Peekaboo Beans Inc. — Interim / Quarterly Report 2021

Aug 31, 2021

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PEEKABOO BEANS INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

NOTICE OF NO AUDITOR REVIEW OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In accordance with National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements. The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

PEEKABOO BEANS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian dollars - unaudited)

Note ASSETS Current assets Cash Amounts receivable Apparel production deposits 4 Prepaid expense Inventories 4 Total current assets Non-current assets Software and equipment 12 Goodwill 6 Total non-current assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdraft 16 Trade payables and accrued liabilities 14, 23 Loans 16 Total current liabilities Non-current liabilities Loans 16 Total liabilities Shareholders’ equity Share capital 15 Obligation to issue shares 15 Equity component of convertible debt Reserves 15 Deficit Accumulated other comprehensive loss Total shareholders’ equity Total liabilities and equity	June 30, 2021 $ - 5,858 31,209 7,282 247,483 291,832 1,239 320,000 321,239 $ 613,071 $ 173,640 1,543,429 972,717 2,689,786 97,443 2,787,229 15,420,048 2,000 22,309 2,815,305 (20,422,513) (11,307) (2,174,158) $ 613,071	September 30, 2020
		$ 122,499 18,533 21,217 9,508 420,971
		592,728 1,055 -
		1,055
		$ 593,783
		$ - 1,407,723 1,271,534
		2,679,257 19,563
		2,698,820
		14,622,486 2,000 - 2,760,973 (19,484,388) (6,108)
		(2,105,037)
		$ 593,783

Note 1, “Nature of Operations and Going Concern” Note 21, “Commitments and Contingencies”

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

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PEEKABOO BEANS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Expressed in Canadian dollars - unaudited)

Note Sales Cost of goods sold 8 Gross profit Operating expenses Marketing and advertising 10 Administrative 11 Distribution and information technology 12 Executive and employee salaries 13 Share-based compensation 13 Professional fees and public company costs 14 Investor relations Total operating expenses Loss before other expenses Other expenses Interest and finance costs Gain/loss on settlement of accounts payable Government subsidies Foreign exchange and other expense Net loss for the period Other comprehensive loss Currency translation adjustment on foreign operations Comprehensive loss for the period Basic and diluted loss per common share Weighted average number of common shares outstanding	Three months ended Nine months ended June 30, June 30, 2021 2020 2021 2020
	$ 225,205 $ 215,749 $ 613,474 $ 1,266,642 198,916 194,654 523,321 1328,684
	26,289 21,095 90,153 (62,042) 58,976 40,163 205,785 175,538 57,374 102,106 149,275 354,643 21,136 4,948 86,097 54,700 137,421 70,587 411,007 423,303 5,716 2,641 17,514 22,117 28,820 26,446 108,322 138,652 - - - 39
	309,443 246,891 978,000 1,168,992
	(283,154) (225,796) (887,847) (1,231,034) 46,216 28,774 136,721 94,944 717 - 64,225 (49,400) (56,472) (33,847) (150,391) (33,847) - 259 (277) 276
	(273,615) (220,982) (938,125) (1,243,007) (5,496) (249) (5,247) 114
	$ (279,111) $ (221,231) $ (943,372) $ (1,242,893)
	$ (0.01) $ (0.01) $ (0.02) $ (0.03)
	38,096,160 35,939,952 38,096,160 35,939,952

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PEEKABOO BEANS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) (Expressed in Canadian dollars - unaudited)

Note At September 30, 2019 Adjustment on adoption of IFRS 16 4 At October 1, 2019 Settlement of debt 15 Shares issued for services 15 Exercise of warrants 15 Share-based compensation 15 Net loss Currency translation adjustment At June 30, 2020 At September 30, 2020 Settlement of debt 15 Shares issued for acquisition 15 Convertible debenture issuance 16 Share-based compensation 15 Net loss Currency translation adjustment At June 30, 2021	Number of shares Share capital Obligation To Issue Shares Equity component of convertible debenture Reserves Deficit Accumulated Other Comprehensive Loss Total
	35,044,885 $ 14,432,485 $ - $ - $ 2,732,567 $ (17,516,573) $ (6,073) $ (357,594) - - - - - (5,862) - (5,862)
	35,044,885 $14,432,485 $ - $ - $2,732,567 $ (17,522,435) $ (6,073) $ (363,456)
	500,000 15,000 - - - - - 15,000 1,440,000 57,600 - - - - - 57,600 2,060,000 103,000 - - - - - 103,000 - - - - 22,117 - - 22,117 - - - - - (1,243,006) - (1,243,006) - - - - - - (114) (114)
	38,044,885$14,608,085 $ - $ - $2,754,684 $ (18,765,441) $ (6,187) $ (1,408,859)
	39,044,885$14,622,486 $ 2,000 $ - $2,760,973 $ (19,484,388) $ (6,060) $ (2,104,990)
	7,531,097 447,563 - - - - - 447,563 4,000,000 320,000 - - - - - 320,000 - - - 22,309 36,818 - - 59,127 - - - - 17,514 - - 17,514 - - - - - (938,125) - (938,125) - - - - - - (5,247) (5,247)
	50,575,982$15,420,048 $ 2,000 $ 22,309 $2,815,305 $ (20,422,513) $ (11,307) $ (2,174,158)

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

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PEEKABOO BEANS INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian dollars - unaudited)

OPERATING ACTIVITIES Loss for the period Adjustments for: Share-based compensation Shares issued for settlement of debt Accrued interest on loans Accrued interest on leases Amortization Changes in non-cash working capital items: Amounts receivable Inventories Apparel production deposits Prepaid expenses Trade payables and accrued liabilities Interest paid on lease liabilities Cash used in operating activities INVESTING ACTIVITIES Purchase of equipment Cash used in investing activities FINANCING ACTIVITIES Loan advances Loan repayments Repayment of principal on lease liabilities Exercise of warrants Share issuances, net of issuance costs Cash provided by financing activities Effect of foreign exchange on cash Change in cash during the period Cash (bank overdraft), beginning of period Cash (bank overdraft), end of period	Nine months ended June 30, 2021 2020
	$ (938,125)$ (1,243,006) 17,514 22,117 155,594 72,599 169,656 8,318 - 3,092 356 88,188 12,675 1,827 173,488 788,849 (9,992) (40,015) 2,226 (14,779) 135,706 126,874 - (3,092)
	(280,901) (189,098)
	(540) -
	(540) -
	172,215 (40,804) (181,714) 190,162 - (91,366) - 103,000 - -
	(9,499) 160,992
	(5,199) (114)
	(296,139) (28,220) 122,499 (20,800)
	$ (173,640) $ (49,020)

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

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PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars – unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

Peekaboo Beans Inc. is a children's apparel brand with a focus on environmentally responsible clothes which are sold through an omni-channel approach. Children playwear apparel is sold through retail, social platforms and online.

Peekaboo Beans Inc. is incorporated in the Province of British Columbia, Canada, and has its head office is located at 206 – 5000 Canoe Pass Way, Tsawwassen, BC. Peekaboo Beans Inc. and its wholly-owned subsidiaries are referred to as the “Company” or “Peekaboo Beans”.

To date, the Company has incurred losses and further losses are anticipated as the Company develops its business. The continuing operations of the Company are dependent upon its ability to generate profitable operations in the future, and to continue to secure additional financing. There can be no assurance that the Company will be successful in its efforts to raise additional financing or if financing is available or that it will be on terms that are acceptable to the Company. These events and conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

The Company’s common shares are listed for trading on the Canadian Securities Exchange ("CSE") in Canada under the trading symbol, “BEAN”.

2. BASIS OF PRESENTATION

These unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34 – Interim financial reporting (International Accounting Standard) which is in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited interim condensed consolidated financial statements follow the same accounting policies and methods of application, and should be read in conjunction with, the audited annual financial statements of the Company for the year ended September 30, 2020. These unaudited interim condensed consolidated financial statements do not include all the information and note disclosures required by IFRS for annual consolidated financial statements and therefore should be read in conjunction with the Company’s audited consolidated financial statements for the year ended September 30, 2020.

There have been no significant changes to the Company’s accounting policies from those disclosed in the audited consolidated financial statements for the year ended September 30, 2020. There have also been no significant changes in judgments or estimates from those disclosed in the audited consolidated financial statements for the year ended September 30, 2020.

The Company’s board of directors approved the release of these financial statements on August 30, 2021.

3. SIGNIFICANT ACCOUNTING POLICIES

These interim financial statements have been prepared using the accounting policies as outlined in note 3 of the Fiscal 2020 audited consolidated financial statements, with the exception of the accounting standards adopted in the year ended September 30, 2021 ("Fiscal 2021"). Changes to significant accounting policies are described below.

PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars - unaudited)

4. SIGNIFICANT NEW ACCOUNTING STANDARDS

Standards recently adopted

– IFRS 16 Leases

In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), which sets out a new model for lease accounting replacing IAS 17, Leases (“IAS 17”) and related interpretations. The standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. Lessors continue to classify leases as finance and operating leases. Other areas of the lease accounting model have been impacted, including the definition of a lease. IFRS 16 became effective for annual periods beginning on or after January 1, 2019. The Company adopted the standard on October 1, 2019 using the modified retrospective method, with the cumulative effect initially recognized in deficit, with no restatement of prior comparative period.

Substantially all of the Company’s existing leases are real estate leases for its retail store, distribution centers and support offices and all were classified as operating leases prior to adoption of IFRS 16. The Company recognized right-of-use assets and lease liabilities for leases previously classified as operating leases under IAS 17. The depreciation expense on the right-of-use assets and the finance charge on the lease liabilities substantially replaced the lease-related expenses recorded in distribution and utilities expenses, previously recognized on a straight-line basis over the lease term under IAS 17. Variable lease payments and non-lease components are expensed as incurred.

The new standard does not change the amount of cash transferred between the lessor and lessee, but changes the presentation of the operating and financing cash flows presented on the Company’s consolidated statements of cash flows.

The Company has elected to apply the following recognition exemptions and practical expedients, as described under IFRS 16:

• i) recognition exemption of short term leases;

• ii) recognition exemption of low-value leases;

• iii) grandfather prior conclusions on contracts containing leases on transition;

• iv) a single discount rate was applied to a portfolio of leases with similar characteristics on transition;

• v) initial direct costs were excluded in the measurement of the right-of-use assets on transition;

• vi) hindsight was used in determining lease term at the date of transition.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate of 12% as at October 1, 2019. The right-of-use assets were measured as if the standard had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of initial application. The cumulative adjustment was recognized directly to deficit at October 1, 2019.

The following table summarizes the adjustments to opening balances resulting from the initial adoption of IFRS 16:

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PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 (Expressed in Canadian dollars - unaudited)

4. SIGNIFICANT NEW ACCOUNTING STANDARDS (continued)

– IFRS 16 Leases (continued)

	As reported previously under IAS 17, September 30, 2019 IFRS 16 transition adjustments Balance at October 1,2019
Assets Right-of-use assets Total impact on assets Liabilities Lease liabilities Retained earnings (deficit) Total impact on liabilities and shareholders' equity (deficit)	$ - $ 68,144 $ 68,144
	$ - $ 68,144 $ 68,144
	$ - $ 112,806 $ 112,806 - (5,862) (5,862)
	$ - $ 106,944 $ 106,944

Upon adoption of IFRS 16, the Company updated its lease accounting policies as follows:

The Company assesses whether a contract is or contains a lease at the inception of the contract. Leases are recognized as a right-of-use asset and corresponding lease liability at the lease commencement date. The lease liability is measured at the present value of the future fixed payments and variable lease payments that depend on an index or rate over the lease term, less any lease incentives receivable, discounted using the lessee’s incremental borrowing rate, unless the implicit interest rate in the lease can be easily determined. Lease liabilities are subsequently measured at amortized cost using the effective interest rate method.

Lease terms applied are the contractual non-cancellable periods of the lease, plus periods covered by renewal or termination options, if the Company is reasonably certain to exercise those options. Lease liabilities are remeasured (with a corresponding adjustment to the right-of-use asset) when there is a change in the lease term, a change in the future lease payments resulting from a change in an index or rate used to determined those payments, or when the lease contract is modified and the lease modification is not accounted for as a separate lease.

The right-of-use assets include the initial measurement of the corresponding lease liabilities, lease payments at or before the commencement date, any initial direct costs, less any lease incentives received before the commencement date. The right-of-use assets are subsequently measured at cost and are depreciated on a straight-line basis from the date the underlying asset is available for use over the lease term.

Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liabilities and are recognized in cost of goods sold and selling, general and administrative expenses as incurred.

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PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars - unaudited)

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of unaudited condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and assumptions are continuously evaluated and are based on management’s best judgments and experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results may differ from these estimates.

In preparing these interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and key sources of estimation of uncertainty were the same as those applied in note 5 of the Fiscal 2020 audited consolidated financial statements, except as noted below relating to the adoption of IFRS 16.

The Company exercises judgment in determining the appropriate lease term on a lease by lease basis and considers all facts and circumstances that create an economic incentive to exercise a renewal or termination option. The periods covered by renewal options are included in the least term only if the Company is reasonably certain it will exercise such renewal options.

The Company uses the lessee’s incremental borrowing rate when determining the carrying amount of right-of-use assets and lease liabilities, as the interest rates implicit in the lease agreements are not readily available. The Company determines the incremental borrowing rate of each leased asset as the rate of interest that the Company would have to pay to borrow, over a similar term with a similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment.

6. BUSINESS COMBINATIONS

Acquisitions that are determined to be business combinations have been recorded under the purchase method of accounting and results have been included in the condensed consolidated interim statements of operations and comprehensive income from their respective acquisition dates. Accordingly, the allocation of the purchase price to assets and liabilities is based on the fair value, with the excess of the purchase price over the fair value of the assets acquired being allocated to goodwill, if any. On June 16, 2021, The Company completed the purchase of 100% of the 1,000 common shares of Les Petits Terribles Inc. for the purchase price of $320,000 by way of 4,000,000 common shares in the Company. The purchase price allocation for the acquisition is preliminary, and subsequent adjustments during the measurement period will occur as the Company completes its estimation of the fair value of assets acquired and liabilities assumed, including valuation of intangible assets.

7. APPAREL PRODUCTION DEPOSITS

PPAREL PRODUCTION DEPOSITS
		June 30,	September 30,
		2021		2020
Apparel Production Deposits	$	31,209	$	21,217

The Company is required to make deposits to its manufacturers to secure production. The deposits will be credited against the final purchase invoice after the inventory is shipped to the Company’s warehouse. The Company’s contract manufacturers are located in Vietnam and conduct business transactions in United States dollars (USD).

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

PEEKABOO BEANS INC.

(Expressed in Canadian dollars - unaudited)

8. INVENTORIES

Inventory consists of children’s playwear apparel which is purchased from third party manufacturers. As at June 30, 2021, the Company holds finished goods of $247,483 (September 30, 2020 - $420,971).

Inventory expensed in net loss and included in cost of goods sold for the three and nine months ended June 30, 2021 was $198,916 and $523,321(2020 - $186,809 and $1,294,557), respectively.

9. ADMINISTRATIVE

DMINISTRATIVE
		Three months		ended		Nine months		ended
		June 30,				June 30,
		2021		2020		2021		2020
Credit card processing and miscellaneous	$	1,220	$	1,356	$	3,887	$	4,229
Consulting		23,359		37,485		74,085		165,553
Insurance		9,703		9,398		29,132		28,158
Travel, meals and entertainment		975		2,487		2,928		17,889
Amortization, accretion and office cost		22,117		51,380		39,243		138,804
	$	57,374	$	102,106	$	149,275	$	354,643
STRIBUTION AND INFORMATION TECHNOLOGY
		Three months		ended		Nine months		ended
		June 30,				June 30,
		2021		2020		2021		2020
Rent and utilities	$	7,202	$	(9,769)	$	39,157	$	(339)
Information technology		13,934		14,717		46,940		55,099
	$	21,136	$	4,948	$	86,097	$	54,700

10. DISTRIBUTION AND INFORMATION TECHNOLOGY

11. EXECUTIVE AND EMPLOYEE COMPENSATION

XECUTIVE AND EMPLOYEE COMPENSATION
Executive and employee salary compensation	Three months ended June 30, Nine months ended June 30, 2021 2020 2021 2020
	$ 16,900 $ 11,011 $ 46,774 $ 94,865 120,521 59,576 364,233 328,438
Executive officer salaries Employee salaries
	$ 137,421 $ 70,587 $ 411,007 $ 423,303

12. PROFESSIONAL FEES AND PUBLIC COMPANY COSTS

ROFESSIONAL FEES AND PUBLIC COMPANY	COSTS
Legal Audit and accounting Other listing and transfer agent fees	Three months ended June 30, Nine months ended June 30, 2021 2020 2021 2020
	$ 15,604 $ 19,788 $ 59,339 $ 75,683 - - 23,401 39,953 13,216 6,658 25,582 23,016
	$ 28,820 $ 26,446 $ 108,322 $ 138,652

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PEEKABOO BEANS INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars - unaudited)

13. SOFTWARE AND EQUIPMENT

13. SOFTWARE AND EQUIPMENT
Cost Balance, September 30, 2020 Acquisitions Balance, June 30, 2021 Accumulated Amortization Balance, September 30, 2020 Amortization Balance, June 30, 2021 Net Book Value As at September 30, 2020 As at June 30, 2021 14. TRADE AND OTHER PAYABLES Trade payables Accruals Other non-trade payables	Computer Hardware Computer Software and Development Total
	$ 5,435 $ 42,615 $ 48,050 643 - 643
	$6,078 $42,615 $48,693
	$ 4,688 $ 42,306 $ 46,994 343 116 459
	$5,032 $42,422 $47,454
	$746 $ 309 $ 1,055
	$1,046 $ 193 $ 1,239
	June 30,2021 September 30,2020
	$ 1,048,618 $ 949,750 46,667 60,167 444,274 394,071
	$1,539,559 $1,403,988

15. SHARE CAPITAL

The Company has authorized an unlimited number of common shares and preferred shares without par value. All common shares issued have equal rights to dividends and shareholders are entitled to one vote per share at annual and general meetings of the Company.

As at June 30, 2021, the Company had 50,575,982 common shares issued and outstanding. Details of the issuance of share capital are as follows:

• (a) Issued and Outstanding

During the nine months ended June 30, 2021, the Company:

• (i) Issued 1,978,333 common shares valued at $15,000 pursuant to settlement of $98,917 of debt and recorded a gain on settlement of liabilities of $19,784. The common shares were valued at the trading price of the Company's stock at the time of issuance.

• (ii) Issued 5,552,764 common shares valued at $360,930 pursuant to settlement of $277,638 of debt and recorded a loss on settlement of liabilities of $83,291. The common shares were valued at the trading price of the Company's stock at the time of issuance.

• (iii) Issued 4,000,000 common shares valued at $320,000 pursuant to acquisition of Les Petits Terribles Inc. The common shares were valued at the trading price of the Company's stock at the time of issuance.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

PEEKABOO BEANS INC.

(Expressed in Canadian dollars - unaudited)

15. SHARE CAPITAL (continued)

(a) Issued and Outstanding (continued)

During the nine months ended June 30, 2020, the Company:

• (i) Issued 500,000 common shares valued at $15,000 pursuant to settlement of $50,000 of debt and recorded a gain on settlement of liabilities of $35,000. The common shares were valued at the trading price of the Company's stock at the time of issuance.

• (ii) Issued 1,440,000 common shares valued at $57,600 pursuant to settlement of services with a value of $72,000 and recorded a gain on settlement of liabilities of $14,400. The common shares were valued at the trading price of the Company's stock at the time of issuance.

• (iii) Issued 1,810,000 common shares valued at $90,500 pursuant to exercise of warrants at $0.05 per share.

All outstanding warrants exercise period of each warrant may be accelerated by the Company if, at any time during the term of the warrant, the volume weighted average price of the Company’s common shares on the Canadian Securities Exchange is equal to or greater than $1.55 over a period of 10 consecutive trading days.

(b) Stock Options

In 2016, and revised in 2020, the Company adopted a stock option plan. The stock option plan will be a 10% rolling plan, whereby the total number of common shares that may be reserved for issuance will be 10% of the issued and outstanding shares of the Company at the time of grant, less any shares reserved for issuance pursuant to the grant of stock options under any other share compensation arrangements.

A summary of options activity to June 30, 2021 is as follows:

September 30, 2020 Issued June 30, 2021 Exercisable	Options Outstanding Weighted Average Exercise Price
	2,817,442 $ 0.27 - -
	2,817,442 0.27
	1,522,442 $ 0.44

Share-based compensation for the three and nine months ended June 30, 2021 was $5,716 and $13,391 (2020 - $2,641 and $22,118) for stock options that were granted or vested in the period.

3,391 (2020 - $2,641 and $22,118) for	stock options that were granted or vested in the period.
Executive, officer and director Employee Consultants	Three months ended June 30, Nine months ended June 30, 2021 2020 2021 2020
	$ 3,987 $ 2,641 $ 8,204 $ 19,059 1,729 - 5,187 - - - - 3,059
	$ 5,716 $ 2,641 $ 13,391 $ 22,118

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

PEEKABOO BEANS INC.

(Expressed in Canadian dollars - unaudited)

15. SHARE CAPITAL (continued)

(b) Stock Options (continued)

The grant date fair value of the options granted and vested during the Nine months ended June 30, 2021 was valued using the Black-Scholes Option Pricing Model with the following assumptions:

ssumptions:
	2021			2020
Volatility		152%		76-133%
Risk-free interest rate		1.5%		1.5%
Expected life of option	10	years		2 – 10 years
Dividend yield		0%		0%
arrants
summary of warrant activity to June 30, 2021, is as follows:
	Warrants		Weighted Average
	Outstanding		Exercise Price
September 30, 2020	9,515,000		$	0.16
Issued	550,000			0.15
Expired	(375,000)			0.30
June 30, 2021	9,140,000		$	0.15

(c) Warrants

A summary of warrant activity to June 30, 2021, is as follows:

As at June 30, 2021, the weighted average remaining life of the outstanding warrants is 0.72 years (September 30, 2020 – 1.35 years).

16. LOANS

ANS
Debt Ranked by Seniority Current loans: Short-term loans (a),(c),(d), (e),(f)(i),(f)( ii) Non-current loans: Convertible debenture (g) CEBA Loan (b)	June 30, 2021 September 30, 2020
	$ 964,944 $ 1,271,534 56,394 19,563 41,049 19,563
	$ 1,062,386 $ 1,291,097

Movement on short term loans

Balance at September 30, 2020 Additions Interest Repayments Balance at June 30, 2021	Amount
	$ 1,271,534 300,433 88,362 (695,385)
	$ 964,944

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PEEKABOO BEANS INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars - unaudited)

16. LOANS (continued)

LOANS (continued)
Movement on non-current loans Balance at September 30, 2020 Additions Additions – new convertible debentures Discount Interest Accretion expense Repayments Balance at June 30, 2021	Amount
	$ 19,563 21,486 110,000 (59,127) 3,002 2,519 -
	$ 97,443

(a) Apparel loans

As at June 30, 2021, the Company has an apparel loan of $74,972 (September 30, 2020 - $85,421) owing to an apparel finance company. The loan is secured by specific apparel inventory and is charged a quarterly finance fee.

(b) Canada Emergency Business Loan

The Company received the Canada Emergency Benefit Account ("CEBA") interest-free loan of $60,000 of which $20,000 is forgivable if repaid by June 30, 2022. The loan was recorded at a fair value of $18,443 using an effective rate of 15%, considering the grant, the interest-free loan and the forgivable portion. The residual value of $21,557 is recorded as other income. As of June 30, 2021 a balance of $41,049 is recorded as a long-term loan, as an additional $20,000 of CEBA was received during the quarter. Effective January 1, 2023, any outstanding balance on the term loan shall bear interest at a rate of 5% per annum. The term loan matures on June 30, 2025. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 33% ($20,000).

(c) Shopify Loan

During the year ended September 30, 2020, the Company received a loan from Shopify in the amount of $76,000 advanced on June 17, 2020, with $82,080 repayable using a 10% remittance rate based on Shopify sales and $74,000 advanced on September 30, 2020, with $81,400 repayable using a 14% remittance rate. Remittances to Shopify will continue until the total remittance payments equal the repayable amount. At June 30, 2021 a balance of $53,010 is owing to Shopify (2020 - $113,500).

(d) Unsecured promissory notes

• (i) The Company has a $86,497 (September 30, 2020 – $184,288) unsecured promissory note bearing interest at 12% per annum, maturing on March 9, 2020. Total interest accrued on the loan during the nine months ended June 30, 2021 is $13,504 (2020 – $16,643).

During the three months ended June 30, 2021, the Company issued 2,000,000 shares at $0.05 per share equivalent to $100,000 as a payment towards the amount outstanding as of March 16, 2021. The loan is now due on demand and continues to accrue interest. The loan is currently being renegotiated and continues to accrue interest.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

PEEKABOO BEANS INC.

(Expressed in Canadian dollars - unaudited)

1. LOANS (continued)

2. (ii) The Company's Chief Executive Officer is owed $58,817 by way of an unsecured promissory note bearing interest at 12% per annum, maturing on November 12, 2018. Total interest accrued on the loan during the nine months ended June 30, 2021 is $11,930 (2020 – $12,597). The loan is now due on demand and continues to accrue interest. The loan is currently being renegotiated and continues to accrue interest.

During the nine months ended June 30, 2021, the Company issued 1,020,833 shares at $0.05 per share equivalent to $51,042 as a partial payment towards amounts outstanding. The loan is now due on demand and continues to accrue interest. The loan is currently being renegotiated and continues to accrue interest.

• (iii) As at June 30, 2021, the Company has advances payable in the amount of $42,176 (September 30, 2020 - $98,495). The advances are to be repaid through a specified percentage of 20% of the Company's product sales and has no specified repayment date.

(e) Term Loans

• (i) During the year ended September 30, 2020, the Company received two non-revolving term loan of $50,000 each with a maturity date of March 15, 2021 and June 30, 2021 respectively. The loans bear no interest and upon maturity date, the Company shall pay $10,000 to the lender as a lender’s fee. The Company shall use 25% of gross revenue derived from sale of facemasks to repay the loan. As at June 30, 2021 a total of $102,623 is owing. The loan is currently being renegotiated and continues to accrue interest.

During the quarter, the Company received a term loan of $100,000, bearing interest at 12% per annum with a maturity date of August 8, 2021. The Company shall pay $2,500 to the lender as a lender’s fee on maturity of the loan. The loan may be renewable upon consent from both parties prior to the maturity of the loan. Total interest accrued on the loan during the nine months ended June 30, 2021 is $4,790. The loan is currently being renegotiated and continues to accrue interest.

(f) Unsecured convertible promissory notes

• (i) The Company’s former Chief Financial Officer is owed $79,540 (September 30, 2020 - $233,958) by way of an unsecured convertible promissory note. The loan was due on June 30, 2020, bearing interest of 12% per annum and convertible into units at $0.60 per unit. Each unit will consist of one share and one half of one share purchase warrant, exercisable at $0.80 per share. On initial receipt of the loan, and on amendment, the Company determined that the carrying value of the debt did not materially differ from the fair market value, and as a result none of the balance was attributed to the conversion option and recorded in equity.

During the three months ended June 30, 2021, the Company issued 2,791,725 shares at $0.05 per share equivalent to $139,586 as a payment towards the amount outstanding as of March 16, 2021. Total interest accrued during the nine months ended June 30, 2021 is $15,160 (2020 - $21,362). The loan is currently being renegotiated and continues to accrue interest.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

PEEKABOO BEANS INC.

(Expressed in Canadian dollars - unaudited)

16. LOANS (continued)

• (ii) During the year ended September 30, 2020, the Company received $275,000 by way of an unsecured convertible promissory note. The note bears interest at 12% per annum, matures on November 6, 2021, and is convertible into units at $0.20 per unit. Each unit will consist of one share and one half of one share purchase warrant, exercisable at $0.30 per share until November 6, 2021. On initial receipt of the loan, the Company determined that the carrying value of the debt did not materially differ from the fair market value, and as a result none of the balance was attributed to the conversion option and recorded in equity. Total interest accrued during the three months ended June 30, 2021 is $24,862 (2020 - $24,773). The Company is in default on making interest payments, and therefore the note is now payable on demand and has been shown as a current liability.

• (g) Convertible Debenture Units

During the nine months ended June 30, 2021, the Company received $110,000 by way of convertible debenture units, issuing 110 units at a price of $1,000 per unit. Each unit comprises of one unsecured convertible debenture with a principal amount of $1,000 each and 5,000 common share purchase warrants. Each warrant entitles the holder to acquire one common share of the Company at a price of $0.15 per share until April 9, 2023. The debentures matures on April 9, 2023 and bear interest at a rate of 12% per annum until maturity. Total interest accrued during the nine months ended June 30, 2021, is $3,001. The $36,818 fair value of the warrants was determined using the Black-Scholes option pricing model assuming no expected dividends, a risk-free interest rate of 1.50, an expected stock price volatility of 218%, and an expected life of two years. The $22,309 residual value was attributed to the equity component of the convertible debentures and is presented in equity.

17. LOSS PER SHARE

Diluted loss per share for the three months ended June 30, 2021 is the same as basic loss per share as the effect of warrants and options would be anti-dilutive.

18. RELATED PARTY TRANSACTIONS

During the nine months ended June 30, 2021:

• (a) The Company paid its Chief Executive Officer $46,774 (2020 - $94,865) in salary (Note 11). (b) The Company recorded $8,204 (2020 - $18,484) in share-based compensation to officers and directors.

• (c) The Company owes its Chief Executive Officer $58,817 by way of an unsecured promissory note bearing interest at 12% per annum (Note 16(d)(ii)). Total interest expense on the loan during the nine months ended June 30, 2021 is $11,930 (2020 – $12,597).

19. COMMITMENTS AND CONTINGENCIES

The commercial premises from which the Company carries out its head office and warehouse locations are leased from third parties. This rental contract is classified as operating lease since there is no transfer of risks and rewards inherent to ownership. The minimum rent payable under noncancellable operating leases are as follows:

2021

$ 97,925

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PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 (Expressed in Canadian dollars - unaudited)

20. FINANCIAL INSTRUMENTS

The Company is exposed to certain financial risks as listed below. There has been no change in the exposure to risk, nor its objectives, policies and process for managing the risk from the prior year. Disclosures relating to exposure to risks, in particular credit risk, liquidity risk, foreign exchange risk and interest rate risk are provided below.

Credit Risk

Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company’s financial instruments that are exposed to concentrations of credit risk are primarily cash. The Company limits its exposure to credit risk with respect to cash by investing available cash with major Canadian chartered banks. The Company’s cash is not subject to any external restrictions.

Liquidity Risk

As at June 30, 2021, the Company had a cash overdraft of $173,640 (September 30, 2020 – cash of $122,499) available to settle current liabilities of $2,689,786 September 30, 2020 - $2,679,257). The Company’s liquidity follows a seasonal pattern based on the timing of inventory purchases. The Company expects to finance its inventory purchases and administrative expenditures through cash flows from operations, debt as well as equity financing.

The following table identifies the undiscounted contractual maturities of the Company’s financial liabilities as at June 30, 2021:

			After one but
			not more than
	Within	oneyear	fiveyears	After fiveyears			Total
Bank overdraft	$	173,640	$ -	$	-	$	173,640
Trade and other payables		1,539,559	-	-			1,539,559
Short-term loan		972,717	-		-		972,717
Notespayable		-	97,443		-		97,443
	$	2,689,786	$ 97,443	$	-	$	2,787,229

Market Risk – foreign exchange risk

At June 30, 2021, a majority of the Company’s inventory purchases are in US dollars. All of the Company’s revenues and future equity raised is expected to be predominantly in Canadian dollars. Accordingly, the US dollar denominated financial assets and liabilities are subject to fluctuations in exchange rates and can have an effect on the Company’s reported results. Management has chosen not to hedge its foreign exchange risk.

The Company’s foreign exchange risk is primarily limited to currency fluctuations between the Canadian and US dollar. At June 30, 2021, the Company does not have significant financial assets or liabilities denominated in US dollars.

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PEEKABOO BEANS INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

(Expressed in Canadian dollars - unaudited)

20. FINANCIAL INSTRUMENTS (continued)

In order to protect itself from the risk of losses should the value of the Canadian dollar decline compared to the foreign currency, the Company may consider using forward contracts to fix the exchange rate of a portion of its expected U.S. dollar requirements. The contracts will be matched with anticipated foreign currency purchases.

Market Risk – interest rate risk

Financial instruments that potentially subject the Company to cash flow interest rate risk include financial assets and liabilities with variable interest rates and consist of cash and the credit facility. As at June 30, 2021, cash consisted of cash on hand and balances (overdraft) with banks. Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk.

Fair Values

At June 30, 2021, and September 30, 2020, the Company’s financial assets and liabilities approximate fair value due to their short-term to maturity or because they bear interest at market rates.

21. CAPITAL MANAGEMENT

As at June 30, 2021, the Company’s capital is composed of interest-bearing debt, its loan facility, and shareholders’ equity. The Company’s primary objectives, when managing its capital, are to maintain adequate levels of funding to support the manufacturing operations of the Company and to maintain corporate and administrative functions.

The Company defines capital as long-term debt, and equity, consisting of the issued common shares, stock options and warrants. The capital structure of the Company is managed to provide sufficient funding operating activities. Funds are primarily secured through a combination of equity capital raised by way of private placements and short-term and long-term debt. There can be no assurances that the Company will be able to continue raising equity capital and bank debt in this manner. The Company invests all capital that is surplus to its immediate needs in short-term, liquid and highly rated financial instruments, such as cash and other short-term deposits, which are all held with major financial institutions.

There were no changes to the Company’s approach to capital management during the period ended June 30, 2021.

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