haddebtlemSissnttosetttresuepursuaen	658,182	181,000	‐	‐	‐	181,000
haissdhaSnttontresuepursuapurcseagreeme	819,457	125,000	‐	‐	‐	125,000
haSisstreuance cos	‐	()17550,	‐	4,287	‐	()13263,
ferffailuercif a's wndtioTrantt ansor vaoenxeseogearranopns	‐	16156,	‐	()16156,	‐	‐
habadSntsre‐sepayme	‐	‐	‐	334,959	‐	334,959
losfoheNetr tseary	‐	‐	‐	‐	()3,649,066	()3,649,066
lanlyBat J312019ceau,	81561,777,	8,279,908	()5,081	508,979	()8,184,397	599,409
Shaissdivalacnttotetresuepursuaprpemen	1,992,727	99636	‐	‐	‐	99636
haSisstreuance cos	‐	,()12652	‐	‐	‐	,()12652
haddebtlemSissnttosetttresuepursuaen	6,282,271	,218,504	‐	‐	‐	,218,504
hadhaSissnttontresuepursuapurcseagreeme	2,769,000	88023,	‐	‐	‐	88023,
habsdScritioeivresupnsrece	‐	‐	19800,	‐	‐	19800,
habadSntsre‐sepayme	‐	‐	‐	73762,	‐	73762,
losfoheNetr tsyear	‐	‐	‐	‐	()1,132,159	()1,132,159
lanlyBat J312020ceau,	92605,775,	8,673,419	14719,	582,741	()9,316,556	()45677,

*Reserves consist of fair values of vestedstock options and warrants.

1. NATURE AND CONTINUANCE OF OPERATIONS

The consolidated financial statements represent the accounts of Eastwest Bioscience Inc. (the "Company" or "Eastwest"), formerly Harbour Star Capital Inc., incorporated under the Business Corporations Act of Alberta on October 24, 2014 and its wholly‐owned subsidiaries. On November 30, 2018, the Company changed its name to Eastwest Bioscience Inc. Its main business activity is developing premium quality hemp nutritional products for people and pets. The Company commenced trading on the TSX Venture Exchange on July 25, 2018 under the trading symbol "EAST". The head office and principal office of the Company is located at 260 Okanagan Avenue East, Penticton BC, V2A 3J7.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. However, the Company had not yet achieved profitable operations. For the year ended July 31, 2020, the Company incurred a net loss of $1,132,159 (2019 ‐ $3,649,066) and had an accumulated deficit of $9,316,556 (2019 ‐ $8,184,397) and expects to incur further losses in the development of its business, all of which casts significant doubt about the Company's ability to continue as a going concern.

The Company's ability to continue as a going concern is dependent upon itssuccessin developing and marketing its wellness products, introducing new revenue channels using its US and Canadian assets, increasing manufacturing at its Canadian facility, expanding its manufacturing and distribution operations, and reduction of debt through paydowns, debt settled with share consideration, and negotiation of debt reductions, and the ability of the Company to obtain capital financing through continued support from its shareholders and B2B arrangements. Management believes the Company will be able to provide sufficient working capital from these measures to satisfy its liabilities and commitments as they become due for the foreseeable future. However, the outcome of these matters cannot be predicted at this time. If the Company is unable to obtain adequate additional financing, management might be required to curtail the Company's operations. These consolidated financial statements do not contain any adjustments to the amounts and classifications of assets and liabilities, which might be necessary should the Company be unable to continue in business.

The recent outbreak of the coronavirus, also known as "COVID‐19", continues to impact worldwide economic activity. The extent to which the coronavirus may impactthe 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. COVID‐19 has had a negative impact on the consolidated operation which has resulted in a decrease in sales compared to the prior year.

2. BASIS OF PRESENTATION

Statement of Compliance and Basis of Measurement

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

These consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information and are based on historical costs except for certain financial instruments which are measured at fair value. The consolidated financial statements are presented in Canadian dollars, which is also the Company's functional currency.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, unless otherwise indicated.

Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly‐owned subsidiaries. The results of the subsidiaries will continue to be included in the consolidated financial statements of the Company until the date that the Company's control over the subsidiaries ceases. 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.

Details of the Company's principal subsidiaries at July 31, 2020 are as follows:

		July 31, 2020	July 31, 2019
		Interest	Interest
Name	Place of Incorporation	%	%
1011705 B.C. Ltd. ("705")	British Columbia	100%	100%
Eastwest Science Ltd. ("EWS")	British Columbia	100%	100%
EastWest Science USA Inc. ("EWUS")	Kentucky, USA	100%	100%
1123568 B.C. Ltd. ("568")	British Columbia	100%	100%
1123573 B.C. Ltd. ("573")	British Columbia	100%	50%
Orchard Valley Naturals Inc. ("Valley")	British Columbia	100%	50%
Orchard Vale Naturals Inc. ("OVN")	British Columbia	100%	100%
102064495 Saskatchewan Inc. ("495")	Saskatchewan	100%	100%
102064509 Saskatchewan Inc. ("509")	Saskatchewan	100%	100%
102064512 Saskatchewan Inc. ("512")	Saskatchewan	100%	100%

On July 23, 2018, the Company closed the qualifying transaction with 1011705 BC Ltd. ("705") by way of the plan of arrangement ("Arrangement") where 705 was acquired by and became a wholly‐owned subsidiary of the Company. The transaction is considered a reverse acquisition of the Company by 705. Accordingly, the consolidated financial statements are the continuation of the consolidated financial statements of 705.

Eastwest Science USA Inc. was incorporated on April 8, 2019 and was dormant since then.

568 and 573 were incorporated on June 19, 2017, 568 was dormant since then and 573 was dormant other than holding natural product numbers during the year ended July 31, 2020 and 2019. 1125707 B.C. Ltd. was incorporated on July 5, 2017 and changed its name to Orchard Valley Naturals Inc. on July 22, 2017.

The Company acquired a 50% interest in 573 and Valley on September 8, 2017 and then on February 11, 2020, it purchased the remaining 50% interest in 573 and Valley. As a result, 573 and Valley became wholly‐owned subsidiaries of the Company and were thereafter included in the consolidated financial statements (Note 5).

Orchard Vale Naturals Inc. was incorporated on February 6, 2018 and commenced operations on March 29, 2018.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Principles of Consolidation (Continued)

On November 30, 2018, the Company acquired the net assets of Restore Holdings Ltd. ("Restore"), G7 Holdings Ltd. ("G7") and Natural Choice Holdings Ltd. ("Natural Choice") through its wholly‐owned subsidiaries 102064495 Saskatchewan Inc. ("495") operating as Sangster's, 102064509 Saskatchewan Inc. ("509") operating as Sangster's Corporate Stores, and 102064512 Saskatchewan Inc. ("512") operating as SHC Leasing (collectively comprising the Business known as "Sangster's") (Note 5).

Foreign Currency Translation

The functional currency is the currency of the primary economic environment in which an entity operates and may differ from the currency in which the entity enters transactions. The functional currency of the Company and the subsidiaries is the Canadian dollar. The presentation currency of the consolidated entity is the Canadian dollar.

Transactions in currencies other than the functional currency are translated to the functional currency at exchange rates prevailing on the dates of the transactions. Monetary assets and liabilities that are denominated in currencies other than the functional currency are translated to the functional currency using the exchange rate prevailing at the year‐end date, while non‐monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the average exchange rate.

Inventory

Inventory consist primarily of raw materials, including packaging materials, and finished goods. Inventory is measured at lower of cost, determined on a weighted average basis, and net realizable value. Costs of raw materials include the purchased cost and the costs of finished goods includes costs of materials, labour and packing. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. If the Company determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, it records a charge to cost of goods sold.

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost less accumulated amortization and accumulated impairment losses, except that land is at historical cost less accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset. Amortization is calculated using the following rates on a declining balance basis.

Asset Rate__________
Buildings	4%	per annum
Leasehold improvements	20%	per annum
Computers	30%	per annum
Furniture	20%	per annum
Manufacturing equipment	30%	per annum
Heavy equipment	30%	per annum
Vehicle	30%	per annum

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible assets

Intangible assets are recorded as cost less accumulated amortization and any accumulated impairment losses. Intangible assets with finite useful lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives of intangible assets are assessed as either finite or indefinite. The amortization method and amortization period of an intangible asset with a finite useful life is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method as appropriate and are treated as a change in accounting estimates.

The amortization expense on intangible assets with finite lives is recognized in the consolidated statements of loss and comprehensive loss.

Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually, either individually or at the cash generating unit ("CGU") level. The assessment of indefinite use life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Intangible assets are comprised of national product numbers, trademarks and brands and are classified as indefinite life intangible assets and not amortized.

Financial instruments

(i) Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument‐by‐ instrument basis) to designate them as at FVTOCI.

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The following table shows classification of the financial assets and liabilities:

Account	Classification
Cash	FVTPL
Accounts receivable	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Deposits	Amortized cost
Promissory note payable	Amortized cost
Mortgage payable	Amortized cost
Loans payable	Amortized cost

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(ii) Measurement

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss and comprehensive lossin the period in which they arise.

(iii) Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

(iv) Derecognition

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of loss and comprehensive loss.

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non‐cash assets transferred or liabilities assumed, is recognized in the statements of loss and comprehensive loss.

Investment in associates and joint ventures

Investments accounted for using the equity method include those investments where the Company (i) can exercise significant influence over the other entity and (ii) holds common stock and/or in‐substance common stock of the other entity. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Under the equity method, investments are carried at cost, and subsequently adjusted for the Company's share of net income (loss), comprehensive income (loss) and distributions received from the investees.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment in associates and joint ventures (continued)

The statement of loss and comprehensive loss reflects the share of the results of operations of the associates and joint ventures. Where there has been a change recognized directly in the equity of the associate, the Company recognizesitsshare of any changes and disclosesthis, when applicable, in the consolidated statements of changes in shareholders' equity (deficiency). Profits and losses resulting from transactions between the Company and the associates and joint ventures are eliminated to the extent of the interest in the investees. When the Company's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long‐term investments, is reduced to nil, and the recognition of further losses is discontinued, except to the extent that the Company has obligation, or has made payments on behalf of the investee. If the current fair value of an investment falls below its carrying amount, this may indicate that an impairment loss should be recorded.

Impairment of tangible and intangible assets

At the end of each reporting period, the Company's assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash‐generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash‐generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Government grants

A government grant is recognized when there is reasonable assurance it will be received, and all related conditions will be complied with. The Company recognizes government grants in profit or loss on a systematic basis and in line with its recognition of the expenses that the grants are intended to compensate. The Company carefully determines whether the grant compensates expenses already incurred or future costs.

The Company also has an interest‐free repayable funding obligation from the Government of Canada. The benefit of the government loan at a below‐market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing the loss for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the "if converted" method. Diluted amounts are not presented when the effect of the computations is anti‐dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.

Share Capital

The Company records proceeds from shares issued net of issuance costs and any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the common shares are issued.

Share‐based Payments

The Company may receive or acquire goods or services in a share‐based transaction. The Company recognizes a corresponding increase in equity if the goods or services were received in an equity‐settled share‐based payment transaction, or a liability if the goods or services were acquired in a cash‐settled share‐based payment transaction. For equity‐settled share‐based payment transactions, the Company measuresthe goods orservices received and the corresponding increase in equity directly at the fair value of the goods or services received, unlessthe fair value of the goods orservicesreceived cannot be estimated reliably, the Company measurestheir value and the corresponding increase in equity by reference to the fair value of the equity instruments issued.

The Company also grants stock options to purchase common shares of the Company to directors, officers and consultants. All share‐based payments made to employees and non‐employees are measured and recognized using the Black‐Scholes option pricing model taking into account the terms and conditions upon which the options were granted.

For employees, the fair value of the options is measured at grant date. For non‐employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete, the date the performance commitment is reached, or the date at which the equity instruments are granted if they are fully vested and non‐forfeitable. Share‐based payments to non‐employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. Stock options that vest over time are recognized using the graded vesting method. Share‐based payments are recognized as an expense with a corresponding increase in reserves. At each financial reporting period, the amount recognized as expense is adjusted to reflect the number of share options expected to vest. If and when the stock options are ultimately exercised, the applicable amounts of reserves are transferred to share capital.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Warrants

Proceeds from issuances by the Company of units consisting of shares and warrants are allocated based on the residual method, whereby the carrying amount of the warrants is determined based on any difference between gross proceeds and the estimated fair market value of the shares. If the proceedsfrom the offering are less than or equal to the estimated fair market value of shares issued, a nil carrying amount is assigned to the warrants.

Income Taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss, except to the extent that it relates to items recognized directly in other comprehensive income or loss or equity, in which case it is recognized in other comprehensive income or loss or equity.

Current tax expense is the expected tax payable on the taxable income for the year, calculated using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regard to previous years.

Deferred income tax assets and liabilities are recognized for deferred income tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred income tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability is settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that substantive enactment occurs. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred income tax assets and liabilities are offset if, and only if, a legally enforceable right exists to offset current tax assets against liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Revenue Recognition

The Company generates its revenue primarily from the product sales to the customers through its manufacturing and distribution arms, as well as other operating revenue which primarily include royalties earned from franchisees. To recognize its revenue, the Company performs the five‐step model analysis in accordance with IFRS 15 Revenue from Contract with Customers as follows:

• 1. Identify the contract with the customer;
• 1. Identify the performance obligations in the contract;
• 1. Determine the transaction price;
• 1. Allocate the transaction price to the performance obligations in the contracts; and
• 1. Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenues from its product sales when, if at storefront, the products are provided to the customers, or if under shipment arrangement or through e‐commence, delivery has occurred and there is no unfulfilled obligation that could affect the customer's acceptance. These criteria are generally met at the time the products are provided or delivered, as control has passed to the customer. Revenue is measured based on the price specified in the invoice provided to the customer.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (continued)

Sales royalties are recognized based on a fixed rate of the product sales made through franchisees as agreed upon and in arrears on a monthly basis; advertising royalties are recognized in the period when the advertising expenses have been incurred and the Company has fulfilled its obligation to perform. Deferred revenue is recognized when consideration is received before the Company performs it obligation under the contract.

Cost of Goods Sold

Cost of goods sold includes the expenses incurred to acquire and produce inventory for sale, including product costs, packaging costs and labour costs. In addition, cost of goods sold consists of provisions for reservesrelated to obsolete inventory, or lower of cost and net realizable value adjustments as required.

New accounting standards adopted effective August 1, 2019:

IFRS 16 Leases

Effective August 1, 2019, the Company adopted IFRS 16 Leases ("IFRS 16") which replaced IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract based on whether the customer controlsthe asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on‐balance sheet accounting model that is similar to the accounting for finance leases under IAS 17, with limited exceptions for short‐term leases (i.e. leases of 12 months or less) or leases of low‐value assets.

At inception of a new contract, the Company assesses whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:

• i. the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company.
• ii. the Company has the right to obtain substantially all the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract.
• iii. the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

At lease commencement date, the Company recognizes a right‐of‐use ("ROU") asset and a lease liability on the consolidated statement of financial position. The ROU asset is initially recorded at cost, which comprises the initial amount of the lease liability and any initial direct costsincurred less any lease payments made at or before the initial adoption date. The ROU asset is depreciated on a straight‐line basis over the shorter of the estimated useful life of the asset or the lease term. The ROU asset is periodically reduced by impairment losses, if any, and adjusted for remeasurements of the lease liability. The lease liability is measured at the present value of the expected lease payments over the lease term, discounted at the interest rate implicit in the lease; if the rate cannot be determined, the incremental borrowing rate is used. The liability is increased for the passage of time and payments on the lease are offset against the lease liability.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

New accounting standards adopted effective August 1, 2019 (continued):

IFRS 16 Leases (continued)

For the year ended July 31, 2020, the Company has applied the short‐term lease exemption for leases which are on month‐to‐month terms or terms of less than twelve months.

Recently Adopted Accounting Standards

Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company's consolidated financial statements.

Comparative Information

Certain comparative figures in the consolidated statements of loss and comprehensive loss have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

4. USE OF ESTIMATES AND JUDGMENTS

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factorsthat are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results may differ from these estimates.

Matters that require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited:

Going concern

The assumption that the Company is a going concern and will continue in operation for the foreseeable future and for at least one year. Management uses judgment in determining assumptions for cash flow projections, such as anticipated financing, anticipated sales and future commitments to assess the Company's ability to continue as a going concern. The factors considered by management are disclosed in Note 1.

4. USE OF ESTIMATES AND JUDGMENTS (CONTINUED)

Impairment of intangible assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts and also at the end of each reporting period. The Company considers both internal and external sources of information when making the assessment of whether there are indications of impairment for the Company's intangible asset. External sources of information considered are changes in the Company's economic, legal and regulatory environment which it does not control but affect the recoverability of its asset. Internal sources of information the Company considers include the manner in which intangible asset are being used or are expected to be used and indications of economic performance of the assets.

Valuation of inventory

The Company determines its allowance for inventory obsolescence based upon expected inventory turnover, inventory aging, the expiry dates of the products, and current and future expectations with respect to product offerings. Assumptions underlying the allowance for inventory obsolescence include future sales trends and offerings and the expected inventory requirements and inventory composition necessary to support these future sales offerings. The estimate of the Company's allowance for inventory obsolescence could materially change from period to period due to changes in product offerings, consumer acceptance of the products and the expiry dates of the products.

Useful life and recovery of long‐lived assets

Management estimates the useful life of long‐lived assets based on the period during which the assets are expected to be available for use. The amounts and timing of recorded expenses for depreciation for any period are affected by these estimated useful lives. The estimates are reviewed at least annually and are updated if expectations change as a result of technical or commercial obsolescence, and legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated useful lives of the Company's long‐lived assets in the future.

The assessment of any impairment of long‐lived assets is dependent upon estimates of recoverable amounts that takes into account factors such as economic and market conditions, timing of cash flows, the useful lives of assets and their related salvage values.

Acquisitions

The determination of whether a set of assets acquired and liabilities assumed in an acquisition constitute a business may require the Company to make certain judgments, taking into account all facts and circumstances. A business is presumed to be an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or economic benefits. The acquisition of Sangster's was determined to constitute a business combination. The acquisitions of Valley and 573 did not constitute a business combination as only net asses were acquired, and accordingly were accounted for as asset purchase transactions (Note 5).

4. USE OF ESTIMATES AND JUDGMENTS (CONTINUED)

Acquisitions (continued)

In an acquisition that constitutes a business combination, all identifiable assets, liabilities and contingent liabilities acquired are recorded at their fair values. One of the most significant estimates relates to the determination of the fair value of these assets and liabilities. Management exercisesjudgment in estimating the probability and timing of when earnouts are expected to be achieved which is used as the basis for estimating fair value. For any intangible asset identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent valuation expert or management may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. The valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount rate applied.

Share‐based payments

The Company measures the cost of equity‐settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share‐based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share‐based payment transactions are disclosed in Note 17.

Income taxes

Significant judgment isrequired in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company's current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

The Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. Assessing the utilization of deferred tax assets requires management to make significant estimates of future taxable profit. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions from deferred tax assets.

5. ACQUISITIONS

Acquisition of Sangster's:

On November 30, 2018, pursuant to an asset purchase agreement through its wholly‐owned subsidiaries 495 operating as Sangster's, 509 operating as Sangster's Corporate Stores, 512 operating as SHC Leasing, the Company acquired the net assets of Restore Holdings Ltd., G7 Holdings Ltd. and Natural Choice Holdings Ltd. respectively (collectively comprising "Sangster's" or "the Seller"). Based in Saskatoon, Saskatchewan, Sangster's sells nutraceutical, sports nutrition, food, and body care products to and collects royalties from its franchisees and operates corporate retail stores in Saskatchewan and Alberta.

The following table summarizes the purchase price allocation for the business combination:

	$
Purchase Price:
Consideration paid in cash	300,000
Consideration paid in shares	125,000
Future cash consideration (a)	306,446
Future share consideration (b)	125,000
Seller promissory note (c)	300,000
Total	1,156,446
Value of assets less liabilities:
Accounts receivable	185,984
Prepaid deposits and expenses	23,407
Inventory	696,900
Property, plant and equipment	77,614
Leasehold improvements	10,940
Prepaid deposits – long‐term	5,112
Intangible assets	63,505
Accounts payable	(211,962)
Deferred revenue	(115,207)
Total	763,293
Goodwill	420,153
Reconciliation to Purchase Price	1,156,446

(a) Future cash consideration included $300,000 cash payable on December 31, 2018, and an additional $6,446 related to closing adjustments for target working capital and deferred revenue.

(b) Future share consideration included $125,000 in common shares of the Company to be issued at a deemed price equal to the 10‐day weighted average trading price and issuance is due on November 30, 2019.

(c) The Seller promissory note payable included $300,000 bearing interest at 8% per annum, payable in installments of $150,000 plus accrued interest on November 30, 2019 and November 30, 2020. The promissory note is secured by a first charge on the assets of Sangster's.

5. ACQUISITIONS (CONTINUED)

Acquisition of Sangster's (Continued):

On November 30, 2018, the Company completed the transaction with the Seller and made the cash payment of $300,000 and issued 819,457 common shares of the Company for $125,000.

However, the future cash consideration of $300,000 payable on December 31, 2018 was not paid by the due date. During the year ended July 31, 2019, the Company and the Seller made arrangements for the payment of the $300,000 amount due in installments of $25,000 on a monthly basis commencing May 1, 2019. The Company paid $75,000 to the Seller for May to July, 2019 and did not make the payments from August 1, 2019. The Seller issued a demand notice for all debt outstanding on August 31, 2019 and filed an application in September 2019 for an interim receivership order with respect to the assets of 495, 509 and 512 in the courts of Saskatchewan.

As at July 31, 2019, all future amounts payable to the Seller were included in other liabilities (Note 13) on the consolidated statement of financial position. In addition, management determined the goodwill of Sangster's was impaired due to the uncertainty in realizing future benefit from the goodwill. Accordingly, a $420,153 impairment loss was charged to the consolidated statements of loss and comprehensive loss, and the carrying value of the goodwill of Sangster's were reduced to nil.

On January 29, 2020, the Company and the Seller executed a forbearance and settlement agreement dated November 15, 2019 for the outstanding payment and accrued interest incurred related to the acquisition of Sangster's. See Note 14 for further details.

For the year ended July 31, 2020, Sangster's has contributed a net income of $83,312 (2019 ‐ net loss of $367,643) to the consolidated statements of loss and comprehensive loss of the Company.

Asset Purchase Agreement ‐ Aquila and SRE:

On September 8, 2017, the Company closed an asset purchase agreement (the "Definitive Agreement") with Aquila Health Corp. ("Aquila") and Sangster's Real Estate Corp. ("SRE").

Pursuant to the Definitive Agreement, through its wholly‐owned subsidiary 1123568 BC Ltd., the Company acquired 100% interest of a natural health products manufacturing, laboratory and warehousing facility located in Penticton, British Columbia (the "Facility") from SRE for total consideration of $2,196,227. The consideration included assumption of the mortgage on the Facility, $485,717 paid in cash and 3,733,333 shares issued at a deemed price of $0.15 by the Company. The acquisition of the Facility was accounted for under IFRS 2 Share‐ based Payment with issuance of shares by the Company for the net assets acquired.

Under the Definitive Agreement, the Company also purchased from Aquila and SRE 50% interest in Orchard Valley Naturals Ltd. ("Valley") which held inventory and manufacturing equipment, and 50% interest in 1123573 BC Ltd. ("573") which held Health Canada approved natural product number ("NPN") assets, for total cash payment of $256,733. Both Valley and 573 were accounted for as joint ventures using the equity method under IFRS 11 and IAS 28.

On December 18, 2019, the Company entered a share purchase agreement with Aquila and SRE to acquire the remaining 50% interest in Valley and 573 in exchange for 2,769,000 common shares of the Company. The acquisition was completed on February 11, 2020 when 2,769,000 common shares of the Company was issued to SRE as consideration given and the shares of Valley and 573 was transferred to the Company.

5. ACQUISITIONS (CONTINUED)

Asset Purchase Agreement ‐ Aquila and SRE: (continued)

The Company has determined Valley and 573 did not meet the criteria for a business primarily due to lack of process and operations and accordingly the transaction was recorded as an acquisition of net assets of Valley and 573 at fair value as follows:

	$
Fair value of net asset acquired:
Equipment	100,309
Intangible assets	133,702
Accounts payable	(2,944)
Due to related parties	(10,000)
Due to subsidiaries	(45,021)
Total net assets at 100% interest	176,046
Value of net assets acquired at 50% interest	88,023
Consideration given:
Shares issued	88,023

6. ACCOUNTS RECEIVABLE

	July 31, 2020	July 31, 2019
	$	$
Trade receivables	89,000	274,772
GST receivable	‐	77,265
	89,000	352,037

7. INVENTORY

	July 31, 2020	July 31, 2019
	$	$
Raw materials	41,638	28,856
Finished goods	169,474	580,665
	211,112	609,521

During the year ended July 31, 2020, the Company recorded $79,585 (2019 ‐ $29,869) for the write‐down of inventory and expensed $615,169 (2019 ‐ $900,702) of inventory as cost of goods sold.

As at July 31, 2020, inventory with a carrying value totaling $137,944 is used as collateral for the promissory note payable (Note 14).

8. PREPAID DEPOSITS AND EXPENSES

	July 31, 2020	July 31, 2019
	$	$
Prepaid expenses	59,281	103,689
Deposits	1,161	15,682
Total	60,442	119,371
Less: current portion	(60,442)	(112,125)
Non‐current portion	‐	7,246

9. PROPERTY, PLANT, AND EQUIPMENT

		Cost				Accumulated Amortization			CarryingValue
	Balance,				Balance,
	August 1,			Balance,	August 1,			Balance,	At
	2018	Additions	Disposals	July 31, 2019	2018	Amortization	Disposals	July 31, 2019	July 31, 2019
	$	$	$	$	$	$	$	$	$
Land	435,870	‐	‐	435,870	‐	‐	‐	‐	435,870
Buildings	1,804,114	11,002	‐	1,815,116	(64,926)	(68,906)	‐	(133,832)	1,681,284
Leasehold
improvements	‐	10,940	‐	10,940	‐	(1,396)	‐	(1,396)	9,544
Computers	3,698	29,534	‐	33,232	(1,525)	(6,046)	‐	(7,571)	25,661
Furniture	8,229	57,645	(5,050)	60,824	(206)	(7,893)	421	(7,678)	53,146
Manufacturing
equipment	127,786	‐	‐	127,786	(12,731)	(30,824)	‐	(43,555)	84,231
Heavy
equipment	86,930	6,700	‐	93,630	(34,445)	(15,315)	‐	(49,760)	43,870
Vehicle	21,496	‐	‐	21,496	(2,150)	(5,183)	‐	(7,333)	14,164
	2,488,123	115,821	(5,050)	2,598,894	(115,983)	(135,563)	421	(251,125)	2,347,769

		Cost				Accumulated Amortization			CarryingValue
	Balance,				Balance,
	August 1,			Balance,	August 1,			Balance,	At
	2019	Additions	Disposals	July 31, 2020	2019	Amortization	Disposals	July 31, 2020	July 31, 2020
	$	$	$	$	$	$	$	$	$
Land	435,870	‐	‐	435,870	‐	‐	‐	‐	435,870
Buildings	1,815,116	1,252	‐	1,816,368	(133,832)	(66,286)	‐	(200,118)	1,616,250
Leasehold
improvements	10,940	‐	(10,940)	‐	(1,396)	(477)	1,873	‐	‐
Computers	33,232	‐	(1,368)	31,864	(7,571)	(6,429)	2,017	(11,983)	19,881
Furniture	60,824	‐	(39,681)	21,183	(7,678)	(8,656)	11,157	(5,177)	16,006
Manufacturing
equipment	127,786	100,309	(31,071)	197,024	(43,555)	(34,974)	21,123	(57,406)	139,618
Heavy
equipment	93,630	‐	(86,930)	6,700	(49,760)	(6,091)	53,138	(2,713)	3,987
Vehicle	21,496	‐	‐	21,496	(7,333)	(3,794)	‐	(11,127)	10,369
	2,598,894	101,561	(169,950)	2,530,505	(251,125)	(126,707)	89,308	(288,524)	2,241,981

As at July 31, 2020, property, plant and equipment with a carrying value of $35,739 in total is used as collateral for the promissory note payable (Note 14).

9. PROPERTY, PLANT, AND EQUIPMENT (CONTINUED)

During the year ended July 31, 2020, the Company disposed equipment with a cost of $169,950 and $89,308 in accumulated amortization for total proceeds of $94,169. As a result, the Company recorded a gain of $13,527 (2019 ‐ loss of $4,629) on the disposal of equipment.

10. INTANGIBLE ASSETS

	July 31, 2020	July 31, 2019
	$	$
Trademarks	60,000	60,000
Natural Product Numbers ("NPNs")	164,782	31,080
	224,782	91,080

Trademarks were acquired through the acquisition of Sangster's completed on November 30, 2018 (Note 5) and include twelve trademarks for the Sangster's and Sangster's Health Centers brand and design, as well as certain product brands, brand names and marketing slogans. As at July 31, 2020, these trademarks are used as collateral for the promissory note payable (Note 14).

Included in the NPNs, there were 125 natural product numbers recognized at the acquired cost of $133,702 in total as a result of the acquisition of remaining net asset of 573 (Note 5, 11).

As at July 31, 2020, the Company determined there was no indication that itsintangible assets may be impaired.

11. INVESTMENT IN JOINT VENTURES

Investment in joint ventures is comprised of the following:

	573	Valley	Hand SanitizerSolution	July 31, 2020	July 31, 2019
	$	$	$	$	$
Balance, beginning of the year	90,395	‐	‐	90,395	99,990
Investment	‐	‐	25,756	25,756	‐
Share of net income (loss)	(23,745)	‐	678	(23,067)	(9,595)
Reversal of impairment	‐	21,373	‐	21,373	‐
	66,650	21,373	26,434	114,457	90,395
Transition from equity
method to consolidation
method	(66,650)	(21,373)	‐	(88,023)	‐
Balance, end of the year	‐	‐	26,434	26,434	90,395

573 and Valley

Upon the closing of the acquisition on February 11, 2020 (Note 5), the previously held 50% interest in Valley and 573 from acquisition which closed on September 8, 2017 was remeasured at fair value due to the change in control in these entities. As a result, the Company recognized a $21,373 reversal on the impairment (2019 ‐ nil) previously recorded on the investment in Valley, and an impairment of $23,745 (2019 ‐ $9,595) on the investment of 573. In addition, the Company now accounts for Valley and 573 as wholly‐owned subsidiaries using the consolidation method.

11. INVESTMENT IN JOINT VENTURES (CONTINUED)

573 and Valley (continued)

The operating results of Valley and 573 prior to the acquisition of remaining interest by the Company are as follows:

	573	Valley	February 11, 2020	July 31, 2019
	$	$	$	$
Revenue	‐	‐	‐	‐
Expenses	‐	(20,548)	(20,548)	(165,565)
Others	(45,967)	(33,836)	(79,803)	‐
Net loss	(45,967)	(54,384)	(100,351)	(165,565)

Hand Sanitizer Solution

On May 20, 2020, the Company entered into a cooperation agreement with Thera‐Plantes Inc. to produce hand sanitizer solution for wholesale and distribution ("Hand Sanitizer Solution"). Pursuant to the cooperation agreement, both parties are entitled to joint control over the operating arrangement and a 50% interest for each in the net assets. The arrangement is accounted for under IFRS 11 and IAS 28 as a joint venture using the equity method.

The joint venture of hand sanitizer solution had the following operating results during the year ended July 31, 2020. 50% of the net income totaling $678 was recognized by increasing the carrying value of the investment in the joint venture.

	July 31, 2020	July 31, 2019
	$	$
Revenue	18,145	‐
Expenses	(16,791)	‐
Net income	1,354	‐

12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	July 31, 2020	July 31, 2019
	$	$
Accounts payable	549,945	602,171
Accrued liabilities	203,588	4,952
GST payable	16,247	-
Total	769,780	607,123

During the year ended July 31, 2020, the Company negotiated a reduction of $88,853 in accounts payable (net of $1,193 in prepaid deposits) with various creditors, resulting in a gain on settlement of debt of $87,600.

13. OTHER LIABILITIES

Other liabilities as at July 31, 2019 included amounts payable to the Seller, specifically Restore, G7 and Natural Choice, in relation to the acquisition of Sangster's (Note 5), which are comprised of the following:

	July 31, 2020	July 31, 2019
	$	$
Cash consideration payable	‐	225,000
Share consideration payable	‐	125,000
Closing adjustments payable	‐	6,446
Amounts due to Restore and G7	‐	8,337
Total	‐	364,783

Under the forbearance and settlement arrangement agreed on January 29, 2020 (Note 5), $130,000 in other liabilities was secured by a promissory note and reclassified to promissory note payable. The remaining amount in other liabilities, including accrued interest totaling $371,829, were conditionally forgiven by the Seller. As a result, a gain of $245,288 on settlement of debt was recorded in the consolidated statement of loss and comprehensive loss for the year ended July 31, 2020. Refer to Note 14 for further details.

14. PROMISSORY NOTE PAYABLE

	July 31, 2020	July 31, 2019
	$	$
Balance, beginning of the year	300,000	‐
Seller promissory note entered upon acquisition of Sangster's	‐	300,000
Promissory note reclassified from other liabilities (Note 13)	130,000	‐
Gain on settlement of debt	(48,031)	‐
Repayments of promissory note	(70,000)	‐
Amount representing accretion expense	18,962	‐
Balance, end of the year	330,931	300,000
Promissory note payable – current portion	(112,689)	(150,000)
Promissory note payable – non‐current portion	218,242	150,000

Pursuant to the forbearance and settlement agreement executed on January 29, 2020 (Note 5), the Company and the Seller agreed that:

• (i) Total debt and accrued interest owing to the Seller was reduced from $671,829 (Note 13) to $430,000, payable in cash;
• (ii) The legal and associated costs of the Seller totaling $55,000 was secured by the $430,000 payable balance; and
• (iii) Share consideration of $125,000 was no longer payable.

The $430,000 payable in cash was secured by a promissory note, payable on a monthly basis in installments of $10,000 per month commencing January 22, 2020 for a period of two years, with any remaining balance due in a balloon payment on December 15, 2021. The Company also committed to divesting of its three corporate stores and using the net proceeds to pay a lump sum payment to the Seller by August 15, 2020 to accelerate the payment for the promissory notes.

The promissory note is non‐interest bearing (2019 – 8% per annum), secured by a first charge on by a general security agreement over the accounts receivable of $92,682, inventory (Note 7) and property, plant and equipment (Note 9) and intangible assets (note 10) of 495, 509 and 512 the subsidiaries of the Company, plus a $200,000 second mortgage charge on the real estate property owned by 568 another subsidiary of the Company.

14. PROMISSORY NOTE PAYABLE (CONTINUED)

The promissory note was accounted for using the amortized cost method discounted at the effective interest rate of 8%, with the accretion portion of $48,031 recorded as a gain on settlement of debt. During the year ended July 31, 2020, payments of $70,000 were made against the promissory note and $18,962 accretion expense was recognized, resulting in a carrying amount of the promissory note at $330,931 as at July 31, 2020.

The minimum repayments for the promissory note over the next two fiscal years including interest are as follows:

	$
Year ended July 31, 2021	120,000
Year ended July 31, 2022	240,000
	360,000

15. MORTGAGE PAYABLE

A summary of the mortgage payable for the years ended July 31 is as follows:

	July 31, 2020	July 31, 2019
	$	$
Balance, beginning of the year	1,600,000	1,411,000
Addition – mortgage payable	160,000	1,600,000
Addition – bridge loan	60,000	‐
Interest expense	134,400	‐
Repayments	(159,200)	(1,230,000)
Settlement through private placement	‐	(181,000)
Balance, ending of the year	1,795,200	1,600,000
Mortgage payable – current portion	(1,795,200)	(1,600,000)
Mortgage payable – non‐current portion	‐	‐

On January 31, 2019, the Company obtained a $1,600,000 mortgage from New City Financial Group ("New City"). On February 1, 2020, the Company renewed the mortgage and was advanced an additional $160,000 under the terms of the renewal. The mortgage bears interest at 4.0% over royal bank prime interest subject to a minimum rate of 8.0% per annum. The loan requires monthly interest payments only and is secured by a first charge on the property of the Company. All amounts outstanding under the agreement shall be repaid on demand by the Lender following the occurrence of an event of default of monthly interest payments.

New City allowed the Company to defer interest payments of $35,200 for the period from April to June 2020 and to add the deferred payment amounts to the principal of the loan which is due on January 31, 2021. The Company resumed interest payments to New City from July 2020.

In January 2020, the Company received $60,000 in bridge loan from an arm's length party. The bridge loan is due on demand in the amount of $66,000, for the principal plus $6,000 application fee, with the proceeds from renewal of the mortgage payable, at which time if not repaid, interest would be payable based on royal bank prime plus 20.00%. In February 2020, the bridge loan was repaid in full.

On September 8, 2017, the Company obtained a mortgage from Lanyard Investments Inc. The mortgage bore interest at 9.5% per annum until August 31, 2018 and at 15.5% per annum thereafter, requiring monthly interest payments only, secured by a first charge on the property and was due on October 1, 2018, which was then extended to October 1, 2019. On January 31, 2019, the Company paid the mortgage in full.

15. MORTGAGE PAYABLE (CONTINUED)

On October 4, 2017, the Company obtained a second mortgage from Gunpowder Capital Corp. The mortgage bore interest at 24% per annum, requiring monthly interest payments only, secured by a second charge on the property and was due on October 1, 2018. On October 4, 2018, Gunpowder settled its debt by participating in the October 4, 2018 private placement.

16. LOANS PAYABLE

	July 31, 2020	July 31, 2019
	$	$
Balance, beginning of the year (a)	36,287	36,287
Addition: CEBA loan (b)	130,540	‐
Addition: CECRA loan (c)	9,523	‐
Accretion expense	2,264	‐
Repayment	(37,330)	‐
Interest expense	1,043	‐
Balance, ending of the year	142,327	36,287
Loans payable ‐ current portion	(140,829)	(16,200)
Loans payable	1,498	20,087

(a) On September 1, 2016, the Company obtained a loan to acquire a tractor, loader and a round baler valued at $86,930. The Company paid a deposit of $9,000 and the balance of $77,930 was financed with a loan, repayable in 60 monthly payments and bears interest at 5.25% per annum.

(b) In April and July 2020, the Company received loans of $160,000 in total under Canada Emergency Business Account ("CEBA") program funded by the Government of Canada, of which $120,000 are non‐forgivable and $40,000 are forgivable if the non‐forgivable $120,000 is repaid prior to December 31, 2022. The CEBA loans are non‐interest bearing, subject to restriction on disbursements for non‐deferrable expenditures of the Company, and are repayable at any time without penalty, but amounts repaid cannot be readvanced.

The CEBA loans are initially due on December 31, 2020, and if not repaid by December 31, 2020, the loans will convert to non‐interest‐bearing term loans with a maturity date of December 31, 2022. If the term loans are not repaid by December 31, 2022, the term loans will automatically renew with a maturity date of December 31, 2025, subject to interest at 5% per annum, with payments of interest due on a monthly basis. In the event of default, the loan payable becomes due immediately.

(c) In July 2020, the Company received a forgivable loan of $9,894 under Canada Emergency Commercial Rent Assistance ("CECRA"). The Company abated 100% of gross rents due for April to June 2020 for CECRA‐ eligible tenants. In exchange of the abatements granted, the Company received a forgivable loan amounting to 50% of gross rents due for the period, resulting in net abatements equaling to 25% of the gross rent. The principal amount of the CECRA loan will be forgiven if certain conditions are met. The loans are repayable at any time without penalty, but amounts repaid cannot be readvanced. If the loans are not forgiven and are not repaid by December 31, 2020, the CECRA loans will be due and will be subject to interest at 5% per annum, with payments of interest due on a monthly basis.

The minimum payments due on the CEBA and CECRA loans are $169,894 over the next year by the initial due date. However, the Company expects to utilize the conversion option which will extend the due date for these payments to December 31, 2022.

Both CEBA and CECRA loans were accounted for using the amortized cost method discounted at an effective interest rate of 8%, with the discount portion recorded as government grants (Note 23). Accretion expense $2,264 (2019 ‐ nil) was recorded in the consolidated statementsloss and comprehensive loss for the year ended July 31, 2020.

17. SHARE CAPITAL

• a) Authorized: Unlimited common shares without par value
• b) Issued and Outstanding:

During the year ended July 31, 2020:

On February 11, 2020, the Company issued 2,769,000 common shares at the value of $88,023 in exchange for shares of Valley and 573 pursuant to the share purchase agreement (Note 5).

On February 12, 2020, the Company issued 275,000 common shares at a deemed price of $0.05 per share to settle debt of $13,750. The Company recorded the share issued at fair value of $8,250 and a gain on the settlement of debt of $5,500 related to the transaction.

On June 25, 2020, the Company issued 6,007,271 common shares at a deemed price of $0.05 per share to settle debt of $300,364. The settlement covered significant portion owing by the Company in respect of various services rendered, including but not limited to consulting, accounting and legal, and for settlement of loans and/or advances provided to the Company. The Company recorded the shares issued at fair value at $210,254 and a gain on the settlement of debt of $90,110 related to the transaction.

On June 25, 2020, the Company issued 1,992,727 common shares pursuant to a private placement at $0.05 per share for total proceeds of $99,636.

During the year ended July 31, 2019:

On August 16, 2018, the Company issued 102,510 common shares pursuant to the exercise of agent's options at $0.10 per share for total proceeds of $10,251.

On October 4, 2018, the Company completed a private placement for 1,999,728 units at $0.275 per unit for total proceeds of $549,925. Each unit consists of one share and one‐half share purchase warrant. Each whole warrant entitles the holder to purchase one additional share at $0.50 per share expiring on October 4, 2019. The Company also paid finders' fee of $6,988 in cash and issued 25,410 agent's warrants exercisable at $0.275 per share expiring on October 4, 2019. The Company fair valued the agent's warrants at $2,287.

On October 4, 2018, the Company issued 658,182 units at a price of $0.275 per unit to settle debt in the amount of $181,000.

On October 25, 2018, the Company issued 149,667 common shares pursuant to the exercise of agent's warrants at $0.15 per share for total proceeds of $22,450.

On November 20, 2018 and December 14, 2018, the Company issued 430,858 shares in total pursuant to the exercise of agents' options at $0.10 per share for total proceeds of $43,086.

On November 30, 2018, the Company issued 819,457 shares pursuant to the asset purchase agreement (Note 5) related to acquisition of Sangster's at an average price of $0.1525 per share with total value at $125,000.

17. SHARE CAPITAL (CONTINUED)

b) Issued and Outstanding (continued)

On April 1, 2019, the Company issued 2,283,668 units for total proceeds of $342,475 at $0.15 per unit. Each unit comprised one share and one‐half warrant entitling the holder to acquire one additional share at $0.20 pershare expiring on April 1, 2021. The Company also paid finders' fees of $6,249 and issued 41,658 agent's warrants exercisable at $0.20 per share expiring on April 1, 2021. The Company determined the fair value of the agent's warrants at $2,000.

c) Commitments:

Stock Options

The Company has adopted an incentive stock option plan (the "Option Plan") which providesthat the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the applicable stock exchange's requirements, grant to directors, officers, employees and consultants of the Company, non‐transferable optionsto purchase common shares. Pursuant to the Option Plan, the number of common shares reserved for issuance shall not exceed 10% of the issued and outstanding common shares of the Company. Options granted under the Option Plan can have a maximum exercise term of 5 years from the date of grant. Vesting terms will be determined at the time of grant by the Board of Directors.

During the year ended July 31, 2020:

On June 14, 2020, the Company granted 312,500 stock options with an exercise price of $0.15 and expiry date of June 14, 2025. The options vest by one third each on June 14, 2021, June 14, 2022, and June 14, 2023. The $9,031 fair value of stock options is to be recognized over the vesting period.

On June 15, 2020, the Company granted 4,707,500 stock options with an exercise price of $0.05 and expiry date of June 15, 2023. The options vest by one third each on September 15, 2020, September 15, 2021, and September 15, 2022. The stock options have a fair value of $130,869 to be recognized over the vesting period.

During the year ended July 31, 2020, the Company recorded share‐based payment expense of $73,762 (2019 ‐ $334,959) related to the stock options vested during the period.

During the year ended July 31, 2019:

On August 26, 2018, the Company granted 1,275,000 stock options with an exercise price of $0.15 with 975,000 stock options expiring on August 26, 2020 and 300,000 stock options expiring on August 31, 2023. The fair value of the stock options amounted to $61,000 and $45,000 respectively.

On September 18, 2018, the Company granted 400,000 with an exercise price of $0.275 and expiry date of September 18, 2020. The fair value of the stock options amounted to $25,500.

On October 22, 2018, the Company granted 100,000 stock options with an exercise price of $0.265 and expiry date of October 22, 2020. The fair value of the stock options amounted to $7,000.

17. SHARE CAPITAL (CONTINUED)

c) Commitments (continued):

Stock Options (continued):

On January 16, 2019, the Company granted 200,000 stock options, vesting immediately. 100,000 stock options were granted with an exercise price of $0.20 and expiry date of January 21, 2021. 100,000 stock options were granted with an exercise price of $0.15 and expiry date of January 21, 2021. The fair value of the stock options amounted to $6,000 and $7,000 respectively.

On June 15, 2019, the Company granted 3,642,500 stock options to certain directors, officers, consultants and employees of the Company. The stock options are exercisable at $0.15 and expire on June 15, 2024. The fair value of the stock options amounted to $160,750.

Stock options transactions during the years ended July 31, 2020 and 2019 are as follows:

	Number ofOptions	Weighted AverageExercise Price
Balance outstanding, July 31, 2018	3,199,700	$0.13
Exercised	(533,368)	$0.10
Forfeited/Cancelled	(3,841,136)	$0.16
Granted	5,617,500	$0.16
Balance outstanding, July 31, 2019	4,442,696	$0.15
Forfeited/Cancelled	(345,000)	$0.15
Granted	5,020,000	$0.06
Balance outstanding, July 31, 2020	9,117,696	$0.10
Exercisable at July 31, 2020	3,396,030	$0.15

As at July 31, 2020, the Company had stock options outstanding as follows:

Expiry Date	Exercise Price	OutstandingNumber ofOptions	ExercisableNumber ofOptions
February 28, 2022	$0.10	107,696	107,696
June 15, 2023	$0.05	4,707,500	‐
July 16, 2023	$0.15	825,000	550,000
August 31, 2023	$0.15	300,000	300,000
June 15, 2024	$0.15	2,865,000	2,338,334
June 14, 2025	$0.15	312,500	‐
Total		9,117,696	3,396,030
Weighted average remaining life of options outstanding as at July 31, 2020			3.26
Weighted average remaining life of options outstanding as at July 31, 2019			4.60

17. SHARE CAPITAL (CONTINUED)

c) Commitments (continued):

Stock Options (continued):

The weighted average fair value of the options issued was estimated at the grant date using the Black‐ Scholes option pricing model with the following assumptions:

For the year ended	July 31, 2020	July 31, 2019
Weighted average expected dividend yield	0%	0%
Weighted average expected volatility	122%	100%
Weighted average risk‐free interest rate	0.54%	1.70%
Weighted average expected term (in years)	3.20	4.11
Weighted average market price	$0.04	$ 0.12

Share Subscriptions Received/Receivable:

During the year ended July 31, 2020, $19,800 share subscriptions were received (2019 ‐ $5,081 share subscriptions receivable).

Agent's Warrants:

Agent's warrant transactions for the year ended July 31, 2020 and 2019 are as follows:

	Number of Warrants	Weighted AverageExercise Price
Balance, July 31, 2018	806,567	$0.15
Exercised	(149,667)	$0.15
Expired	(643,900)	$0.15
Issued	75,401	$0.23
Balance, July 31, 2019	88,401	$0.21
Expired	(38,410)	$0.22
Balance, July 31, 2020	49,991	$0.20
Weighted average remaining life of warrants outstanding
as at July 31, 2020		0.67
Weighted average remaining life of warrants outstanding
as at July 31, 2019		1.01

The weighted average fair value of the agent's warrants issued was estimated at the grant date using the Black‐Scholes option pricing model with the following assumptions:

For the year ended	July 31, 2020	July 31, 2019
Weighted average expected dividend yield	n/a	0%
Weighted average expected volatility	n/a	100%
Weighted average risk‐free interest rate	n/a	1.82%
Weighted average expected term (in years)	n/a	1.62
Weighted average market price	n/a	$ 0.16

17. SHARE CAPITAL (CONTINUED)

a) Commitments (Continued):

The following agent's warrants are outstanding as at July 31, 2020:

Expiry Date	Exercise Price	Number of Shares	Remaining ContractualLife (Years)
March 31, 2021	$0.20	49,991	0.67

Share Purchase Warrants:

Share purchase warrant transactions for the year ended July 31, 2020 and 2019 are as follows:

	Number of Warrants	Weighted AverageExercise Price
Balance, July 31, 2018	‐	‐
Issued	2,470,541	$0.36
Balance, July 31, 2019	2,470,541	$0.36
Expired	(1,328,955)	$0.50
Balance, July 31, 2020	1,141,586	$0.20
Weighted average remaining life of warrants outstanding as
at July 31, 2020		0.67
Weighted average remaining life of warrants outstanding as
at July 31, 2019		0.87

The following share purchase warrants are outstanding as at July 31, 2020:

Expiry Date	Exercise Price	Number of Shares	Remaining ContractualLife (Years)
March 31, 2021	$0.20	1,141,586	0.67

Escrow shares:

As at July 31, 2020, 14,107,000 shares were subject to escrow conditions and will be released from escrow over time.

18. OTHER OPERATING REVENUE

For the year ended	July 31, 2020	July 31, 2019
	$	$
Sales royalties	277,466	223,967
Advertising royalties	103,952	119,205
Rental income	2,000	18,689
	383,418	361,861

19. CAPITAL DISCLOSURES

The Company's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders. The Company considers the items included in shareholders' equity and cash as capital. The Company manages the capital structure and makes adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company's primary objective with respect to its capital management isto ensure that it hassufficient cash resources to fund the development of and promotion of its nutritional hemp products. To secure the additional capital necessary to pursue these plans, the Company intends to raise additional funds through the equity or debt financing. The Company is not subject to any capital requirements imposed by a regulator.

20. FINANCIAL INSTRUMENTS

The Company's financial instruments are exposed to certain financial risks which are in common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. The following note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them.

General Objectives, Policies and Processes

The Board of Directors have overall responsibility for the determination of the Company's risk management objectives and policies and have delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance function. The Board of Directors are kept apprised on the process and would monitor the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board of Directorsis to set policies that seek to reduce risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below.

Rick Factors

The risk exposures and the impact on the Company's financial instruments are summarized below.

Credit Risk

The Company's credit risk was primarily attributable to bank balances. The Company limits its credit exposure on cash held in bank accounts firstly by holding its key transactional bank accounts with banks of international financial institutions. Management believes that the credit risk to be minimal.

Liquidity Risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at July 31, 2020, the Company had cash balance of $107,084 (2019 ‐ $54,808), total current assets of $690,560 (2019 ‐ $1,230,518) and current liabilities of $3,009,694 (2019 ‐ $2,997,512). Current liabilities include $1,936,029 in financing with renewable, extendable or forgivable terms. A substantial amount of the Company's total financial liabilities has contractual maturities of less than 365 days, and are subject to normal trade terms.

20. FINANCIAL INSTRUMENTS (CONTINUED)

Rick Factors (continued)

Liquidity Risk (continued)

Management has undertaken and is considering different alternatives to secure adequate debt or equity financing to meet the Company short term and long‐term cash requirement. During the year ended July 31, 2020, the Company closed a private placement for cash of $99,636, debt settlement of $314,114 (Note 17) with share consideration, and negotiated $98,106 debt reductions with creditors. The Company will also continue to pursue non‐dilutive B2B financing options with shared working capital requirements and B2B based sales programs in both Canada and the US to mitigate its liquidity risk.

Interest Risk

Interest risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in market risk. At present the Company's sensitivity to interest rates is immaterial as the mortgage is subject to a maximum interest rate of 8% per annum, which is currently being applied to the mortgage.

Currency Risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company holds no financial instruments that are denominated in a currency other than Canadian dollar. Therefore, the Company's exposure to currency risk is minimal.

Fair value

The Company has classified fair value measurements of its financial instruments using a fair value hierarchy that reflects the significance of inputs used in making the measurements as follows:

• Level 1: Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or
• liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates; and Level 3: Valuations based on significant inputs that are not derived from observable market data, such as discounted cash flow methodologies based on internal cash flow forecasts.

As at July 31, 2020, the fair values of financial instruments measured on a recurring basis include cash, determined based on level 1 input and consisting of quoted prices in active markets for identical assets. The fair values of other financial instruments, which include accounts receivable, accounts payable and accrued liabilities, amounts due to or from related parties, other liabilities and mortgage payable approximate their carrying values due to the relatively short‐term maturity of these instruments. The promissory note payable and loans payable are non‐interest bearing and are accounted for at amortized cost using the effective interest method.

21. DUE TO/FROM RELATED PARTIES AND RELATED PARTY TRANSACTIONS

Name	Relationship	July 31, 2020	July 31, 2019
		$	$
Due from related parties
0999650 BC Ltd.	Controlled by CEO	‐	7,085
Azema Sciences Inc. ("Azema")	Controlled by Common officers and	175,088	1,722
	directors
Continental Agro Trade Corporation	Controlled by common former director	23,995	24,450
Haltain Developments Inc.	Controlled by former director	23,839	23,749
Orchard Valley Naturals Inc.	Formerly investee with significant
	influence and currently a subsidiary	‐	45,021
		222,922	102,027

Amounts due from related parties are non‐interest bearing, unsecured and are due on demand.

Name	Relationship	July 31, 2020	July 31, 2019
		$	$
Due to related parties
Geoff Balderson	Former CFO	‐	3,810
Point Nexus	Controlled by former director	‐	117
Vigroup Data Consulting	Controlled by former IR Manager	‐	15,750
Rodney Gelineau	CEO of the Company	6,923	8,626
0999650 B.C. Ltd.	Controlled by CEO	28,601	‐
10620771 BC Ltd.	Controlled by CEO	6,824	6,824
1175218 BC Ltd.	Controlled by COO	12,875	19,250
Marjerrison Financial Management	Controlled by CFO	19,302	83,553
Ira Sudargo	Related to COO	1,201	25,288
Sigma Penta International	Controlled by COO	52	7,272
DeepRock Minerals Inc	Controlled by common former director	‐	350
		75,778	170,840

Amounts due to related parties are non‐interest bearing, unsecured, and are due on demand, except for the amount due to Ira Sudargo which is subject to the same conditions but bears interest at 15% per annum.

Name	Relationship	July 31, 2020	July 31, 2019
		$	$
Consulting fees (recoveries)
0999650 B.C. Ltd.	Controlled by CEO	103,500	76,500
1175218 BC Ltd.	COO of the Company	71,552	67,500
Azema	Controlled by common officers and	43,333	‐
	directors
Geoff Balderson	Former CFO	‐	4,581
Marjerrison Financial Management	Controlled by CFO	(3,333)	131,667
Nathan Lidder	Director of the Company	9,524	‐
Point Nexus	Controlled by director	‐	26,000
Vigroup Data Consulting	Controlled by former IR Manager	(1,050)	29,722
		223,526	335,970

The Company incurred the following expenses and expense recoveries with related parties during the year ended July 31, 2020 and 2019:

21. DUE TO/FROM RELATED PARTIES AND RELATED PARTY TRANSACTIONS (CONTINUED)

During the year ended July 31, 2020, the Company charged Azema $156,125 (2019 – nil) for consulting fees and travel expense recoveries and Azema charged the Company $43,333 (2019 – nil) for accounting servicesincurred in anticipation of undertaking a joint venture as contemplated in a letter of agreement dated July 19, 2019. The amounts recoverable from Azema have been recorded as a reduction against the related expenditures.

During the year ended July 31, 2020, the Company purchased $27,820 (2019 – nil) inventory from Azema, of which $1,070 (2019 – nil) was used for research and development on a new product line. As at July 31, 2020, the Company has $14,980 (2019 – nil) on deposit with Azema for inventory purchase which is recorded in prepaid expenses and deposits.

The above transactions are in the normal course of operations and are measured at the amounts of considerations established and agreed to by the related parties.

22. NON‐CASH TRANSACTIONS

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the consolidated statements of cash flows. The following transactions have been excluded:

For the year ended	July 31, 2020	July 31, 2019
	$	$
Shares issued for acquisition of Sangster's (Note 5)	‐	125,000
Shares issued for acquisition of Valley and 573 (Note 5)	88,023	‐
Equipment recognized from acquisition of Valley (Note 5, 9)	100,309	‐
Shares issued to settle debts (Note 17)	300,364	181,000
Interest convert to principal upon renewal of mortgagepayable (Note 15)	35,200	‐

23. GOVERNMENT GRANTS

The $29,459 (2019 – nil) related to the interest‐free CEBA and CECRA loans discounted using effective interest rate method (Note 16) was recognized as government grants received in lieu for the year ended July 31, 2020.

Wages and benefits expenses are presented net of $198,010 (2019 – nil) in subsidies received from the Federal Canada Emergency Wage Subsidy program.

24. SEGMENTED INFORMATION

During the year ended July 31, 2020, the Company had reportable operating segments including (1) corporate, (2) manufacturing, (3) development, marketing and distribution, and (4) retailing for nutraceutical, sports nutrition, food, and body care products, as well as (5) property management.

The operating results and summarized financial position of the Company's operating segments are as follows:

	Corporate	Retail	Distribution& Franchise	Property	Management Manufacturing	Total
	$	$	$	$	$	$
For the year ended July 31, 2020
Revenue	‐	342,064	799,613	2,000	162,573	1,306,250
Net loss	262,031	303,998	94,979	297,568	173,583	1,132,159
For the year ended July 31, 2019
Revenue	‐	339,197	1,232,428	18,689	161,711	1,752,025
Net loss	1,370,938	494,974	1,133,379	354,436	295,339	3,649,066

25. LEGAL PROCEEDINGS

The Company has settled a claim against the Company for $30,914 in total owing to a creditor. On November 29, 2019, a settlement agreement was entered with the creditor, whereby the claim was settled for a value of $24,750, of which $11,000 is to be paid in cash and $13,750 to be settled by issuing 275,000 common shares of the Company. As at July 31, 2020, $9,000 (2019 ‐ $nil) has been paid to the creditor, and $13,750 was settled with the common shares issued to the creditor effective February 11, 2020. The remaining $2,000 was paid in full subsequent to July 31, 2020.

Refer to Note 5 for other legal proceedings.

26. INCOME TAXES

The reconciliation of the combined Canadian federal and provincial income tax rate to the income tax recovery presented in the accompanying statements of loss and comprehensive loss is provided below:

	July 31, 2020	July 31, 2019
	$	$
Loss before income taxes	(1,132,159)	(3,649,066)
Combined federal and provincial statutory income tax rate	27.00%	27.00%
Expected income tax recovery at statutory tax rates	(305,000)	(979,000)
Non‐deductible expenditures and other	19,000	61,000
Effect of change in tax rate	‐	34,000
Effect of interprovincial tax rates	8,000	‐
Non‐capital loss carryover from acquisition of control	(95,000)	‐
Other	(3,000)	‐
Current and prior tax attributes not recognized	376,000	884,000
Deferred income tax recovery	‐	‐

26. INCOME TAXES (CONTIUNED)

Significant components of deferred tax assetsthat have not been set up are as follows:

	July 31, 2020	July 31, 2019
	$	$
Non‐capital losses	2,003,000	1,587,000
Share issue costs	15,000	61,000
Equipment	199,000	193,000
Less: unrecognized deferred tax assets	(2,217,000)	(1,841,000)
Total	‐	‐

At July 31, 2020, the net amount which would give rise to a deferred income tax asset has not been recognized as management determined it is not probable that such benefit will be utilized in the future years.

As at July 31, 2020, the Company has non‐capital losses carried forward of approximately $7,573,000, which are available to offset future years' taxable income. These losses expire as follows:

	$
2035	87,000
2036	398,000
2037	774,000
2038	2,096,000
2039	2,542,000
2040	1,676,000
	7,573,000

27. SUBSEQUENT EVENTS

In August and September 2020, the Company received $4,947 CECRA forgivable loan and $80,000 CEBA loans ($60,000 non‐forgivable and $20,000 forgivable) on the same terms as disclosed in Note 16.

On September 30, 2020, the Company settled with creditors for indebtedness totaling $28,623 by issuing 572,470 common shares at a deemed price of $0.05 per share. The amount owing is related to various services rendered, including but not limited to consulting and accounting, and for settlement of loans and/or advances provided to the Company.

On October 30, 2020, the Company settled with another creditor for an indebtedness of $30,673 by issuing 613,467 common shares at a deemed price of $0.05 per share.