LNG Energy Group — Annual Report 2021

Sep 1, 2021

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MIND CURE HEALTH INC. CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars)

For the year ended May 31, 2021 and for the period from incorporation on March 6, 2020 to May 31, 2020

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Mind Cure Health Inc.

Opinion

We have audited the accompanying consolidated financial statements of Mind Cure Health Inc. (the “Company”), which comprise the consolidated statements of financial position as at May 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the year ended May 31, 2021 and the period from incorporation on March 6, 2020 to May 31, 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at May 31, 2021 and 2020, and its financial performance and its cash flows for the year ended May 31, 2021 and the period from incorporation on March 6, 2020 to May 31, 2020 in accordance with International Financial Reporting Standards (“IFRS”).

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 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 in our audits is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes 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, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, 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.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 Alyson Neil.

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Vancouver, Canada August 31, 2021

Chartered Professional Accountants

MIND CURE HEALTH INC.

Consolidated Statements of Financial Position As at May 31, 2021 and 2020

(Expressed in Canadian dollars)

	Notes		May 31, 2021		May 31,2020
ASSETS
CURRENT
Cash and cash equivalents		$	18,281,343	$	609,634
Accounts receivable			85,738		1,696
Inventory	4, 15		186,478		-
Prepaid expenses	5		459,192		63,330
			19,012,751		674,660
NON-CURRENT ASSETS
Equipment			2,053		-
Deposits	6, 15		500,000		-
Intangible assets	7		548,736		111,829
Investments	8,15		1,237,500		-
TOTAL ASSETS		$	21,301,040	$	786,489
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accruedliabilities	9,10	$	697,383	$	36,564
TOTAL LIABILITIES			697,383		36,564
SHAREHOLDERS' EQUITY
Share capital	11		27,383,873		827,129
Reserves	11		3,472,035		-
Contributed surplus			-		1,699
Deficit			(10,252,251)		(78,903)
TOTALSHAREHOLDERS' EQUITY			20,603,657		749,925
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY		$	21,301,040	$	786,489

Nature and continuance of operations (note 1) Subsequent events (note 15)

Approved on behalf of the Board:

"Kelsey Ramsden" "Michael Wolfe" Chief Executive Officer/Director Chief Financial Officer

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

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MIND CURE HEALTH INC.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian dollars)

(Expressed in Canadian dollars)
					~~o t e pe od~~
					March 6, 2020
					(incorporation)
		Year ended May			to May 31,
	Notes		31, 2021		2020
EXPENSES
Advertising and promotion		$	204,549	$	12,459
Bank charges			4,428		-
Business development costs			112,768		-
Consulting fees and employee payroll	10		1,831,600		2,000
Insurance			96,066		-
Investor relations and marketing			4,226,904		29,896
License & Dues			45,274		-
Transfer agent and filing fees			115,742		-
Management fees	10		691,651		-
Office and general			20,159		762
Professional fees	10		746,270		30,808
Research expenses			50,363		2,978
Share-based payments	10		2,316,218		-
Travel			6,436		-
LOSS BEFORE THE FOLLOWING:		$	(10,468,428)	$	(78,903)
Impairment of technology platform	7		(170,932)		-
Interest earned			33,253		-
Foreign exchange gain			45,259		-
Gainon investment	8		387,500		-
LOSS ANDCOMPREHENSIVE LOSS, for the period		$	(10,173,348)	$	(78,903)
Loss per share, basic and diluted		$	(0.18)	$	(0.02)
Weighted average number of shares outstanding, basic and diluted			57,312,612		3,791,628

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

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MIND CURE HEALTH INC.

Consolidated Statements of Changes in Shareholders' Equity

(Expressed in Canadian dollars)

Shares Amount Warrants Reserve Options Reserve Contributed Surplus Deficit Total Shareholders' Equity Share Capital	Shares Amount Warrants Reserve Options Reserve Contributed Surplus Deficit Total Shareholders' Equity Share Capital	Shares Amount Warrants Reserve Options Reserve Contributed Surplus Deficit Total Shareholders' Equity Share Capital	Shares Amount Warrants Reserve Options Reserve Contributed Surplus Deficit Total Shareholders' Equity Share Capital
Balance, March 6, 2020 1 $ 1 $ - $ - $ - $ - $ 1 Repurchase of issued share (1) (1) - - - - (1)
Issuance of shares 1,750,000	17,500 -	- -	- 17,500
20,250,000 Issuance of shares	405,000 -	- -	- 405,000
8,270,000 Issuance of shares	413,500 -	- 1,699	- 415,199
Share issuance costs	(8,871) -	- -	- (8,871)
Loss and comprehensive loss for the period	- -	- -	(78,903) (78,903)
30,270,000 Balance, May 31, 2020	827,129 -	- 1,699	(78,903) 749,925
- Reclassification of contributed surplus	1,699 -	- (1,699)	- -
Issuance of shares pursuant to initial public offering 14,950,000	2,990,000 -	- -	- 2,990,000
Issuance of shares to employees and contractors 164,300	127,780 -	- -	- 127,780
Issuance of shares pursant to private placement 8,000,000	3,600,000 -	- -	- 3,600,000
Issuance of shares pursuant to bought deal financing 38,542,433	23,125,460 -	- -	- 23,125,460
Share issuance costs -	(2,728,984) -	- -	- (2,728,984)
Finders' warrants issued -	(1,274,797) 1,274,797	- -	- -
Issuance of shares pursant to exercise of warrants 683,323	236,204 (63,998)	- -	- 172,206
Issuance of shares pursant to exercise of options 255,000	129,382 -	(54,982) -	- 74,400
Issuance of shares pursant to investment agreement 796,541	350,000 -	- -	- 350,000
Share-based payments	- -	2,316,218 -	- 2,316,218
Loss and comprehensive loss for the year	- -	- -	(10,173,348) (10,173,348)
Balance, May 31, 2021 93,661,597 $ 27,383,873 $ 1,210,799 $ 2,261,236 $ - $ (10,252,251) $ 20,603,657

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

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MIND CURE HEALTH INC. Consolidated Statements of Cash Flow

(Expressed in Canadian dollars)

MIND CURE HEALTH INC. Consolidated Statements of Cash Flow (Expressed in Canadian dollars)	MIND CURE HEALTH INC. Consolidated Statements of Cash Flow (Expressed in Canadian dollars)
For the period March 6, 2020 (incorporation) to May 31, 2020 For the year ended May 31, 2021
OPERATING ACTIVITIES Loss for the periods $ (10,173,348) $ (78,903) Items not involving cash: Share-based payments 2,316,218 - Gain on investment (387,500) - Issuance ofshares to employees and contractors 127,780 -
(8,116,850) (78,903) Change in non-cash working capital items: Accounts receivable (84,042) (1,696)
Prepaid expenses (395,862) (63,330)
Accounts payable and accrued liabilities 493,618 36,564
Inventory (186,478) -
Net cashusedinoperating activities $ (8,289,614) $ (107,365)
INVESTING ACTIVITIES Equipment (2,053) -
Deposits (500,000) -
Intangible assets (269,706) (111,829) Investments (500,000) -
Net cashusedin investing activities $ (1,271,759) $ (111,829)
FINANCING ACTIVITIES Issuance of shares for IPO	2,990,000 -
Issuance of shares pursuant to private placement	3,600,000 836,000
Issuance of shares pursuant to bought deal financing	23,000,460 -
Share issuance costs	(2,603,984) (7,172)
Issuance of shares pursuant to warrants exercised	172,206 -
Issuance ofshares pursuant to options exercised	74,400 -
Net cash from financing activities $ 27,233,082 $ 828,828
INCREASE IN CASH AND CASH EQUIVALENTS $ 17,671,709 $ 609,634 CASH AND CASH EQUIVALENTS, beginning of the period 609,634 -
CASH ANDCASH EQUIVALENTS, end of the period $ 18,281,343 $ 609,634
Supplemental cash flow disclosures Non-cash activities Transfer of fair value of warrants exercised $ 63,998 $ - Transfer of fair value of options exercised $ 54,982 $ -
Share issued pursuant to investment agreement $ 350,000 $ - Share issuance costs - non-cash $ 1,399,797 $ - Intangible asset included in accounts payable $ 167,201 $ - Cash paid for Interest $ - $ - Income taxes $ - $ - Cash and cash equivalents Cash $ 3,229,834 $ 609,634 Cash equivalent $ 15,051,509 $ -

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

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

1. Nature and continuance of operations

Mind Cure Health Inc. (“MINDCURE” or the “Company”) was incorporated on March 6, 2020, pursuant to the Business Corporations Act of British Columbia, Canada. MINDCURE is a life sciences company with a mission to identify, develop and commercialize products that enhance mental health and wellness. MINDCURE’s current business activities are primarily focused on developing digital therapeutics technology and researching psychedelic compounds to rapidly scale science-backed and evidence-based mental health therapy globally.

The Company’s head office is located at 422 Richards Street, Suite 170, Vancouver, BC V6B 2Z4, and its registered office is located at 2500 – 700 West Georgia Street, Vancouver, British Columbia V7Y 1B3.

On August 3, 2020, a wholly owned subsidiary, Mind Cure Health (US) Inc. (the “Subsidiary”) was incorporated in the State of Nevada.

On September 17, 2020, the Company completed its Initial Public Offering (“IPO”) of the Company’s common shares under the prospectus dated August 27, 2020, including the exercise in full of the over-allotment option under the terms of the prospectus. A total of 14,950,000 of the Company’s common shares at a price of $0.20 were sold through the IPO, for aggregate gross proceeds of $2,990,000. Trading of the Company’s shares commenced on September 21, 2020, on the Canadian Securities Exchange (“CSE”) under the ticker symbol “MCUR”.

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The Company is in the development stage and currently has no sources of cash from operations. Management estimates that the Company will be able to meet its obligations and to sustain operations for at least the next twelve months.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The Company has begun to realize some negative effects on its ability to meet specific business goals and objectives, especially as related to the delivery of the Company’s products to market, due to travel constraints either for raw materials and/or the moving of finished products between Canada and the United States. Although, vaccinations have been approved and inoculations have commenced worldwide, new variants of the coronavirus and challenges in the production and distribution of the approved vaccinations, continue to make it difficult for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

These consolidated financial statements were approved and authorized for issue by the Board of Directors on August 31, 2021.

2. Basis of presentation and statement of compliance

Statement of Compliance

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 issued by the International Reporting Interpretation Committee (“IFRIC”) for the periods presented.

Basis of Presentation

These consolidated financial statements of the Company have been prepared on an accrual basis except cashflow information and are based on historical cost, except for financial instruments measured at fair value. The consolidated financial statements are presented in Canadian dollars unless otherwise noted.

The functional and presentation currency of the Company and its subsidiary is the Canadian dollar.

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

2. Basis of presentation and statement of compliance (cont’d)

Principles of consolidation

Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases. All significant intercompany transactions and balances have been eliminated.

These consolidated financial statements include accounts of the Company and the following subsidiary:

Name of subsidiary	Countryof incorporation	Percentage ownership
Mind Cure Health (US) Inc.	United States	100%

3. Significant accounting policies

Intangible assets

Intangible assets are stated at cost less accumulated amortization (note 7). The Company has capitalized direct costs that were directly attributable to the development of its technology and iSTRYM digital therapeutic platforms (note 7). Those capitalized direct costs include costs incurred during the application and infrastructure development and graphical design development stages of its technological platform project. Subsequent to the year end, the Company decided to discontinue the development of its nootropics line of products (note 15) and therefore, the carrying value of the associated technology platform was deemed impaired and was written-off as at May 31, 2021.

Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization periods and the amortization methods for an intangible asset with a finite useful live are reviewed at least at the end of each reporting period. Changes in the expected useful lives or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the remaining amortization periods or methods, as appropriate, and are treated as changes in accounting estimates.

Intangible assets are amortized over the following methods and periods:

Type	Amortization method
iSTRYM Digital Therapeutics Platform	Straight-line basis over 3 years

Inventory

Inventory is recorded at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

All inventories are periodically reviewed for impairment due to slow-moving and obsolete inventory. The provisions for obsolete, slow-moving or defective inventories are recognized in profit or loss. Previous write-downs to net realizable value are reversed to the extent there is a subsequent increase in the net realizable value of the inventories.

Foreign Currency

In accordance with IAS 21, “The Effects of Changes in Foreign Exchange Rates,” management determined the functional currency of the Company based on the currency of the primary economic environment in which the Company operates. These financial statements are presented in Canadian dollars, which is the functional and presentation currency of the Company and its subsidiary.

Foreign currency transactions are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the period end rate of exchange. Foreign exchange gains and losses resulting from such translations are recognized in profit or loss.

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

3. Significant accounting policies (cont’d)

Research and development expenditure

Expenditures on research activities are recognized as expenses in the period in which they are incurred.

Share-based Compensation

The cost of equity-settled transactions with employees are measured at the fair value of the equity instruments granted in exchange for the rendering of services on the grant date. The fair value is determined based on market prices if available, taking into account terms and conditions upon which the equity instruments are granted. If market prices are not available, an acceptable option pricing model is used to determine fair value.

As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration for equity instruments cannot be reliably measured, they are measured by reference to the fair value of the equity instruments granted.

The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which the performance and/or service conditions are satisfied, ending on the date on which the relevant party become fully entitled to the award (the “vesting period”). The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.

The expense or income recognized in profit or loss represents the change between the cumulative expense recognized at the end of the reporting period and the cumulative expense recognized at the end of the previous reporting period.

Where vesting is conditional upon a market condition, an expense is recognized over the vesting period irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.

The fair value of stock options is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

Warrants

The Company follows the relative fair value method with respect to the measurement of Common Shares and warrants issued as units. The proceeds from the issuance of units are allocated between share capital and warrants. The warrant component is recorded in equity reserve. Unit proceeds are allocated to Common Shares and warrants using the Black-Scholes option pricing model and the share price at the time of financing. If and when the warrants are exercised, consideration paid by the warrant holder, together with the amount previously recognized in warrant reserve, is recorded as an increase to share capital.

Financial instruments

The Company adopted all of the requirements of IFRS 9 Financial Instruments on incorporation. IFRS 9 utilizes a revised model for recognition and measurement of financial instruments in a single, forward-looking “expected loss” impairment model.

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition.

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

3. Significant accounting policies (cont’d)

Financial instruments (cont’d)

Classification (cont’d)

The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The following table shows the classification under IFRS 9:

Financial assets/liabilities	Classification IFRS 9
Cash	FVTPL
Deposits	FVTPL
Accounts receivables	FVTPL
Accounts payable and accrued liabilities	Amortized cost

Measurement

Financial assets and liabilities at amortized cost

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

Financial assets and liabilities at FVTPL

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

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

Impairment of financial assets at amortized cost

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

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

3. Significant accounting policies (cont’d)

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

Gains and losses on derecognition are generally recognized in profit or loss.

Impairment of assets

The carrying amount of the Company’s assets is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of loss and comprehensive loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Assets that have an indefinite useful life and goodwill are not subject to amortization and are tested annually for impairment.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, and short-term highly liquid investments and bank overdrafts. As at May 31, 2021, the Company held a number of fixed and variable rate guaranteed investment certificates (“GIC”) valued at $15,051,509 which is presented as cash equivalents.

The Company had no cash equivalents at May 31, 2020.

Loss per Share

The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by dividing the profit or loss attributable to common shareholders by the weighted average number of common shares outstanding, adjusted for own shares held and for the effects of all potential dilutive common shares related to outstanding stock options and warrants issued by the Company for the periods presented, except if their inclusion proves to be antidilutive.

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

3. Significant accounting policies (cont’d)

Share capital

The Company records proceeds from the issuance of its common shares as equity. Proceeds received on the issuance of common shares are allocated to common share component. The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the most easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in the private placement was determined to be the more easily measurable component and were valued at their fair value, as determined by cash received. The remaining proceeds, if any, are allocated to the attached warrants. Any fair value attributed to the warrants is recorded as warrant reserve. Management does not expect to record a value to the warrant in most equity issuances as unit private placements are commonly priced at market or at a permitted discount to market. If the warrants are issued as share issuance costs, the fair value of agent’s warrants are measured using the Black-Scholes Option Pricing Model and recognized in equity as a deduction from the proceeds.

If the warrants are exercised, the related amount is reclassified as share capital. If the warrants expire unexercised, the related amount remains in warrant reserve.

Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds.

Income taxes

Income tax consists of current and deferred tax expense. Current tax and deferred tax are recognized in the consolidated statements of loss and comprehensive loss except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.

Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the yearend date.

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect both accounting or taxable loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the date of the statement of financial position.

Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Critical Accounting Estimates, Judgments and Assumptions

The preparation of consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the financial position reporting date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

14

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

3. Significant accounting policies (cont’d)

Critical accounting estimates :

Intangible assets

The assessment of indications of impairment of intangible assets:

Management has determined that intangible asset costs which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including anticipated cash flows and estimated economic life.

Share-based compensation

Share-based compensation expense is measured by reference to the fair value of the stock options at the date at which they are granted. Estimating fair value for granted stock options requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, dividend yield, and rate of forfeitures and making assumptions about them.

Deferred tax assets and liabilities

The measurement of a deferred tax provision is subject to uncertainty associated with the timing of future events and changes in legislation, tax rates and interpretations by tax authorities. The estimation of taxes includes evaluating the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income, which in turn is dependent upon the successful operations of the Company. To the extent that management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets, and future tax provisions or recoveries could be affected.

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of inventory includes cost of purchase (purchase price, import duties, transport, handling, and other costs directly attributable to the acquisition of inventories), and other costs incurred in bringing the inventories to their present location and condition. Net realizable value for inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Provisions are made in profit or loss in the period for any difference between book value and net realizable value.

Valuation of Investments

The Company recognizes its investments at fair value. The basis in determining fair value is market prices from independent sources, if available. If there is no market price, then the fair value is determined using level 3 inputs which involve considerable estimates as the inputs used to value these financial instruments are based on unobservable market data. These level 3 inputs may include assessing the discounted cash flows of the investee, determining the net book value of the investee in comparison to the Company’s cost of investment and reviewing the price-per-share of recently completed financings of the investee.

15

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

4. Inventory

		May	31, 2021
Finished Goods	$		186,478
	$		186,478

As at May 31, 2021, inventory consisted of the Company’s nootropic line of functional mushrooms and supplement product ready for sale. As at May 31, 2020, the Company did not have any inventory.

5. Prepaid expenses

	May 31, 2021 May31, 2020
Insurance License agreements Vendor deposits Other month-to-month prepayments	$ 65,974 $ - 176,369 - 132,330 63,330 84,519 -
	$ 459,192 $ 63,330

6. Deposits

On May 20, 2021, the Company deposited $500,000, in trust, for a subscription to a private placement for 200,000 common shares of Awakn Life Sciences Inc. (“AWAKN”) a biotechnology company with clinical operations, researching, developing, and delivering psychedelic medicine. On May 17, 2021, AWAKN announced that it had entered into a definitive binding amalgamation agreement that, if successful, would result in a reverse takeover by AWAKN and the shares of AWAKN would then be listed on the NEO Exchange Inc. (“NEO”). As part of the proposed transaction, AWAKN was to complete a private placement of which the Company participated. Subsequent to the year end, AWAKN successfully completed the reverse takeover (note 15).

7. Intangible assets

Cost	iSTRYM Digital Therapeutic SaaS Platform	iSTRYM Digital Therapeutic SaaS Platform		Technology Platform		Total
Balance, May 31, 2020	$	-	$	111,829	$	111,829
Additions		548,736		59,103		607,839
Impairment		-		(170,932)		(170,932)
Balance, May 31, 2021	$	548,736	$	-	$	548,736
Accumulated Amortization	iSTRYM Digital Therapeutic SaaS Platform			Technology Platform		Total
Balance, May 31, 2020	$	-	$	-	$	-
Additions		-		-		-
Balance, May 31, 2021	$	-	$	-	$	-

16

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

7. Intangible assets (cont’d)

Net carrying amounts	iSTRYM Digital Therapeutic SaaS Platform	iSTRYM Digital Therapeutic SaaS Platform		Technology Platform		Total
Balance, May 31, 2020	$	-	$	111,829	$	111,829
Balance, May 31, 2021	$	548,736	$	-	$	548,736

During the year ended May 31, 2021, the Company made changes to its product line requiring changes to the Company’s technology platform. Amortization was not recorded in these consolidated financial statements for the year ended May 31, 2021, as the technology platform was not ready for use. Subsequent to the year end (note 17) the Company determined that the product line for which the technology platform had been built would no longer be developed and that all existing inventory would be sold and not replaced. Therefore, for the year ended May 31, 2021, the technology platform was impaired as the Company determined that the associated costs were unrecoverable.

During the year ended May 31, 2021, the Company began development of the iSTRYM Digital Therapeutic SaaS Platform (“iSTRYM”), a digital therapeutic tool, designed to provide close to real-time data regarding patient care, procedures and protocols. Amortization was not recorded during as at May 31, 2021, as iSTRYM was not ready for use.

The Company entered into a license agreement with the third-party company that is assisting the Company with the development of iSTRYM. The license allows the Company to use the developer’s infrastructure to deploy iSTRYM. The license has been prepaid (note 5) until October 2021 and shall automatically renew for an additional term of one year unless, either party, elects not to renew it.

8. Investments

Investment – ATMA
Opening balance, June 1, 2020	$	-
Additions, February 26, 2021		500,000
Additions, April 8, 2021		350,000
Fair market value adjustment		387,500
Total FMV of ATMA investment, May 31, 2021	$	1,237,500

On February 26, 2021, the Company subscribed for a total of 1,250,000 common shares of ATMA Journey Centers Inc. ("ATMA") at a price of $0.40 per common share with a fair value of $500,000. On April 8, 2021, the Company completed a further strategic equity investment in ATMA. The investment is comprised of 492,958 ATMA series A preference shares, at a price of $0.71 per share, for an aggregate price of $350,000. The Company satisfied the aggregate subscription price through the issuance of 796,541 of its common shares at an agreed-upon price of $0.4394 per share, being the 10-day volume-weighted average trading price of the common shares on the Canadian Securities Exchange. As at May 31, 2021, the Company adjusted the value of its initial investment to $0.71 per share (a gain of $0.31 per share) resulting in a total gain on the ATMA investment of $387,500.

9. Accounts payable and accrued liabilities

		May 31, 2021		May 31, 2020
Accounts payable and accrued liabilities	$	674,494	$	33,064
Due torelated parties (note10)		22,889		3,500
Total Accounts payables and accrued liabilities	$	697,383	$	36,564

17

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

10. Related party transactions

Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company’s Board of Directors and corporate officers. The following table summarizes the remuneration of key management personnel:

		For the year ended		For the period March 6,
		May 31, 2021		2020 (incorporation) to
				May 31, 2020
Management, officer, and director remuneration	$	691,651	$	-
Professional fees		139,328		3,500
Share-basedpayments		1,329,254		-
	$	2,160,233	$	3,500

Included in the accounts payable and accrued liabilities (note 9) as at May 31, 2021, is a total amount due to related parties of $22,889 (2020 - $3,500).

The above transactions are measured at their exchange amount, which is the amount of consideration established and agreed to by the related parties. Amounts due to related parties are unsecured, non-interest bearing and have no fixed term of repayment.

11. Share capital

Authorized share capital

At May 31, 2021, and 2020, the authorized share capital was comprised of an unlimited number of common shares without par value.

Issued share capital

As at May 31, 2021, 93,661,597 common shares (2020 – 30,270,000) were issued and outstanding.

Period ended May 31, 2020

On March 6, 2020, the Company issued an incorporation share at $1 per share.

On May 15, 2020, the Company repurchased and cancelled the incorporation share and issued 1,750,000 founder’s shares at $0.01 per share for total proceeds of $17,500.

On May 20, 2020, the Company issued 20,250,000 shares at $0.02 per share for gross proceeds of $405,000.

On May 29, 2020, the Company issued 8,270,000 shares at $0.05 per share for gross proceeds of $413,500.

The Company incurred share issuance costs of $8,871 in connection with the private placements completed during the period ended May 31, 2020.

Year ended May 31, 2021

On September 17, 2020, the Company completed its IPO of the Company’s common shares under the prospectus dated August 27, 2020, including the exercise in full of the over-allotment option under the terms of the prospectus. A total of 14,950,000 of the Company’s common shares at a price of $0.20 per share were sold through the IPO, for aggregate gross proceeds of $2,990,000. Issuance costs of $574,800 were incurred and 1,196,000 finders’ warrants valued at $112,424 were issued.

18

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

11. Share capital (cont’d)

Issued share capital (cont’d)

On September 28, 2020, the Company issued a total of 96,000 common shares to an employee of the Company at a price of $0.80 per share. The shares were subject to a hold period of four months and a day from the date of issuance.

On September 28, 2020, the Company issued 50,000 common shares of the Company at a price of $0.80 per share, to an independent consultant. The shares were subject to a hold period of four months and a day from the date of issuance.

On November 19, 2020, the Company closed a non-brokered private placement. The Company issued 8,000,000 units at a price of $0.45 per unit for gross proceeds of $3,600,000. Each unit consisted of one common share and one common share purchase warrant. Each warrant is exercisable into one common share in the capital of the Company at an exercise price of $0.60 per share for a period of 24 months after the date of issue. Issuance costs of $54,640 were incurred.

On February 10, 2021, the Company closed a bought deal public offering. The Company issued 38,334,100 units at a price of $0.60 per unit for gross proceeds of $23,000,460. Each unit consisted of one common share and one-half of one common share purchase warrant of the Company. Each Warrant is exercisable into one common share in the capital of the Company at an exercise price of $0.80 per common share for a period of 24 months after the date of issuance. The Company paid a corporate finance fee in the amount of $250,000 with 50% of the corporate finance fee paid in cash of $125,000 and 50% paid in common shares at a price of $0.60 per share for a total of 208,333 common shares with a cash equivalent value of $125,000. Total issuance costs of $2,099,544 were incurred and 2,050,041 finders’ warrants valued at $1,162,373 were issued.

On April 6, 2021, the Company satisfied the purchase of $350,000 ATMA series A preference shares as part of ATMA’s series A financing through the issuance of 796,541 common shares in its capital at an agreed-upon price of $0.4394 per share, being the 10-day volume-weighted average trading price of the common shares on the Canadian Securities Exchange.

On May 6, 2021, the Company issued 18,300 common shares of the Company at a price of $0.60 per share, to an independent consultant. The shares are subject to a hold period of four months and a day from the date of issuance.

During the year ended May 31, 2021, a total of 683,323 warrants were exercised for proceeds of $172,206. The Company reallocated $63,998 from warrants reserve to share capital that was associated with the warrants that were exercised.

During the year ended May 31, 2021, a total of 255,000 options were exercised for proceeds of $74,400. The Company reallocated $54,982 from options reserve to share capital that was associated with the options that were exercised.

In connection with the IPO, as at May 31, 2021, 2,250,000 shares continued to be held in escrow and will be released based on the Company’s escrow agreement, pursuant to the following schedule:

September 17,2021	1/5 of the remainingescrow securities
March 17,2022	1/4 of the remainingescrow securities
September 17,2022	1/3 of the remainingescrow securities
March 17,2023	1/2 of the remainingescrow securities
September 17,2023	the remainingescrow securities

19

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

11. Share capital (cont’d)

Stock option plan

On May 31, 2020, the Company adopted an incentive stock option plan (“the Plan”). Options may be granted under the Plan to such officers, directors, employees, and consultants, of the Company and its affiliates, if any, as the Board may from time to time designate. The exercise price of Options will be determined by the Board but may not be less than the greater of: (a) the fair market value of the Common Shares at the time of grant, as determined by the Board, in its sole discretion; and (b) the lowest price permitted under the applicable rules and regulations of all regulatory authorities to which the Company is subject, including the Stock Exchange and the Securities Commissions.

The Plan provides that, subject to the requirements of the Securities Commissions and the Exchange, the aggregate number of Common Shares in respect of which Options may be granted pursuant to the Plan shall not exceed 20% of the issued and outstanding Common Shares. Additionally, the Plan provides that, unless disinterest shareholder approval is obtained, the Plan will not result in or allow at any time the issuance to any one director or executive officer, within a 12-month period, of a number of Common Shares exceeding 5% of the outstanding Common Shares at the time of granting the Options.

Subject to earlier termination in the event of dismissal for cause, termination other than for cause, or in the event of death, all Options granted under the Plan will expire not later than the date that is the earlier of: (i) ten years from the date that such options are granted; and (ii) the latest dated permitted under the applicable rules and regulations of all regulatory authorities to which the Company is subject, including the Exchange and the Securities Commissions. Options granted under the Plan are not transferable or assignable other than by will or other testamentary instrument, pursuant to the laws of succession or by a committee or duly appointed committee by reason that the holder is incapable, by reason of physical or mental infirmity, of managing their affairs. Vesting of stock options is at the discretion of the Board of Directors.

Options

As at May 31, 2021, the total outstanding options were 10,215,000 (2020 – Nil).

		Weighted
	Number of options	average exercise
		price
Balance, March 6 and May 31, 2020	-	$ -
Options granted	10,745,000	0.41
Exercised	(255,000)	0.29
Expired	(275,000)	0.25
Balance, May 31, 2021	10,215,000	$ 0.41
Exercisable, May 31, 2021	7,185,000	$ 0.38

20

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

11. Share capital (cont’d)

Options (cont’d)

		Options	Exercisable	Exercise
Grant Date	Expiry Date	Outstanding	Options	Price
Balance, May 31, 2020		-	-	$ -
June 10, 2020	June 10, 2025	1,275,000	1,275,000	0.20
September 20, 2020	September 20, 2025	4,175,000	3,125,000	0.25
October 14, 2020	October 14, 2025	200,000	200,000	0.79
October 22, 2020	October 22, 2020	25,000	25,000	0.71
November 9, 2020	November 9, 2025	500,000	500,000	0.64
November 30, 2020	November 30, 2025	500,000	500,000	0.63
December 7, 2020	December 7, 2025	200,000	100,000	0.65
February 10, 2021	February 10, 2026	85,000	75,000	0.74
February 12, 2021	February 12, 2026	800,000	400,000	0.63
February 16, 2021	February 16, 2026	200,000	200,000	0.63
February 16, 2021	February 16, 2022	100,000	25,000	0.63
February 18, 2021	February 18, 2026	250,000	250,000	0.60
March 15, 2021	March 15, 2026	475,000	-	0.60
March 29, 2021	March 29, 2026	400,000	-	0.60
April 12, 2021	April 12, 2026	10,000	-	0.60
April 16, 2021	April 16, 2026	250,000	250,000	0.60
April 19, 2021	April 19, 2026	350,000	-	0.60
April 26, 2021	April 26, 2026	50,000	-	0.60
May 1, 2021	May 1, 2026	10,000	-	0.60
May 10, 2021	May 10, 2026	250,000	250,000	0.38
May 17, 2021	May 17, 2026	100,000	-	0.32
May25,2021	May25,2026	10,000	10,000	0.38
Balance, May 31, 2021		10,215,000	7,185,000	$ 0.41

As at May 31, 2021, the weighted-average remaining life of the outstanding options was 4.42 years.

The fair value of the options was determined using the following weighted average Black-Scholes Option Pricing model assumptions:

	May 31, 2021
Share price	$0.36
Exercise price	$0.40
Fair value	$0.26
Expected life	4.97 years
Volatility	100%
Risk-free interest Rate	0.50%

During the year ended May 31, 2021, the Company recorded $2,316,218 in stock-based compensation in relation to the options vested (period ended May 31, 2020 - $nil).

21

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

11. Share capital (cont’d)

Warrants

As at May 31, 2021, the total outstanding warrants were 29,729,768 (2020 – Nil).

		Weighted
	Number of warrants	average
		exerciseprice
Balance, March 6 and May 31, 2020	-	$ -
Issued	30,413,091	0.71
Exercised	(683,323)	0.25
Balance, May 31, 2021	29,729,768	$ 0.72

			Exercise	Remaining life
	Expiry Date	Warrants	Price
Finders’ warrants	September 17, 2022	515,177	0.25	1.30
Private placement	November 19, 2022	8,000,000	0.60	1.47
Bought deal short form prospectus	February 10, 2026	19,164,550	0.80	4.70
Finders’ warrants	February10,2026	2,050,041	0.60	4.70

As at May 31, 2021, the weighted-average remaining life of the outstanding warrants was 3.77 years.

During the year ended May 31, 2021, the Company issued 3,246,041 finders’ warrants valued at $1,274,797 using the Black-Scholes pricing model and the following weighted average assumptions:

	May 31, 2021
Share price	$0.54
Exercise price	$0.47
Fair value	$0.39
Expected life	3.89 years
Volatility	100%
Risk-free interest Rate	0.41%

12. Income Taxes

A reconciliation of the income taxes at statutory rates to reported taxes is as follows:

				Period from
				March 6, 2020
		Year ended May	(incorporation)
		31, 2021	to May 31, 2020
Net loss	$	(10,173,348)	$	(78,903)
Expected income tax (recovery)	$	(2,747,000)	$	(21,000)
Change in statutory, foreign tax, foreign exchange rates and other		3,000		-
Permanent differences		573,000		-
Share issuance costs		(703,000)		(2,000)
Change in unrecognized deductible temporarydifferences		2,874,000		23,000
Total income tax expense(recovery)	$	-	$	-

22

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

12. Income Taxes (cont’d)

The significant components of the Company’s deferred tax assets that have not been included on the consolidated statement of financial position are as follows:

		2021		2020
Deferred tax assets (liabilities)
Equipment and intangible assets		46,000		-
Share issuance costs		564,000		2,000
Investments		(52,000)		-
Non-capital losses available for futureperiod		2,340,000		22,000
		2,898,000		24,000
Unrecognized deferred tax assets		(2,898,000)		(24,000)
Net deferred tax assets	$	-	$	-

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the consolidated statement of financial position are as follows:

		Expiry Date		Expiry Date
	2021	Range	2020	Range
Temporary differences
Equipment and intangible assets	171,000	No expiry date	-	No expiry date
Share issuance costs	2,089,000	2042 to 2045	7,000	2041 to 2044
Non-capital losses available for futureperiods	8,286,000	2040 to indefinite	81,000	2040
Canada	8,254,000	2040 to 2041	-	2040
USA	32,000	No expiry date	-	No expiry date

Tax attributes are subject to review, and potential adjustment, by tax authorities.

13. Financial risk and capital management

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts. The majority of cash is deposited in bank accounts held with a major bank in Canada and a full-service financial services firm. As most of the Company’s cash is held by one bank and one financial services firm, there is a concentration of credit risk. This risk is managed by using a Canadian chartered bank. Credit risk related to cash is assessed as low.

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 has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash. As of May 31, 2021, the Company had working capital of $18,315,368 to cover short term obligations.

23

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

13. Financial risk and capital management (cont’d)

Liquidity risk (cont’d)

Historically, the Company's sole source of funding has been loans from related parties and private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding. Liquidity risk is assessed as moderate.

Foreign exchange risk

The Company is exposed to currency risk to the extent that monetary operational expenses are denominated in both CAD and USD while functional currency of CAD in used for reporting. The Company has not entered into any foreign currency contracts to mitigate this risk.

The Company had the following balances in monetary assets and monetary liabilities which are subject to fluctuation against CAD:

		Denominated in: US$
Cash	$	568,888
Accountspayable and accrued liabilities		(177,471)
Total net US$	$	391,417
Foreign currencyrate		1.21424
Equivalent to Canadian dollars	$	475,274

Based on the above net exposures as at May 31, 2021, and assuming that all other variables remain constant, a 10% change of the USD against the CAD would impact net loss by approximately by $47,527

Price risk

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

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. As at May 31, 2021, the Company did not have any financial instruments subject to interest rate risk.

Capital management

The Company's policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of equity and cash. There were no changes in the Company's approach to capital management during the period. The Company is not subject to any externally imposed capital requirements.

Fair value

The fair value of the Company’s financial assets and liabilities approximates the carrying amount. Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

• Level 3 – Inputs that are not based on observable market data.

24

Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

13. Financial risk and capital management (cont’d)

The following is an analysis of the Company’s financial instruments measured at fair value using level inputs as at May 31, 2021:

			As at May 31, 2021	As at May 31, 2021
		Level 1		Level 2		Level 3
Financial assets
Cash	$	3,229,834	$	-	$	-
Cash equivalents		15,051,509		-		-
Accounts receivable		85,738		-		-
Investments – ATMA		-		1,237,500		-
Deposits		-		500,000		-
Financial liabilities
Accounts payable and accrued liabilities	$	697,383		-		-

Accounts payable approximates its fair value due to its short-term maturity.

14. Segmented Information

The Company’s operations are currently located in a single geographical location in North America, specifically Canada. As at May 31, 2021, all long-lived assets were located in Canada.

15. Subsequent Events

Subsequent to May 31, 2021, 430,000 options were granted to certain employees, consultants, officers and directors with a weighted average exercise price of $0.438 per share, exercisable for a term of 5 years.

On June 7, 2021, the Company issued 28,620 common shares of the Company to an independent consultant. The shares are subject to a hold period of four months and a day from the date of issuance.

On June 17, 2021, AWAKN announced the successful completion of the reverse takeover and the AWAKN shares began trading on June 23, 2021. The Company was issued 200,000 AWAKN shares for the Company’s investment of $500,000.

On July 5, 2021, the Company issued 24,686 common shares of the Company to an independent consultant. The shares are subject to a hold period of four months and a day from the date of issuance.

On July 26, 2021, the Company’s board of directors approved a new long-term incentive plan (the “2021 Long-Term Incentive Plan”) subject to, and effective upon, shareholder approval. The Company has undertaken a review of its equity compensation plans and determined additional methods of equity compensation would be beneficial to align the interests of participants with those of the Company and its shareholders. The 2021 Long-Term Incentive Plan will permit the grant of stock options, stock appreciation rights, restricted share awards, restricted share unit awards, other share-based awards, performance awards or any other right, interest or option relating to shares or other property granted pursuant to the provisions of the 2021 Long-Term Incentive Plan to eligible participants. Upon approval of the 2021 Long-Term Incentive Plan by the shareholders of the Company, the current incentive stock option plan will immediately terminate, no new options will be granted under the current incentive stock option plan and any options issued and outstanding under the current incentive stock option plan will continue to be governed by its terms. As of the effective date of the 2021 Long-Term Incentive Plan, and subject to certain adjustment as provided in the 2021 Long-Term Incentive Plan, the maximum number of Shares issuable upon the exercise or redemption and settlement of all Awards granted under the 2021 Long-Term Incentive Plan, the current incentive stock option plan and outside these plans, shall not exceed 20% of the issued and outstanding shares of the Company at the time of granting of an award.

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Mind Cure Health Inc. Notes to the Consolidated Financial Statements For the year ended May 31, 2021 (Expressed in Canadian Dollars)

15. Subsequent Events (cont’d)

On July 30, 2021, the Company discontinued the development of its nootropics line of products in order to focus its efforts and resources on its digital therapeutics platform and researching psychedelic compounds. The Company intends to make a commercially reasonable effort to sell its existing inventory.

On August 5, 2021, the Company issued 40,185 common shares for warrants exercised at $0.25 per common share.

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