MTL Cannabis Corp. — Annual Report 2021

Aug 31, 2021

Consolidated Financial Statements

April 30, 2021

(Expressed in thousands of Canadian dollars)

Table of Contents	Page
Independent Auditor's Report
Consolidated Statements of Financial Position	1
Consolidated Statements of Loss and Comprehensive Loss	2
Consolidated Statements of Changes in Shareholders' Equity	3
Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5-38

Canada House Wellness Group Inc. Consolidated Statements of Financial Position

(Expressed in thousands of Canadian Dollars, except for shares and per share amounts)

		April 30 2021	April 30, 2020
	Note	\$000's	\$000's
ASSETS
Current assets:
Cash		1,835	1,767
Trade and other receivables Inventory	5 4,6	1,945 5,018	1,014 1,773
Biological assets	4,7	692	203
Prepaid expenses and deposits		383	225
		9,873	4,982
Property, plant and equipment, net	8	14,587	6,140
Right-of-use assets, net	10	2,413	3,182
Intangible assets, net	4,9	7,087	124
Goodwill	4	3,032	-
		36,992	14,428
LIABILITIES
Current liabilities:
Trade and other payables		8,345	2,089
Due to related parties	12	3	73
Current portion of lease liability	10	524	703
Current portion of convertible debentures Promissory notes	14 11,12	873 68	522 553
Borrowings	13	326	-
Mortgage payable	15	2,000	-
		12,139	3,940
Non-current liabilities
Lease liability Borrowings	10 13	1,952 120	2,505 320
Promissory notes	4,11,12	10,938	-
Convertible debentures	14	3,115	2,589
Deferred tax liabilities	4	1,855	-
		30,119	9,354
SHAREHOLDERS' EQUITY
Share capital	16	48,685	39,241
Equity component of convertible debentures	14	2,174	419
Contributed surplus Deficit	16,17	15,775 (59,761)	13,810 (48,396)
		6,873	5,074
		36,992	14,428

Nature of operations and going concern (note 1) Commitments and contingencies (note 21) Subsequent events (note 25)

Approved by the Board: "Dennis Moir" Chair of the Board "Norman Betts" Director

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in thousands of Canadian Dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

		April 30 2021	April 30, 2020
	Note	\$000's	\$000's
Revenue Referral revenue	24	5,141	4,874
Product revenue	24	6,309	301
License revenue and other	24	430	159
Less excise tax	24	(1,320)	(24)
Net revenue		10,560	5,310
Cost of sales	6,24	6,066	1,144
Inventory impairment	6	2,266	-
Gross profit before fair value adjustments		2,228	4,166
Fair value adjustment on sale of inventory		1,136	(15)
Fair value adjustment on biological assets	7	(1,866)	796
Gross profit		2,958	3,385
Expenses
General and administrative	20	8,253	7,649
Sales and marketing	20	506	551
Share-based compensation Right-of-use assets amortization	17 10	461 460	762 413
Depreciation and amortization	8,9	911	1,882
Loss from operations		(7,633)	(7,872)
Finance and transaction costs (recovery), net		2,736	(150)
(Gain) loss on debt settlement		918	(24)
Impairment of intangible assets	9	-	1,942
Other expenses		10	65
Loss before income taxes		(11,297)	(9,705)
Provision for (recovery of) income taxes		68	(185)
Net loss and comprehensive loss for the year		(11,365)	(9,520)
Weighted average number of shares outstanding
- basic and diluted		651,237,623	283,574,902
Net loss per share - basic and diluted	18	\$ (0.02)	\$ (0.03)

Canada House Wellness Group Inc. Consolidated Statements of Changes in Shareholders' Equity (Expressed in thousands of Canadian Dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

Note	Number of Shares	Share Capital \$000's	Equity Component of Convertible Debentures \$000's	Contributed Surplus \$000's	Deficit \$000's	Total Shareholders' Equity \$000's
Balance as at May 1, 2019	253,157,570	34,508	265	12,196	(38,571)	8,398
Common shares issued pursuant to private placement Common shares issuable in exchange for services Common shares issued on settlement of liabilities Forgiveness of contingent consideration Convertible debenture Share-based compensation Net loss for the period	97,342,857 1,000,000 62,447,347 (3,955,596) - - -	1,813 160 3,071 (311) - - -	- - - - 154 - -	909 (160) - - 103 762 -	- - - (305) - - (9,520)	2,722 - 3,071 (616) 257 762 (9,520)
Balance as at April 30, 2020	409,992,178	39,241	419	13,810	(48,396)	5,074
Balance as at May 1, 2020	409,992,178	39,241	419	13,810	(48,396)	5,074
Common shares issued pursuant to business acquisition 4,16 Convertible debenture 14 Share-based compensation 17 Net loss and comprehensive loss for the period	273,461,452 - - -	9,444 - - -	- 1,755 - -	- 1,504 461 -	- - - (11,365)	9,444 3,259 461 (11,365)
Balance as at April 30, 2021	683,453,630	48,685	2,174	15,775	(59,761)	6,873

Canada House Wellness Group Inc. Consolidated Statements of Cash Flows (Expressed in thousands of Canadian Dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

	Note	April 30 2021 \$000's	April 30 2020 \$000's
Cash provided by (used in)
Operating activities:
Net loss and comprehensive loss for the period		(11,365)	(9,520)
Add (deduct) items not affecting cash
Depreciation and amortization	8,9	1,371	3,855
Share-based compensation		461	762
Non-cash finance and transaction costs		1,436	(111)
Realized fair value gain (loss) on sale of inventory		1,136	(15)
Unrealized fair value gain (loss) in fair value of biological assets		(1,866)	796
Inventory impairment Loss on debt settlement		2,266 918	- -
Loss on disposal of assets		-	144
Impairment of intangible assets		-	1,942
Other non-cash expenses, net		-	(193)
		(5,643)	(2,340)
Changes in non-cash working capital balances related to operations
Trade and other receivables		(931)	503
Inventory		(3,598)	(1,716)
Biological assets		(232)	(999)
Prepaid expenses and deposits		(158)	240
Trade and other payables		7,207	(967)
Net cash used in operating activities		(3,355)	(5,279)
Investing activities:
Purchase of property, plant and equipment		(794)	(757)
Cash from acquisition	4	130	-
Proceeds from loan receivable		-	10
Net cash used in investing activities		(664)	(747)
Financing activities:
Issuance of convertible debenture, net of transaction costs		6,110	2,428
Lease payments		(707)	(762)
Repayment of convertible debenture		(2,818)	-
Cash interest payments on debenture		(133)	-
Mortgage payable		2,000	-
Repayment of promissory note		(485)	-
Borrowings		120	(7)
Proceeds from private placement		-	2,722
Due to related parties		-	(15)
Net cash from financing activities		4,087	4,366
Increase (decrease) in cash during the period		68	(1,660)
Cash, beginning of period		1,767	3,427
Cash, end of period		1,835	1,767

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

1. Nature of operations and going concern uncertainty

Canada House Wellness Group Inc. (the "Company"), formerly Abba Medix Group Inc., was incorporated on September 29, 1982 under the Company Act of the Province of British Columbia and is listed on the Canadian Securities Exchange (the "Exchange") under the symbol CHV (formerly "ABA").

These consolidated financial statements of the Company for the year ended April 30, 2021, comprise the results of the Company and its wholly owned subsidiaries Abba Medix Corp. ("Abba"), 672800 NB Inc. doing business as Canada House Clinics Inc. ("CHC"), The Longevity Project Corp. ("TLP"), 690050 NB Inc. doing business as Knalysis Technologies ("Knalysis"), 2104071 Alberta Inc., which holds the dispensary license in Edmonton, Alberta, and IsoCanMed Inc. ("IsoCanMed"), a licensed producer in Louiseville, Quebec, that produces high quality medical grade cannabis. Canada House's goal is to become the leading cultivator of premium craft cannabis and provider of cannabinoid therapy, targeting the national medical cannabis markets, the recreational adult-use market in Quebec and across Canada.

Using its own proprietary patient management software developed by Knalysis, CHC provides education services concerning appropriate cannabinoid therapies to patients. Abba initially received its license to produce medical marijuana under the Access to Cannabis for Medical Purposes Regulations, as well as its license to produce cannabis oil and subsequently received an amendment to its Producer's Licence from Health Canada to include the sale and provision of marijuana seeds. In December 2018, Abba received a sales license to sell products from others, but not its own production. In August 2019, Abba was granted an amended license to sell its own production to provincially and territorially authorized provincial retailers and to holders of a license for medical purposes. The Company commenced sale of its Abba branded cannabis flower on October 1, 2019. On June 7, 2021, the Company announced that the registered office of the Company changed to 551 Rue SaintMarc, Louiseville, Quebec from 1773 Bayly Street, Pickering, Ontario.

Going concern uncertainty

The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

For the year ended April 30, 2021, the Company incurred a net loss of \$11,365, and as at April 30, 2021, had an accumulated deficit of \$59,761 and a working capital deficit of \$2,266. Cash flow used in operations for the year ended April 30, 2021 was \$3,355. Whether, and when, the Company can attain profitability and positive cash flows from operations is subject to material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business. The Company will need to raise additional capital in order to fund its planned operations and meet its obligations. While the Company has been successful in obtaining financing to date and believes it will be able to obtain sufficient funds in the future and ultimately achieve profitability and positive cash flows from operations, there can be no assurance that the Company will achieve profitability and be able to do so in the future on terms favourable for the Company.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

1. Nature of operations and going concern uncertainty (continued)

COVID-19 global pandemic

On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a global pandemic resulting in uncertain economic and business impact on a global scale. Taking into consideration the impact of COVID-19, the Company has reviewed its significant estimates, assumptions and judgments used in the preparation of these consolidated financial statements, including with respect to the determination of whether indicators of impairment exist for its tangible and intangible assets and the credit risk of its counterparties that the Company transacts with.

Based on this analysis, the Company has determined that there was no significant impact to any of managements estimates, assumptions or judgments, however, the continuing uncertainty associated with the COVID-19 pandemic may require changes to certain of these estimates, assumptions or judgments which could have a material impact on the Company's financial position and results of operations.

2. Basis of preparation

Statement of compliance

These consolidated financial statements ("financial statements") have been prepared by management in accordance with generally accepted accounting principles in Canada for publicly accountable enterprises, as set out in the CPA Canada Handbook – Accounting, which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The policies set out below have been consistently applied to all periods presented, unless otherwise noted.

These consolidated financial statements were approved and authorized for issuance in accordance with a resolution of the Board of Directors of the Company on August 30, 2021.

Basis of measurement

These financial statements have been prepared on a historical cost basis, except for convertible notes and biological assets that are measured at fair value and fair value less costs to sell. Historical costs are generally based upon the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, Share-based Payments ("IFRS 2") and measurements that have some similarities to fair value but are not fair value, such as value in use in IAS 36, Impairment of Assets.

Functional currency and presentation currency

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

Use of estimates and judgments

The preparation of these financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

2. Basis of preparation (continued)

Estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgments, apart from those involving estimations, that management has made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognized in the financial statements:

Going concern

At each reporting period, management assesses the basis of preparation of the financial statements. These financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Estimated useful lives, residual values and depreciation of property, plant and equipment

Depreciation of property, plant and equipment is dependent upon estimates of useful lives and residual values, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

Estimated useful life and amortization of intangible assets

The Company employs significant estimates to determine the estimated useful life of intangible assets, considering industry trends, contractual rights, past experience, expected use and review of asset useful lives. The Company reviews amortization methods and useful lives annually or when circumstances change and adjusts its amortization methods and assumptions prospectively.

Impairment of property, plant and equipment and intangible assets

Property, plant and equipment and intangible assets impairment testing requires management to make estimates in the impairment testing model. Impairment of property, plant and equipment and intangible assets is influenced by judgment in defining a cash-generating unit ("CGU") and determining the indicators of impairment and estimates used to measure impairment losses. The recoverable value of property, plant and equipment and intangible assets is determined using discounted future cash flow models, which incorporate assumptions regarding future events, specifically future cash flows, growth rates and discount rates.

Valuation of share-based payments and warrants

Management measures the costs for share-based payments and warrants using market-based option valuation techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected risk-free interest rate and the rate of forfeiture. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of share-based payments and warrants.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

2. Basis of preparation (continued)

Business combinations

In a business combination, substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded at the date of acquisition at their respective fair values. One of the most significant areas of judgment and estimation relates to the determination of the fair value of these assets and liabilities, including the fair value of consideration given. If any intangible assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, the Company determines the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned and the discount rate applied.

Convertible debentures

Separating the liability and equity components requires the Company to estimate a market rate for an equivalent non-convertible instrument and in allocating the remainder to the conversion feature that is an equity instrument.

Valuation of the fair value less costs to sell of biological assets and agricultural produce

Biological assets, consisting of medical cannabis plants and agricultural produce, are measured at fair value less costs to sell up to the point of harvest. The determination of the fair values of the biological assets requires the Company to make assumptions with respect to how market participants would estimate fair value.

3. Significant accounting policies

Cash

Cash includes cash deposits in financial institutions.

Foreign currency translation

Foreign currency transactions are translated into Canadian dollars at exchange rates in effect on the date of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the foreign exchange rate applicable at that period-end date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Expenses are translated at the exchange rates that approximate those in effect on the date of the transaction. Realized and unrealized exchange gains and losses are recognized in the consolidated statements of loss and comprehensive loss.

Revenue recognition

The Company recognizes revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services by applying the following steps:

• 1. Identify the contract with a customer;
• 1. Identify the performance obligations in the contract;
• 1. Determine the transaction price;
• 1. Allocate the transaction price; and
• 1. Recognize revenue when, or as, the Company satisfies a performance obligation.

Revenue represents the amount the Company expects to receive for products and services in its contracts with customers, net of discounts and sales taxes. The Company earns referral fee revenue by providing educational services to patients that may benefit from cannabis products. The Company educates consumers on different strains of cannabis plants and how to properly use the products of licensed producers based on the consumers' ailments and ultimately refers these clients to the cannabis producers.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

The Company recognizes revenue upon transfer of control of products or services to customers at an amount that reflects the consideration the Company expects to receive in exchange for the products or services transferred. The Company evaluates contracts with customers to determine the appropriate unit of accounting (performance obligation) for revenue recognition purposes based on whether the product or service is distinct from some or all of the other products or services in the arrangement. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer. Non-distinct products and services are combined with other goods or services until they are distinct as a bundle and therefore form a single performance obligation.

The Company also earns revenue for Skype fees, which are earned for arranging an appointment between the Company's clients and a physician to obtain a prescription for the medical cannabis. These fees are paid by the patient and billed at the time when the appointment is arranged. Revenue is recognized when the appointment is completed.

In addition, the Company earns revenue through licensing of its proprietary patient management software, recognizing revenue using a software as a service model, whereby it earns and collects revenue monthly based on patient count and/or number of clinics.

Biological assets

While the Company's biological assets are within the scope of IAS 41, Agriculture, the direct and indirect costs of biological assets are determined using an approach similar to the capitalization criteria outlined in IAS 2, Inventories. They include the direct cost of seeds and growing materials as well as other indirect costs such as utilities and supplies used in the growing process. Indirect labour for individuals involved in the growing and quality control process is also included, as well as depreciation on production equipment and overhead costs such as rent to the extent it is associated with the growing space. All direct and indirect costs of biological assets are capitalized as they are incurred, and they are all subsequently recorded within the line item "cost of sales" in the consolidated statements of loss and comprehensive loss in the period that the related product is sold. Unrealized fair value gains/losses on growth of biological assets are recorded in a separate line on the face of the consolidated statements of loss and comprehensive loss. Biological assets are measured at their fair value less costs to sell on the consolidated statements of financial position.

Inventories

The direct and indirect costs of inventory initially include the fair value of the biological asset at the time of harvest. They also include subsequent costs such as materials, labour and depreciation expense on equipment involved in packaging, labeling and inspection. All direct and indirect costs related to inventory are capitalized as they are incurred and they are subsequently recorded within "cost of sales" in the consolidated statements of loss and comprehensive loss at the time cannabis is sold, except for realized fair value amounts included in inventory sold, which are recorded as a separate line on the face of the consolidated statements of loss and comprehensive loss. Inventory is measured at lower of cost or net realizable value on the consolidated statements of financial position.

Property, plant and equipment

The Company's property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

The cost of an item of property, plant and equipment includes expenditures that are directly attributable to the acquisition or construction of the asset. The cost includes the cost of materials and direct labour, site preparation costs, installation and assembly costs, and any other costs directly attributable to bringing the assets to the location and condition necessary for the assets to be capable of operating in the manner intended by management. The cost of property, plant and equipment also includes any applicable borrowing costs. Borrowing costs are capitalized to property, plant and equipment until such time that the constructed asset is substantially complete and ready for its intended use.

Depreciation is recorded over the estimated useful lives as outlined below:

Building	4% on a declining balance basis
Leasehold improvements	Lesser of 5 years or lease term on a straight-line basis
Computer equipment	30% on a declining balance basis
Security equipment	5 years on a straight-line basis
Furniture and fixtures	20% on a declining balance basis
Vehicles	30% on a declining balance basis

The Company assesses an asset's residual value, useful life and depreciation method at each financial year-end or as required and makes adjustments if appropriate.

Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and are recognized in the consolidated statements of loss and comprehensive loss.

Intangible assets

Intangible assets consist of acquired intellectual property with a finite life. Intangible assets are amortized on a straight-line basis over their estimated useful lives and are measured at cost less accumulated amortization and accumulated impairment losses. At each reporting period, the useful lives of such assets are reviewed to determine whether events and circumstances continue to support the useful life assessment for the asset. Costs for intangible assets acquired in a business combination represent the fair value of the asset at the time of the acquisition. Intellectual property intangibles are amortized over a threeyear period and software intangible is amortized 30% on a declining balance basis.

Impairment of non-financial assets

The carrying values of property and equipment and finite life intangible assets are assessed at the end of each reporting period as to whether there is any indication that the assets may be impaired. Goodwill and indefinite life intangible assets are tested for impairment annually during the fourth quarter of the fiscal year or when there is an indication that the asset may be impaired. If any indication of impairment exists or when the annual impairment testing for an asset is required, the Company estimates the recoverable amount of the asset or cash-generating unit ("CGU") to which the asset relates to determine the extent of any impairment loss. The recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use ("VIU") to the Company. In determining fair value less costs of disposal, the Company takes into consideration the market capitalization method. If the recoverable amount of an asset or a CGU is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statements of operations and comprehensive income. For impaired assets, excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of operations and comprehensive income. As disclosed in Note 24, the Company has one reportable and operating segment, and goodwill has been fully allocated to this segment as it represents the lowest level at which management monitors goodwill.

Income taxes

Income tax expense represents the sum of the income tax currently payable and deferred tax.

The income tax currently payable is based on taxable profit for the year. Taxable profit differs from "loss before income taxes" as reported in the consolidated statements of loss and comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the year.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each year and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the year.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the year, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive loss or directly in equity, in which case the current and deferred taxes are also recognized in other comprehensive loss or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Share-based payments

The Company measures equity-settled share-based payments based on their fair value at the grant date and recognizes compensation expense over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period) with a corresponding increase in equity (contributed surplus). Fair value is measured using the Black-Scholes option pricing model. The cumulative expense recognized for equity-settled transactions at each reporting date 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 credit in the consolidated statements of loss and comprehensive

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

loss for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognized is the grant date fair value of the unmodified award, provided the original terms of the award are met. An additional expense, measured as at the date of modification, is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through the consolidated statements of loss and comprehensive loss.

Loss per share

The Company presents basic and diluted loss per share data for its common shares. Basic loss per share is calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding, adjusted for the effects of all dilutive potential common shares, which comprise preferred shares, warrants, share options and convertible debentures issued.

Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss ("FVTPL")) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

(i) Financial assets

On initial recognition, a financial asset is classified as measured at amortized cost, fair value through other comprehensive income (''FVOCI''), or FVTPL. The classification of financial assets is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are not separated. Instead, the hybrid financial asset as a whole is assessed for classification.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

It is held within a business model whose objective is to hold assets to collect contractual cash flows; and Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment 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 ("OCI"). This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

The following accounting policies apply to the subsequent measurement of financial assets.

Financial assets at FVTPL	Subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost	Subsequently measured at amortized cost using the effective interest method, less any impairment losses. Interest income, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI	Subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI	Subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

(ii) Financial liabilities

The Company initially recognizes financial liabilities at fair value on the date at which the Company becomes a party to the contractual provisions of the instrument.

The Company classifies its financial liabilities as either financial liabilities at FVTPL or at amortized cost.

Subsequent to initial recognition, other liabilities are measured at amortized cost using the effective interest method. Financial liabilities at fair value are stated at fair value with changes being recognized in profit or loss.

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.

(iii) Financial liabilities and equity instruments

Classification as debt or equity

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

Equity instruments

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

Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

(iv) Classification of financial instruments

The Company classifies its financial assets and liabilities depending on the purpose for which the financial instruments were acquired, their characteristics and management intent as outlined below:

Financial assets/liabilities	Classification
Cash	Amortized cost
Trade and other receivables	Amortized cost
Loan receivable	Amortized cost
Trade and other payables	Amortized cost
Contingent consideration	Fair value through profit or loss
Due to related parties	Amortized cost
Borrowings	Amortized cost
Convertible debentures	Amortized cost

(v) Impairment of financial assets

An expected credit loss ("ECL") model applies to financial assets measured at amortized cost. The Company's financial assets measured at amortized cost and subject to the ECL model consist primarily of trade and other receivables and loan receivable. The Company adopted the simplified approach to impairment for trade and other receivables by recognizing lifetime expected losses on initial recognition.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

Convertible debentures

Convertible debentures are separated into liability and equity components based on the terms of the contract.

On issuance of the instruments, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortized cost (net of transaction costs) until it is extinguished on conversion or redemption.

The remainder of the proceeds is allocated to the equity component that is recognized and included in equity. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent periods.

New standards, amendments and interpretations adopted by the Company

The following new accounting standards applied or adopted during the year ended April 30, 2021 had no material impact on the consolidated financial statements:

IFRS 3 – Business Combinations ("IFRS 3")

In October 2018, the IASB amended IFRS 3 seeking to clarify whether an acquisition transaction results in the acquisition of an asset or the acquisition of a business. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020, although earlier application is permitted. The Company applied the standard from May 1, 2020 and it did not have material impact on the consolidated financial statements:

Amendment to IFRS 16, COVID-19-Related Rent Concessions

In May 2020, the IASB issued an amendment to permit lessees, as a practical expedient, not to assess whether particular rent concessions that reduce lease payments occurring as a direct consequence of the COVID-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications. The amendment is effective for annual reporting periods beginning on or after June 1, 2020, with earlier application permitted. The amendment did not have an impact on the consolidated financial statements.

Amendments to IAS 1 and IAS 8: Definition of Material

In October 2018, the IASB issued amendments to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to align the definition of "material" across the standards and to clarify certain aspects of the definition. The new definition states that, "Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity"

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

3. Significant accounting policies (continued)

Future Accounting Pronouncements

The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Amendments to IAS 1: Classification of Liabilities as Current or Non-Current and Deferral of Effective Date In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements, to provide a more general approach to the presentation of liabilities as current or non-current based on contractual arrangements in place at the reporting date. These amendments:

• specify that the rights and conditions existing at the end of the reporting period are relevant in determining whether the Company has a right to defer settlement of a liability by at least twelve months; provide that management's expectations are not a relevant consideration as to whether the Company will exercise its rights to defer settlement of a liability; and
• clarify when a liability is considered settled.

On July 15, 2020, the IASB issued a deferral of the effective date for the new guidance by one year to annual reporting periods beginning on or after January 1, 2023 and is to be applied retrospectively. The Company has not yet determined the impact of these amendments on its consolidated financial statements.

Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract

In May 2020, the IASB issued amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, to specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract, and can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The new guidance will be effective for annual periods beginning on or after January 1, 2022 and is to be applied to contracts that have unfulfilled obligations as at the beginning of that period. The Company has not yet determined the impact of these amendments on its consolidated financial statements.

4. Business acquisition

On June 12, 2020 ("Closing Date"), the Company acquired 100% of the outstanding shares of IsoCanMed Inc. ("IsoCanMed"), a fully operational cannabis producer located in Louisville, Quebec, for total consideration of \$19,843. The consideration consisted of 273,461,452 consideration shares valued as \$9,444, plus assumption of three promissory notes ("Notes") for \$12,500 payable, valued as \$10,399, on or before June 12, 2023 and bearing interest at 5% payable annually. The Notes are secured by a general security agreement registered against the assets of IsoCanMed. The Company has the right at any time to prepay all or any portion of the principal amount of the Note without penalty or interest.

4. Business acquisition and reverse takeover (continued)

The following table sets out the allocation of the purchase price to assets acquired and liabilities assumed:

Purchase Consideration	\$000's
Share consideration Assumption of promissory note	9,444 10,399
	19,843
Fair value of net identifiable assets acquired	\$000's
Net Working Capital Tangible Assets Intangible Assets Other Liabilities Deferred Tax Liability	3,836 9,869 7,000 (2,039) (1,855)
Goodwill	16,811 3,032
	19,843

The acquisition was accounted for as a business combination using the acquisition method, with the results of operations consolidated with the Company from the date of acquisition. Goodwill represents the excess of the purchase price of the acquisition over the fair value of the net identifiable assets acquired. The goodwill recognized is attributable mainly to expected future growth potential and expected synergies. Goodwill arising from the acquisition is deductible for tax purposes.

The share consideration comprised of 273,461,452 common shares of the Company ("Share Consideration") and are subject a lockup agreement whereby the IsoCanMed shareholders covenant not to sell, transfer or otherwise dispose of:

• With respect to 25% of the Share Consideration, for a period ending on the 6 month anniversary of the Closing Date;
• With respect to an additional 25% of the Share Consideration, for a period ending on the 12 month anniversary of the Closing Date;
• With respect to an additional 25% of the Share Consideration, for a period ending on the 18 month anniversary of the Closing Date; and
• An additional 25% of the Share Consideration, for a period ending on the 24 month anniversary of the Closing Date.

For accounting purposes, the Share Consideration transferred for the acquired business includes a discount in the value of the share consideration to reflect the trading restriction placed on the shares.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

5. Trade and other receivables

The Company's trade and other receivables include the following:

	April 30 2021 \$000's	April 30, 2020 \$000's
Trade and other receivables	1,926	842
Input taxes and other taxes receivables	19	172
	1,945	1,014

As at April 30, 2021, \$14 (April 30, 2020 - \$11) of allowance for doubtful accounts has been provided for and is not expected to be collected.

6. Inventory

The Company's inventory is comprised of the following:

	Carrying Value \$000's
Balance as at April 30, 2019 Purchased cannabis Harvested cannabis Supplies and consumables	- 827 823 123
Balance as at April 30, 2020	1,773
Purchased cannabis Harvested cannabis	1,330 1,915
Balance as of April 30, 2021	5,018

As of April 30, 2021, the balance of inventory is comprised of a fair value loss of \$411 (April 30, 2020 - loss of \$555) upon harvest, \$3,149 (April 30, 2020 - \$1,378) of cost capitalized to inventory and \$2,280 (April 30, 2020 - \$950) of purchased products.

Products purchased from other producers are carried at the lower of their carrying amount and net realizable value. Carrying amount approximates the price paid to acquire the products.

Cost of sales for the year ended April 30, 2021 is \$6,066 (April 30, 2020 - \$1,144). The Company impaired \$2,266 (April 30, 2020 - \$16 included in cost of sales) cannabis inventory during the year ended April 30, 2021, due to the costs capitalized exceeding the net realizable value of the inventory.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

7. Biological assets

Biological assets consist of cannabis on plants. The changes in the carrying value of biological assets are as follows:

	\$000's
Balance as at April 30, 2019	-
Production costs capitalized	1,800
Changes in fair value due to biological transformation	(796)
Transferred to inventory upon harvest	(801)
Balance as at April 30, 2020	203
Acquired on business combination	585
Production costs capitalized	3,580
Changes in fair value due to biological transformation	2,492
Transferred to inventory upon harvest	(6,168)
Balance as at April 30, 2021	692

The Company measures its biological assets at their fair value less costs to sell. This is determined using a model that estimates the expected harvest yield in grams for plants currently being cultivated, and then multiplies that amount by the expected wholesale selling price.

The fair value measurements for biological assets have been categorized as Level 3 fair values based on the inputs to the valuation technique used. The Company's method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest.

The biological assets were measured at their fair value less costs to sell of \$692 on April 30, 2021 (April 30, 2020 - \$203).

As at April 30, 2021, it is expected that the Company's cannabis plants biological assets will yield approximately 488,338 grams (April 30, 2020 - 85,500 grams) of dry cannabis flowers and approximately 6,949 grams (April 30, 2020 - 85,500 grams) of dry cannabis trim upon completion of production. For the year ended April 30, 2021, \$1,866 (April 30, 2020 - and \$796 of losses) is recognized as unrealized gain on changes in fair value of biological assets.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

8. Property, plant and equipment

Cost	Leasehold ImprovementsEquipmentand FixturesBuilding		Furniture		Land	Total
	\$000's	\$000's	\$000's	\$000's	\$000's	\$000's
Balance as at April 30, 2019 Additions	6,494 475	1,350 269	313 13	261 -	555 -	8,973 757
Disposals	(65)	(110)	(15)	-	-	(190)
Balance as at April 30, 2020	6,904	1,509	311	261	555	9,540
Acquired on business combination	-	1,848	21	7,625	375	9,869
Additions	608	427	16	-	-	1,051
Disposals	(197)	(14)	(44)	-	-	(255)
Balance as at April 30, 2021	7,315	3,770	304	7,886	930	20,205

Accumulated depreciation	Leasehold ImprovementsEquipmentand FixturesBuilding		Furniture		Land	Total
	\$000's	\$000's	\$000's	\$000's	\$000's	\$000's
Balance as at April 30, 2019	1,147	501	125	30	-	1,803
Additions	1,356	242	36	9	-	1,643
Disposals	(2)	(38)	(6)	-	-	(46)
Balance as at April 30, 2020	2,501	705	155	39	-	3,400
Additions	1,424	575	34	270	-	2,303
Disposals	(43)	(12)	(30)	-	-	(85)
Balance as at April 30, 2021	3,882	1,268	159	309	-	5,618

Net book value	Leasehold ImprovementsEquipmentand FixturesBuilding \$000's	\$000's	Furniture \$000's	\$000's	Land \$000's	Total \$000's
Balance as at April 30, 2020	4,403	804	156	222	555	6,140
Balance as at April 30, 2021	3,433	2,502	145	7,577	930	14,587

Of total depreciation for the year ended April 30, 2021 totaling \$2,293 (April 30, 2020 - \$1,643), Nil (April 30, 2020 - \$265) has been expensed to cost of sales, \$1,126 (April 30, 2020 - \$733) to biological assets, \$293 (April 30, 2020 - \$173) to inventory and \$874 (April 30, 2020 - \$272) to depreciation.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

9. Intangible assets

Cost	Computer Software \$000's	License \$000's	Intellectual Property \$000's	Total \$000's
Balance as at April 30, 2019	398	-	4,672	5,070
Impairment	-	-	(4,672)	(4,672)
Balance as at April 30, 2020	398	-	-	398
Acquired on business combination	-	7,000	-	7,000
Balance as at April 30, 2021	398	7,000	-	7,398

Accumulated Amortization	Computer Software \$000's	License \$000's	Intellectual Property \$000's	Total \$000's
Balance as at April 30, 2019 Amortization Impairment	221 53 -	- - -	1,173 1,557 (2,730)	1,394 1,610 (2,730)
Balance as at April 30, 2020 Amortization	274 37	- -	- -	274 37
Balance as at April 30, 2021	311	-	-	311
Net Book value	Computer Software \$000's	License \$000's	Intellectual Property \$000's	Total \$000's
Balance as at April 30, 2020	124	-	-	124
Balance as at April 30, 2021	87	7,000	-	7,087

In June 2020, the Company had a business combination with IsoCanMed and as part of the transaction, a license was acquired and valued at \$7,000. (note 4)

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

10. Right-of-use assets and lease liability

The change in carrying value of the Company's right-of-use assets and lease liability was as follows:

	Right-of-use Assets \$000's	Lease Liability \$000's
Balance as at April 30, 2019	3,374	3,317
Additions Amortization expense Interest expense	410 (602) -	410 - 186
Payments	-	(705)
Balance as at April 30, 2020 Additions Disposal Amortization expense Interest expense Payments	3,182 119 (286) (602) - -	3,208 115 (289) - 150 (708)
Balance as at April 30, 2021	2,413	2,476
Current Non-current	- 2,413	524 1,952

Of total amortization for the year ended April 30, 2021 totaling \$604 (April 30, 2020 - \$602), Nil (April 30, 2020 - \$36) has been expensed to cost of sales, \$123 (April 30, 2020 - \$153) to biological assets, \$21 (April 30, 2020 - \$7) to inventory and \$460 (April 30, 2020 - \$413) to amortization.

11. Promissory notes

Current

In January 2020, the Company issued 30,000,000 common shares at a deemed price per share of \$0.05 to each of two former shareholders of MFT and TLP pursuant to separate debt settlement agreements entered into between the Company and each such individual for the satisfaction of \$3,000 of remaining contingent consideration of \$3,545 owing to the shareholders, which payments were originally due in November 2019. The remaining \$545 remains owing under two promissory notes, part of which was repaid in the year ended April 30, 2021. As at April 30, 2021, the balance of promissory notes of \$68 includes \$53 of principals and the accrued interest at the rate of 8% per annum payable.

Non-current

On June 12, 2020, the Company acquired 100% of the outstanding shares of IsoCanMed. As part of the consideration, the Company assumed three promissory notes in the total amount of \$12,500 payable on or before June 12, 2023 and bearing interest at 5% payable annually. The promissory notes are secured by a general security agreement registered against the asset of IsoCanMed. At the time of acquisition, the promissory notes were valued at \$10,398. As of April 30, 2021, the amortized cost is \$10,938. (note 4 and 12)

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

12. Related party transactions

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling activities of the Company, directly or indirectly, including the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Technology Officer and equivalent and Directors.

Compensation expense for the Company's key management personnel for the year ended April 30, 2021 and 2020 is as follows:

	April 30, 2021 \$000's	April 30, 2020 \$000's
Salaries and wages	1,819	1,530
Share-based compensation	342	711
General and administrative	-	172
	2,161	2,413

During the year ending April 30, 2021, the Company paid \$185 of consulting fees in total to two shareholders and paid \$19 of rent to a company owned by a shareholder. As of April 30, 2021, the Company owes \$3 (April 30, 2020 - \$73) to a shareholder of the Company and owes promissory notes in the total amount of \$12,500 payable to three shareholders. (note 4 and 11)

All related party transactions were in the normal course of operations, measured at the exchange amount.

13. Borrowings

Borrowings consist of the following:

	April 30, 2021 \$000's	April 30, 2021 \$000's
Loan from vendor Loans from bank	326 120	320 -
	446	320

The loan from vendor is a three-year loan at 2% interest per annum. The interest is payable annually. The loan is unsecured and matures on October 31, 2021.

The loans from bank in the amount of \$120 are loans from a Canadian financial institution under the Canada Emergency Business Account ("CEBA") program. The loans are due by December 31, 2023 at the interest rate of 5% per annum starting from January 1, 2023. Repaying the balance of the loans on or before December 31, 2022 will result in loan forgiveness of 25 percent (\$30).

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

14. Convertible debentures

During the year ended April 30, 2021, the changes of the carrying value of the convertible debentures are as follows:

	2020 Debentures \$000's	2017 Debentures \$000's	2019 Debenture \$000's	Total \$000's
Balance as at April 30, 2019	-	386	-	386
Principal amount issued	-	-	2,588	2,588
Issuance costs	-	-	(159)	(159)
Conversion feature at inception	-	-	(154)	(154)
Warrants at inception	-	-	(103)	(103)
Interest payments	-	(100)	(151)	(251)
Interest accretion expense	-	274	530	804
Balance as at April 30, 2020	-	560	2,551	3,111
Principal amount issued (repaid)	6,500	-	(2,587)	3,913
Issuance costs	(390)	-	-	(390)
Conversion feature at inception	(1,755)	-	-	(1,755)
Warrants at inception	(1,504)	-	-	(1,504)
Interest payments	-	(99)	(518)	(617)
Loss on settlement	-	-	385	-
Interest accretion expense	264	412	169	845
Balance as at April 30, 2021	3,115	873	-	3,988
Current	-	873	-	873
Non-current	3,115	-	-	3,115

2017 convertible debentures

On December 5, 2017, the Company issued 8,624 unsecured convertible debenture ("2017 Debentures") units for gross proceeds of \$8,624. Of the gross proceeds received, \$2,000 represented promissory notes that were settled through the issuance of these convertible debenture units, \$75 represented convertible debentures issued to former key management as severance and \$130 represented convertible debentures issued as settlement of \$176 of trade payables. Each 2017 Debentures unit comprises: (i) \$1,000 principal amount of 8.5% unsecured convertible debentures with a maturity date of December 5, 2021; and (ii) 5,263 detachable common share purchase warrants of the Company (each, a "2017 Warrant"). Each 2017 Debenture shall be convertible at the holder's option into fully paid common shares of the Company at any time prior to the maturity date at a conversion price of \$0.19 per share if converted within the first 12 months following issuance, and at a conversion price of \$0.40 per share if converted at any time following the date that is 12 months and one day following issuance until maturity. If the volume weighted average closing price of the common shares is greater than or equal to \$0.35 for a period of five consecutive days at any time within the first 12 months of the closing date, the Company has the option to force conversion at \$0.19 per share. If the volume weighted average closing price of the common shares of the Company is greater than or equal to \$0.50 for a period of five consecutive days at any time after 12 months and before maturity, the Company has the option to force conversion at \$0.40 per share.

Notes to Consolidated Financial Statements
(Expressed in thousands of Canadian dollars, except for shares and per share amounts)
For the years ended April 30, 2021 and 2020

14. Convertible debentures (continued)

The debentures may be redeemed at any time after issuance on the following basis:

Redemption price	Redemption date
115% of the principal amount plus any accrued and unpaid interest	0–12 months from closing
112% of the principal amount plus any accrued and unpaid interest	12–24 months from closing
109% of the principal amount plus any accrued and unpaid interest	24–36 months from closing
106% of the principal amount plus any accrued and unpaid interest	36–48 months from closing

The interest payable on the debenture is payable monthly in cash. Each December Warrant shall be exercisable into one common share of the Company at an exercise price of \$0.30 per share for a period of 12 months following issuance; at an exercise price of \$0.40 from 12 months to 24 months following issuance; at an exercise price of \$0.60 from 24 months to 36 months following issuance and at an exercise price of \$0.80 from 36 months to 48 months following issuance.

Transaction costs consisted of \$307 in cash and \$356 of broker warrants with identical terms as the December Warrants.

On initial recognition, the Company allocated the proceeds, net of transaction costs, as follows:

	\$000's
Convertible debentures, liability	1,934
Conversion feature	1,955
Deferred tax liability on conversion feature	705
Warrants	3,368
	7,962

The value of the conversion option was calculated by subtracting the net present value of the debenture from the face value of the convertible debentures. The net present value of the debenture was calculated using a discount rate of 20.37% over a term of 48 months. As of April 30, 2021, \$1,170 of the principal amount of the 2017 debentures remains outstanding.

2019 convertible debenture

On September 10, 2019, the Company issued a convertible security (the "2019 Debenture") with a notional value of \$3,105 for cash consideration of \$2,588. The 2019 Debenture has a term of 24 months and is convertible into common shares of the Company at a fixed conversion price per share of \$0.08, being the last closing price of the Company's common shares on the Exchange prior to execution of the Convertible Security Funding Agreement.

The \$3,105 notional value of the 2019 Debenture is composed of a principal amount of \$2,588 and a imputed interest of \$517. The Company is required to repay the cash consideration received of \$2,588 in 18 equal monthly payments commencing on the seventh month after closing, except that the repayment amount will be reduced in any month by any amount converted by the investor into the Company's common shares.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

14. Convertible debentures (continued)

The imputed interest will accrue monthly with the holder of the 2019 Debenture having the right to convert accrued interest into the Company's common shares once accrued at a conversion price equal to the last closing market price of the shares on the Exchange on the day prior to conversion. Upon receiving an accrued interest conversion notice from the Investor, the Company may elect to satisfy that conversion in cash.

Upon issuance of the 2019 Debenture, the Company also issued 16,171,875 warrants, with each warrant entitling the holder of the 2019 Convertible Debenture to purchase one common share at an exercise price of \$0.15. The warrants expire 36 months from their date of issue, provided that if the volume weighted average price of the Company's common shares is at least \$0.60 for 20 consecutive trading days, then the expiry date of the warrants may be accelerated by the Company.

The Company has the right to buyback the Debenture and the prepaid interest at any time with no penalty (the "BuyBack Right"). Should the Company exercise its Buy-Back Right, the Investor will have the right to convert 25 percent of the outstanding principal amount and 100 % of the prepaid interest into the Company's common shares.

The 2019 Debenture is secured by a general security agreement from the Company and certain of its subsidiaries.

On initial recognition, the Company allocated the proceeds of \$2,429, net of \$159 of transaction costs, as follows:

	\$000's
Convertible debenture, liability	2,172
Conversion feature	154
Warrants	103
	2,429

On initial recognition, the fair value of the host debt was valued at \$2,172 using a discount rate of 25% and a volatility of 75%. The warrants were valued at \$103 using a volatility of 75% and risk-free interest rate of 1.6%. The principal amount of \$2,588 was allocated to the host debt and subsequently to the warrants and conversion option using the residual approach, with the subsequent allocation between the two equity components based on their prorated fair values. The transaction costs were allocated pro-rata based on each individual component's fair value.

During the year ended April 30, 2021, the full amount of the 2019 Debenture was repaid using the proceeds of the 2020 convertible debenture below.

2020 convertible debenture

On August 8, 2020, the Company closed the strategic investment transaction with Archerwill Investments Inc.("Archerwill"). Archerwill invested \$6,500 in the form of a secured convertible debenture, repaying the 2019 convertible debentures in full. The debenture may be converted into common shares at a price of \$0.05 per common share and bears interest at 8.0%, compound annually, convertible into shares or payable in cash at maturity, at the option of Archerwill. Unless converted earlier, the debentures mature in five years.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

14. Convertible debentures (continued)

Prior to the transaction, Archerwill beneficially owned or had control or direction over 3,122,000 common shares in the capital of the Company and 4,973,635 securities of the Company convertible into or exercisable for 4,973,635 common shares.

Archerwill concurrently received 130 million common share purchase warrants, exercisable at six cents per share for a period of four years, which, if exercised in full, would subsequently increase Archerwill's ownership interest to 28.3% (assuming Archerwill's conversion and exercise in full of all securities it holds in the Company but no other conversions of outstanding securities of the Company). The transaction costs were allocated pro rata based on each individual component's fair value.

On initial recognition, the Company allocated the proceeds, net of \$390 of transaction costs, as follows:

	\$000's
Convertible debenture, liability	2,851
Conversion feature	1,755
Warrants	1,504
	6,110

As of April 30, 2021, \$6,500 of the principal amount of the 2020 convertible debenture remains outstanding and the amortized cost is \$3,115.

15. Mortgage payable

On December 24, 2020, the Company closed a \$2,000 non-dilutive term loan financing at an annual interest rate of 10% (the "Loan"). The Loan is secured by the property and assets of the Company's wholly owned subsidiary, IsoCanMed, in Louiseville, Quebec and is subject to monthly interest-only installments of \$17, with the principal amount repayable at the end of one year. The Loan may be extended for an additional year, at the discretion of the lender, upon 30 days written renewal notice by the Company. The renewal notice will indicate if the Company intends to repay any portion of the loan, up to a maximum of \$1,000. A commitment fee, equal to 4% of the loan amount less the amount repaid, is payable at the time of renewal.

16. Share capital

(a) Authorized

The authorized share capital of the Company consists of an unlimited number of common shares.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

16. Share capital (continued)

(b) Issued and outstanding

	Common Shares Number	\$000's	Equity component of convertible debentures \$000's	Number of Warrants	Contributed Surplus \$000's
Balance as at April 30, 2019	253,157,570	34,508	265	85,868,964	12,196
Common shares issued pursuant to private placement (b)	97,342,857	1,813	-	97,342,857	909
Common shares issuable in exchange for professional services (c)	1,000,000	160	-	-	(160)
(d) Settlement of liability	62,447,347	3,071	-	-	-
Forgiveness of contingent consideration (e)	(3,955,596)	(311)	-	-	-
Convertible debenture	-	-	154	16,171,875	103
Share-based compensation	-	-	-	-	762
Balance as at April 30, 2020 Common shares issued pursuant to	409,992,178	39,241	419	199,383,696	13,810
business combination (a)	273,461,452	9,444	-	-	-
Convertible debenture (note 14)	-	-	1,755	130,000,000	1,504
Share-based compensation	-	-	-	-	461
Balance as at April 30, 2021	683,453,630	48,685	2,174	329,383,696	15,775

During the year ended April 30, 2021:

(a) The Company issued 273,461,452 common shares pursuant to the acquisition of IsoCanMed Inc. (see note 4) valued at \$9,444.

During the year ending April 30, 2020:

• (b) In March 2020, the Company issued 97,342,857 common shares and 97,342,857 common share purchase warrants for total cash proceeds of \$2,725. The transaction costs were \$3. Each common share purchase warrant is exercisable to acquire one common share at an exercise price of \$0.05 per common share for a period of three years from the date of issuance. Total proceeds of \$2,725 were allocated to common shares (\$1,813) and common share purchase warrants (\$909) on a fair value proportionate basis. The fair value of common shares on date of issuance was \$0.04 per share. The fair value of common share purchase warrants was determined to be \$0.03 per warrant using the Black-Scholes option pricing model with a market price per common share of \$0.04, a risk-free interest rate of 0.99%, an expected annualized volatility of 75% and expected dividend yield of 0%.
• (c) A consultant provided professional services to the Company from February 15, 2019 to April 15, 2019 in exchange for 1,000,000 common shares of the Company. The shares were not issued as April 30, 2019, resulting in recognition of contributed surplus of \$160 during the year ended April 30, 2019. The shares were issued during the year, resulting in reclassification of \$160 from contributed surplus to shareholders' equity.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

16. Share capital (continued)

(d) The Company issued the following shares to settle various obligations of the Company during the year ended April 30, 2020:

	Number of shares	\$000's
Settlement of trade payables and other obligations in the amount
of \$85 for \$61 of common shares of the Company	2,114,014	61
Settlement of debt of \$10	333,333	10
	2,447,347	71

In addition, in January 2020, the Company issued 30,000,000 common shares at a deemed price per share of \$0.05 to each of two former shareholders of MFT and TLP, totaling 60,000,000 common shares, pursuant to separate debt settlement agreements entered into between the Company and each such individual for the satisfaction of \$3,000 of remaining contingent consideration of \$3,545 owing to the shareholders, which payments were originally due in November 2019.

(e) In May 2019, an agreement was reached with the former shareholders of TLP to forgive 3,955,595 of their escrowed shares. Their remaining 7,000,000 escrowed shares were released from escrow on November 11, 2019. The fair value of escrowed shares was estimated at \$613, of which \$311 was accounted for as a reduction to share capital and the balance of \$302 to deficit. The gain of \$613 is included within finance and transaction costs, net, in the consolidated statements of loss and comprehensive loss for the year ended April 30, 2020.

17. Share-based compensation

The Company has established a stock option plan (the "Option Plan") for directors, officers, employees and consultants of the Company. The Company's Board of Directors determines, among other things, the eligibility of individuals to participate in the Option Plan and the term, vesting periods, and the exercise price of options granted to individuals under the Option Plan.

Each share option converts into one common share of the Company on exercise. No amounts are paid or payable by the individual on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The Company's Option Plan provides that the number of common shares reserved for issuance may not exceed 10% of the common shares that are outstanding unless the Board of Directors shall have increased such limit by a Board of Directors resolution. In addition, the aggregate number of shares so reserved for issuance to one person may not exceed 5% of the issued and outstanding shares. If any options terminate, expire, or are cancelled as contemplated by the Option Plan, the number of options so terminated, expired or cancelled shall again be available under the Option Plan.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

17. Share-based compensation (continued)

The changes in the number of stock options during the period were as follows:

	Number of Options #	Weighted Average Exercise Price \$
Balance as at April 30, 2019	20,200,000	0.20
Granted	20,100,000	0.05
Exercised	(3,100,000)	0.21
Balance as at April 30, 2020	37,200,000	0.12
Granted	21,925,000	0.05
Forfeited	(3,425,000)	0.15
Balance as at April 30, 2021	55,700,000	0.09

The following table is a summary of the Company's share options outstanding as at April 30, 2021:

Number Exercising Contractual Life # Years	Weighted Average Number Exercisable #
4.40	19,682,293
	1,000,000
	100,000
	2,662,500
	1,250,000
	7,000,000
0.53	2,400,000
3.77	34,094,793
	Outstanding 40,400,000 1,000,000 2.96 100,000 2.98 3,550,000 2.56 1,250,000 2.50 7,000,000 2.21 2,400,000 55,700,000

17. Share-based compensation (continued)

The following table is a summary of the Company's share options outstanding as at and April 30, 2020:

Exercising Price \$	Number Outstanding #	Weighted Average Exercising Contractual Life Years	Number Exercisable #
0.050	19,900,000	4.85	11,770,833
0.155	1,000,000	3.99	1,000,000
0.160	1,100,000	3.98	433,333
0.170	3,550,000	3.56	1,479,167
0.190	1,500,000	3.50	1,233,333
0.200	7,000,000	3.16	7,000,000
0.250	2,400,000	1.53	2,400,000
0.295	750,000	3.41	750,000
0.119	37,200,000	4.08	26,066,666

The Company recognized \$461 of share-based compensation expense during the year ended April 30, 2021 (April 30, 2020 – \$762), with a corresponding amount recognized as a contributed surplus.

18. Loss per share

Net loss per common share represents net loss attributable to common shareholders divided by the weighted average number of common shares outstanding during the period.

Diluted loss per common share is calculated by dividing the applicable net loss by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period.

For the year ended April 30, 2021, diluted loss per share equals basic loss per share due to the anti-dilutive effect of convertible debentures, warrants and stock options. The outstanding number and type of securities that could potentially dilute basic net loss per share in the future, but would have decreased the loss per share (anti-dilutive) for the periods presented, are as follows:

	April 30, 2021 Number of Shares	April 30, 2020 Number of Shares
Convertible debentures Warrants Share options	132,925,000 329,383,696 55,700,000	32,268,750 199,383,696 36,450,000
	518,008,696	268,102,446

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

19. Income taxes

Income tax expense varies from the amount that would be computed by applying the basic federal and provincial tax rates to loss before income taxes, shown as follows:

	April 30, 2021	April 30, 2020
Loss before income taxes	(11,297)	(9,705)
Statutory federal and provincial income tax rate in Canada	26.5%	26.5%
Income tax recovery at the statutory tax rate	(2,994)	(2,572)
Permanent differences	(54)	235
Change in deferred tax assets not recognized	3,116	2,152
Provision for (recovery of) income taxes	68	(185)

A valuation allowance has been applied against all of the above deferred income tax assets.

The Company has a non-capital loss carried forward to reduce future years' taxable income, which will expire as follows:

	\$000's
2034	265
2035	2,971
2036	2,082
2037	1,698
2038	4,890
2039	8,198
2040	8,305
2041	11,757
	40,166

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

20. Nature of expenses

General and administrative expenses for the year ended April 30, 2021 and 2020 are composed of:

	April 30, 2021 \$000's	April 30, 2020 \$000's
Salaries, wages and consulting fees	6,221	4,811
General operating	1,280	1,587
Occupancy costs	411	369
Professional fees	341	882
	8,253	7,649

Sales and marketing expenses for the year ended April 30, 2021 and 2020 are comprised of:

	April 30, 2021 \$000's	April 30, 2020 \$000's
Advertising and promotion Travel	480 26	379 172
	506	551

21. Commitments and contingencies

Commitments

As at April 30, 2021, the Company is committed under leases for equipment and office space for the following minimum annual rentals:

	\$000's
2021	603
2022	505
2023	375
Thereafter	1,459
	2,942

Contingencies

(a) On September 23, 2020, the Company was served with a Statement of Claim for damages for the alleged breach of a former employee's employment agreement, or in the alternative, for the alleged constructive dismissal of a former employee, in the amount of \$728 plus interest and costs. The claim was initiated in the Ontario Superior Court of Justice. The Company filed a Statement of Defence to the claim on November 6, 2020 and believes the claim is without merit.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

21. Commitments and contingencies (continued)

• (b) The Company and its subsidiary, Abba, were served with a Statement of Claim for damages for the alleged failure to pay invoices in the amount of \$200 plus pre- and post-judgment interest. Pleadings have now closed, and the parties are in the process of scheduling examinations for discovery. Given that examinations for discovery have not yet occurred, it is too early in the process to have a reasonable expectation or evaluation of the Plaintiff's claim, but the Company believes the claim to be without merit.
• (c) On April 15, 2021, Canada House's wholly owned subsidiary, IsoCanMed, was served with an application to initiate proceedings for damages for its alleged failure to pay invoices in the amount of \$304 plus pre and post judgment interest. Prior to the Plaintiff initiating proceedings, IsoCanMed provided the Plaintiff with a list of deficiencies related to the Plaintiff's work installing the HVAC system at IsoCanMed's facility. The list of deficiencies includes the Plaintiff's supply and installation of a chiller which has not yet been put into operation by the Plaintiff. The Plaintiff and IsoCanMed discussed IsoCanMed's payment of the balance owing (approximately \$305) on the total contract value of \$2,300 when the Plaintiff had successfully remedied the outstanding deficiencies in its workmanship. In addition, at the request of the Plaintiff, IsoCanMed provided the Plaintiff with comments on the items it disputed in the Plaintiff's outstanding invoices. After receiving IsoCanMed's requested comments, the Plaintiff halted all communication and proceeded with this application.

IsoCanMed has retained external counsel to appear on IsoCanMed's behalf and respond to the application. IsoCanMed's external counsel has advised the Court of its intent to file a Defence and Counterclaim to the Plaintiff's application. The Court has accepted protocol which require IsoCanMed to file its Defense, Counterclaim, and any expert reports relied upon in same by October 29, 2021. Initial discoveries of the Parties related to the Plaintiff's claim are scheduled for November 2324, 2021, and Discovery of IsoCanMed related to its potential counterclaim is scheduled for February 9, 2022. The Plaintiff's defense to the potential counterclaim of IsoCanMed and any expert evidence to be relied upon by the Plaintiff must be filed by April 15, 2022.

In the ordinary course of business and from time to time, the Company is involved in various other claims related to its ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to these claims to be material to these consolidated financial statements.

In the ordinary course of business and from time to time, the Company is involved in various other claims related to its ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to these claims to be material to these consolidated financial statements.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

22. Capital management

The Company defines the capital that it manages as the amounts it classifies in share capital, augmented by any amounts raised through the issuance of convertible debentures, promissory notes, borrowings and mortgage payable.

	\$000's
Share capital, including equity component of convertible debentures	50,859
Convertible debentures	3,988
Promissory notes	11,006
Borrowings	446
Mortgage payable	2,000
	68,299

The Company's objectives when managing capital are to ensure that there are adequate capital resources to safeguard the Company's ability to continue as a going concern and to maintain adequate levels of funding to support its ongoing initiatives and business development activities in order to provide returns for its shareholders.

The Company is an early-stage company and is dependent on raising further capital, primarily equity, to fund its capital expenditures and its operating expenses in excess of revenue until such time as it reaches cash break-even. As at April 30, 2021, the Company had raised, net of issuance costs, approximately \$40,612 (April 30, 2020 - \$32,112) by the issuance of common shares, warrants, convertible debentures and long-term debt. The Company may raise additional equity in the future, although there can be no assurance that the Company will be successful in doing so.

23. Financial instruments and risk management

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from deposits with banks and outstanding receivables. The Company trades only with recognized, creditworthy third parties. The Company performs credit checks for all customers who wish to trade on credit terms. As at April 30, 2021 and April 30, 2020, three customers represented 73% and two customers represented 57% of the outstanding trade and other receivable balance, respectively.

For the year ended April 30, 2021, three customers accounted for approximately 59% of the Company's consolidated revenue (2020 – 78%). As at April 30, 2021, the Company had one customer that accounted for 47% of total accounts receivable.

The Company does not hold any collateral as security, but mitigates this risk by dealing only with what management believes to be financially sound counterparties and, accordingly, does not anticipate significant loss for non-performance.

23. Financial instruments and risk management (continued)

The aging of trade receivables is as follows:

	April 30, 2021 \$000's	April 30, 2020 \$000's
Not past due 1 to 30 days past due 31 to 60 days past due Over 61 days past due	1,627 94 196 9	503 262 27 50
	1,926	842

As at April 30, 2021, the expected credit loss recognized was \$14 (April 30, 2020 - \$11).

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's exposure to liquidity risk is dependent on the Company's ability to raise additional financing to meet its commitments and sustain operations. The Company mitigates liquidity risk by management of working capital, cash flows and the issuance of share capital.

The Company is obligated to the following contractual maturities of undiscounted cash flows:

	Carrying Amount \$000's	Total Contractual Cash Flow \$000's	Year 1 \$000's	Year 2 \$000's	Year 3 \$000's	Year 4 and Beyond \$000's
Lease liability	2,476	2,942	603	505	375	1,459
Promissory notes	68	68	68	-	-	-
Promissory note - non-current	10,938	14,375	1,172	625	12,578	-
Trade and other payables	8,345	8,345	8,345	-	-	-
Convertible debentures	3,988	10,328	1,228	-	-	9,100
Borrowings	446	443	443	-	-	-
Due to related parties	3	3	3	-	-	-
Mortgage payable	2,000	2,133	2,133	-	-	-
	28,264	38,637	13,995	1,130	12,953	10,559

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

23. Financial instruments and risk management (continued)

Currency risk

Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates. The Company is not exposed to foreign currency exchange risk as it has minimal financial instruments denominated in a foreign currency and substantially all of the Company's transactions are in Canadian dollars, which is also the Company's functional currency.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as at April 30, 2021 as the Company does not have any variable interest rate assets or liabilities.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risk as at April 30, 2021.

Fair values

The carrying values of cash, trade and other receivables, loan receivable, trade and other payables, borrowings and convertible debentures approximate the fair values due to the short-term nature of these items or the interest rates and discount rates being at market. The risk of material change in fair value is not considered to be significant due to a relatively short-term nature. The Company does not use derivative financial instruments to manage this risk.

Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company's valuation techniques. A level is assigned to each fair value measurement based on the lowest-level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

• Level 1 Unadjusted quoted prices as at the measurement date for identical assets or liabilities in active markets.
• Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
• Level 3 Significant unobservable inputs that are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.

During the year ended April 30, 2021, there were no transfers of amounts between levels.

Notes to Consolidated Financial Statements (Expressed in thousands of Canadian dollars, except for shares and per share amounts) For the years ended April 30, 2021 and 2020

24. Segmented information

The Company has one reportable and operating segment, which primarily cultivates and distributes cannabis related products via federally approved cannabis programs, and this single reportable segment derives its revenue from the sale of such products. The Company reports segment information based on internal reports used by the Chief Operating Decision maker ("CODM") to make operating and resource decisions and to assess performance. The CODM is the Chief Executive Officer. The CODM makes decisions and assesses performance of the Company on a consolidated basis such that the Company is a single reportable operating segment.

The Company primarily operates in one principal geographical area, Canada, accordingly all of the Company's long lived assets are located in Canada.

25. Subsequent events

On May 27, 2021, the Company announced the acquisition of Margaree Health Group Inc. ("Margaree"), a medical cannabis clinic dedicated to veterans in the Province of Nova Scotia. The purchase consideration included cash consideration of \$500 and an earn out measured against Margaree's revenue over a three year period.

On August 9, 2021, the Company announced that they have entered into a definitive share exchange agreement for the Company acquisition of all of the issued and outstanding shares of Montréal Cannabis Medical Inc. ("Montreal Cannabis") (herein referred to as the "Transaction"). The Transaction is considered an arm's length transaction and will constitute a "reverse takeover" of the Company by Montreal Cannabis as it is anticipated that the Company's shareholders will account for approximately 20% of the combined company post merger. Should the Transaction be completed, it is anticipated that the Company will operate under the Montreal Cannabis corporate name with shares continuing to trade on the Canadian Securities Exchange.