Indigenous Bloom Hemp Corp. — Audit Report / Information 2020

Aug 29, 2020

Consolidated Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

To the Shareholders of Veritas Pharma Inc.:

Opinion

We have audited the consolidated financial statements of Veritas Pharma Inc. and its subsidiaries (the "Company"), which comprise the consolidated statement of financial position as at April 30, 2020, and the consolidated statements of operations and comprehensive loss, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at April 30, 2020, and its consolidated financial performance and its consolidated 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 Consolidated 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 consolidated 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 in the consolidated financial statements, which indicates that during the year ended April 30, 2020, the Company did not generate any revenues and had a net loss of $1,782,488. As at April 30, 2020, the Company had a working capital deficit of $875,047 and an accumulated deficit of $32,384,008. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, 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 consolidated financial statements of the Company for the year ended April 30, 2019 were audited by another auditor who expressed an unmodified opinion on those statements on May 13, 2020.

Other Information

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

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, 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.

Suite 2200, MNP Tower, 1021 West Hastings Street, Vancouver, British Columbia, V6E 0C3, Phone: (604) 685 8408, 1 (877) 688 8408

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

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

In preparing the consolidated 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 Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements, including the disclosures, and whether the consolidated 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 Jian-Kun Xu.

Vancouver, British Columbia

August 28, 2020 Chartered Professional Accountants

Consolidated statements of financial position

(Expressed in Canadian dollars)

	April 30,	April 30,
	2020$	2019$
Assets
Current assets
CashAmounts receivablePrepaid expenses	8,8912495,969	19,99643,519–
Total current assets	15,109	63,515
Non-current assets
Property and equipment (Note 4)Investments (Note 7)	––	319,439375,000
Total non-current assets	–	694,439
Total assets	15,109	757,954
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 9)Advance payable (Note 8)Due to related parties (Note 9)	524,729–365,427	416,923180,000622,208
Total liabilities	890,156	1,219,131
Shareholders' deficit
Share capitalShare-based payment reserveWarrant reserveDeficit	29,381,2131,443,613684,135(32,384,008)	28,778,344677,864684,135(30,601,520)
Total shareholders' deficit	(875,047)	(461,177)
Total liabilities and shareholders' deficit	15,109	757,954

Nature of operations and going concern (Note 1) Contingencies (Note 15) Subsequent events (Note 18)

Approved and authorized for issuance on behalf of the Board of Directors on August 28, 2020:

/s/ Lorne Mark Roseborough /s/ Nick Standish

Lorne Mark Roseborough, Director Nick Standish, Director

Consolidated statements of operations and comprehensive loss

(Expressed in Canadian dollars)

	Year endedApril 30,2020	Year endedApril 30,2019
	$	$
Expenses
Consulting fees (Note 9)	278,758	1,345,638
Depreciation	–	10,492
Investor relations	–	121,362
Office and miscellaneous	20,266	90,971
Professional fees	294,272	236,227
Rent	150,300	160,766
Research and development	–	148,946
Share-based compensation (Note 12)	765,749	464,126
Transfer agent and filing fees	20,912	31,257
Travel and promotion	4,952	63,203
Wages and benefits	197,596	566,289
Total expenses	1,732,805	3,239,277
Loss before other income (expense)	(1,732,805)	(3,239,277)
Other income (expense)
Gain on sale of property and equipment (Note 4)	15,221	–
Impairment of investments (Note 7)	–	(5,809,166)
Impairment of intangible asset (Note 6)	–	(1,580,000)
Impairment of loan receivable (Note 5)	–	(214,580)
Impairment of property and equipment (Note 4)	–	(66,517)
Loss on settlement of debt (Note 10)	(31,369)	–
Unauthorized payment (Note 3)	–	(1,000,000)
Write-off of accounts payable	–	10,750
Write off of amounts receivable	(33,535)	–
Total other income (expense)	(49,683)	(8,659,513)
Net loss and comprehensive loss for the year	(1,782,488)	(11,898,790)
Net loss per share, basic and diluted	(0.14)	(1.32)
Weighted average shares outstanding	12,386,213	9,021,235

(The accompanying notes are an integral part of these consolidated financial statements)

Statements of changes in equity (Expressed in Canadian dollars)

			Share-based		Share		Total
	Share capitalNumber ofshares	Amount$	paymentreserve$	Warrantreserve$	subscriptionsreceivable$	Deficit$	shareholders'equity (deficit)$
Balance, April 30, 2018	6,929,680	22,395,823	231,197	684,135	(194,500)	(18,702,730)	4,413,925
Shares issued pursuant to privateplacements	713,158	1,460,000	–	–	–	–	1,460,000
Share subscriptions received	–	–	–	–	147,500	–	147,500
Shares issued pursuant to acquisitionof 3 Carbon Extractions Inc.	150,000	367,500	–	–	–	–	367,500
Shares issued pursuant to acquisitionof Indigenous Bloom	4,166,666	4,166,666	–	–	–	–	4,166,666
Shares issued for services	157,894	307,896	–	–	–	–	307,896
Shares issued for exercise of stockoptions	50,000	149,309	(39,309)	–	–	–	110,000
Cancellation of shares	(10,000)	(68,850)	21,850	–	47,000	–	–
Fair value of stock options vested	–	–	464,126	–	–	–	464,126
Net loss for the year	–	–	–	–	–	(11,898,790)	(11,898,790)
Balance, April 30, 2019	12,157,398	28,778,344	677,864	684,135	––	(30,601,520)	(461,177)
Shares issued for settlement of debt	3,273,913	602,869	–	–	–	–	602,869
Fair value of stock options vested	–	–	765,749	–	–	–	765,749
Net loss for the year	–	–	–	–	–	(1,782,488)	(1,782,488)
Balance, April 30, 2020	15,431,311	29,381,213	1,443,613	684,135	–	(32,384,008)	(875,047)

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated statements of cash flows

(Expressed in Canadian dollars)

	Year endedApril 30,2020$	Year endedApril 30,2019$
Operating activities
Net loss for the year	(1,782,488)	(11,898,790)
Items not involving cash:DepreciationGain on sale of property and equipmentImpairment of intangible assetImpairment of investmentsImpairment of loans receivable	–(15,221)–––	10,492–1,580,0005,809,166214,580
Impairment of property and equipmentLoss on settlement of debtShares issued for servicesShare-based compensationWrite off of amounts receivable	–31,369–765,74933,535	66,517–307,896464,126–
Changes in non-cash operating working capital:Amounts receivablePrepaid expenses and depositsAccounts payable and accrued liabilitiesDue to/from related parties	9,735(5,969)139,306212,519	(142,873)427,110212,114704,730
Net cash used in operating activities	(611,405)	(2,244,932)
Investing activities
Cash paid for acquisition of 3 Carbon Extractions Inc.Proceeds received from disposition of 3 Carbon Extractions Inc.investment	–375,000	(400,000)–
Cash paid for acquisition of 1182372 B.C. Ltd.(Repayment of) Cash acquired from advance payableLoan to Springbank Capital Partners, LLCProceeds received from sale of property and equipmentPurchase of property and equipment	–(180,000)–334,660–	(1,250,000)180,000(108,561)–(30,507)
Net cash provided by (used in) investing activities	529,660	(1,609,068)
Financing activities
Advances from related partyProceeds from issuance of shares and share subscriptions receivedProceeds from issuance of options	70,700––	–1,607,500110,000
Net cash provided by financing activities	70,700	1,717,500
Change in cash	(11,105)	(2,136,500)
Cash, beginning of year	19,996	2,156,496
Cash, end of year	8,891	19,996

Supplement cash flow information (Note 17)

(The accompanying notes are an integral part of these consolidated financial statements)

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

1. Nature of Operations and Going Concern

Veritas Pharma Inc. (the "Company") was incorporated on May 14, 2014 under the Business Corporations Act of British Columbia as Seashore Organic Marijuana Corp. for the purpose of completing the Plan of Arrangement between Noor Energy Corporation and Sechelt Organic Marijuana Corp. which was completed on August 7, 2014. On September 22, 2014, the Company changed its name from Seashore Organic Marijuana Corp. to Seashore Organic Medicine Inc. and had intentions to become a producer and distributor of medical marijuana in Canada. On December 29, 2015, the Company's name was changed to Veritas Pharma Inc., and its trading symbol was changed to "VRT". Its current focus is to develop the most effective proprietary cannabis strains for specific disease conditions. The Company's head office is located at Suite 3200, 650 West Georgia Street, Vancouver, BC.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company is not currently determinable, but management continues to monitor the situation.

These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. During the year ended April 30, 2020, the Company did not generate any revenues and has a net loss of $1,782,488. As at April 30, 2020, has a working capital deficit of $875,047 and has an accumulated deficit of $32,384,008. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors indicate the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Significant Accounting Policies

(a) Basis of Presentation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") in effect as at May 1, 2019.

These consolidated financial statements include the accounts of the Company and its 100% owned subsidiaries, Sechelt Organic Marijuana Corp. ("Sechelt"), Cannevert Therapeutics Ltd. ("CTL"), and Veritas Hemp Corp. All significant inter-company balances and transactions have been eliminated on consolidation.

These consolidated financial statements have been prepared on a historical cost basis and are presented in Canadian dollars, which is also the Company's functional currency.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(b) Application of New IFRS

IFRS 16, Leases

On May 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 sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard is effective for annual periods beginning on or after January 1, 2019. IFRS 16 eliminates the classification of leases as either operating leases or finance leases for a lessee. Instead, all leases are treated in a similar way to finance leases applied in IAS 17. IFRS 16 does not require a lessee to recognize assets and liabilities for short-term leases (i.e. leases of 12 months or less), leases with certain variable lease payments, and leases of low-value assets.

The Company adopted IFRS 16 effective May 1, 2019, using the modified retrospective method, with no significant impact on the Company's consolidated financial statements.

IFRS 9, Financial Instruments (Amendment)

On October 2017, the IASB issued amendments to IFRS 9 Financial Instruments to address the classification of certain prepayable financial assets.

The amendments clarify that a financial asset that would otherwise have contractual cash flows that are solely payments of principal and interest but do not meet that condition only as a result of a prepayment feature with negative compensation may be eligible to be measured at either amortized cost or fair value through other comprehensive income. This classification is subject to the assessment of the business model in which the particular financial asset is held as well as consideration of whether certain eligibility conditions are met. The Company adopted IFRS 9 (amendment) on May 1, 2019 with no significant impact on the Company's consolidated financial statements.

IFRIC 23, Uncertainty over Income Tax Treatments

In June 2017, IASB issued a new International Financial Reporting Interpretations Committee ("IFRIC") interpretation, incorporated into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards Board ("AcSB") in September 2017, to specify how to reflect the effects of uncertainty in accounting for income taxes. IAS 12 Income Taxes provides requirements on the recognition and measurement of current or deferred income tax liabilities and assets. However, it does not provide a specific requirement for the accounting for income tax when the application of tax law to a particular transaction or circumstance is uncertain. As a result, the interpretation aims to reduce the diversity in how entities recognise and measure a tax liability or tax asset when there is uncertainty over income tax treatments. The Company adopted IFRIC 23 on May 1, 2019 with no significant impact on the Company's consolidated financial statements.

(c) Use of Estimates and Judgments

The preparation of these consolidated financial statements in conformity with IFRS requires the Company's management to make judgments, estimates, and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

Significant areas requiring the use of estimates include recoverability of loans receivable, impairment of investments, recognition and measurement of provisions: key assumptions about the likelihood and magnitude of an outflow of resources, fair value of share-based compensation, and unrecognized deferred income tax assets.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(c) Use of Estimates and Judgments (continued)

Recoverability of Loans Receivable

The recoverability of loans receivable is assessed by management at the reporting date by applying expected credit loss impairment model. The model reflects historical loss experiences, facts and circumstances that have existed during the period, informed credit assessment, and consideration of forward-looking information. If actual credit losses differ from estimates, future earnings would be affected.

Impairment of Investments

The Company reviews and assesses the carrying amount of investments for indicators of impairment when facts or circumstances suggest that the carrying amount is not recoverable. Determination of carrying amount is subject to estimates and assumptions about the underlying data. Changes to these estimates may affect value of investment and the impairment recognized.

Current and Deferred Income Taxes

The determination of income tax expense and the composition of deferred income tax assets and liabilities involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred income tax assets and liabilities, and interpretations of tax laws. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these interpretation, judgments and estimates may materially affect the final amount of current and deferred income tax provisions, deferred income tax assets and liabilities, and results of operations.

Share-based Compensation

Fair values are determined using the Black-Scholes option pricing model. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide reliable measurement of the fair value of the Company's stock options.

Provisions and Contingent Liabilities

Provisions are accrued for liabilities with uncertain timing or amounts, if, in the opinion of management, it is both likely that a future event will confirm that a liability had been incurred at the date of the consolidated financial statements and the amount can be reasonably estimated. Where it is not possible to determine whether such a liability has occurred, or to reasonably estimate the amount of loss until the performance of some future event, no accrual is made until that time and a disclosure of contingent liability is made unless the possibility of settlement is remote. Management has applied significant judgments in assessing the possibility of any outflow in settlement based on factors and situations known to management at the time of preparing these consolidated financial statements. Actual results may differ. Please refer to Note 15 for details.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(c) Use of Estimates and Judgments (continued)

Significant Judgment

The critical judgments that the Company's management has made in the process of applying the Company's accounting policies that have the most significant effect on the amounts recognized in the Company's consolidated financial statements are as follows:

Going concern

Management has applied judgments in the assessment of the Company's ability to continue as a going concern when preparing its consolidated financial statements for the year ended April 30, 2020. Management prepares the consolidated financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management considered a wide range of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing. As a result of the assessment, management concluded there is a significant doubt as to the ability of the Company to meet its obligations as they fall due and, accordingly, the ultimate appropriateness of the use of accounting principles applicable to a going concern.

The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but is not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties related to events or conditions may cast significant doubt upon the Company's ability to continue as a going concern.

(d) Cash

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance, are readily convertible to known amounts of cash, and which are subject to insignificant risk of changes in value to be cash equivalents. As of April 30, 2020, the Company does not have any cash equivalents.

(e) Property and Equipment

Property and equipment is recorded at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following rates:

Computer equipment	2 year straight-line
Computer software	1 year straight-line
Lab equipment	5 years straight-line

Residual values and useful economic lives are reviewed at least annually, and adjusted if appropriate, at each reporting date. Subsequent expenditure relating to an item of property and equipment is capitalized when it is probable that future economic benefits from the use of the assets will be increased. All other subsequent expenditures are recognized as repairs and maintenance expenses during the period in which they are incurred. Gains and losses on disposal of equipment are determined by comparing the proceeds from disposal with the carrying amount of the asset and are recognized net within other income in the consolidated statement of operations.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(f) Impairment of Non-Financial Assets

At each reporting date, the Company assesses whether there are indicators of impairment for its non-financial assets. If indicators exist, the Company determines if the recoverable amount of the asset or cash generating unit ("CGU") is greater than its carrying amount. A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets. The Company has used geographical proximity, geological similarities, analysis of shared infrastructure, commodity type, assessment of exposure to market risks, and materiality to define its CGUs.

If the carrying amount exceeds the recoverable amount, the asset or CGU is recorded at its recoverable amount with the reduction recognized in the consolidated statement of operations. The recoverable amount is the greater of the value in use or fair value less costs to sell. Fair value is the amount the asset could be sold for in an arm's length transaction. The value in use is the present value of the estimated future cash flows of the asset from its continued use. The fair value less costs to sell considers the continued development of a property and market transactions in a valuation model.

Impairments are reversed in subsequent periods when there has been an increase in the recoverable amount of a previously impaired asset or CGU and these reversals are recognized in the consolidated statement of operations. The recovery is limited to the original carrying amount less depreciation, if any, that would have been recorded had the asset not been impaired.

Intangible asset with indefinite useful lives are not amortized but are tested for impairment annually, either individually or at the CGU level. The assessment of indefinite 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.

(g) Financial Instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the respective instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are included in the initial carrying value of the related instrument and are amortized using the effective interest method. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the consolidated statement of operations.

Fair value estimates are made at the consolidated statement of financial position date based on relevant market information and information about the financial instrument. All financial instruments are classified into either: fair value through profit or loss ("FVTPL") or amortized cost. The Company has made the following classifications:

Cash	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Advance payable	Amortized cost
Due to related parties	Amortized cost

The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(g) Financial Instruments (continued)

Financial assets at FVTPL

Financial assets are classified as FVTPL when the financial asset is either held for trading or it is designated as FVTPL. A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at amortized cost

Financial assets at amortized cost are non-derivative financial assets which are held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. Subsequent to initial recognition, financial assets are measured at amortized cost using the effective interest method, less any impairment.

Subsequent to initial recognition, financial liabilities are measured at amortized cost, unless designated as fair value through profit or loss. The Company's accounts payable and accrued liabilities, loan payable, and amounts due to related parties are measured at amortized cost.

Impairment of Financial Assets

Financial assets, other than those classified as FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been decreased.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are offset against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statement of operations. Loss allowances are based on the lifetime ECL's that result from all possible default events over the expected life of the trade receivable, using the simplified approach.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement of operations to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

(h) Financial Liabilities and Equity Instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(h) Financial Liabilities and Equity Instruments (continued)

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized as the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities (including loans and borrowings and trade payables and other liabilities) are initially measured at fair value, net of transaction costs. Subsequently, other financial liabilities are measured at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(i) Foreign Currency Translation

The functional and presentation currency is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the statement of financial position date. Non-monetary items are translated using the historical rate on the date of the transaction. Revenue and expenses are translated at average rates for the periods. Foreign exchange gains and losses are included in the consolidated statement of operations and comprehensive loss.

(j) Income Taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in the consolidated statement of operations. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax

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

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

2. Significant Accounting Policies (continued)

(k) Provisions

Provisions for legal claims and obligations are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

(l) Share-based Payments

The grant date fair value of share-based payment awards granted to employees is recognized as stock-based compensation expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Where equity instruments are granted to parties other than employees, they are recorded by reference to the fair value of the services received. If the fair value of the services received cannot be reliably estimated, the Company measures the services received by reference to the fair value of the equity instruments granted, measured at the date the counterparty renders service.

All equity-settled share-based payments are reflected in share-based payment reserve, unless exercised. Upon exercise, shares are issued from treasury and the amount reflected in sharebased payment reserve is credited to share capital, adjusted for any consideration paid.

(m) Loss Per Share

Basic loss per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted loss per share, whereby all "in the money" stock options and share purchase warrants are assumed to have been exercised at the beginning of the period and the proceeds from their exercise are assumed to have been used to purchase common shares at the average market price during the period. When a loss is incurred during the period, basic and diluted loss per share are the same as the exercise of stock options and share purchase warrants is considered to be anti-dilutive. As at April 30, 2020, the Company had 1,565,738 (2019 – 1,700,000) potentially dilutive shares outstanding.

(n) Comprehensive Loss

Comprehensive loss is the total non-owner change in equity for a reporting period. This change encompasses all changes in equity other than transactions from shareholders. For the years ended April 30, 2020 and 2019, the Company did not have any transactions impacting comprehensive income (loss).

(o) Accounting Standards Issued But Not Yet Effective

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended April 30, 2020, and have not been early adopted in preparing these consolidated financial statements. These new standards, and amendments to standards and interpretations are either not applicable or are not expected to have a significant impact on the Company's consolidated financial statements.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

3. Advance to Liht Cannabis Corp.

On June 25, 2018, the Company advanced $1,000,000 to Liht Cannabis Corp. (formerly Marapharm Ventures Inc.) ("Liht"), which was supposed to bear interest at 10% per annum compounded daily, was to be repayable within 90 days, and was to be secured by certain assets of Liht, but the agreement was not executed. The Company and Liht had common officers and directors at the time of the advance. During the year ended April 30, 2019, the Company recorded this as an unauthorized payment in the consolidated statement of operations and comprehensive loss. The Company has filed a civil claim against Liht, refer to Note 15 (a).

4. Property and Equipment

	Computer	Computer	Lab
	hardware	software	equipment	Land	Total
	$	$	$	$	$
Cost:
Balance, April 30, 2018	3,471	4,810	58,237	319,439	385,957
AdditionsImpairment	–(3,471)	–(4,810)	30,507(88,744)	––	30,507(97,025)
Balance, April 30, 2019	–	–	–	319,439	319,439
Disposals	–	–	–	(319,439)	(319,439)
Balance, April 30, 2020	–	–	–	–	–
Accumulated depreciation:
Balance, April 30, 2018	2,120	3,099	14,797	–	20,016
AdditionsImpairment	–(2,120)	–(3,099)	10,492(25,289)	––	10,492(30,508)
Balance, April 30, 2019 and 2020	–	–	–	–	–
Carrying amounts:As at April 30, 2019	–	–	–	319,439	319,439
As at April 30, 2020	–	–	–	–	–

On November 28, 2019, the Company sold its land for gross proceeds of $350,000. A gain of $15,221 on the sale of land was recognized after deducting selling costs of $15,340.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

5. Loans Receivable

• (a) During the year ended April 30, 2019, the Company recorded an impairment of $108,561 (US$81,785) owed from an unrelated party due to the uncertainty of collectability.
• (b) During the year ended April 30, 2019, the Company recorded an impairment of $19,460 owed from a company controlled by the former Chief Financial Officer of the Company due to the uncertainty of collectability.
• (c) During the year ended April 30, 2019, the Company recorded an impairment of $5,313 owed from a company controlled by a former director of the Company due to the uncertainty of collectability.
• (d) During the year ended April 30, 2019, the Company recorded an impairment of $23,352 owed from a company which had common officers and directors due to the uncertainty of collectability.
• (e) During the year ended April 30, 2019, the Company recorded an impairment of $57,894 owed from a company which had common officers and directors due to the uncertainty of collectability.

6. Intangible Asset

Intangible asset consists of intellectual property relating to the development and assessment of specific cannabis cultivars that are selective in action on specific medical disorders with a fair value of $1,580,000 acquired from Cannevert Therapeutics Ltd. as part of the acquisition. The fair value of the intangible asset was determined using an independent valuator. As at April 30, 2019, CTL was conducting clinical trials testing of one of its compounds. It was not determinable if the results of the trials would be successful or if the compound could be sold to a third party. Based on these factors, the Company recorded an impairment of $1,580,000 as at April 30, 2019.

7. Investments

(a) On July 9, 2018, the Company issued 150,000 common shares with a fair value of $367,500 and paid $400,000 (US$300,000) to acquire 1,000 Class A voting common shares of 3 Carbon Extractions Inc. ("3 Carbon"), a private company.

The Company determined that the investment no longer fit into its business plan. The Company recorded an impairment of $392,500 on April 30, 2019 to bring the carrying value to its estimated fair value of $375,000.

On June 25, 2019, the Company entered into an agreement for the Company to sell the 1,000 Class A voting shares of 3 Carbon for $375,000. The amount was received on June 28, 2019.

(b) On October 17, 2018, the Company entered into a purchase agreement with 1182372 B.C. Ltd. ("1182372") to acquire a 25% interest in 1182372 for $1,250,000. 1182372 is a private company which is building a marijuana growing facility and applying for a marijuana licence.

As at April 30, 2019, 1182372 was experiencing significant cash funding problems which creates significant doubt that the growing facility will be completed which is needed to obtain a marijuana licence. As a result, the Company recorded an impairment of $1,250,000 as at April 30, 2019.

(c) In December 2018, the Company entered into share purchase agreements with three shareholders of Indigenous Bloom Corp. ("IB") to purchase an aggregate 2,000,000 common shares of IB in exchange for 4,166,666 common shares of the Company with a fair value of $4,166,666. As at April 30, 2019, this represents an approximately 3.5% interest in IB, which is a private company with a marijuana licence application.

Legislated changes introduced in February 2019 created a lot of uncertainty in the licence process. This added uncertainty impacted the cash funding problems that IB was already experiencing as it relates to its licence application. As a result, the Company recorded an impairment of $4,166,666 as at April 30, 2019.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

8. Advance Payable

On September 26, 2018, the Company entered into a share purchase agreement with Leis Industries Limited ("Leis") whereby Leis is to purchase 100% of the outstanding common shares of Sechelt for $350,000.

As at April 30, 2019, the Company has received $180,000 from Leis.

On November 28, 2019, the Company entered into a settlement agreement with Leis and repaid the $180,000 advance payable to Leis.

9. Related Party Transactions

• (a) As at April 30, 2020, the Company owed $26,250 (2019 $nil) to a company controlled by a director of the Company, which is recorded in accounts payable and accrued liabilities. The amount is unsecured, non-interest bearing, and due on demand. During the year ended April 30, 2020, the Company incurred consulting fees of $57,903 (2019 – $nil) to a company controlled by a director of the Company.
• (b) As at April 30, 2020, the Company owed $21,000 (2019 $nil) to a company controlled by a director of the Company, which is recorded in accounts payable and accrued liabilities. The amount is unsecured, non-interest bearing, and due on demand. During the year ended April 30, 2020, the Company incurred consulting fees of $20,000 (2019 – $nil) to a company controlled by a director of the Company.
• (c) As at April 30, 2020, the Company owed $10,500 (2019 $nil) to a company controlled by the Chief Executive Officer of the Company, which is recorded in accounts payable and accrued liabilities. The amount is unsecured, non-interest bearing, and due on demand. During the year ended April 30, 2020, the Company incurred consulting fees of $85,000 (2019 – $nil) to a company controlled by the Chief Executive Officer of the Company. Refer to Note 10 (a) for debt settlement.
• (d) As at April 30, 2020, the Company owed $24,454 (2019 $20,358) to a company controlled by the former Chief Executive Officer of the Company, which is recorded in accounts payable and accrued liabilities. The amount is unsecured, non-interest bearing, and due on demand. During the year ended April 30, 2020, the Company incurred consulting fees of $nil (2019 – $73,634) to a company controlled by the former Chief Executive Officer of the Company.
• (e) During the year ended April 30, 2020, the Company incurred consulting fees of $nil (2019 $60,000) to a company controlled by the former Chief Financial Officer of the Company.
• (f) During the year ended April 30, 2020, the Company incurred consulting fees of $nil (2019 $378,457) to a company controlled by a former director of the Company.
• (g) As at April 30, 2020, the Company owed $318,420 (2019 $575,202) to a company where a director of the Company is a director. The amount is unsecured, non-interest bearing, and due on demand. Refer to Note 10 (b) for debt settlement.
• (h) As at April 30, 2020, the Company owed $47,006 (2019 $47,006) to a former director of Sechelt. The amount is unsecured, non-interest bearing, and due on demand.
• (i) During the year ended April 30, 2020, the Company granted 2,415,738 (2019 270,000) stock options with a fair value of $765,749 (2019 - $211,203) to officers and directors of the Company.
• (j) During the year ended April 30, 2019, the Company issued 65,790 common shares to officers, and directors of the Company for proceeds of $125,001 pursuant to a private placement.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

10. Share Capital

Authorized: Unlimited number of common shares without par value

Share transactions for the year ended April 30, 2020:

• (a) On March 9, 2020, the Company issued 273,913 common shares with a fair value of $32,869 to settle debt owing to a company controlled by the Chief Executive Officer of the Company. This resulted in a loss on settlement of debt of $1,369.
• (b) On April 8, 2020, the Company issued 3,000,000 common shares with a fair value of $570,000 to settle debt of $540,000 owing to a company where a director of the Company is a director. This resulted in a loss on settlement of debt of $30,000.

Share transactions for the year ended April 30, 2019:

• (c) On July 9, 2018, the Company issued 150,000 common shares with a fair value of $367,500 for the purchase of common shares of 3 Carbon.
• (d) On July 27, 2018, the Company cancelled 10,000 previously issued common shares as the proceeds for the shares were not received from the subscriber. The fair value of the stock options of $21,850 was reallocated from share capital to share-based payment reserve.
• (e) On July 30, 2018, the Company issued 50,000 units at $4.00 per unit for proceeds of $200,000. Each unit consisted of one common share and one share purchase warrant. Each share purchase warrant entitles the holder to purchase one additional common share at $5.00 per share until January 30, 2020.
• (f) On August 16, 2018, the Company issued 50,000 common shares for proceeds of $110,000 pursuant to the exercise of stock options. The fair value of the stock options exercised of $39,309 was reallocated from the share-based payment reserve to share capital.
• (g) On November 9, 2018, the Company issued 663,158 common shares at $1.90 per share for proceeds of $1,260,000.
• (h) On November 9, 2018, the Company issued 157,894 common shares with a fair value of $307,896 to a consultant for services rendered.
• (i) On December 18, 2018, the Company issued 4,166,666 common shares with a fair value of $4,166,666 for the purchase of shares of IB. Refer to Note 7(c).
• (j) On February 20, 2019, the Company effected a 1-for-10 share consolidation. All share amounts were retroactively restated for all periods presented.

11. Share Purchase Warrants

The following table summarizes the continuity of share purchase warrants:

	Number ofwarrants	Weightedaverageexerciseprice$
Balance, April 30, 2018	2,081,725	3.90
IssuedExpired	50,000(931,725)	5.003,90
Balance, April 30, 2019	1,200,000	4.79
Expired	(900,000)	4.06
Balance, April 30, 2020	300,000	7.00

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

11. Share Purchase Warrants (continued)

As at April 30, 2020, the following share purchase warrants were outstanding:

Number ofwarrants	Exerciseprice
outstanding	$	Expiry date
300,000	7.00	March 28, 2021

12. Stock Options

The Company has adopted a stock option plan pursuant to which options may be granted to directors, officers, employees, and consultants of the Company to a maximum of 10% of the issued and outstanding common shares. The exercise price of each option is set by the Board of Directors at the time of grant subject to a minimum price of $0.10 per share but cannot be less than the market price (less permissible discounts) on the Canadian Securities Exchange ("CSE"). Options can have a maximum term of five years and typically terminate ninety days following the termination of the optionee's employment or engagement (thirty days for options granted for investor relations services), except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.

The following table summarizes the continuity of the Company's stock options:

	Number ofstock options	Weightedaverageexerciseprice$
Outstanding, April 30, 2018	524,500	6.80
GrantedExercisedExpired	640,000(50,000)(614,500)	2.142.206.13
Outstanding, April 30, 2019	500,000	2.15
GrantedExpired/cancelled	2,415,738(1,700,000)	0.330.99
Outstanding, April 30, 2020	1,215,738	0.15

Additional information regarding stock options outstanding as at April 30, 2020, is as follows:

	Outstanding and exercisable
		Weighted
Range of		average	Weighted
exercise		remaining	average
prices	Number of	contractual life	exercise price
$	stock options	(years)	$
0.15	1,215,738	5.0	0.15

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

12. Stock Options (continued)

The fair value for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:

	2020	2019
Risk-free interest rate	1.04%	2.05%
Expected life (in years)	5.0	1.0
Expected volatility	168%	104%

The total fair value of stock options vested during the year ended April 30, 2020 was $765,733 (2019 - $464,126) which was recorded as share-based payment reserve and charged to operations. The weighted average grant date fair value of stock options granted during the year ended April 30, 2020 was $0.32 (2019 - $0.73) per share. The weighted average share price for stock options exercised during the year ended April 30, 2020 was $nil (2019 - $2.05).

13. Capital Management

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and equity comprised of issued share capital, share-based payment reserve, and warrant reserve.

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issuances or by undertaking other activities as deemed appropriate under the specific circumstances.

The Company is not subject to externally imposed capital requirements and the Company's overall strategy with respect to capital risk management remains unchanged from the year ended April 30, 2019.

14. Financial Instruments and Risk Management

(a) Fair Values

Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and,
• Level 3 valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of financial instruments, which include accounts payable and accrued liabilities, advance payable, and amounts due to related parties, approximate their carrying values due to the relatively short-term maturity of these instruments.

(b) Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of financial assets represents the maximum credit exposure.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

14. Financial Instruments and Risk Management (continued)

(c) Foreign Exchange Rate Risk

Foreign exchange risk is the risk that the Company's financial instruments will fluctuate in value as a result of movements in foreign exchange rates. Foreign exchange risk arises from purchase transactions. As at April 30, 2020 and 2019, the Company is not exposed to significant currency risk as it did not have material assets or liabilities held in currencies other than its functional currencies.

(d) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company manages its interest rate risk by maximizing the interest earned on excess funds while maintaining the liquidity necessary to fund daily operations. Fluctuations in market interest rates do not have a significant impact on the Company's results of operations due to the short term to maturity of the investments held. The Company is not exposed to significant interest rate risk.

(e) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations out of cash. The ability to do this relies on the Company raising debt or equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs.

15. Contingencies

• (a) On February 28, 2019, the Company filed a civil claim against Liht for the recovery of the $1,000,000 advance plus interest. The interest payable on the advance was to be 10% per annum compounded daily from June 25, 2018 through and including the date on which it was repaid in full. The advance was to be repayable within 90 days and secured by certain assets of Liht. The Company alleges that, even though the Company had advanced Liht $1,000,000, Liht had refused to execute the loan agreement and has taken no steps to perfect the security of the advance. On August 28, 2018, the Company made a demand for the return of the $1,000,000 and again on January 14, 2019 together with interest accrued totalling of $1,055,068.49 on or before January 21, 2019. Liht has refused to return any portion of the $1,000,000 and any interest or deliver any consideration for the advance. The civil claim is ongoing and the Company believes that the advance to Liht will be recovered, but the outcome cannot be reasonably determined at this time.
• (b) On June 26, 2019, the Company filed a civil claim against its former management for the breach of their fiduciary duty and duty of care to the Company with respect to the advance made to Liht. This resulted in a loss and damage to the Company. The civil claim is ongoing and the amount of any damages recoverable cannot be reasonable determined or estimated at this time.
• (c) On May 14, 2020, a civil claim was filed against the Company by a former employee. The former employee is claiming $114,061 in relief as follows: $31,500 in damages for breach of contract. $31,500 in damages for outstanding wages, $1,061 in damages for outstanding business expenses, and $50,000 in damages for the breach of common law duty to perform contract obligations honestly and in good faith. The Company has recorded $63,873 in the accounts payable and accrued liabilities for previous services rendered, outstanding business expenses and damages for breach of contract.

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

16. Income Taxes

The following table reconciles the expected income tax expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of operations and comprehensive loss for the years ended April 30, 2020 and 2019.

	2020$	2019$
Net loss before taxStatutory tax rate	(1,782,488)27%	(11,898,790)27%
Expected income tax recovery	(481,272)	(3,212,673)
Tax effect of:
Non-deductible itemsChange in estimatesChange in unrecognized deferred income tax assets	206,8351,369,852(1,095,415)	118,747213,0922,880,834
Income tax provision	–	–

The unrecognized deductible temporary differences at April 30, 2020 and 2019 are as follows:

	2020$	2019$
Non-capital losses carried forward	18,953,709	23,331,325
Investment tax credits carried forward	178,569	178,569
Property and equipment	40,304	(315,461)
Capital losses	629,034	-
Share issuance costs	50,335	71,405
Total unrecognized deductible temporary differences	19,851,951	23,265,838

As at April 30, 2020, the Company has not recognized a deferred tax asset in respect of non-capital loss carryforwards of $18,953,709 (2019- $23,331,325) which may be carried forward to apply against future income for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

	$
2034	16,370
2035	558,210
2036	690,002
2037	2,770,959
2038	9,822,420
2039	4,002,821
2040	1,092,927
	18,953,709

Notes to the consolidated financial statements Years ended April 30, 2020 and 2019 (Expressed in Canadian dollars)

17. Supplemental Cash Flow Disclosure

	Year endedApril 30,2020$	Year endedApril 30,2019$
Non-cash investing and financing activities:
Fair value of options transferred to share capital upon exercise	–	39,309
Fair value of options transferred from share capital	–	21,850
Fair value of shares issued for acquisition of 3 Carbon	–
Extractions Ltd.		367,500
Fair value of shares issued for acquisition of Indigenous Bloom	–
Corp.		4,166,666
Fair value of shares issued to settle debt	602,869	–

18. Subsequent Events

• (a) On May 14, 2020, the Company entered into a Letter of Intent to acquire Indigenous Bloom Hemp Corporation ("HempCo"). The Company will acquire 100% of the issued and outstanding shares of HempCo for aggregate consideration of $28,000,000 to be provided in common shares of the Company, at a deemed price per share equal to the closing price on the CSE on the day prior to closing.
• (b) On August 5, 2020, the Company issued a total of 1,263,333 common shares to settle debt of $21,000 owing to the Chief Executive Officer of the Company, $31,750 owing to a director of the Company, and $42,000 owing to a company controlled by a director of the Company.