New Leaf Ventures Inc. - Interim / Quarterly Report 2021

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New Leaf Ventures, Inc.

Unaudited Condensed Consolidated Interim Financial Statements (Expressed in Canadian Dollars)

For the Three and Nine Month Periods Ended September 30, 2021 and 2020

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Financial Position As at September 30, 2021 and December 31, 2020

(Unaudited - Expressed in Canadian Dollars )

		December 31,
Notes 2021		2020
ASSETS Current Assets Cash Receivables Due from related party Prepaid expenses Currentportion of lease receivables	$ 189,306$ 32,366 9 1,780,290 6 274,936 10 276,007	136,553 79,873 1,868,318 291,006 242,657
Total Current Assets Non-Current Assets Property and Equipment Lease receivables Other assets	$ 2,552,905 $ 8 $ 911,634$ 10 2,790,180 9 25,811	2,618,407 843,775 2,999,166 25,792
Total Non-Current Assets	$ 3,727,625$	3,868,733
TOTAL ASSETS	$ 6,280,530$	6,487,140
LIABILITIES Current Liabilities Accounts payable and accrued liabilities Due to related parties Current portion of lease obligations Notes payable to related party Derivative liability Securitydeposit	8 $ 837,043$ 9 53,861 10 288,227 9 1,296,389 11 352,536 9 15,289	650,578 195,673 254,985 2,415,991 362,758 15,278
Total Current Liabilities	$ 2,843,345$	3,895,263
Non-Current Liabilities Lease obligations	10 2,813,070	3,031,179
Total Non-Current Liabilities	$ 2,813,070$	3,031,179
TOTAL LIABILITIES	$ 5,656,415$	6,926,442
SHAREHOLDERS’ EQUITY (DEFICIENCY) Share capital Share-based payments reserve Warrant reserve Accumulated other comprehensive income Accumulated deficit	11 $ 11,222,432$ 12 508,190 11 16,780 121,153 (11,244,440)	7,087,003 138,339 38,075 104,739 (7,807,458)
TOTAL SHAREHOLDERS’ EQUITY(DEFICIENCY)	$ 624,115$	(439,302)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY(DEFICIENCY)	$ 6,280,530$	6,487,140
Nature of operations and continuance of operations (note 1) Related party transactions (note 9) Subsequent events (note 15)	Approved on behalf of the Board by: /s/ Robert Colwell /s/ Chris Cooper Director Director

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss For the Three and Nine Month Periods Ended September 30, 2021 and 2020 (Unaudited - Expressed in Canadian Dollars Except Number of Shares )

	Notes	Three-months period ended September 30, Nine-months period ended September 30,	Three-months period ended September 30, Nine-months period ended September 30,	Three-months period ended September 30, Nine-months period ended September 30,	Three-months period ended September 30, Nine-months period ended September 30,
		2021	2020 2021		2020
Revenue	9	$ 621,131$ 759,029$ 1,850,673		$ 1,276,929
Expenses Communication Consulting Depreciation & Amortization Director fees Marketing General office & administration Utilities and property tax Professional fees Regulatory and filing fees Share-based compensation Wages and salaries	7 9 12 9	$ 40,070$ 2,430$ 88,617 45,975 35,988 134,452 55,701 79,599 139,596 6,000 6,000 18,000 746,448 514,980 2,607,552 46,914 118,175 150,932 87,979 - 283,631 62,078 114,244 282,703 20,144 5,899 43,851 160,108 - 499,557 473,201 446,035 1,341,307		$ 21,879 94,456 133,517 18,000 948,275 186,584 - 396,166 27,972 69,009 1,638,288
Other Income / (Expenses) Interest income Accretion expense Foreign exchange loss Gain / (Loss) on remeasurement of derivative Other income Interest expense Amortization of deferredgain	9,10 9 11 9 10	$ (1,744,618) $ (1,323,350) $ (5,590,198) $ 105,043$ 107,703$ 268,687 (36,310) (84,023) (130,696) (133,897) (4,467) (92,207) 299,313 - 10,222 67,323 - 467,829 (72,812) (107,705) (221,292) - 23,971 -		$ (3,534,146) $ 182,534 (145,354) (17,126) (182,536) 40,466
Net Loss for the Period		$ (894,827) $ (628,842) $ (3,436,982)		$ (2,379,233)
Other Comprehensive Loss Items that may be subsequently reclassified to profit and loss Foreign currencytranslation adjustment		$ 23,161$ (144,955) $ 16,414		$ (144,955)
Total Comprehensive Loss for the Period Basic and diluted lossper common share		$ (871,666) $ (773,797) $ (3,420,568) $ (0.02) $ (0.02) $ (0.07)		$ (2,524,188) $ (0.10)
Weighted average number of common shares outstanding (basic and diluted)		51,288,714 35,458,877 48,115,539		24,490,581

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Deficiency) For the Nine Month Period Ended September 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars )

	Number of shares Share capital Share subscription received Stock options reserve	Warrants reserve	Accumulated other comprehensive income Accumulated deficit Total shareholder’s equity
Balance - December 31, 2019	12,645,000$ 736,251$ 40,000 $ 34,338	$ -	$ -$(1,207,353) $(396,764)
Shares issued for cash ‐ private placement Shares issued upon exercise of warrants and agent units Share issue costs Shares issued on Acquisition Transaction Shares issued as signing bonus to New Leaf USA Executives Fair value of warrants issued for Acquisition Transaction Share-based payments Net loss of theperiod	7,759,271 1,939,817 (40,000) - 4,658,220 1,191,813 - (3,998) - (184,039) - 42,073 9,000,000 2,250,000 - - 3,658,676 914,669 - - - - - 649,440 - - - 69,009 - - - -	- - - - - - -	- - 1,899,817 - - 1,187,815 - - (141,966) - - 2,250,000 - - 914,669 649,440 - - 69,009 (144,955) (2,379,233) (2,524,188)
Balance - September 30, 2020	37,721,167$ 6,848,511$ -$ 790,862	$ -	$(144,955) $(3,586,586) $ 3,907,832

Balance - December 31, 2020	39,097,167 $ 7,087,003 $ - $ 138,339	$ 38,075	$ 104,739$(7,807,458) $(439,302)
Shares issued upon exercise of warrants Shares issued upon exercise of options Share-based payments Net loss for theperiod	11,907,417 3,841,974 - - 625,000 293,455 - (129,706) - - - 499,557 - - - -	(21,295) - - -	- - 3,820,679 - - 163,749 - - 499,557 16,414 (3,436,982) (3,420,568)
Balance – September 30, 2021	51,629,584$ 11,222,432$ -$ 508,190	$ 16,780	$ 121,153$ (11,244,440)$ 624,115

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

New Leaf Ventures, Inc. Condensed Consolidated Interim Statements of Cash Flows For the Nine Month Periods Ended September 30, 2021 and 2020 (Unaudited - Expressed in Canadian Dollars)

		Nine Months ended September 30,	Nine Months ended September 30,
		2021	2020
	Notes	$	$
OPERATING ACTIVITES Net loss for theyear	$ 9,10 $ 10 9 7 12 11 $ 9 9 10 $ 7 $ $ 11 $ 11 9 10 $ $ $	(3,436,982) $ (268,687) $ 221,276 130,696 139,596 80,519 499,556 (10,222) - 47,507 $ 16,070 192,767 538,563 (140,701) 666 (221,276) (2,210,651) $ (205,655) $ - (205,655) $ - 3,820,679 $ 163,750 (1,231,941) (191,221) 2,561,267 $ (92,207) 52,753 136,553 $ 189,306 $	(2,379,233)
*Non-cash items:* Interest income Interest expense Accretion expense Depreciation & Amortization Foreign exchange Share-based compensation Gain / (loss) on remeasurement of derivative Wages and salaries for shares *Changes in non-cash working capital items:* Accounts receivable Prepaids Accounts payable and accrued liabilities Due from related party Due to related party Other assets Interestpaid			(182,534) - 145,354 93,051 (6,642) 69,009 - 914,669 (9,747) - (153,687) (962,415) - - -
Net cash used in operating activities			(2,472,175)
INVESTING ACTIVITIES Acquisition of property and equipment Leasepayments received			(105,556) 99,505
Net cash used by investing activities			(6,051)
FINANCING ACTIVITIES Proceeds from share issuance Proceeds from exercise of warrants Proceeds from exercise of options Repayment of note payable Payment of lease obligations			2,976,416 - - (105,090) (55,090)
Net cashprovided by financing activities			2,816,236
Effect of foreign exchange rate fluctuation Increase in cash in theyear			- 338,010
Cash – beginning of theperiod			80,150
Cash – end of theperiod			418,160

Supplemental cash flow information (Note 14)

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

New Leaf Ventures, Inc. Notes to the Condensed Consolidated Interim Financial Statements For the Three and Nine-Month Periods Ended September 30, 2021 and 2020 (Unaudited - Expressed in Canadian Dollars )

1. NATURE OF OPERATIONS AND CONTINUANCE OF OPERATIONS

New Leaf Ventures Inc. (the “Company”) was incorporated under the Business Corporations Act (British Columbia) on June 4, 2018. On September 13, 2019, the Company entered into the Share Purchase Agreement (“Acquisition Transaction”) to purchase New Leaf USA Inc. (“New Leaf USA”) and its subsidiaries (collectively the “New Leaf USA Entities”). As a result of the completion of the Acquisition Transaction on April 30, 2020, the New Leaf USA Entities are now the core business of the Company, and through which the Company will provide consulting services, real property, intellectual property and equipment for lease and enhanced ancillary services to New Leaf Enterprises, Inc., a Washington-based Tier 3 Producer/Processor focused on industrial-scale agronomy, processing, packaging, marketing and distributing cannabis and cannabis related products (the “License Holder”). The License Holder is considered a related party; refer to Note 5 for details on the Acquisition Transaction and Note 10 for details on the related party nature and transactions with the License Holder during the three and nine month period ended September 30, 2021.

The Company’s head office, principal address and registered address and records office is 2200 HSBC Building, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8, Canada. The Company is listed on the Canadian Securities Exchange (the “CSE”) under the ticker symbol “NLV.CN” and on the OTCQB, part of the OTC Markets Group, under the ticker “NLVVF”.

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) on a going concern basis, which contemplates the realization of assets and discharge liabilities at their carrying values in the ordinary course of operations for the foreseeable future rather than through the process of forced liquidation.

During the nine months period ended September 30, 2021, the Company generated a net loss of $3,436,982 (September 30, 2020 – net loss of $2,379,233) and negative cash flows from operating activities of $1,977,688 (September 30, 2020 – negative cash flows of $2,472,175). As at September 30, 2021, the Company has an accumulated deficit of $11,244,440 (December 31, 2020 – deficit of $7,807,458) and a working capital deficiency of $290,440 (December 31, 2020 – working capital deficiency $1,276,856). As a result, the Company may not have sufficient capital to fund its current planned operations during the twelvemonth period subsequent to September 30, 2021.

These unaudited condensed consolidated Interim Financial Statements do not include any adjustments to the classification and amounts of assets and liabilities that may be required should the Company be unable to continue as a going concern. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company’s continuing operations as intended are dependent upon its ability to identify, evaluate and negotiate the acquisition of, participation in or interest in new assets or business opportunities, and its ability to attain profitable operations and generate funds therefrom, and raise equity capital or obtain the necessary financing sufficient to meet current and future obligations. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Although the Company has been successful at raising funds in the past through the issuance of securities, it is uncertain whether it will be successful in doing so in the future

The COVID-19 pandemic continues to cause significant financial market and social dislocation. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. While the Company has experienced the impact of the COVID-19 outbreak on its operations, it has

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

continued to operate during the current pandemic. The Company will continue to monitor developments of the pandemic and continuously assess its potential further impact on its operations to prevent any disruptions. The Company has put in place multiple contingency plans to ensure its supply chain and general operations can be maintained with minimal disruption throughout the crisis. In the event of prolonged continuation of the pandemic, it is not clear what the potential impact may be on the Company’s business, financial position and financial performance.

2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE

Basis of presentation and statement of compliance

The unaudited condensed consolidated interim financial statements (“Interim Financial Statements”) of the Company as at and for the three and nine month period ended September 30, 2021, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, applicable to the preparation of Interim Financial Statements as set out in International Accounting Standard 34 Interim Financial Reporting (“IAS 34”).

The Company has consistently applied the same accounting policies throughout all periods presented. These Interim Financial Statements do not include all the disclosures required for a complete set of IFRS financial statements. Accordingly, they should be read in conjunction with the last audited consolidated annual financial statements and notes thereto for the year ended December 31, 2020 (“Annual Financial Statements”), which are available on SEDAR at www.sedar.com. Selected explanatory notes are included in the Interim Financial Statements to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual financial statements. These Interim Financial Statements were authorized for issue by the Audit Committee, on behalf of the Board of Directors, on November 29, 2021.

These Interim Financial Statements include the accounts of the Company and its subsidiaries with intercompany balances and transactions eliminated upon consolidation. The entities contained in the Interim Financial Statements are as follows:

Entity Name	Principal activity	Place of business and operations	Functional currency	Equity percentage
New Leaf Ventures, Inc. (the “Company”)	Parent company	Canada	CAD $	n/a
New Leaf USA, Inc. (“New Leaf USA”)	Holding company for US Entities	United States	USD $	100%
New Leaf Real Estate, LLC (“RealEstateCo”)	Real property leasing	United States	USD $	100%
New Leaf Equipment, LLC (“EquipmentCo”)	Equipment leasing	United States	USD $	100%
New Leaf IP, LLC (“IPCo”)	Intellectual property licensing	United States	USD $	100%
New Leaf Services LLC (“ServicesCo”)	Management services	United States	USD $	100%
New Leaf Hemp Company LLC (“HempCo”)	Inactive	United States	USD $	100%

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE, CONTINUED

Use of Judgements, Estimates and Assumptions

The preparation of these Interim Financial Statements in accordance with IAS 34 requires management to use judgement and make estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities at the date of the Interim Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. The judgements, estimates and associated assumptions are based on historical experience and other factors that management considers to be relevant and are subject to uncertainty. Judgements, estimates and underlying assumptions are reviewed on an ongoing basis, and revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results could differ from these estimates due to changes in interest rates, foreign exchange rates, inflation, and economic conditions. The areas of significant judgement and estimation were identified in the Company’s Annual Financial Statements for the year ended December 31, 2020.

3. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies applied to these condensed consolidated Interim Financial Statements are the same as those applied to the Company’s audited consolidated financial statements for the year ended December 31, 2020.

4. SEGMENT REPORTING

The Company operates in one operating segment which provides management and ancillary services to a cannabis producer and processor based in the United States. For the purpose of segment reporting, the Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker. The determination of the Company’s operating segment is based on its organizational structure and how the information is reported to CEO on a regular basis. During the nine month period ended September 30, 2021, all the revenues from the Company were generated through intellectual property licensing, equipment leasing, and provision of management services to a single customer, the License Holder, who is located in the United States.

The Company’s non-current assets by country are as follows:

	As of September 30, 2021 As of December 31, 2020
United States	$ 3,727,625 $ 3,868,733
Total non-current assets	$ 3,727,625 $ 3,868,733

All of the Company’s non-current assets are held in the United States for the periods presented.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

5. ACQUISITION OF NEW LEAF USA, INC.

On April 30, 2020, the Company completed their previously announced acquisition of New Leaf USA, Inc. and all of its wholly-owned subsidiaries. The acquisition provides the Company with immediate strategic access and footprint to the US cannabis market, specifically in the state of Washington. With the acquisition, the Company now has the ability to provide turnkey solutions to other licensed cannabis operators in the state of Washington. This is the first step in realizing management’s vision for the Company to manage and invest in advanced stage operations in the North American Cannabis sector. In consideration for the acquisition, the Company issued the following:

Issued 9,000,000 shares; and
Issued 4,000,000 performance warrants (“Performance Warrants”).

Each Performance Warrant entitles the holder to purchase one common share of the Company at the price of $0.02 per common share for a period of three years, and will vest and become exercisable as follows:

i. 2,000,000 Performance Warrants will vest and become exercisable if the Company or New Leaf Enterprises, Inc. (the “License Holder”) achieves at least $5,000,000 in annual gross revenue; and
ii. 2,000,000 Performance Warrants will vest and become exercisable the Company or License Holder achieves at least $7,500,000 in annual gross revenue.

In addition, New Leaf USA entered into employment agreements, pursuant to which Robert Colwell is appointed to act as Chief Executive Officer of New Leaf USA, and Boris Gorodnitsky is appointed to act as President of New Leaf USA, in each case, for a period of three years following the closing of the Acquisition Transaction, and pursuant to which the Company issued 1,829,338 common shares to each of Boris Gorodnitsky and Robert Colwell. The following table shows the final allocation of the purchase price to assets acquired and liabilities assumed, based on estimates of fair value, including a summary of the identifiable classes of consideration transferred, and amounts by category of assets acquired and liabilities assumed at the acquisition date:

isition date:
	Final
Consideration transferred: Fair value of 9,000,000 common shares issued Fair value of contingent consideration(i)	$ 2,250,000 352,800
	$ 2,602,800
Fair value of assets and liabilities recognized: Cash Related party receivable (note 9) Lease receivable Equipment Intangible assets Lease deposits Accounts payable Capital lease obligations Notes payable Fair value of net assets acquired Goodwill(iii)	$ 3 584,555 3,695,586 896,289 345,948 28,179 (420,334) (3,752,996) (2,555,321)
	$(1,178,091)
	$ 3,780,891

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

5. ACQUISITION OF NEW LEAF USA, INC. CONTINUED

(i) The warrants were valued using the Black-Scholes Option Pricing model (note 12) and adjusted for the probability that revenue targets would be met over the vesting period. The Performance Warrants were accounted for under IFRS 9 Financial Instruments as a derivative financial liability as the instrument had an option to convert the Performance Warrants into shares of the Company for no consideration and which would result in a variable number of the Company’s shares being issued on exercise (see note 12). The Performance Warrants are subsequently re-measured at each reporting date. As at September 30, 2021, the Performance Warrants were re-measured with a resulting gain on re-measurement of $299,313 for the three months period ended September 30, 2021 recognized in profit and loss. For the nine months period ended September 30, 2021 a cumulative gain on re-measurement of $10,222 has been recognized in profit and loss.
(ii) There were no deferred tax liabilities identified as part of the Acquisition Transaction. Deferred tax assets were identified but were not recognized as its recoverability was not considered probable.
(iii) During the year ended December 31, 2020 the Company performed an annual impairment test of goodwill and determine that the carrying value of the Company’s total net assets exceeded the Company’s value-in-use as at December 31, 2020. Subsequently, for the year ended December 31, 2020, the Company recorded an impairment loss of $3,780,891 to reduce goodwill to $nil. Refer to Note 8 of the Company’s Annual Financial Statements for the year ended December 31, 2020

The intangibles recognized on the acquisition relate to existing contracts at acquisition date for equipment leasing and intellectual property licensing, as well as management services. New Leaf USA leases intellectual property (“IP agreement”), including, brand names and know-how specific to operations and management of cannabis production and processing. The License Holder pays an annual exclusivity fee of USD$100,000 and the greater of $1.07 per each unit sold or a quarterly license fee of USD$150,000 for a period of six month, expiring October 1, 2020. New Leaf USA also leases cannabis production and processing equipment for a monthly leasing fee of USD$6,000 per month. Both the equipment and IP agreement were extended by the License Holder for another six months on October 1, 2020. The Company is currently in the process of renegotiating the contracts at period end.

New Leaf USA provides various management services to the License Holder including office administration, human resource and staffing, marketing, and IT. For the provision of these services the License Holder pays a monthly services fee of USD$100,000 a month. The management service agreement has a term of six months but automatically renews for an additional six months for up to four additional six-month renewal terms (from effective date August 1, 2019) unless sooner terminated. At the time of acquisition, the service agreement had three remaining six-month renewal terms available.

The goodwill recognized from the acquisition is attributable to synergies expected from integrating New Leaf USA into the Company’s existing business. Another component of goodwill includes non-separable intangibles assets acquired, including know-how specific to operations and management of cannabis production and processing. The goodwill acquired is not deductible for tax purposes.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

6. PREPAID EXPENSES

	September 30, 2021 December 31, 2020
Prepaid marketing expense	$ 255,882 $ 256,060 - 30,000 19,054 4,946
Prepaid accounting expense
Otherprepaid expenses
Totalprepaid expenses	$ 274,936 $ 291,006

7. PROPERTY AND EQUIPMENT

	Equipment	Leasehold Improvements	Total
Cost
As at December 31, 2019 $	-$	- $	-
Acquisition transaction (note 5) Additions Currencytranslation adjustment	896,289 121,968 (75,904)	- 7,079 -	896,289 129,047 (75,904)
As at December 31, 2020 $	942,353 $	7,079 $	949,432
Additions Currencytranslation adjustment	26,813 1,155	178,842 3,264	205,655 4,419
As at September 30, 2021 $	970,321 $	189,185 $	1,159,506
Accumulated Depreciation
As at December 31, 2019 $	- $	- $	-
Additions Currencytranslation adjustment	110,259 (4,602)	- -	110,259 (4,602)
As at December 31, 2020 $	105,657 $	- $	105,657
Additions Currencytranslation adjustment	122,612 2,309	16,984 310	139,596 2,619
As at September 30, 2021 $	230,578 $	17,294 $	247,872
Carrying Amount
As at December 31,2020 $	836,696$	7,079 $	843,775
As at September 30, 2021 $	739,743 $	171,891 $	911,634

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

		September 30,		December 31,
		2021		2020
Trade payables	$	631,113	$	473,293
Accrued liabilities		205,930		177,285
Total accountspayable and accrued liabilities	$	837,043	$	650,578

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

9. RELATED PARTY TRANSACTIONS

Related party transactions consist of monthly transactions with the License Holder, who is considered a related party due to sharing common executives and key management with the Company. Key management include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole.

(i) Transactions with the License Holder

During the three and nine-months period ended September 30, 2021 and 2020, the Company recognized the following revenues from the License Holder:

		Three months ended	Three months ended	Three months ended		Nine Months ended	Nine Months ended	Nine Months ended
		September		30,		September 30,

Transactions with License Holder		2021		2020		2021		2020
Equipment lease revenue	$	22,682	$	23,978	$	67,570	$	40,478
Service fee revenue		377,931		599,445		1,126,170		1,011,945
Variable IP licensingrevenue		220,518		135,606		656,933		224,506
Total revenues from License Holder	$	621,131	$	759,029	$	1,850,673	$	1,276,929

In addition, the Company also incurred the following transactions with the License Holder during the nine-month period ended September 30, 2021:

a) Interest income on outstanding receivables relating to IP licensing revenues of $38,332 ($nil – nine-months period September 30, 2020)
b) Interest income on lease receivables of $230,371 ($182,534 – nine-months period September 30, 2020) – see Note 11
c) Accretion expense on notes payables of $130,696 ($145,354 – nine-months period September 30, 2020) – see Note 10(i)
d) Other income of $467,829 ($nil – nine-months period September 30, 2020) relating to sub-lease operating expenses (utilities, property tax, insurance) that were incurred for by the Company and which are reimbursable by the License Holder

As at September 30, 2021 there was a balance of $1,780,290 (December 31, 2020 - $1,868,318) due from the License Holder to the Company related to the provision of services during nine-month period ended September 30, 2021 and for services previously rendered during the year ended December 31, 2020. In addition, there was a balance of $53,861 (December 31, 2020 - $195,673) due from the Company to the License Holder for reimbursable lease operating costs.

As at September 30, 2021, there was a balance of $3,066,187 (December 31, 2020 - $3,241,823) due from the License Holder to the Company related to the lease receivable. In addition, at September 30, 2021, there was a balance of $15,289 (December 31, 2020 - $15,278) due from the Company to the License Holder for a refundable security deposit.

As at September 30, 2021, there was a notes payable balance of $1,296,389 (December 31, 2020 - $2,415,991) due to the License Holder. The notes were recorded at fair value at initial recognition by

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

9. RELATED PARTY TRANSACTIONS CONTINUED

measuring the present-value of future note payments discounted at 12%. The notes are unsecured and bear a coupon interest rate of 2.72% per annum for a period of 27 months with a maturity date of August 1, 2022. The notes are to be repaid in eight, equal, quarterly instalments of US$236,269. The notes payables were considered in default during the nine-months period ended September 30, 2021 due to missing of instalment payments. However, on May 10, 2021, the License Holder granted a waiver of default to EquipmentCo and IPCo in relation to missed payments. The License Holder waived its rights to demand immediate repayment for the entire principal and accrued interest outstanding on the notes. In addition, the License

Holder waives its right to increase the interest rate as permitted due to the occurrence of a default event. The waiver is effective for an indefinite period of time subject to the License Holder’s discretion.

A continuity of notes payable for the nine-months period ended September 30, 2021 and year ended December 31, 2020 is as follows:

	Nine-month period ended September 30, 2021	Year ended December 31, 2020
Balance, beginning ofperiod $ 2,415,991$		-
Acquisition transaction - Accretion expense 130,696 Payment (1,231,941) Currencytranslation adjustment (18,357)		2,555,321 180,547 (99,908) (219,969)
Balance, end ofperiod $ 1,296,389$		2,415,991

Less: Current portion of notes payable $ 996,319 $ Non-currentportion of notespayable $ 300,070$		2,415,991 -

Repayments due on notes payable, including interest, for the next five years and thereafter are as follows:

2021	$	456,238
2022		903,092
2023		-
2024		-
2025		-
Thereafter		-
Total	$	1,359,330

(ii) Transactions with other related parties

During the nine-months period ended September 30, 2021, the Company had the following transactions with a company controlled by a director of the Company:

(i) Interest expense on lease obligations of $152,317 (Note 10)

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

9. RELATED PARTY TRANSACTIONS CONTINUED

As at September 30, 2021, there was a balance of $25,811 (December 31, 2020 - $25,792) due from the related party to the Company related to the prepaid rent. In addition, as at September 30, 2021 there was a balance of $2,138,366 (December 31, 2020 - $2,256,571) due from the Company to the related party related to the lease obligations

(iii) Key Personnel Compensation

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company defines key management personnel as being the directors and key officers. The compensation awarded to key management personnel is as follows:

	Three months ended September 30, Nine Months ended September 30,
	2021 2020 2021 2020
Directors' fees	$ 6,000 $ 6,000 $ 18,000 $ 18,000 33,000 27,000 99,000 61,000 9,701 - 244,704 69,009 81,328 79,926 219,458 1,049,595
Consulting fees(1)
Share-based payments(2)
Wages and salaries(3)
Total	$ 130,029 $ 112,926 $ 581,162 $ 1,197,604

(1) During the nine-months ended September 30, 2021, the Company incurred consulting fees of $54,000 (ninemonths ended September 30, 2020 - $36,000) to a company controlled by the CEO and consulting fees of $45,000 (September 30, 2020 - $25,000) to a company controlled by the CFO.

(2) Share-based payments relates to expenses accrued for options vested during the nine-month periods ended September 30, 2021 and 2020. These options were issued to directors and officers of the Company in 2021, 2020 and 2019.
(3) Wages and salaries consist of salaries to key executives for the nine-month periods ended September 30, 2021 and 2020.

10. LEASES

On April 30, 2020, as part of the Acquisition Transaction (note 5), the Company acquired two building leases (the “Head Leases”) currently housing an integrated cultivation facility in Seattle, Washington. Building Lease #1 is between RealEstateCo and a Washington based Company which is owned by a director of the Company. Building Lease #2 is between RealEstateCo and an arms-length Washington based Company. The Head Leases include an option to extend for a further 5 years until May 31, 2028, which the Company intends to exercise. Subsequently, the Company subleased the combined building space to the License Holder, a related party, with an option to extend for additional 5 years until May 31,

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

10. LEASES CONTINUED

2028 (the sub-lease). Under IFRS 16, the Company classified the sub-lease as a finance lease because it is for the whole of the remaining term of the Head Lease.

There were no other leases identified, including short-term or low value leases, during the course of the nine-month period ended September 30, 2021.

The Company as a Lessee

The facility is subleased to the License Holder with the Company maintaining the lease obligation. The Company used 9.5% interest rate, its incremental borrowing rate to calculate the present value of the lease payments as well as to calculate the monthly accretion expense.

The Company’s lease obligations are as follows:

Lease Obligation	September 30, 2021	December 31, 2020
Balance, beginning ofperiod $	3,286,164 $	-
Acquisition transaction (note 5) Interest expense Payment of lease obligations Foreign exchange impact	- 221,276 (412,497) 6,354	3,752,996 220,420 (359,675) (327,577)
Balance, end of period $	3,101,297 $	3,286,164

Minimum lease payments are as follows:

Remaining minimum leasepayments for each fiscalyear:
2021	$	139,991
2022		570,936
2023(i)		599,228
2024(i)		625,941
2025(i)		647,300
2026 and thereafter(i)		1,630,227
Total	$	4,213,623
Amount representing interest		(1,112,326)
Less: Current lease obligation		(288,227)
Long-term lease obligation	$	2,813,070

(i) The Company intends to exercise the extension option on the leases which will push the Head Lease end date out to May 31, 2028. However, the Company is only contractually obligated to remit Head Lease payments to May 31, 2023. The minimum Head Lease payments, as detailed in the above table, from May 31, 2023 onward illustrate the potential commitments upon exercise of the extension option.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

10. LEASES CONTINUED

The Company as a Lessor

*he Company as a Lessor*
Lease Receivable	September 30, 2021	December 31, 2020
Balance, beginning ofperiod $	3,241,823 $	-
Acquisition transaction (note 5) Interest income Accrued sublease payments receivable Foreign exchange impact	- 230,371 (412,497) 6,490	3,695,586 229,007 (359,675) (323,095)
Balance, end ofperiod $	3,066,187 $	3,241,823

(a) The Company fair-valued the acquired lease receivables by discounting the expected lease receivable payments over the life of the lease. The Company used an interest rate of 10.7% and 9.91%; the interest rate implicit in the lease.

Minimum leasepayments receivable are as follows:
Remaining minimum leasepayments receivable for each fiscalyear:
2021 2022 2023(i) 2024(i) 2025(i) 2026 and thereafter(i)	139,989 570,936 599,228 625,941 647,300 1,656,039
Total $ Amount representing interest Less: Currentportion of lease receivables	4,239,433 (1,173,246) (276,007)
Non-current lease receivables $	2,790,180

(i) The Company expects that the sublease tenant will exercise the extension option on the sublease, which will push the sublease end date out to May 31, 2028. However, the Company only has the contractual right to receive sublease payments up to May 31, 2023. The minimum sublease payments receivable, as detailed in the above table, from May 31, 2023 onward illustrate the potential commitments upon exercise of the extension option.

11. SHARE CAPITAL

Authorized share capital

The Company’s authorized to issue an unlimited number of preferred shares and common shares without par value.

As at September 30, 2021, 7,895,206 (December 31, 2020 – 12,126,755) total common shares outstanding were held in escrow.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

11. SHARE CAPITAL CONTINUED

Issued share capital

During the Nine-months period ended September 30, 2021:

During the Nine-months period ended September 30, 2021, the Company collected $3,787,349 and $163,750 in gross proceeds from the exercise of 11,774,097 share purchase warrants and 625,000 share options respectively. The warrant and option exercises resulted in the issuance of 12,399,097 common shares of the Company.

During the nine-months period ended September 30, 2021, the Company collected $33,330 in gross process from the exercise of 133,320 Agent Warrants (“IPO Agent Warrants”) which resulted in the issuance of 133,320 common shares and 66,660 share purchase warrants of the Company. Each share purchase warrant (“Additional Warrants”) is exercisable into one common share of the Company at an exercise price of $0.40 and expires on April 30, 2022. The exercise of the Agent Warrants also resulted in the reclassification of $21,295 from warrant reserve to share capital.

During the year ended December 31, 2020:

On April 30, 2020, the Company completed the first tranche of its initial public offering (the “Offering”) of 4,768,871 units (the “Units”) at a price of $0.25 per Unit (the “Offering Price”), for aggregate gross proceeds of approximately $1,192,217. Each Unit is comprised of one common share in the Company (a “Common Share”) and one-half common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant will be exercisable at a price of $0.40 for a period of 24 months from the listing of the Common Shares on the Canadian Securities Exchange (the “CSE”), subject to early expiry (the “Early Expiry Event”) if the closing price of the Common Shares on the CSE (or any equivalent exchange) is equal to or greater than $0.60 per Common Share for a period of ten consecutive trading days.

In connection with the Offering, the Company paid cash commissions and corporate finance fees of $128,355. The Company also granted 136,280 non-transferrable share purchase warrants (the “Agent Warrants”). Each Agent Warrant may be exercised into one unit (the “Agent Unit”) at a price of $0.25 until April 30, 2022, subject to an early expiry date upon the occurrence of the Early Expiry Event. Each Agent Unit consists of one common share and one-half of a common share purchase warrant (each whole warrant a “Warrant”). The fair value of the Agent Warrants was $21,840, calculated using the Black-Scholes option pricing model. The amount was charged to share capital as non-cash share issue costs.

On April 30, 2020, the Company issued 9,000,000 common shares with assessed fair-value of $2,250,000 in connection with the Acquisition Transaction (Note 5) that made up a portion of the purchase price. In addition, as part of the Acquisition Transaction, the Company issued a total of 3,658,676 common shares, with assessed fair-value of 914,669, to Boris Gorodnitsky and Robert Colwell as a signing bonus to become executives of New Leaf USA, Inc.

On June 2, 2020, the Company completed a second tranche of its initial public offering of 2,990,400 units at a price of $0.25 per Unit, for aggregate gross proceeds of approximately $747,600 (the “Second Tranche”). Each Unit is comprised of one common share in the Company and one-half common share

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

11. SHARE CAPITAL CONTINUED

purchase warrant. Each Warrant will be exercisable at a price of $0.40 until April 30, 2022 subject to early expiry on the Early Expiry Event.

In connection with the Second Tranche the Company paid a cash commission in the amount of $9,600 as well reimbursement of expenses totalling $4,012. In addition, the Company incurred $105,507 of legal expense in connection with the Offering which was charged to share capital as share issuance costs.

The Company also granted 76,000 Agent Warrants. Each Agent Warrant may be exercised into one unit at a price of $0.25 until April 30, 2022, subject to an early expiry date upon the occurrence of the Early Expiry Event. Each Agent Unit consists of one common share and one-half of a common share purchase warrant. The fair value of the Agent Warrants was $20,233, calculated using the Black-Scholes option pricing model. The amount was charged to share capital as non-cash share issue costs.

During the twelve months ended December 31, 2020, the Company raised $1,531,815 in gross proceeds from the exercise of 6,005,000 warrants and 29,220 Agent Warrants. Upon exercise of the Agent Warrants, the Company transferred $3,997 from warrant reserve to share capital, representing the fair value of the Agent Warrants. In addition, the Company issued 14,610 warrants with an exercise price of $0.40, expiring on April 30, 2022 as a result of the exercise of the Agent Warrants.

Warrants

The changes in warrants during the nine months period ended September 30, 2021 and the year ended December 31, 2020 are as follows:

	Number of Warrants Weighted Average Exercise Price
Balance, December 31, 2019	12,000,000$ 0.25
Granted (i)(ii)(iii) Exercised	20,106,526 0.32 (6,034,220) 0.25
Balance, December 31, 2020	26,072,306$ 0.31
Granted Exercised Expired(iv)	66,660 0.40 (11,907,417) 0.32 (701,809) 0.40
Balance, September 30, 2021	13,529,740$ 0.30

(i) On June 19, 2020, the Company decided to amend the terms (the “Amendment”) of an aggregate of 12,000,000 outstanding common share purchase warrants previously issued by the Company. The 12,000,000 warrants were previously exercisable to acquire common shares of the Company at a price of $0.05 until February 26, 2021. Under the Amendment, the exercise price of the Warrants was increased to $0.25. There was no increase to the incremental fair value of the warrants as a result of these modifications. As compensation to allow for the repricing of the share purchase warrants, the Company issued 12,000,000 additional share purchase warrants with expiry date of June 19, 2022 and an exercise

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

11. SHARE CAPITAL CONTINUED

price of $0.40. There was no increase to the value of the warrant reserve for the compensatory warrants as it was offset by a corresponding increase to warrant issuance costs resulting in a $nil impact on the Company’s equity position.

(ii) As part of the acquisition transaction (note 5), the Company issued 4,000,000 Performance Warrants. The Performance Warrants are subject to vesting conditions based on revenue targets for either the Company or the License Holder. Each Performance Warrant entitles the holder to purchase one Class A common share of the Company at an exercise price of $0.02. Assuming vesting conditions are met, the holder can elect to exercise the Performance Warrants, on a net settlement basis based on the fair market value of the shares on the exercise date

The Performance Warrants were assessed to be a derivative liability in accordance with IFRS 9 and were initially measured at fair value of $352,800 using the Black-Scholes option pricing model. Subsequent to initial recognition, the Performance Warrants were re-measured at fair value using the following input assumptions:

assumptions:
	Nine-month period
	ended September 30,	Year ended
	2021	December 31, 2020
Share price at grant date ($)	$ 0.25	$ 0.25
Exercise Price	$ 0.02	$ 0.02
Expected annual volatility	158%	116.33%
Expected life (in years)	1.58	3.0
Expected dividend yield	0%	0%
Risk-free interest rate	0.53%	0.28%
Fair valueper warrant	$0.24	$0.24

A cumulative gain on re-measurement of $10,223 (year ended December 31, 2020 – loss of $9,958) was recognized in profit and loss for the nine-months period ended September 30, 2021.

(iii) As part of the initial public offering closed during the year ended December 31, 2020, the Company issued 212,281 agent warrants which were fair-valued using the Black-Scholes option pricing model and the following weighted average input assumptions:

	Year ended
	December 31, 2020
Share price at grant date ($)	$ 0.30
Exercise Price	$ 0.25
Expected annual volatility	106%
Expected life (in years)	1.97
Expected dividend yield	0%
Risk-free interest rate	0.29%
Fair valueper warrant	$0.17

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

11. SHARE CAPITAL CONTINUED

(iv) On March 2, 2021, the Company accelerated the expiry of share purchase warrants (“IPO warrants”) originally granted as part the Company’s initial public offering on April 30, 2020. The IPO warrants were subject to early expiry (the “Early Expiry Event”) if the closing price of the Common Shares on the CSE (or any equivalent exchange) was equal to or greater than $0.60 per Common Share for a period of ten consecutive trading days. The Company determined that as of start of day March 2, 2021 (the “Assessment Date”), that the Company’s Common Share price had been trading at, or greater than, $0.60 for the last 10 consecutive trading days. As a result, the warrants were accelerated to expire within 30 days from and including the Assessment Date. The accelerated expiry date was March 31, 2021.

As at September 30, 2021, warrants outstanding are as follows:

Number of Warrants Outstanding	Number of Warrants Exercisable	Exercise Price Expiry Date Weighted Average Remaining Contractual Life in Years
49,740 9,480,000 4,000,000	49,740 9,480,000 -	0.25 April 30, 2022 0.58 0.40 September 19,2022 0.72 0.02 April 30,2023 1.58
13,529,740	9,529,740	$ 0.29 0.97

12. SHARE-BASED COMPENSATION

Equity incentive plan

The Company implemented an Equity Incentive Plan (the “EIP”) which provides for the grant to eligible directors and employees (including officers) of share options and Restricted Share Rights (“RSR”). The EIP also provides for the grant to eligible directors of Deferred Share Units (“DSU”) which the directors are entitled to redeem for 90 days following retirement or termination from the Board of the Company (the “Board”). The aggregate number of Common Shares that may be subject to issuance under the Equity Incentive Plan, together with any other securities-based compensation arrangements of the Corporation, shall not exceed 15% of the Corporation’s issued and outstanding share capital from time to time.

Options are exercisable for a period of five years from the date the Option is granted or such greater or lesser period as determined by the Board. Options may be earlier terminated in the event of death or termination of employment or appointment. Vesting of Options is determined by the Board. Failing a specific vesting determination by the Board, Options automatically become exercisable incrementally over a period of eighteen months from the date of grant, as to: (i) 25% of the total number of shares under Option immediately upon the date of grant; and (ii) at each six-month interval thereafter, an additional 25% of the total number of shares under Option such that after the 18th month of the Option period, 100% of the Option will be exercisable. The right to exercise an Option may be accelerated in the event a takeover bid in respect of the Common Shares is made.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

12. SHARE-BASED COMPENSATION CONTINUED

Concurrent with the granting of the RSR, the Board shall determine the period of time during which the RSR is not vested and the holder of such RSR remains ineligible to receive Common Shares. Such period of time may be reduced or eliminated from time to time for any reason as determined by the Board. Once the RSR vests, the RSR is automatically settled through the issuance of an equivalent number of underlying Common Shares as RSRs held.

DSUs are redeemable during the period commencing on the business day immediately following the date such director ceases to hold any directorship and ending on the 90[th] day following such date by providing written notice of redemption to the Corporation. Upon redemption, the director shall be entitled to receive the number of Common Shares equal to the number of DSUs in the director’s account. If the director ceases to hold office during a year where DSUs have been granted in advance of being earned and they have not held office for the entire year, the director will only be entitled to a pro-rated issuance of shares.

The Company’s recorded share-based compensation for the three-month periods ended September 30, 2021 and 2020 comprised the following:

	Three months ended Nine Months ended
	September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Stock Options(a) $	160,108 $ - $ 499,557 $ 69,009

(a) Share options

The number of options, the exercise price per option, the vesting period and any other terms and conditions of options granted from time to time pursuant to the EIP, are determined by the Board at the time of the grant, subject to the defined parameters of the EIP. Movements in the number of stock options outstanding and their related weighted average exercise prices are as follows:

	Number of Options Weighted Average Exercise Price
Balance, December 31, 2019	500,000 $ 0.25
Granted	1,225,000 0.34
Balance, December 31, 2020	1,725,000 $ 0.31
Granted Exercised	1,375,000 0.28 (625,000) 0.26
Balance, September 30, 2021	2,475,000 $ 0.31

The exercise of stock options in the period resulted in a transfer from stock option reserve to share capital of $129,706 for the nine-months ended September 30, 2021.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

12. SHARE-BASED COMPENSATION CONTINUED

The Company fair valued the options using the Black-Scholes option pricing model with the following inputs:

	Nine-month period
	ended September 30,	Year ended
	2021	December 31, 2020
Share price at grant date ($)	$ 0.28	$ 0.34
Exercise Price	$ 0.28	$ 0.34
Expected annual volatility	129% - 133%	138%
Expected life (in years)	5	5
Expected dividend yield	0%	0%
Risk-free interest rate	0.42% - 0.92%	0.27%
Fair valueper option	$0.24	$0.30

The risk-free interest rate is based on the yield of a risk-free Canadian government security with a maturity equal to the expected life of the options from the date of the grant. The assumption of expected volatility is based on the average historical volatility of comparable companies for the period immediately preceding the option grant. The Company does not anticipate paying any cash dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero in the option-pricing model.

Total fair value of stock options granted during the nine-months period ended September 30, 2021 was $330,625 (nine-months period ended September 30, 2020 - $Nil).

Stock options outstanding and exercisable at September 30, 2021 are as follows:

Number of Options Outstanding	Number of Options Exercisable	Exercise Price Expiry Date Weighted Average Remaining Contractual Life in Years
125,000 625,000 500,000 1,225,000	125,000 625,000 500,000 230,000	0.25 November 14, 2024 3.13 0.28 January 15, 2026 4.30 0.28 September 22, 2026 4.98 0.34 November 10,2031 10.12
2,475,000	1,480,000	$ 0.31 7.26

(b) Restricted Share Rights (“RSR”)

RSR’s granted by the Company provides the recipient with the right to receive common shares of the Company as a discretionary payment in consideration of past services or as an incentive for future services. The terms including the vesting period of the RSRs are determined at the sole discretion of the Board.

During the nine-month period ended September 30, 2021 and year-ended December 31, 2020, the Company did not issue any RSRs and there are no RSRs outstanding.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

12. SHARE-BASED COMPENSATION CONTINUED

(c) Deferred Share Units (“DSU”)

The EIP authorizes the Board to grant DSUs, in its sole and absolute discretion in a lump sum amount or on regular intervals to eligible directors of the Company.

During the nine-month period ended September 30, 2021 and year-ended December 31, 2020, the Company did not issue any DSUs and there are no DSUs outstanding.

13. FINANCIAL INSTRUMENTS

Fair value

The carrying values of cash, receivables, accounts payable and accrued liabilities and due to/from related parties approximate their fair values due to the relatively short period to maturity of those financial instruments. The fair value of notes payable to related parties and lease receivable from related parties approximate their carrying value as they were fair valued as part of the acquisition purchase price allocation using a market rate of interest. Derivative warrant liability is carried at fair value and revalued at each reporting date.

Financial instruments recorded at fair value on the statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Change in assumptions could significantly affect the estimates.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

13. FINANCIAL INSTRUMENTS CONTINUED

The following table summarizes the classification of the Company’s financial instruments under IFRS 9:

FINANCIAL ASSETS	$
Cash	Fair Value Through Profit and Loss
Receivables	Amortized cost
Due from related party	Amortized cost
Lease receivable	Amortized cost
FINANCIAL LIABILITIES
Accounts payable and accrual liabilities	Amortized cost
Due to related party	Amortized cost
Notes payable	Amortized cost
Derivative liability	Fair Value Through Profit and Loss

Credit risk

Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash, receivables, and amounts due from related parties. Receivables are primarily related to GST receivable and other receivable balances. Given the GST is payable by the government of Canada, management feels there is minimal credit risk associated with this receivable balance. Similarly, management feels there is minimal risk of non-collection since License Holder has been paying its obligations to the Company. The Company does not have significant credit risk with respect to customers. The Company’s maximum credit risk exposure is equivalent to the carrying value of these instruments.

Liquidity risk

The Company manages liquidity risk by maintaining adequate cash balances to meet short and long-term business requirements. As at September 30, 2021, all of the Company’s financial liabilities, except for its warrant derivative liability and notes payable, have maturities less than one year. As at September 30, 2021, the Company had cash of $189,306 (December 31, 2020 – $136,553) and a working capital deficiency of $290,440 (December 31, 2020 – working capital deficiency of $1,276,856). Refer to note 1 for further discussion regarding going concern.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company holds cash in accounts with variable interest rates, and currently does not carry variable interest-bearing debt. It is management’s opinion that the Company is not exposed to significant interest rate risk.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Foreign currency risk

Foreign currency risk is defined as the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company maintains financial instruments and enters into transactions denominated in foreign currencies, principally in USD, exposing the Company to fluctuating balances and cash flows due to various in foreign exchange rates. The Company has not entered into any foreign currency contracts to mitigate this risk. The CAD equivalent carrying amounts of the Company’s USD denominated monetary assets and monetary liabilities is as follows:

	As of September 30, 2021	As of December 31, 2020
ASSETS	$	$
Cash	189,306 1,780,290 837,043 53,861 1,296,389	- 1,868,318 230,189 195,673 2,415,991
Due from related party

LIABILITIES
Accounts payable and accrual liabilities
Due to related party
Notespayable

Assuming all other variables remain constant, a fluctuation of +/- 5.0% in the exchange rate between CAD and USD would impact the comprehensive loss for the period by approximately $2,977 (2020 - $50,894).

14. SUPPLEMENTAL CASH FLOW INFORMATION

The following are non-cash investing and financing activities that occurred during the period ended September 30, 2021 and September 30, 2020

	September 30, 2021	September 30, 2020
Movement from reserve on exercise of options $ Movement from reserve on exercise of warrants Accrued sublease payments receivable Share subscription redeemed Share issuance costs – agent warrants Prepaid share issuance costs Acquisition of New Leaf USA	129,706 $ 21,295 244,657 - - - -	- 3,997 292,310 40,000 42,072 30,750 2,602,800

During the period ended September 30, 2021, the Company made cash payments of $nil related to taxes (September 30, 2020 - $nil) and $187,344 related to interest (September 30, 2020 - $118,662).

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

New Leaf Ventures, Inc. Condensed Consolidated Interim Statements of Cash Flows For the Nine Month Periods Ended September 30, 2021 and 2020 (Unaudited - Expressed in Canadian Dollars)

15. SUBSEQUENT EVENTS

On November 2, 2021, pursuant to its base shelf prospectus dated July 26, 2021 and the prospectus supplement dated October 27 2021, the Company completed a public offering consisting of 6,000,000 units of the Company (the “Units”) at a price of $0.25 per Unit (the “Offering Price”), for aggregate gross proceeds of $1,500,000. Each Unit is comprised of one (1) common share of the Company (a “Common Share”) and one half (1/2) common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant will be exercisable at a price of $0.40 until November 1, 2023 (the “Expiry Date”) subject to acceleration. If, during the life of the Warrants, the closing price of the Common Shares as quoted on the Canadian Securities Exchange is equal to or exceeds $0.60 per Common Share for any 10 consecutive trading days, the Company may provide notice to the holders of the Warrants by issuance of a news release that the expiry date of the Warrants will be accelerated to the 30th day after the date on which the Company issues such news release.

In connection with the public offering and pursuant to an agency agreement dated October 27, 2021, between the Company and Research Capital Corporation (the “Agent”), the Agent acted as agent for the offering, and received a cash commission in the amount of $105,000 in connection with the offering from certain purchasers of the Units (the “Purchasers”). The Company also issued 420,000 non-transferrable share purchase warrants (the “Agent Warrants”) to the Agent and members of its selling group. Each Agent Warrant will entitle the holder thereof to purchase one Unit (an “Agent Unit”) at an exercise price of $0.25 until the Expiry Date. Each Agent Unit consists of one Common Share and one-half of one warrant (each whole warrant, an “Agent Unit Warrant”). Each Agent Unit Warrant will entitle the holder thereof to purchase one Common Share on the same terms and conditions as the Warrants.

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

AI assistant

New Leaf Ventures Inc. — Interim / Quarterly Report 2021

47855_rns_2021-11-29_5e591638-fca5-424e-8325-81bbf63e7cc1.pdf

New Leaf Ventures, Inc.

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Financial Position As at September 30, 2021 and December 31, 2020

(Unaudited - Expressed in Canadian Dollars )

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss For the Three and Nine Month Periods Ended September 30, 2021 and 2020 (Unaudited - Expressed in Canadian Dollars Except Number of Shares )

New Leaf Ventures, Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Deficiency) For the Nine Month Period Ended September 30, 2021 and 2020

(Unaudited - Expressed in Canadian Dollars )

1. NATURE OF OPERATIONS AND CONTINUANCE OF OPERATIONS

2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE

Basis of presentation and statement of compliance

2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE, CONTINUED

Use of Judgements, Estimates and Assumptions

3. SIGNIFICANT ACCOUNTING POLICIES

4. SEGMENT REPORTING

5. ACQUISITION OF NEW LEAF USA, INC.

5. ACQUISITION OF NEW LEAF USA, INC. CONTINUED

6. PREPAID EXPENSES

7. PROPERTY AND EQUIPMENT

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

9. RELATED PARTY TRANSACTIONS

(i) Transactions with the License Holder

9. RELATED PARTY TRANSACTIONS CONTINUED

(ii) Transactions with other related parties

9. RELATED PARTY TRANSACTIONS CONTINUED

(iii) Key Personnel Compensation

10. LEASES

10. LEASES CONTINUED

The Company as a Lessee

The Company’s lease obligations are as follows:

10. LEASES CONTINUED

The Company as a Lessor

11. SHARE CAPITAL

Authorized share capital

11. SHARE CAPITAL CONTINUED

Issued share capital

During the Nine-months period ended September 30, 2021:

During the year ended December 31, 2020:

11. SHARE CAPITAL CONTINUED

Warrants

11. SHARE CAPITAL CONTINUED

11. SHARE CAPITAL CONTINUED

12. SHARE-BASED COMPENSATION

Equity incentive plan

12. SHARE-BASED COMPENSATION CONTINUED

(a) Share options

12. SHARE-BASED COMPENSATION CONTINUED

(b) Restricted Share Rights (“RSR”)

12. SHARE-BASED COMPENSATION CONTINUED

(c) Deferred Share Units (“DSU”)

13. FINANCIAL INSTRUMENTS

Fair value

13. FINANCIAL INSTRUMENTS CONTINUED

Credit risk

Liquidity risk

Interest rate risk

Foreign currency risk

14. SUPPLEMENTAL CASH FLOW INFORMATION

15. SUBSEQUENT EVENTS

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New Leaf Ventures Inc. Interim / Quarterly Report 2021