Lancaster Resources Inc. — Audit Report / Information 2022

Mar 30, 2023

Financial Statements (Expressed in Canadian Dollars)

For the Years Ended November 30, 2022 and 2021

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of NeonMind Biosciences Inc.

Opinion

We have audited the financial statements of NeonMind Biosciences Inc. (the "Company"), which comprise the statements of financial position as at November 30, 2022 and 2021, and the statements of operations and comprehensive loss, changes in shareholders' equity (deficit), and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at November 30, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits 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 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 financial statements, which indicates that the Company used cash of $1,080,848 for operating activities and incurred a net loss of $2,034,352 during the year ended November 30, 2022. As at November 30, 2022, the Company has a working capital deficit of $555,058 and an accumulated deficit of $15,123,243. These events or conditions, along with other matters as set forth in Note 1 of the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis, but does not include the financial statements and our auditor's report thereon.

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

In connection with our audit of the financial statements, our responsibility is to read the other information, 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. If, based on the work we have performed, 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 Henry Chow.

Saturna Group Chartered Professional Accountants LLP

Vancouver, Canada

March 29, 2023

Statements of Financial Position (Expressed in Canadian Dollars)

	November 30,2022	November 30,2021
ASSETS
Current assetsCashMarketable securities (Note 3)Amounts receivablePrepaid expenses and deposits (Note 7)Total current assets	$35,81734,09058,1931,330129,430	$773,525193,750104,915206,7411,278,931
Non-current assetsRestricted cash (Note 4)Computer equipmentTotal non-current assetsTotal assets	$---129,430	$57,5002,69360,1931,339,124
LIABILITIES
Current liabilitiesAccounts payable and accrued liabilities (Notes 6 and 7)Due to related party (Note 7)Total current liabilities	$676,7757,713684,488	$581,87216,948598,820
Non-current liabilitiesConvertible debentures (Note 6)Total liabilities	846,9371,531,425	450,0091,048,829
SHAREHOLDERS' EQUITY (DEFICIT)SHAREHOLDERS' EQUITY
Share capital (Note 8)Reserve for convertible debentures (Notes 6 and 8)Equity reserves (Notes 8, 10, and 11)DeficitTotal shareholders' equity (deficit)Total liabilities and shareholders' equity (deficit)	$8,379,69742,9345,298,617(15,123,243)(1,401,995)129,430	$7,800,88021,0635,557,243(13,088,891)290,2951,339,124

Nature of operations and continuance of business (Note 1) Subsequent events (Note 17)

Approved and authorized for issuance on behalf of the Board of Directors on March 29, 2023:

/s/ "Rob Tessarolo"	/s/ "Cole Drezdoff"
Director	Director

Statements of Operations (Expressed in Canadian Dollars)

	Year endedNovember 30,
	2022	2021
EXPENSES
Consulting fees (Note 7)	$397,942	$216,788
Depreciation	1,127	688
Investor relations (Note 7)	112,094	442,550
Listing	6,000	19,785
Marketing, publicity, and digital media (Note 7)	320,162	1,786,672
Office and administrative (Note 7)	155,159	359,731
Pharmaceutical research and development (Note 7)	149,018	1,356,291
Professional fees (Note 7)	159,892	454,424
Share-based compensation (Notes 7, 10 and 11)	166,077	2,499,933
Wages (Note 7)	283,899	639,520
Total expenses	1,751,370	7,776,382
LOSSBEFORE OTHER ITEMSBEFOREITEMS ITEMS	(1,751,370)	(7,776,382)
OTHER ITEMS
Accretion expense (Note 6)	(178,419)	(403)
Foreign exchange loss	(22,550)	(8,569)
Gain on extinguishment of debt (Note 7)	165,663	576,383
Gain on reclassification of investment (Note 5)	-	93,027
Gain on sale of investment (Note 3)	-	450,000
Interest expense (Note 6)	(101,090)	(33,034)
Loss on disposal of computer equipment	(1,566)	-
Loss on sale of marketable securities (Note 3)	(12,960)	-
Share of net loss of equity accounted investee (Note 5)	-	(54,212)
Unrealized gain(loss) on marketable securities (Note 3)	(132,060)	68,750
Total other items	(282,982)	1,091,942
NET LOSS FROM CONTINUING OPERATIONSNET LOSSOPERATIONS	(2,034,352)	(6,684,440)
Net loss from discontinued operations (Note 15)	-	(523,067)
NET LOSSNET LOSS	$ (2,034,352)	$ (7,207,507)
LOSS PER SHARE, BASIC AND FULLY DILUTED- Continuing operations	$(1.80)	$(6.80)
- Discontinued operations	-	(0.53)
Weighted average shares outstanding	1,131,606	983,299

Statement of Changes in Shareholders' Equity (Deficit) (Expressed in Canadian Dollars)

	halSitarecap
	fbeNumr ohasres		Amtoun		foReserverbleitconverdebetunres		Eqityureserves	fDeicit	s	lTotahaholde'rers(def)iicitytequ
BBAALLAANNCCE,E,NNOOVVEEMMBBEERR30,22002200	553,588	$	1,779,158	$	–	$	3,324,813	$()5,881,384	$	()777,413
dfohUniisstsuer cas	383,333		4,600,000		–		–	–		4,600,000
haSisstsreuance cos	–		()855,043		–		280,473	–		()574,570
had of sk oSissiseiontotresuen exercocps	9,250		221,562		–		()110,562	–		111,000
had of wSissisetsresuen exercoarran	62,417		1,292,286		–		()3407,7	–		1,24,8957
d of'sUniissiseAgOiontsttuen exercoenps	18,657		436,716		–		()216,262	–		220,454
d shadfoReiciissicetrtetssreunuer servs	–		–		–		20,487	–		20,487
d shadReicitrtetstesreunves	30,486		326,201		–		()326,201	–		–
f cbledebeEqiionitytttuuporoonvernres	–		–		21,063		121,969	–		143,032
luef sha-bd cFair viontaoreaseompensalosfoheNettsryear	––		––		––		2,499,933–	–()7,207,507		2,499,933()7,207,507
BBAALLAANNCCE,E,NOVEMBER330,02021NOVEMBER	1,058,055	$	7,800,880	$	21,063	$	5,557,243	$()13,088,891	$	290,295
d shadfoReiciissicetrtetssreunuer servs	–		–		–		14,703	–		14,703
d shadReicitrtetstesreunves	137,583		470,452		–		()470,452	–		–
had ufdebeSissioturesueponconversn onres	11,111		08,3615		()8,365		–	–		00,0001
f cbledebeEqiionitytttuuporoonvernres	–		–		30,236		30461,	–		62821,
luef sha-bd cFair viontaoreaseompensa	–		–		–		166,077	–		166,077
losfoheNettsryear	–		–		–		–	()2,034,352		()2,034,352
BALANCE,NNOOVVEEMMBBEERR33300,02022	1,206,749	$	8,379,697	$	42,934	$	5,298,617	$()15,123,243	$	()1,401,995

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

Statement of Cash Flows (Expressed in Canadian Dollars)

	Year ended
		November 30,
	2022	2021
OPERATING ACTIVITIESOPERATING ACTIVITIES
Net loss from continuing operations	$ (2,034,352)	$ (6,684,440)
Items not involving cash:
Accretion expense	178,419	403
Depreciation	1,127	689
Gain on extinguishment of debt	(165,663)	(576,383)
Gain on reclassification of investment	–	(93,027)
Gain on sale of investment	–	(450,000)
Interest accrued on convertible debentures	98,308	208
Loss on disposal of computer equipment	1,566	–
Loss on sale of marketable securities	12,960	–
Share of net loss of equity accounted investee	–	54,212
Share-based compensation	166,077	2,499,933
Unrealized loss (gain) on marketable securities	132,060	(68,750)
Changes in non-cash operating working capital:
Amounts receivable	46,722	(86,941)
Prepaid expenses and deposits	205,411	(149,241)
Accounts payable and accrued liabilities	285,752	493,468
Due to related parties	(9,235)	(145,282)
Net cash used in operating activities – continuing operations	(1,080,848)	(5,205,151)
Net cash used in operating activities – discontinued operations (Note 15)	–	(615,805)
INVESTING ACTIVITIESACTIVITIES
Proceeds from sale of investment	–	450,000
Proceeds from sale of marketable securities	14,640	–
Purchase of computer equipment	–	(3,382)
Purchase of guaranteed investment certificate	–	(57,500)
Redemption of guaranteed investment certificate	57,500	–
Net cash provided by investing activities – continuing operations	72,140	389,118
FINANCING ACTIVITIESFINANCING ACTIVITIES
Proceeds from exercise of stock options	–	111,000
Proceeds from issuance of units (net of issuance costs)	–	4,600,000
Share issuance costs	–	(574,570)
Proceeds from exercise of warrants	–	1,254,879
Proceeds from exercise of Agent's Options	–	220,454
Proceeds from issuance of convertible debentures (net of issuance costs)	271,000	592,430
Net cash provided by financing activities – continuing operations	271,000	6,204,193
CHANGE IN CASH IN CASH	(737,708)	772,355
Cash, beginning of year	773,525	1,170
CASH, END OF YEARCASH, END OF YEAR	$35,817	$773,525

Supplemental disclosures (Note 12)

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

1. Nature of Operations Nature Operationsand Continuance of Business and Business Business

NeonMind Biosciences Inc. ("NeonMind" or the "Company") was incorporated under the laws of the province of British Columbia on September 18, 2019. On April 9, 2020, the Company changed its name to NeonMind Biosciences Inc. The Company is engaged in drug development research into potential therapeutic uses of psychedelic compounds. On December 29, 2020, the Company's common shares were listed on the Canadian Securities Exchange (the "Exchange") and were immediately halted pending the closing of its initial public offering ("IPO"). On December 30, 2020, the Company completed its IPO and on January 4, 2021 the Company's common shares resumed trading on the Exchange under the ticker symbol "NEON."

These financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to realize its assets and satisfy its liabilities in the normal course of business for the foreseeable future. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon the Company's ability to continue as a going concern.

The Company has incurred a net loss from continuing operations of $2,034,352 and used $1,080,848 of cash for operating activities from continuing operations during the year ended November 30, 2022. As of November 30, 2022, the Company had an accumulated deficit of $15,123,243 and working capital deficit of $555,058. The continued operations of the Company are dependent on future profitable operations, management's ability to manage costs, and the future availability of equity or debt financing. Whether and when the Company can generate sufficient operating cash flows to pay for its expenditures and settle its obligations as they fall due is uncertain. As of November 30, 2022, the development of the Company's business was on hold pending additional funding required. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption be inappropriate. The impact of these adjustments could be material.

The outbreak of the coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the Canadian and global economies, and disruptions of financial markets. The COVID-19 pandemic has impacted and could further impact the Company's operations and the operations of the Company's suppliers and vendors as a result of quarantines, facility closures, and travel and logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company's business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company's suppliers and vendors and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume. The management team is closely following the progression of COVID-19 and its potential impact on the Company and is working on alternative measures and resources to minimize such impact. Even after the COVID-19 pandemic has subsided, the Company may experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, the Company cannot reasonably estimate the impact at this time our business, liquidity, capital resources and financial results.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting

Statement of Compliance

These financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the interpretations of the International Financial Reporting Interpretations Committee.

Basis of Presentation

These financial statements have been prepared on a historical cost basis. In addition, these financial statements have been prepared using the accrual basis of accounting, except for the cash flow information. The presentation and functional currency of the Company is the Canadian dollar.

In the opinion of the Company's management, all adjustments considered necessary for a fair presentation have been included.

Significant Accounting Estimates and Judgments

The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the 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. Actual results may differ from these estimates.

Significant areas requiring the use of estimates include the carrying value of marketable securities, fair value of convertible debentures and share-based compensation, and measurement of unrecognized deferred income tax assets.

Judgments made by management in the application of IFRS that have a significant effect on the financial statements include the factors that are used in determining whether the Company has significant influence over another entity, and the application of the going concern assumption which requires management to consider all available information about the future, which is at least but not limited to 12 months from the end of the reporting period.

The Company had previously determined that it had significant influence in Komo Plant Based Comfort Foods Inc. ("Komo Foods") despite holding less than 20% of the voting rights in Komo Foods due to the company sharing a common CFO, and the fact that the Company and Komo Foods entered into a license agreement that was a key component of Komo Food's business in prior periods. As a result, Komo Foods was considered an associate of the Company, and the investment in Komo Foods was accounted for using the equity method. The equity method involves recording the initial investment at cost and subsequently adjusting the carrying value of the investment for the Company's proportionate share of the profit or loss, other comprehensive income or loss and any other changes in the associate's net assets, such as further investments or dividends. During the year ended November 30, 2021, Komo Foods entered into a merger agreement and management determined that significant influence in Komo Foods no longer existed (Note 5) and the Company reclassified its investment to fair value through profit and loss under IFRS 9, Financial Instruments.

Management also requires the use of judgment with respect to the assessment of fair value of investment in a private company. The fair value of common shares in a private company is determined by valuation techniques such as recent arm's length transactions, option pricing models, or other valuation techniques commonly used by market participants. The investment in common shares is measured at fair value through profit or loss and unrealized gains and losses are recorded in the statement of operations.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting Policies(continued) (continued)

Cash and Cash Equivalents

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.

Equipment

Equipment consists of computer equipment, and is recorded at cost. The Company depreciates the cost of equipment over the following useful lives:

Computer equipment – 3 years

Impairment of non-current assets

Non-current assets are reviewed for indicators of impairment at each statement of financial position date or whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "CGU"). The recoverable amount of an asset or a CGU is the higher of its fair value, less costs to sell, and its value in use. If the carrying amount of an asset exceeds its recoverable amount, an impairment charge is recognized immediately in the statement of operations by the amount by which the carrying amount of the asset exceeds the recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously.

Income (Loss) Per Share

Basic Income (loss) per common share is computed by dividing their respective net income (loss) by the weighted average number of common shares outstanding during the year. The computation of diluted income per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the income per share. The dilutive effect of convertible securities is reflected in the diluted income per share by application of the "if converted" method. The dilutive effect of outstanding incentive stock options and their equivalents is reflected in the diluted income per share by application of the treasury stock method. As at November 30, 2022, there were 416,634 (2021 – 1,347,095) potentially dilutive shares outstanding.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting Policies(continued) (continued)

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. 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.

Investment in Associates

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company's share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of operations reflects the Company's share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Company's OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes, when applicable, in the statement of changes in shareholders' equity. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate. The aggregate of the Company's share of operating results of an associate is shown on the face of the statement of operations and represents net income or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognizes the loss within the statement of operations.

Upon loss of significant influence over the associate, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognized in the statement of operations.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting nificant Policies(continued) (continued)

Financial Instruments

Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 contains three primary measurement categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVOCI"), and fair value through profit and loss ("FVTPL").

The following is the Company's accounting policy for financial instruments under IFRS 9:

	Classification under
Financial instrument	IFRS 9
Cash	Amortized cost
Marketable securities	FVTPL
Restricted cash	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Convertible debentures	Amortized cost
Due to related parties	Amortized cost

Non-derivative financial assets:

On initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at: (i) amortized cost; (ii) fair value through other comprehensive income ("FVOCI"); or (iii) fair value through profit or loss ("FVTPL"). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortized cost or FVOCI are classified as FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income/loss.

The classification determines the method by which the financial assets are carried in the statement of financial position subsequent to inception and how changes in value are recorded.

Impairment:

An 'expected credit loss' impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of future cash flows associated with the asset, discounted at the financial asset's original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in the statement of operations for the period.

In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through the 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.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting gnificant Policies(continued) (continued)

Financial Instruments (continued)

Non-derivative financial liabilities:

Financial liabilities, other than derivatives, are initially recognized at fair value less directly attributable transaction costs. Subsequently, 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 allocating the interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon recognition as FVTPL. Fair value changes on these liabilities are recognized in the statement of operations. The Company has no hedging arrangements and does not apply hedge accounting.

Share Capital

Common shares are classified as equity. Transaction costs directly attributable to the issuance of common shares are recognized as a deduction from equity.

Compound Instruments – Convertible Debentures

The components of compound instruments issued by the Company are classified separately as financial liabilities and equity in accordance with the contractual agreement. At the date of issue, the fair value of the liability component is estimated using the market interest rate then in effect for a similar instrument without a conversion feature. The amount is recorded as a liability at amortized cost, using the effective interest rate method until its expiry at the time of conversion or maturity of the instrument. The calculated liability component is deducted from the total fair value of the compound instrument, with the residual value assigned to the equity component.

Transaction costs related to the issuance of convertible debentures are allocated proportionately to the liability and equity components based on their initial carrying amounts. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the life of the debenture using the effective interest method. Transaction costs relating to the equity component are recognized as a deduction from equity.

Revenue Recognition

Under IFRS 15, Revenue from Contracts with Customers, the Company uses the 5-step model for revenue recognition based on identifying the contract with the customer, identifying the performance obligations, determining the individual transaction price, and allocating the transaction price to the individual performance obligations making up the contract. Revenue is then recognized when or as the associated performance obligations are delivered and based on the expected consideration to be received. The Company expects to recognize future revenues in licensing and product sales, which are primarily derived from licensing and distribution fees from companies for the right to the Company's formulations and technology, or the right to manufacture and distribute the Company's proprietary products, and the sale of products on the Company's ecommerce website and through retail locations in Canada. The fees that are outlined in an agreement are recognized when the Company's obligations have been performed. For licenses with multiple performance obligations, the Company will identify specific distinct goods and services and will recognize income when the performance obligations for each distinct good or service has been performed.

	2022	2021
Revenues earned at a point in timeRevenues earned over time	$––	$16,075–
	$–	$16,075

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant Accounting Policies Significant Accounting Policies(continued) (continued)

Share-based Payments

The grant date fair value of share-based payment awards granted to employees is recognized as share-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 nonvesting 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 share-based payment reserve is credited to share capital, adjusted for any consideration paid.

Future Accounting Pronouncements

Certain pronouncements have been issued by the IASB, or the IFRS Interpretations Committee that are not mandatory for the current period and have not been early adopted. Management has assessed that there are no future accounting pronouncements that are expected to have a material impact on the Company in the current or future reporting periods.

3. Marketable S Marketable Securities ecurities ecuritiesand Inv and Investments estmentsestments

Below is a summary of the Company's marketable securities as of November 30, 2022 and 2021:

	November 30,2021fair value	Additions	Proceedsfrom sale	Realizedloss	Unrealizedloss	November 30,2022fair value
KPBF Shares	$193,750	$–	$	(14,640) $ (12,960)	$ (132,060)	$34,090
	November 30,2020fair value	Additions	Proceedsfrom sale	Realizedgain (loss)	Unrealizedgain (loss)	November 30,2021fair value
KPBF SharesTLS Shares	$	–$ 125,000––	$(450,000)	– $–450,000	$68,750–	$ 193,750–
Total	$	–$ 125,000		$ (450,000) $ 450,000	$68,750	$ 193,750

Marketable Securities

Komo Plant Based Foods Inc. (formerly Fasttask Technologies Inc.) ("KPBF")

On January 30, 2023, KPBF effected a 10:1 share consolidation. All share and per share amounts in these financial statements have been retroactively adjusted for the share consolidation.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

3. Marketable Securities and Investments (continued) Marketable Securities (continued)

Komo Plant Based Foods Inc. (formerly Fasttask Technologies Inc.) ("KPBF") (continued)

On May 31, 2021, Komo Foods entered into a merger agreement with KPBF whereby Komo Foods became a wholly owned subsidiary of KPBF and all Komo Foods shares were exchanged 1-to-1 for KPBF shares.

The Company's investment in Komo Foods was previously accounted for as an Investment in Associate (Note 5). As a result of the merger, the Company's holdings of 1,250,000 shares of Komo Foods were exchanged for 1,250,000 shares of KPBF. Management performed an analysis to determine whether significant influence over KPBF remained after the merger. Management concluded that the Company no longer has significant influence over KPBF as its ownership decreased to 1.5% of the outstanding shares at the date of the merger. In addition to the decreased ownership, the Company does not have any representation on the board of directors, having no common directors between the Company and KPBF.

As at November 30, 2022, the Company held 97,400 shares (2021 – 125,000) of KPBF.

Investments

Translational Life Sciences Inc. ("TLS")

On August 19, 2021, the Company entered into a share purchase agreement to sell the 7,285,000 common shares of TLS acquired during the year ended November 30, 2020 for consideration of $450,000. As the fair value of the shares was previously written down to $nil, the Company recorded a gain on sale of investment of $450,000 in the statement of operations.

4. Restricted Cash

During the year ended November 30, 2021, the Company invested in a variable rate guaranteed investment certificate ("GIC") in the principal amount of $57,500 as security for the credit card with the Company's banking institution. All renewals and replacements and all interest shall be held by the bank as continuing security. During the year ended November 30, 2022, the Company cancelled the credit card with the banking institution and redeemed the $57,500 GIC.

5. Investment in Associate

Komo Foods is a plant-based food company engaged in the development, production, marketing, and distribution of a variety of plant-based frozen meals. On December 1, 2020, Komo Foods entered into a 1-for-4 reverse stock split of its issued and outstanding common shares. All common share amounts have been retroactively restated for the reverse stock split. The Company held 1,250,000 common shares of Komo Foods, with a fair value of $415,000, representing a 4.05% ownership interest in Komo Foods, pursuant to their license agreement.

On May 31, 2021, Komo Foods entered into a merger agreement with KPBF. Prior to the merger, the Company had determined that it had significant influence in Komo Foods as it shared a common CFO, and there had been significant transactions including the licensing agreement entered into with Komo Foods. As a result of having significant influence in Komo Foods, the Company's investment in Komo Foods was accounted for as an investment in an associate using the equity method. The equity method involves recording the initial investment at cost and subsequently adjusting the carrying value of the investment for the Company's proportionate share of the profit or loss, other comprehensive income or loss and any other changes in the associate's net assets, such as further investments or dividends.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

5. Investment in Associate (continued) (continued)

Subsequent to the merger, the Company's shares of Komo Foods were exchanged 1-to-1 for KPBF shares, and it was determined that the Company no longer had significant influence over KPBF. As a result, the Company began accounting for the investment in Komo Foods at fair value through profit or loss (Note 3).

The carrying value of the Company's investment in Komo Foods as at May 31, 2021, time of the merger, was $31,973 prior to being reclassified as an investment recorded at fair value through profit and loss. The difference between the carrying value of $31,973 and the fair value of $125,000 was recorded as a gain on reclassification of investment of $93,027 in the statement of operations. During the year ended November 30, 2022, the Company recorded its proportionate loss from Komo Foods of $nil (2021 - $54,212).

The following table outlines the changes in investment in associate that are accounted for using the equity method for the six months ended May 31, 2021. As the Company does not have the same reporting date as its associate, the Company was provided with unaudited financial statements for the six months ended May 31, 2021, to calculate the portion of net loss attributable to the Company.

	From January 1,
	2021 to May 31,
	2021
Komo Foods net loss	$(1,955,755)
% ownership	2.66%
Portion of net loss from investment in associate	$(54,212)

Subsequent to May 31, 2021, the Company no longer recorded the investment in Komo Foods as an investment in associate using the equity method, therefore the net income subsequent to this period is not relevant to the measurement of the investment as it is recorded at fair value through profit and loss.

The following table outlines the carrying amount of the investment in Komo Foods as at May 31, 2021 prior to the merger:

	Investment in
	associate
Carrying value of investment, November 30, 2020	$86,185
Loss from investment in associate	(54,212)
Carrying value of investment, May 31, 2021	$31,973

The following table summarizes the financial information of Komo Foods as at May 31 prior to the merger, and for the period then ended:

	May 31,
	2021
Cash	$	384,995
Current assets		474,505
Total assets		477,734
Current and total liabilities		18,790

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

6. Convertible Debentures Convertible Debentures

	November 29,	April 8,	Total
	2021	2022
	issuance	issuance
Proceeds from issue of convertible debentures	$750,000	$–	$750,000
Transaction costs – cash	(157,570)	–	(157,570)
Net proceeds	592,430	–	592,430
Transaction costs – non-cash	(61,993)	–	(61,993)
Amount classified as equity	(21,063)	–	(21,063)
Fair value of warrants attached to units	(59,976)	–	(59,976)
Accrued interest	208	–	208
Accretion	403	–	403
Carrying amount of liability at November 30, 2021	$450,009	$–	$450,009
Proceeds from issue of convertible debentures	–	285,000	285,000
Convertible debentures issued to settle payables	–	109,000	109,000
Transaction costs - cash	–	(14,000)	(14,000)
Net proceeds	–	380,000	380,000
Transaction costs – non-cash	–	(3,809)	(3,809)
Reclassification of accrued interest	(208)	–	(208)
Amount classified as equity	–	(30,236)	(30,236)
Fair value of warrants attached to units	–	(27,238)	(27,237)
Accretion	145,122	33,297	178,419
Conversion	–	(100,000)	(100,000)
Carrying amount of liability at November 30, 2022	$594,923	$252,014	$846,937

November 29, 2021 issuance

On November 29, 2021, the Company issued 750 convertible debenture units at a price of $1,000 per unit for gross proceeds of $750,000. Each unit consisted of a repayable note with a face value of $1,000 (the "Debentures") and 66 warrants to purchase common shares of the Company. The Debentures bear interest at a rate of 10% per annum on an accrual basis from issuance, calculated and payable semi-annually in arrears on May 31 and November 30 of each year. The Company issued an aggregate of 50,000 warrants to the debenture holders.

The Debentures have a redemption date that is 24 months from the date of issuance and are convertible in full or in part, at the holders' option, into common shares of the Company at a price of $14.40 per common share, at any time prior to their redemption. Each warrant entitles the holder thereof to acquire one common share of the Company at a price of $16.80 per share for a period of 36 months from the date of issue.

In connection with the issuance of the Debentures, the Company paid broker fees of $82,570, commission fees of $75,000, and granted 5,208 agent's options (the "Agent's Options") with a fair value of $61,993 entitling the holder to purchase a unit of the Company (the "Agent's Option Unit") at $14.40 per Agent's Option until November 29, 2023. Each Agent's Option Unit consists of one common share of the Company (each, an "Agent's Option Share") and one share purchase warrant (each, an "Agent's Option Warrant"). Each Agent's Option Warrant further entitles the holder to purchase one additional common share of the Company at a price of $16.80 for a period of 36 months from the Agent's Options issue date of November 29, 2021. The estimated fair value associated with the Agent's Options granted was determined using the Black-Scholes Pricing model with the following assumptions: stock price at grant date of $16.92; annualized volatility of 132%; expected life of 2 years; dividend yield of 0%; expected forfeiture rate of 0%; and risk-free rate of 1.08%.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

6. Convertible Debentures (continued) Convertible Debentures (continued)

During the year ended November 30, 2022, the Company accrued interest of $75,000 (2021 - $208) relating to the Debentures, which has been recorded in accounts payable and accrued liabilities.

April 8, 2022 issuance

On April 8, 2022, the Company issued 285 convertible debenture units at a price of $1,000 per unit for gross proceeds of $285,000, and 109 convertible debenture units at a price of $1,000 per unit to settle accounts payable of $109,000. Each unit consisted of a repayable note with a face value of $1,000 (the "Debentures") and 79 warrants to purchase common shares of the Company. The Debentures bear interest at a rate of 10% per annum on an accrual basis from issuance, calculated and payable semi-annually in arrears on May 31 and November 30 of each year. The Company issued an aggregate of 31,192 warrants to the debenture holders.

The Debentures have a redemption date that is 24 months from the date of issuance and are convertible in full or in part, at the holders' option, into common shares of the Company at a price of $9.00 per common share, at any time prior to their redemption. Each warrant entitles the holder thereof to acquire one common share of the Company at a price of $9.60 per share for a period of 36 months from the date of issue.

In connection with the issuance of the Debentures, the Company paid broker fees of $14,000 and granted 1,108 agent's options (the "Agent's Options") with a fair value of $3,809 entitling the holder to purchase a unit of the Company (the "Agent's Option Unit") at $9.00 per Agent's Option until April 8, 2024. Each Agent's Option Unit consists of one common share of the Company (each, an "Agent's Option Share") and one share purchase warrant (each, an "Agent's Option Warrant"). Each Agent's Option Warrant further entitles the holder to purchase one additional common share of the Company at a price of $9.60 for a period of 36 months from the Agent's Options issue date of April 8, 2022. The estimated fair value associated with the Agent's Options granted was determined using the Black-Scholes Pricing model with the following assumptions: stock price at grant date of $6.00; annualized volatility of 129%; expected life of 2 years; dividend yield of 0%; expected forfeiture rate of 0%; and risk-free rate of 2.42%.

During the year ended November 30, 2022, the Company accrued interest of $23,308 (2021 - $nil) relating to the Debentures, which has been recorded in accounts payable and accrued liabilities and $100,000 (2021 - $nil) of the Debentures were converted into 11,111 common shares of the Company (Note 8(b)).

7. Related Party Transactions

During the years ended November 30, 2022 and 2021, compensation of key management personnel and related parties were as follows:

	Year ended
	November 30,
		2022		2021
Consulting fees	$	356,088	$	216,788
Share-based compensation		167,662		2,171,336
Wages		268,333		615,799
	$	792,083	$	3,003,923

As at November 30, 2022, Better Plant Sciences Inc. ("Better Plant"), a company with common officers and directors, held a deposit of $nil (2021 - $10,000) from the Company, which was included in prepaid expenses and deposits. As at November 30, 2022, the Company owed $7,713 (2021 - $16,948) to Better Plant, which is included in due to related party. The balance is unsecured, non-interest bearing, and due on demand.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

7. Related Party Transactions Transactions(continued) (continued)(continued)

During the year ended November 30, 2022, the Company incurred marketing expenses of $2,693 (2021 - $59,719), investor relations expenses of $30,000 (2021 - $53,639), professional fees of $54,211 (2021 - $138,307), office and administrative expenses of $18,299 (2021 - $62,121), and pharmaceutical research and development expenses of $nil (2021 - $65,140) from Better Plant. Better Plant provided such services to the Company pursuant to an operating agreement dated August 30, 2020.

On September 10, 2021, the Company entered into an agreement with Better Plant for the sale of functional food assets related to the Company's consumer division. The following assets were transferred by the Company to Better Plant: four mushroom coffee products being sold in Canada at the time of sale and four mushroom coffee dietary products, including existing inventory, raw materials and packaging for all eight products, social media accounts related to the products, a domain neonmind.com and the neonmind.com Shopify-enabled website in Canada and the US, as well as associated marketing materials and a license to use the brand NeonMind in association with the products.

As consideration for the assets, Better Plant paid $645,000 including taxes, which was offset by the balance due on a promissory note of a remaining balance of $645,000 owed by the Company to Better Plant. The fair value of the assets sold was determined to be $68,617, resulting in a gain on extinguishment of debt of $576,383. In addition, a 3% royalty of net product sales for a term of 25 years will be payable to the Company after the Better Plant reaches cumulative net product sales of over $1,000,000. For the year ended November 30, 2022 and 2021, the Company did not earn any royalty revenues from Better Plant.

During the year ended November 30, 2022, the Company entered into debt settlement agreements with various related parties, in order to settle outstanding accounts payable and accrued liabilities with a fair value of $165,663 (2021 - $nil) for a nominal amount, resulting in a gain on extinguishment of debt on the statement of operations.

During the year ended November 30, 2022, the Company issued 129,166 common shares to directors and officers of the Company with fair value of $382,500, pursuant to pursuant to the conversion of fully vested restricted share units.

As at November 30, 2022, the Company owed $4,750 (2021 - $nil) to a company controlled by the CFO of the Company, which is included in accounts payable and accrued liabilities. The amount owing is unsecured, noninterest bearing, and due on demand.

As at November 30, 2022, the Company owed $20,000 (2021 - $nil) to a director of the Company, which is included in accounts payable and accrued liabilities. The amount owing is unsecured, non-interest bearing, and due on demand.

8. Share Capital Share Capital

Authorized: unlimited number of common shares without par value.

On April 18, 2022, the Company effected a 4:1 share consolidation and on January 24, 2023, the Company effected a 30:1 share consolidation. All share and per share amounts in these financial statements have been retroactively adjusted for the share consolidations.

During the year ended November 30, 2022, the Company completed the following transactions:

(a) The Company issued 137,583 common shares pursuant to the conversion of fully vested restricted share units. The fair value of the restricted share units of $470,452 was transferred from equity reserves to share capital upon conversion, of which $382,500 pertains to directors and officers of the Company.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

8. Share Capital (continued) Share Capital (continued)(continued)

(b) On September 15, 2022, the Company issued 11,111 common shares pursuant to the conversion of $100,000 of convertible debentures. Convertible debenture reserve of $8,365 were transferred to share capital as part of the conversion.

During the year ended November 30, 2021, the Company completed the following transactions:

• (c) On December 30, 2020, the Company completed its IPO of 383,333 units at $12.00 per unit for proceeds of $4,600,000. Each unit consisted of one common share and one share purchase warrant exercisable at $24.00 per share until December 30, 2021. In connection with the IPO, the Company paid broker fees of $45,000, commission fees of $460,000, due diligence fees of $69,570, and issued 38,333 agents' options (the "Agents' Options") with a fair value of $280,473, entitling the holder to purchase a unit of the Company (the "Agent's Option Unit") at $12.00 per Agent's Option Unit until December 30, 2022. Each Agent's Option Unit consisted of one common share of the Company (each, an "Agent's Option Share") and one share purchase warrant (each, an "Agent's Option Warrant"). Each Agent's Option Warrant further entitles the holder to purchase one additional common share of the Company for a period of 24 months from the IPO closing date on December 30, 2020. The estimated fair value associated with the Agent's Options granted was determined using the Black-Scholes Pricing model with the following assumptions: stock price at grant date of $12.00; an annualized volatility of 121%; an expected life of 2 years; a dividend yield of 0%; a forfeiture rate of 0% and a risk-free rate of 0.20%.
• (d) The Company issued 9,250 common shares for proceeds of $111,000 pursuant to the exercise of stock options. The fair value of the stock options of $110,562 was transferred from equity reserves to share capital upon exercise.
• (e) The Company issued 62,741 common shares for proceeds of $1,254,879 pursuant to the exercise of warrants. The fair value of the warrants of $37,407 was transferred from equity reserves to share capital upon exercise.
• (f) The Company issued 17,229 Agent's Option Shares and 17,229 Agent's Option Warrants pursuant to the exercise of Agent's Options for proceeds of $206,750. Each Agent's Option Warrant entitles the holder to purchase one additional common share of the Company at $24.00 per common share for a period of 24 months from the IPO closing date on December 30, 2020. The fair value of the Agent's Option Warrants of $207,060 was transferred from equity reserves to share capital upon exercise.
• (g) The Company issued 30,486 common shares pursuant to the conversion of fully vested restricted share units. The fair value of the restricted share units of $326,201 was transferred from equity reserves to share capital upon conversion, all of which pertains to directors and officers of the Company.
• (h) The Company issued 1,428 Agent's Option Shares and 1,428 Agent's Option Warrants pursuant to the exercise of Agent's' Options for proceeds of $13,704. Each Agent's Option Warrant entitles the holder to purchase one additional common share of the Company at $18.00 per common share until May 14, 2021. The fair value of the Agent's Option Warrants of $9,201 was transferred from equity reserves to share capital upon exercise.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

9. Share Purchase Warrants Share Purchase

On April 18, 2022, the Company effected a 4:1 share consolidation and on January 24, 2023, the Company effected a 30:1 share consolidation. Figures in the tables below have been retroactively adjusted for the share consolidation.

The following table summarizes the continuity of the Company's share purchase warrants:

	Number of		Weighted average
	warrants	exercise price
Balance, November 30, 2020	734,608	$	36.00
Issued	495,532		22.80
Exercised	(81,398)		18.00
Expired	(17,917)		60.00
Balance, November 30, 2021	1,130,825	$	30.00
Issued	32,300		9.60
Expired	(1,037,283)		29.70
Balance, November 30, 2022	125,842	$	15.00

As at November 30, 2022, the following share purchase warrants were outstanding:

Number of	Exercise	Expiry
warrants	price	date
21,104	$12.00	December 30, 2022
17,230	$24.00	December 30, 2022
5,208	$16.80	November 29, 2023
1,108	$9.60	April 8, 2024
50,000	$16.80	November 29, 2024
31,192	$9.60	April 8, 2025
125,842

10. Stock Options

On January 13, 2020, the Company adopted an incentive stock option plan, which was replaced by an amended and restated incentive stock option plan on September 9, 2020. Pursuant to the Company's stock option plan, directors may, from time to time, authorize the issuance of options to directors, officers, employees, and consultants of the Company. The terms of the granted stock options as well as the vesting conditions are at the sole discretion of the directors.

On April 18, 2022, the Company effected a 4:1 share consolidation and on January 24, 2023, the Company effected a 30:1 share consolidation. Figures in the tables below have been retroactively adjusted for the share consolidation.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

10. Stock Options Options(continued) (continued)(continued)

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

	Number ofWeighted average
	options	exercise price
Outstanding, November 30, 2020	52,416	$	12.00
Granted	124,625		27.60
Exercised	(9,250)		12.00
Expired/cancelled	(5,688)		12.00
Outstanding, November 30, 2021	162,103	$	24.00
Granted	169,959		3.04
Expired/cancelled	(134,353)		25.41
Outstanding, November 30, 2022	197,709	$	5.55
Exercisable, November 30, 2022	139,126	$	5.88

Additional information regarding stock options outstanding and exercisable as at November 30, 2022, is as follows:

Range of			Weighted average
exercise	Stock options	Stock options	remaining contracted
prices	outstanding	exercisable	life (years)
$3.00 - $11.70	164,126	112,501	3.79
$12.00 - $18.00	26,750	19,917	0.42
$30.00 - $34.80	6,833	6,708	0.14
	197,709	139,126	4.35

Share-based compensation expense related to stock options was determined using the Black-Scholes option pricing model. During the year ended November 30, 2022, the Company recognized share-based compensation recovery relating to stock options of $29,133 (2021 – expense of $2,176,213) in equity reserves as a result of accounting for stock options cancelled during the period, of which an expense of $29,139 (2021 - $1,884,006) pertains to directors and officers of the Company. The weighted average fair value of options granted during the year ended November 30, 2022, was $1.20 (2021 - $21.60) per option. The weighted average share price on the date of stock options exercised during the year ended November 30, 2021 was $21.60. Weighted average assumptions used in calculating the fair value of share-based compensation expense, including no expected dividends or forfeitures, are as follows:

	2022	2021
Risk-free interest rate	2.67%	0.70%
Expected volatility	123%	123%
Expected life (years)	4.54	4.88

As at November 30, 2022, there was $37,295 (2021 - $589,721) of unrecognized share-based compensation related to unvested stock options.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

11. Restricted Share Units Units

On April 16, 2020, the Company adopted a restricted share unit plan, which was replaced by an amended and restated restricted share unit plan on April 27, 2020, September 9, 2020 and November 3, 2020. Pursuant to the Company's restricted share unit plan, directors may, from time to time, authorize the issuance of restricted share units to directors, officers, employees, and consultants of the Company. The terms of the granted restricted share units as well as the vesting conditions are at the sole discretion of the directors.

On April 18, 2022, the Company effected a 4:1 share consolidation and on January 24, 2023, the Company effected a 30:1 share consolidation. Figures in the tables below have been retroactively adjusted for the share consolidation.

	Number of
	Restricted
	share units
Balance, November 30, 2020	76,641
Granted	13,491
Cancelled	(5,479)
Vested	(30,486)
Balance, November 30, 2021	54,167
Granted	121,750
Cancelled	(30,000)
Vested	(137,583)
Balance, November 30, 2022	8,334

Share-based compensation expense relating to restricted share units was determined using the fair value of common shares of the Company on the date of grant. For restricted share units issued prior to the IPO on December 30, 2020, the fair value was determined based on previous private placements with third parties. For restricted share units issued subsequent to the IPO, the fair value was determined using the market price of the Company's common shares. During the year ended November 30, 2022, the Company recognized share-based compensation expense relating to restricted share units of $195,210 (2021 - $323,720) in equity reserves, $61,488 (2021 - $287,330) of which pertains to directors and officers of the Company. During the year ended November 30, 2022, the Company granted restricted share units with a fair value of $14,702 (2021 - $20,487) in exchange for consulting services. During the year ended November 30, 2022, the Company cancelled 30,000 (2021 – 5,479) unvested restricted share units with a fair value of $288,000 (2021 - $159,538). The weighted average fair value of restricted share units granted during the year ended November 30, 2022, was $2.40 (2021 - $21.60) per share.

As at November 30, 2022, there was $13,333 (2021 - $183,567) of unrecognized share-based compensation related to unvested restricted share units.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

12. Supplemental Disclosures Disclosures

	Year endedNovember 30,
	2022		2021
Non-cash investing and financing activities:
Restricted share units issued for services	$14,702	$	20,847
Transfer of fair value of options to share capital upon exercise	–		110,562
Transfer of fair value of warrants to share capital upon exercise	–		37,407
Transfer of fair value of Agent's Options to share capital upon exercise	–		216,262
Equity portion of convertible debentures and warrants issued	61,283		143,032
Fair value of Agent's Options issued as finder's fees	–		280,473
Fair value of brokers' warrants issued as finders' fees	3,809		61,993
Fair value of restricted share units converted	470,452		326,201
Fair value of convertible debentures to settle accounts payable	109,000		–
Common shares issued for the conversion of debentures	108,365		–

13. Capital Management Capital Management

The Company manages its capital structure and makes adjustments, based on the funds available to the Company, to support the general operations of the Company and facilitate the liquidity needs of its operations. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The Company defines capital to include its working capital position and share capital.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital requirements.

14. Financial Instruments Instrumentsand Risk and Riskand RiskManagement ManagementManagement

Fair Values

Assets and liabilities measured at fair value on a recurring basis were presented on the statement of financial position as at November 30, 2022, as follows:

	Fair Value Measurements Using
		Quoted prices inactive markets foridentical instruments(Level 1)		Significant otherobservable inputs(Level 2)		Significantunobservableinputs(Level 3)	Balance,November 30,2022
Marketable securitiesConvertible debentures	$	34,090–	$	–846,937	$	––	$34,090846,937
	$	34,090	$	846,937	$	–	$881,027

The fair values of other financial instruments, including cash, accounts payable and accrued liabilities, and amount due to related party approximate their carrying values due to the relatively short-term maturity of these instruments.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

14. Financial Instruments and Risk and RiskManagement (continued) Management (continued)Management (continued)

Credit Risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counter-party default on its obligation. The Company's credit risk is primarily attributable to cash. The Company minimizes its credit risk associated with its cash balance by dealing with major financial institutions in Canada and has no other significant concentration of credit risk arising from operations. The carrying amount of financial assets represents the maximum credit exposure.

Foreign Exchange Rate and Interest Rate Risk

The Company is not exposed to any significant foreign exchange rate or interest rate risk.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Company manages liquidity risk by maintaining sufficient cash balances and adjusting its operating budget and expenditure. Liquidity requirements are managed based on expected cash flows to ensure that there are sufficient funds to meet short-term and specific obligations.

Price Risk

The Company is exposed to price risk with respect to its marketable securities, which consists of common shares held in publicly-traded companies and is dependent upon the market price or the fair value of the common shares for those companies. The market price or the fair value of the common shares of those companies can fluctuate significantly, and there is no assurance that the future market price or the fair value of those companies will not decrease significantly.

15. Discontinued Operations

The Company entered into an Asset Purchase Agreement dated September 10, 2021 with Better Plant in which the Company agreed to sell certain assets in consideration for $645,000. The following assets were transferred by the Company to Better Plant: four mushroom coffee products being sold in Canada at the time of sale and four mushroom coffee dietary products, including existing inventory, raw materials and packaging for all eight products, social media accounts related to the products, a domain neonmind.com and the neonmind.com Shopify-enabled website in Canada and the US, as well as associated marketing materials and a license to use the brand NeonMind in association with the products.

As a result of the sale of the assets pertaining to the functional mushroom coffee consumer products (the "Consumer Products Division"), as well as management's decision to no longer pursue this retail division, the Consumer Products Division meets the criteria to be classified as discontinued operations as of September 10, 2021, and therefore the results of operations of the Consumer Products Division for all periods have been classified as discontinued operations on the statements of operations.

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

15. Discontinued Operations Operations(continued) (continued)(continued)

Net Loss from Discontinued Operations

	Year ended November 30,
Consumer Products Division	2022	2021
REVENUE
Product sales	$-	$16,013
Cost of sales	-	5,154
Gross profit	-	10,859
EXPENSESAmortizationInformation systemsOffice and administrativeMarketing, publicity, and digital mediaResearch and development – consumer productsProfessional feesTotal expenses	-------	3,1481,9805,610308,163133,97355,850508,724
LOSS BEFORE OTHER ITEMS	-	(497,865)
OTHER ITEMSImpairment of intangible assets	-	(25,202)
NET LOSS	$-	$(523,067)

Cash Flows from Discontinued Operations

		Year endedNovember 30,
Consumer Products Division	2022		2021
OPERATING ACTIVITIES
Net loss	$	-	$(523,067)
Items not involving cash
Amortization		-	3,148
Impairment of intangible assets		-	25,202
Changes in non-cash operating working capital
Accounts receivable		-	1,565
Inventory		-	(51,462)
Accounts payable and accrued liabilities		-	(70,971)
Deferred revenue		-	(220)
Net cash used in operating activities	$	-	$(615,805)

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

16. Income Taxes Taxes

The Company is subject to Canadian federal and provincial tax at the rate of 27%. The tax effect of the significant temporary differences, which comprise deferred income tax assets and liabilities, are as follows:

	2022	2021
Net loss	$(2,034,352)	$(7,207,507)
Statutory income tax rate	27%	27%
Income tax provision at statutory rate	(549,275)	(1,946,027)
Tax effect of:
Permanent differences and other	223,610	323,172
Change in unrecognized deferred income tax assets	325,665	1,622,855
Income tax provision	$–	$–

The significant components of deferred income tax assets and liabilities are as follows:

	2022		2021
Deferred income tax assets (liabilities)
Non-capital losses carried forward	$2,231,379	$	1,797,666
Capital losses carried forward	40,500		40,500
Marketable securities	17,094		(18,563)
Investment in associate	-		112,050
Intangible assets	453,558		479,166
Share issuance costs	128,742		134,789
Total gross deferred income tax assets	2,871,273		2,545,608
Unrecognized deferred income tax assets	(2,871,273)		(2,545,608)
Net deferred income tax assets	$–	$	–

As at November 30, 2022, the Company has non-capital losses carried forward of $8,264,368, which are available to offset future years' taxable income. These losses expire as follows:

Year of expiry
2039	$71,412
2040	681,274
2041	5,768,108
2042	1,743,574
	$8,264,368

17. Subsequent Events Events

On December 14, 2022, the Company signed a binding letter agreement with Lancaster Lithium Inc. ("Lancaster Lithium") whereby the parties have agreed to complete a reverse merger transaction that will result in Lancaster Lithium becoming a wholly-owned subsidiary of the Company (the "Transaction").

Lancaster Lithium is a private company which is committed to powering the transition to a low carbon economy through the acquisition, exploration and development of properties that are prospective for Lithium. It has the right to acquire 100% of the Alkali Flat Lithium Project ‐ a lithium brine exploration project located in southwestern New Mexico, USA (the "Property").

Notes to the Financial Statements Years Ended November 30, 2022 and 2021 (Expressed in Canadian Dollars)

17. Subsequent Events (continued) Events (continued)s (continued)

Prior to the closing of the Transaction, the Company is obligated to complete the consolidation of shares at the ratio of one new share for every thirty existing shares (the "Consolidation") (completed on January 24, 2023). At the closing of the Transaction (the "Closing") the Company will acquire 100% of the outstanding securities in Lancaster Lithium in exchange for the issuance of post‐Consolidation shares of the Company on a 1:1 basis.

Prior to the Closing, Lancaster Lithium may complete a financing at a price of $0.20 per unit to raise gross proceeds of up to $1,000,000, with each unit to consist of one common share and one warrant to purchase a common share at $0.40 per share for a period of 36 months (the "Lancaster Financing"). Prior to the Closing, the Company may complete a private placement at a price of $0.20 per unit to raise gross proceeds of up to $400,000 on terms similar to the Lancaster Financing.

The completion of the Transaction is subject to the satisfaction of various conditions that are customary for a transaction of this nature, including but not limited to (i) the delivery by Lancaster Lithium to the Company of a technical report on the Property substantially in compliance with the requirements of National Instrument 43‐ 101 Standards of Disclosure for Mineral Projects; (ii) the Company having entered into amending agreements with the holders of certain convertible debentures; (iii) the completion of the Consolidation; (iv) all related party debt of the Company being forgiven for nominal consideration, with the exception of $40,000, which may be converted into units; (v) the Company and Lancaster Lithium obtaining all required director and shareholder approvals; and (vi) the receipt of all requisite regulatory, stock exchange or governmental authorizations and consents, including the authorization and consent of the CSE.

Subsequent to November 30, 2022, in preparation for the Transaction with Lancaster Lithium, the Company cancelled an aggregate of 124,747 stock options, 7,500 restricted share units, and 83,333 issued common shares, previously granted to certain directors and officers pursuant to the company's stock plan and the Company's RSU plan.

Subsequent to November 30, 2022, the Company settled accounts payable of $400,745 (US$296,672) for consideration of $27,032 (US$20,000).

On March 13, 2023, the Company incorporated a fully owned subsidiary, 1405306 B.C. Ltd. ("Subco").

On March 21, 2023, the Company signed a definitive merger agreement with Lancaster Lithium for a reverse merger transaction (the "Transaction"). After obtaining all necessary approvals, the Transaction will be completed via a three-cornered amalgamation between the Company, Lancaster Lithium, and Subco. In this process, the Company will acquire 100% of the issued and outstanding Lancaster Lithium common shares in exchange for common shares of the Company on a 1:1 basis. The outstanding warrants and options of Lancaster Lithium will be exchanged into warrants and options of the Company on an identical basis. Upon closing the Transaction, the company resulting from the amalgamation of Lancaster Lithium and Subco will become a wholly-owned subsidiary of the Company, and the Company will change its name to Lancaster Lithium Inc. and continue to advance the Lancaster Lithium exploration and development strategy.

The closing of the Transaction is contingent upon several conditions, including approval from a special majority of Lancaster Lithium shareholders and approval from the Canadian Securities Exchange.