Ultra Brands Ltd. — Interim / Quarterly Report 2021

Aug 31, 2021

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FEEL FOODS LTD. (formerly NHS Industries Ltd.)

UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTH PERIOD ENDED JUNE 30, 2021

(Expressed in Canadian dollars)

Index

	Page
Management Responsibility	2
Unaudited Condensed Interim Consolidated Statements of Financial Position	3
Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Operations	4
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	5
Unaudited Condensed Interim Consolidated Statements of Cash Flows	6
Notes to the Unaudited Condensed Interim Consolidated Financial Statements	7 - 18

MANAGEMENT'S RESPONSIBILITY FOR UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL REPORTING

The accompanying unaudited condensed interim consolidated financial statements of Feel Foods Ltd. (formerly NHS Industries Ltd. [the "Company"] are the responsibility of the management and Board of Directors of the Company. The unaudited condensed interim financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the unaudited condensed interim consolidated financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the balance sheet date. In the opinion of management, the unaudited condensed interim consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34 Interim Financial Reporting consistent with International Financial Reporting Standards appropriate in the circumstances.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

David Greenway CEO & Director

Vancouver, BC August 30, 2021

NOTICE TO READERS

The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements for the six months period ended June 30, 2021 have not been reviewed by the Company's auditors.

2

FEEL FOODS LTD.

(formerly NHS Industries Ltd.)

Unaudited Condensed Interim Consolidated Statements of Financial Position (expressed in Canadian dollars)

(expressed inCanadian dollars)
	June 30, 2021 December 31, 2020
Current Cash Amounts receivable Due from related parties (Note 4) Due from related party(Note 4) Investments(Note 4, Note 6 and Note 9) Property, plant and equipment(Note 3) Total assets	$ 2,415,547 $ 21,894 57,622 16,383 - -
	2,473,169 38,277 416,000 400,000 400,001 175,001 1,270,047 1,291,630
	$ 4,559,217 $1,904,908
Current Accounts payable and accrued liabilities (Note 4) Due to relates party (Note 4) Security deposit Current portion of mortgage (Note 5) Long term portion of mortgage(Note 5) Long term loan(Note 11) Total liabilities Shareholders’ equity Shares capital (Note 6) Subscription receivable Contributed surplus Deficit, per accompanying statement Total shareholders’ equity Total liabilities and shareholders’ equity	$ 529,190 $ 166,468 167,682 182,210 7,000 7,000 23,393 22,902
	727,265 378,580 520,369 532,349 52,417 30,246
	1,300,051 941,175
	14,403,461 4,431,038 (773,730) - 961,915 343,686 (11,332,480) (3,810,991)
	3,259,166 963,733
	$ 4,559,217 $ 1,904,908

Nature and continuance of operations (Note 1)

Approved on behalf of the Board on August 30, 2021:

“David Greenway” “Natasha Sever” Director – David Greenway Director – Natasha Sever

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

3

FEEL FOODS LTD.

(formerly NHS Industries Ltd.)

Unaudited Condensed Interim Consolidated Statements of Operations and Comprehensive Operations (expressed in Canadian dollars)

(expressed inCanadian dollars)
	Three Months Ended			Six Months	Ended
	June 30,	June	30,	June 30,	June 30,
	2021	2020		2021	2020
Revenue
Rent	$ 24,285	$	24,286	$ 48,571	$	24,286
Net food service revenue	-		(70)	-		358
Interest	8,000		8,000	16,000		16,009
Total revenue	32,285		32,216	64,571		40,653
Expenses
Accretion (Note 11)	1,110		-	2,171		-
Amortization (Note 3)	10,792		11,462	21,583		22,889
Bank charges	435		52	519		78
Consulting fees (Note 4)	212,575		13,200	217,375		80,200
Director fees (Note 4)	18,000		24,000	39,000		40,000
Interest on long term loans (Note 4 and Note 5)	10,867		6,057	21,536		12,103
Professional fees	16,452		(1,120)	22,352		230
Salaries	-		-	-		31
Share based payments (Note 6)	-		-	-		64,604
Transfer agent & filing fees	22,486		3,703	22,486		6,093
Office, utility, property taxes and
miscellaneous	11,574		2,642	13,823		5,633
Total expenses before other items	**304,291 **		59,996	360,845		231,830
Other items
Gain on settlement of debts (Note 6)	-		-	-	(360,700)
Consideration paid in excess of net assets
acquired from acquisition	(25,000)		-	7,439,059		-
Fair value adjustment to investment (Note 4)	6,250		-	(225,000)		-
Write offof receivable	11,156			11,156		-
Total expenses (income)	296,697		59,996	7,586,060	(128,839)
Net (loss) income and comprehensive (loss)
income for the period	$ (264,411)	$ (27,780)		$ (7,521,489)	$	169,492
Net (loss) income per share	$ (0.006)	$	(0.001)	$ (0.209)	$	0.008
Weighted average number of shares
outstanding	47,627,006	24,040,901		36,026,456	20,054,538

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

4

FEEL FOODS LTD. (formerly NHS Industries Ltd.) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (expressed in Canadian dollars) Number of Shares Share Capital & subscribed Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity Balance, December 31, 2019 8,659,900 $ 3,596,507 $ - $ 279,082 $ (3,415,703) $ 459,886 Common shares issued to settle debts 2,725,000 184,300 - - - 184,300 Common shares issued as an investment 1,250,000 250,000 - - - 250,000 Common shares issued to acquire Plenty-full 11,406,000 400,231 - - - 400,231 Shared based payments - - - 64,604 - 64,604 Net income for the period - - - - 169,492 169,492 Balance, June 30, 2020 24,040,900 4,431,038 - 343,686 (3,246,211) 1,528,513 Balance, December 31, 2020 24,040,900 4,431,038 - 343,686 (3,810,991) 963,733 Common shares issued for cash 16,261,875 3,252,375 (773,730) - - 2,478,645 Share issuance costs - (152,973) - - - (152,973) Fair value of finders’ warrants - (618,229) - 618,229 - - Common shares issued to acquire Be Good 22,050,000 7,166,250 - - - 7,166,250 Common shares issued as finder’s fee 1,000,000 325,000 - - - 325,000 Net loss for the period - - - - (7,521,489) (7,521,489) Adjustment onconsolidationofshares (3) - - - - - Balance, June 30, 2021 63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166	FEEL FOODS LTD. (formerly NHS Industries Ltd.) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (expressed in Canadian dollars) Number of Shares Share Capital & subscribed Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity Balance, December 31, 2019 8,659,900 $ 3,596,507 $ - $ 279,082 $ (3,415,703) $ 459,886 Common shares issued to settle debts 2,725,000 184,300 - - - 184,300 Common shares issued as an investment 1,250,000 250,000 - - - 250,000 Common shares issued to acquire Plenty-full 11,406,000 400,231 - - - 400,231 Shared based payments - - - 64,604 - 64,604 Net income for the period - - - - 169,492 169,492 Balance, June 30, 2020 24,040,900 4,431,038 - 343,686 (3,246,211) 1,528,513 Balance, December 31, 2020 24,040,900 4,431,038 - 343,686 (3,810,991) 963,733 Common shares issued for cash 16,261,875 3,252,375 (773,730) - - 2,478,645 Share issuance costs - (152,973) - - - (152,973) Fair value of finders’ warrants - (618,229) - 618,229 - - Common shares issued to acquire Be Good 22,050,000 7,166,250 - - - 7,166,250 Common shares issued as finder’s fee 1,000,000 325,000 - - - 325,000 Net loss for the period - - - - (7,521,489) (7,521,489) Adjustment onconsolidationofshares (3) - - - - - Balance, June 30, 2021 63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166	FEEL FOODS LTD. (formerly NHS Industries Ltd.) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (expressed in Canadian dollars) Number of Shares Share Capital & subscribed Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity Balance, December 31, 2019 8,659,900 $ 3,596,507 $ - $ 279,082 $ (3,415,703) $ 459,886 Common shares issued to settle debts 2,725,000 184,300 - - - 184,300 Common shares issued as an investment 1,250,000 250,000 - - - 250,000 Common shares issued to acquire Plenty-full 11,406,000 400,231 - - - 400,231 Shared based payments - - - 64,604 - 64,604 Net income for the period - - - - 169,492 169,492 Balance, June 30, 2020 24,040,900 4,431,038 - 343,686 (3,246,211) 1,528,513 Balance, December 31, 2020 24,040,900 4,431,038 - 343,686 (3,810,991) 963,733 Common shares issued for cash 16,261,875 3,252,375 (773,730) - - 2,478,645 Share issuance costs - (152,973) - - - (152,973) Fair value of finders’ warrants - (618,229) - 618,229 - - Common shares issued to acquire Be Good 22,050,000 7,166,250 - - - 7,166,250 Common shares issued as finder’s fee 1,000,000 325,000 - - - 325,000 Net loss for the period - - - - (7,521,489) (7,521,489) Adjustment onconsolidationofshares (3) - - - - - Balance, June 30, 2021 63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166	FEEL FOODS LTD. (formerly NHS Industries Ltd.) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (expressed in Canadian dollars) Number of Shares Share Capital & subscribed Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity Balance, December 31, 2019 8,659,900 $ 3,596,507 $ - $ 279,082 $ (3,415,703) $ 459,886 Common shares issued to settle debts 2,725,000 184,300 - - - 184,300 Common shares issued as an investment 1,250,000 250,000 - - - 250,000 Common shares issued to acquire Plenty-full 11,406,000 400,231 - - - 400,231 Shared based payments - - - 64,604 - 64,604 Net income for the period - - - - 169,492 169,492 Balance, June 30, 2020 24,040,900 4,431,038 - 343,686 (3,246,211) 1,528,513 Balance, December 31, 2020 24,040,900 4,431,038 - 343,686 (3,810,991) 963,733 Common shares issued for cash 16,261,875 3,252,375 (773,730) - - 2,478,645 Share issuance costs - (152,973) - - - (152,973) Fair value of finders’ warrants - (618,229) - 618,229 - - Common shares issued to acquire Be Good 22,050,000 7,166,250 - - - 7,166,250 Common shares issued as finder’s fee 1,000,000 325,000 - - - 325,000 Net loss for the period - - - - (7,521,489) (7,521,489) Adjustment onconsolidationofshares (3) - - - - - Balance, June 30, 2021 63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166	FEEL FOODS LTD. (formerly NHS Industries Ltd.) Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (expressed in Canadian dollars) Number of Shares Share Capital & subscribed Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity Balance, December 31, 2019 8,659,900 $ 3,596,507 $ - $ 279,082 $ (3,415,703) $ 459,886 Common shares issued to settle debts 2,725,000 184,300 - - - 184,300 Common shares issued as an investment 1,250,000 250,000 - - - 250,000 Common shares issued to acquire Plenty-full 11,406,000 400,231 - - - 400,231 Shared based payments - - - 64,604 - 64,604 Net income for the period - - - - 169,492 169,492 Balance, June 30, 2020 24,040,900 4,431,038 - 343,686 (3,246,211) 1,528,513 Balance, December 31, 2020 24,040,900 4,431,038 - 343,686 (3,810,991) 963,733 Common shares issued for cash 16,261,875 3,252,375 (773,730) - - 2,478,645 Share issuance costs - (152,973) - - - (152,973) Fair value of finders’ warrants - (618,229) - 618,229 - - Common shares issued to acquire Be Good 22,050,000 7,166,250 - - - 7,166,250 Common shares issued as finder’s fee 1,000,000 325,000 - - - 325,000 Net loss for the period - - - - (7,521,489) (7,521,489) Adjustment onconsolidationofshares (3) - - - - - Balance, June 30, 2021 63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166
Balance, June 30, 2021	Balance, December 31, 2020 Common shares issued for cash Share issuance costs Fair value of finders’ warrants Common shares issued to acquire Be Good Common shares issued as finder’s fee Net loss for the period Adjustment onconsolidationofshares	Balance, June 30, 2020	Balance, December 31, 2019 Common shares issued to settle debts Common shares issued as an investment Common shares issued to acquire Plenty-full Shared based payments Net income for the period
63,352,772 $ 14,403,461 $ (773,730) $ 961,915 $ (11,332,480) $ 3,259,166	24,040,900 16,261,875 - - 22,050,000 1,000,000 - (3)	24,040,900	8,659,900 2,725,000 1,250,000 11,406,000 - -	Number of Shares
	4,431,038 3,252,375 (152,973) (618,229) 7,166,250 325,000 - -	4,431,038	$ 3,596,507 184,300 250,000 400,231 - -	Share Capital & subscribed
	- 343,686 (3,810,991) 963,733 (773,730) - - 2,478,645 - - - (152,973) - 618,229 - - - - - 7,166,250 - - - 325,000 - - (7,521,489) (7,521,489) - - - -	- 343,686 (3,246,211) 1,528,513	$ - $ 279,082 $ (3,415,703) $ 459,886 - - - 184,300 - - - 250,000 - - - 400,231 - 64,604 - 64,604 - - 169,492 169,492	Subscriptions Receivable Contributed Surplus Retained Earnings (Deficit) Shareholders’ Equity

FEEL FOODS LTD.

(formerly NHS Industries Ltd.)

Unaudited Condensed Interim Consolidated Statements of Cash Flows (expressed in Canadian dollars)

	(expressed inCanadian dollars)
	Six Months Ended	June 30, 2021 June 30,2020
	Cash flows from (used in) Operating activities Net (loss) income for the period $ Items not affecting cash: Accretion expense Amortization of tangible assets Accrued interest income Accrued interest expense on loan payable to related party Fair value adjustment to investment Gain on settlement of debts Share based payments Consideration paid in excess of net assets acquired from acquisition Changes in non-cash working capital items: Accounts receivable Accounts payable and accrued liabilities and GST payable Amounts receivable acquired from Be Good Accounts payable and accrued liabilities acquired from Be Good GST receivable acquired from Plenty-full Accounts payable and accrued liabilities acquired from Plenty-full Net cash used in operating activities Investing activities Cash acquired from Be Good Cash acquired from Plenty-full Net cash provided by investing activities Financing activities Shares issued for cash Share issuance costs First mortgage Due to related parties Due to related parties acquired from Be Good Long term loan Net cash provided by (used in) financing activities Increase (decrease) in cash and cash equivalents during the period Cash and cash equivalents, beginning of the period	(7,521,489) $ 169,492 2,171 - 21,583 22,889 (16,000) (16,000) 9,972 - (225,000) - - (360,700) - 64,604 7,439,059 -
		(289,704) (119,715) (41,239) (24,717) 362,722 125,350 3,381 - (26,000) - - 9,978 - (16,213)
		9,159 (25,317)
		50,310 - - 5,745
		50,310 5,745
		2,478,645 - (152,973) - (11,488) (10,949) 500 20,430 (500) - 20,000 40,000
		2,334,184 49,481
		2,393,653 29,909 21,894 9,487
	Cash and cash equivalents, end of theperiod $	2,415,547 $ 39,396
	Interest paid $ Income tax paid $ Non-cash Transactions: Fair value of finders’ warrants issued $ Settlement of debts into shares $ Shares issued as an investment $ Shares issued to acquire Be Good, including finder’s fee $	11,564 $ 12,103 - $ - 618,229 $ - $ 545,000 $ 250,000 7,491,250 $ -

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

6

(expressed in Canadian dollars)

FEEL FOODS LTD. (formerly NHS Industries Ltd.) Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021

1. NATURE AND CONTINUANCE OF OPERATIONS

627073 B.C. Ltd. was incorporated on May 4, 2001 under the British Columbia Business Corporations Act and changed its name to “NHS Industries Ltd.” on September 17, 2010 and then to “Feel Foods Ltd.” (“FEEL” or the “Company”) on July 28, 2021. The Company’s principal business is the provisions of a property rental service and a development of real estate property and facility. On August 13, 2014, the Company completed the amalgamation between 0998955 BC. Ltd., a wholly owned subsidiary of New Age Farm Inc. (“New Age”), and has since become a wholly owned subsidiary of New Age. New Age had issued 6,882,885 of its common shares to the shareholders of the Company to complete the amalgamation.

On August 31, 2016, the Company entered into an arrangement agreement with New Age in which New Age has spun-off FEEL, together with all its assets and liabilities, as a separate operating entity and FEEL would operate the Company’s Langley property located in Langley, British Columbia (the “Arrangement”). In return, following completion of the Arrangement, shareholders of New Age would hold one new share (each, a “New Share”, collectively the “New Shares”) in the capital of New Age and its pro–rata share of the post-consolidation FEEL shares (“FEEL Shares”) be distributed under the Arrangement for each currently held New Age share. On September 27, 2016, shareholders of New Age approved the Arrangement on its Annual and Special General Meeting of shareholders.The board of directors of New Age also have set the share distribution record date of the plan of Arrangement at close of business on November 30, 2016 (the “Share Distribution Record Date”). Shareholders as of the Share Distribution Record Date would be entitled to receive the New Shares and the FEEL Shares. As part of the spin-off process, the Company consolidated its common shares at 5:1 ratio and had 6,899,116 common shares outstanding prior to the spin-off and these shares were to be distributed to shareholders of New Age as of the Share Distribution Record Date. The management of New Age also determined that the Company has separated from New Age on December 31, 2016. The Company completed the re-distribution of the spin-off of FEEL Shares in September 2017. The Company completed its listing requirement and commenced trading of its common shares on Canadian Securities Exchange (“CSE”) on April 5, 2018. The Company completed a consolidation of its common shares at 4 old shares for 1new common share on March 11, 2021.

The registered address, head office, principal address and records office of the Company are located at 700-838 West Hastings Street, Vancouver, BC V6C 0A6.

At June 30, 2021, the Company had working capital (deficit) of $1,745,904 (December 31, 2020 – ($340,303)), had not yet achieved profitable operations, has accumulated losses of $11,332,480 since its inception and expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to conduct its planned business, meet its on-going levels of corporate overhead and discharge its liabilities as they come due. These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge liabilities in the normal course of business. Although the Company presently has sufficient financial resources to undertake its currently planned business and has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. Accordingly, it does not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and liquidate its liabilities in other than the normal course of business and at amounts which may differ from those shown in these consolidated financial statements.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The impact on the Company is not currently determinable but management continues to monitor the situation.

7

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance and Basis of Presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”), in accordance with IAS 34 Interim Financial Reporting.

These unaudited condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value, as explained in the accounting policies set out in the below.

(b) Basis of consolidation

Consolidated financial statements include the assets, liabilities and results of operations of all entities controlled by the Company. Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the Company’s the consolidated financial statements. Where control of an entity is obtained during a financial year, its results are included in the consolidated statements of comprehensive loss from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control exists.

These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries as follows:

subsidiaries as follows:
Name	Country of		Functional
	**incorporation **	Holding	currency
Plenty-full Food Services Corp.	Canada	100.0%	Canadian dollar
Be Good Plant Based Foods Ltd.	Canada	100.0%	Canadian dollar

Plenty-full Food Services Corp. (“Plenty-full”) was acquired effective February 27, 2020. Be Good Plant Based Foods Ltd. (“Be Good”) was acquired effective March 31, 2021. These unaudited condensed interim consolidated financial statements include the financial statements of Plenty-full and Be Good from the date of acquisition.

(c) Revenue recognition

IFRS 15 and its related amendments supersede IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations. It applies to all revenue arising from contracts with its customers and became effective for annual periods beginning on or after 1 January 2018. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. It requires revenue to be recognized when (or as) control of a good or service transfers to a customer at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires enhanced and extensive disclosures about revenue to help investors better understand the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

The Company adopted IFRS 15 since January 1, 2018. The Company undertook an analysis of the impact of the new revenue standard based on a review of the contractual terms with the primary focus being to understand whether the timing and amount of revenue recognized could differ under IFRS 15. Based on the Company’s analysis, there were no changes identified with respect to the timing of revenue recognition in relation to rental revenue charged to the tenant.

Rental revenue includes rent from tenants, incidental income and sale of meal-prep kits. Rental revenue is recognized when rents are due and interest income is recognized when earned and food service revenue is recognized upon delivery of meal-prep kits.

8

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Foreign currency translation

The functional currency of the Company, as determined by management, is the Canadian dollar and this is also the currency in which it presents these financial statements. The Company recognizes transactions in currencies other than the Canadian dollar (foreign currencies) at the rates of exchange prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the period end exchange rates are recognized in the statement of operation and comprehensive operation. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

(e) Share based Compensation

The Company operates an employee stock option plan. Share based payments to employees are measured at the fair value of the instruments issued and amortized over the relevant vesting periods. Share based payments to nonemployees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of options is determined using a Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

(f) Property, plant and equipment

The Company records property, plant and equipment at cost less accumulated amortization and accumulated impairment losses. It recognizes amortization to write off the cost of assets less their residual values over their useful lives, using the following methods and rates:

useful lives, using the following methods and rates:
Building	-	15 years straight line
Greenhouse	-	35 years straight line
Tenant improvements on greenhouse	-	10 years straight line
Furniture, fixtures and equipment	-	10-20% declining balance
Motor vehicle and tractor	-	30% declining balance

An item of property, plant and equipment is de-recognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss. Where an item of property, plant and equipment consists of major components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized.

(g) Loss per share

The Company calculates basic loss per share by dividing the loss for the year by the weighted average number of common shares outstanding during the year. It calculates diluted loss per share in a similar manner, except that it increases the weighted average number of common shares outstanding, using the treasury stock method, to include common shares potentially issuable from the assumed exercise of stock options and other instruments, if dilutive. In the Company’s case, these potential issuances are “anti-dilutive” as they would decrease the loss per share; consequently, the amounts calculated for basic and diluted loss per share are the same.

(h) Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity. Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

9

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Income taxes (continued)

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affects neither accounting nor taxable loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

• (i) Impairment of long-lived assets

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment to determine whether any indication exists that any of those assets have suffered an impairment loss. If any such indication exists, it estimates the asset’s recoverable amount to determine the extent of the impairment loss (if any). Where it is not possible to estimate an individual asset’s recoverable amount, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where it can identify a reasonable and consistent basis of allocation, it also allocates corporate assets to individual cash-generating units, or otherwise allocates them to the smallest group of cash-generating units for which it can identify a reasonable and consistent allocation basis.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the Company discounts estimated future cash flows to their present value using a pre-tax discount rate. This rate reflects current market assessments of the time value of money and also reflects the risks specific to the asset (unless these risks are reflected in the estimates of future cash flows).

If the Company estimates an asset or cash-generating unit’s recoverable amount to be less than its carrying amount, it reduces the carrying amount to the recoverable amount, recognizing an impairment loss immediately in profit or loss. Where an impairment loss subsequently reverses, the Company increases the asset or unit’s carrying amount to the revised estimate of its recoverable amount, without exceeding the carrying amount that would have been existed if no impairment loss had been recognized in prior years. It recognizes a reversal of an impairment loss immediately in profit or loss.

(j) Financial Instruments

Effective January 1, 2018, the Company has adopted IFRS 9 Financial Instruments (“IFRS 9”) which replaced IAS 39 Financial Instruments and elected to use the exemption to not restate comparative information for prior periods. Prior periods were not restated and no material changes resulted from adopting this new standard. IFRS 9 introduced a revised model for classification and measurement, and there were no quantitative impacts from adoption on the Company’s financial statements.

As a result of the adoption of IFRS 9, The Company’s accounting policy for financial instruments under IFRS 9 has been updated as follows:

Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classified at FVTPL, directly attributable transaction costs. Measurement of financial assets in subsequent periods depends on whether the financial instrument has been classified and measured at:

(i) amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL). All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. The classification determines the method by which financial assets are carried on the balance sheet subsequent to inception and how changes in value are recorded. Cash and cash equivalents and investments are measured at FVTPL with subsequent impairments recognized in the statements of operations and comprehensive loss while accounts

10

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(j) Financial Instruments (continued)

receivable and due from related party are measured at amortized cost. Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other financial liabilities. Financial liabilities, other than financial liabilities classified as FVTPL, are measured in subsequent periods at amortized cost using the effective interest method. Accounts payable and accrued liabilities, due to related party and long‐term loan and mortgage are classified as other financial liabilities and carried on the balance sheet at amortized cost.

- Impairment and un collectability of financial assets:

The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is considered impaired if objective evidence that can be estimated reliably indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. If a financial asset measured at amortized cost is impaired, an amount equal to the difference between its carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate is recognized as an impairment loss in the consolidated statement of operations. If it has been determined that the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount to a maximum of the carrying amount that would have been determined had no impairment charge been recognized in prior periods. Reversals of impairment charges are recognized in the consolidated statements of operations and comprehensive loss in the period in which they occur.

Under IFRS 9, the Company’s financial instruments are classified and subsequently measured as follows: cash and cash equivalents and investments are valued at FVTPL, accounts receivable, due from related parties, accounts payable and accrued liabilities, due to related party, securities deposit, long term loan and mortgages payable are valued at amortized cost.

(k) Significant accounting judgments and estimates

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the year. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.

The most significant accounts that require estimates as the basis for determining the stated amounts include the amortization of plant, property and equipment, valuation of share-based payments and recognition of deferred income tax amounts.

Critical judgments and estimates exercised in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

Determination of functional currency

The Company determines the functional currency through an analysis of several indicators such as expenses and cash flow, financing activities, retention of operating cash flows, and frequency of transactions with the reporting entity.

Income taxes

In assessing the probability of realizing income tax assets, management makes estimates related to expectations of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.

Valuation of share-based payments

The Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.

11

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Adoption of new accounting standards

IFRS 16 ‐ Leases

IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance. The standard is effective for annual periods beginning on or after January 1, 2019.

The Company charged rental income to its tenant on a month by month basis without any long term leases. The Company also does not identify any other lease that is applicable under the IFRS 16. Therefore, the Company does not have any financial impact from the adoption of this new standard.

3. PROPERTY, PLANT AND EQUIPMENT

Land $ Building Greenhouse Furniture, fixture and equipment $		June 30, 2021	Net Carrying Amount 900,000 $ 14,252 352,746 3,049 1,270,047 $	December 31, 2020
	Cost 900,000 $ 213,800 499,216 11,962 1,624,978 $	Accumulated Amortization - $ 199,548 146,470 8,913 354,931 $		Net Carrying Amount
				900,000 21,379 367,042 3,209
				1,291,630

During the year ended December 31, 2019, the Company acquired a total of tenant’s improvement to the greenhouse in the amount of $200,590 incurred by the current tenant and offset against the accounts receivable from the tenant. During the year ended December 31, 2020, the Company wrote off certain equipment and motor vehicle considered as impaired.

4. DUE TO/FROM RELATED PARTY AND RELATED PARTY TRANSACTIONS

For management compensation information for the period ended June 30, 2021, please refer to the below:

June 30, 2021 Robert Nygren, CEO & Director Anthony Chan, CFO & Director Natasha Sever, Director Krystal Pineo, Director Ming Chiang, CSO & Director Carman Parente, Former Director David Johnson, Former Director Lorrain Pike, Former Director June 30, 2020 Robert Nygren, CEO & Director Anthony Chan, CFO & Director Natasha Sever, Director Krystal Pineo, Director Ming Chiang, CSO & Director Carman Parente, Former Director David Johnson, Former Director Lorrain Pike, Former Director	Consulting Fees Director Fees Share-based Compensation Total $ $ $ $
	3,000 12,000 - 15,000 3,000 12,000 - 15,000 - - - - - - - - 3,000 12,000 - 15,000 - 3,000 - 3,000 - - - - - - - -
	9,000 39,000 - 48,000
	Consulting Fees Director Fees Share-based Compensation Total $ $ $ $
	12,500 8,000 19,878 40,378 25,000 12,000 19,878 56,878 - - - - - - - - 10,000 8,000 19,878 37,878 30,000 12,000 - 42,000 - - - - - - - -
	77,500 40,000 59,634 177,134

12

FEEL FOODS LTD. (formerly NHS Industries Ltd.) Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

4. DUE TO/FROM RELATED PARTY AND RELATED PARTY TRANSACTIONS (continued)

The Company commenced accruing consulting fees and director fees to each of the directors in December 2018. During the period ended June 30, 2021, total consulting fees of $9,000 (2020 - $77,500) and directors fees of $39,000 (2020 - $40,000) have been accrued and recognized. On February 27, 2020, the Company granted a total of 3,000,000 stock options to the CEO, CFO and CSO and recognized share based compensation of $59,634 to these parties.

All related party transactions are in the normal course of operations and have been measured at the agreed to amounts, which is the amount of consideration established and agreed to by the related parties.

During the year ended December 31, 2018, the Company advanced a loan in the amount of $400,000 to a limited partnership managed by a company controlled by the CFO of the Company as a general partner with no beneficial interest. This loan is non-interest bearing, non-secured with no fixed terms of repayment. On December 31, 2019, a company controlled by the CFO assumed this loan from the limited partnership and converted the loan into a secured promissory note payable to the Company maturing on December 31, 2022, with interest payable at an annual rate of 8% and personal guaranteed by the CFO. As at June 30, 2021, interest revenue of $16,000 (June 30, 2020 - $16,000) has been accrued and received by the Company on this note receivable. As at June 30, 2021, loan payable of $167,182 (December 31, 2020 - $182,210) is due to a former Director of the Company, a non-secured loan, interest bearing at an annual rate of 10.80%, compound quarterly, with no fixed terms of repayment. During the period ended June 30, 2021, total interest of $9,972 (2020 - $Nil) was charged by this former related party who had commenced charging catch-up interest in the last quarter of 2020.

As at June 30, 2021, the amounts owing to related parties are as below:

Robert Nygren, CEO & Director Anthony Chan, CFO & Director Natasha Sever, Director Krystal Pineo, Director Ming Chiang, CSO & Director Carman Parente, Former Director David Johnson, Former Director Lorrain Pike, Former Director A company controlled by the CFO BeGood Plant Based Foods Ltd.	Accounts Payable Accrued Liabilities (Director Fees) Loans Payable (Receivable) $ $ $
	53,025 - - 23,160 - - - - - - - - 49,350 - - 11,050 60,000 167,182 5,200 - - 5,200 - - - - (416,000) - - 500
	146,985 60,000 (248,318)

During the year ended December 31, 2020, the Company settled toal debts owing to a former Director of the Company in the amount of $221,000 by issuing 1,105,000 (pre-conolidated 4,420,000) common shares of the Company at a deemed price of $0.20 (pre-consolidated price of $0.05) per share and recognized gain on debt settlements of $154,700. The Company also settled total debts owing to the former CFO and a Director of the Company in the amount of $116,000 by issuing 580,000 (pre-consolidated 2,320,000) common shares of the Company at a deemed price of $0.20 (pre-consolidated price of $0.05) per share and recognized gain on debt settlements of $81,200. In addition, a total amount of debts of $208,000 owing to two former directors of the Company has been assigned to several arms-length parties and these debts have been settled by the Company by issuing 1,040,000 (pre-consolidated 4,160,000) common shares of the Company at deemed price of $0.20 (preconsolidated price of $0.05) per share and recogized gain on debt settlements of $124,800.

During the year ended December 31, 2020, the Company also invested in a limited partnership with the general partner being related by common officers in the amount of $250,000 by issuing 1,250,000 (pre-consolidated 5,000,000) common shares of the Company at a deemed price of $0.20 (pre-consolidated price of $0.05) per share. The investment was fair valued adjusted to $400,000 as at June 30, 2021.

13

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

5. MORTGAGE / SECOND MORTGAGE

The Company has negotiated a credit facility with the BlueShore Financial (the “BSF”) for a commercial mortgage. The Company renewed the mortgage during 2017 under the same term and monthly payments. The commercial mortgage bears interest at 4.25% per annum until September 1, 2022. The mortgage requires monthly blended payments of $3,842. Payments will be adjusted at a time of term renewal based on the fixed rate of interest in effect and the remaining amortization period. The mortgage is secured by a rental property of the Company and an assignment of rents.

	June 30, 2021 December 31, 2020
Balance, beginning of the period/year $ Principal payments made during the period/year Balance, end of the period/year Amount payable within one year $	555,251 $ 577,379 (11,489) (22,128)
	543,762 555,251 (23,393) (22,902)
	520,369 $ 532,349

6. SHARE CAPITAL

Authorized: Unlimited common shares without par value

• (a) Shares issued:

In January 2019, the Company issued additional 30,966 (pre-consolidated 123,870) common shares for $Nil as part of the spin-out shares.

In March 2019, the Company issued 1,300,000 (pre-consolidated 5,200,000) common shares at a fair value of $0.18 (pre-consolidated price of $0.045) per common share for services totaling $234,000 as compensation to the CEO of the Company as a result of his personal guarantees offered on the mortgages.

In January 2020, the Company issued a total of 2,725,000 (pre-consolidated 10,900,000) common shares at a deemed price of $0.20 (pre-consolidated price of $0.05) per share to settle total debts of $545,000 and recognized gain on debt settlements of $360,700.

In February 2020, the Company issued 1,250,000 (pre-consolidated 5,000,000) common shares of the Company at a deemed price of $0.20 (pre-consolidated price of $0.05) per share and invested in a limited partnership as the founding limited partner.

In February 2020, the Company acquired 100% ownership of a food serving company, Plenty-full Food Services Corp., from arms-length parties in exchange of 11,406,000 (pre-consolidated 45,624,000) common shares of the Company at total fair value of $400,231.

On March 11, 2021, the Company consolidated all of its issued and outstanding common shares (the “ NHS Shares ”) on the basis of one (1) post-consolidated NHS Share for every four (4) pre-consolidated NHS Shares (the “ Consolidation ”). The Consolidation resulted in the number of issued and outstanding NHS Shares being reduced from 96,163,602 NHS Shares to 24,040,897 NHS Shares. The Company has outstanding warrants to purchase 8,000,000 NHS Shares reserved for issuance, equal to 2,000,000 NHS Shares on a post Consolidation basis and also has outstanding incentive stock options to purchase 3,850,000 NHS Shares reserved for issuance, equal to 962,500 NHS Shares on a post Consolidation basis.

On March 31, 2021, the Company acquired 100% ownership of a food production company, Be Good Plant based Foods Ltd., from arms-length parties in exchange of 22,050,000 common shares of the Company at total fair value of $7,166,250. One million common shares were also issued as finder’s fee with respect to this acquisition at total fair value of $325,000.

On June 28, 2021, the Company closed a private placement financing for gross proceeds of $3,252,375 through the issuance of 16,261,875 units at a price of $0.20 per Unit (a “Unit”). Each Unit is comprised of one common share and one transferable common share purchase warrant (a “Warrant”). Each Warrant will entitle the holder to purchase one additional common share of the Company for a period of two years, subject to accelerated expiry, at a

14

FEEL FOODS LTD. (formerly NHS Industries Ltd.) Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

6. SHARE CAPITAL (continued)

(a) Shares issued (continued)

price of $0.30 per share in the first year and $0.45 per share in the second year. Under the private placement, the Company paid aggregate cash finder’s fees of $151,543 and issued an aggregate of 757,715 finder’s warrants with a fair value of $618,229, each exercisable for one common share for two years at a price of $0.30 per share in the first year and $0.45 per share in the second year and subject to accelerated expiry.

(b) Stock Options

The Company has adopted an incentive stock option plan (the "Option Plan") dated which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with stock exchanges requirements, grant to directors, officers, employees and consultants to the Company, non-transferable options to purchase common shares. Included in the Option Plan are provisions that provide that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares of the Company.

During the period ended June 30, 2020, the Company granted incentive stock options to several officers and directors and consultants of the Company to purchase up to an aggregate of 812,500 (pre-consolidated 3,250,000) common shares in the capital stock of the Company on February 27, 2020. These options are exercisable at a price of $0.20 (pre-consolidated price of $0.05) per share, and will expire on February 27, 2025. All options were fully vested at the date of grant. The fair value of these 812,500 (pre-consolidated 3,250,000) stock options was determined to be $64,604 using the Black Scholes option pricing model using the assumptions at the time of grant of risk free interest rates of 1.163%, expected life of 5 years, expected volatility of 257%, forfeiture rate of 0% and a dividend rate of 0%.

As at June 30, 2021, 37,500 (pre-consolidated 450,000) stock options at exercise price of $0.40 (pre-consolidated price of $0.10) and 750,000 (pre-consolidated 3,000,000) stock options at exercise price of $0.20 (pre-consolidated price of $0.05) are still outstanding.

(c) Warrants

Warrants
	Warrants Outstanding & Exercisable Weighted Average Exercise Price
Balance, December 31, 2020 Granted /Expired	2,000,000 $0.40 16,261,875 $0.375
Balance, June 30, 2021	2,000,000 $0.38
Number ofShares 1,500,000 500,000 17,019,590 19,019,590	Exercise Price Expiry Date $0.40 July 31, 2022 $0.40 November 30, 2022 $0.375 June 28,2023 $0.40

7. CAPITAL DISCLOSURES

The Company's objective when managing capital is to maintain adequate cash resources to support planned activities which include administrative costs and general expenditures. In the management of capital, the Company includes cash, mortgages, due to related parties, due to shareholders and the components of shareholders’ equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. Historically, funding for the Company's plan is primarily managed through the issuance of additional common shares, through its commercial activities and through obtaining financing. There are no assurances that funds will be made available to the Company when required.

In order to carry out the planned development and pay for administrative costs, the Company will spend its existing

15

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

7. CAPITAL DISCLOSURES (Continued)

working capital and expects to raise additional amounts as needed. The Company will continue to assess new business and seek to acquire an interest in additional business if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

The Company invests all capital that is surplus to its immediate operational needs in short-term, liquid and highly rated financial instruments, such as cash, and all are held in major Canadian financial institutions. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company's approach to capital management during the period ended June 30, 2021 and the year ended December 31, 2020. The Company is not subject to externally imposed capital requirements.

8. FINANCIAL INSTRUMENTS AND RISK FACTORS

(a) Fair values

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The fair value of transactions is classified according to the following hierarchy based on the amount of observable inputs used to value the instrument.

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – Inputs are other than quoted prices in Level 1 that are either directly or indirectly observable for the asset or liability.

• Level 3 – Inputs for the asset or liability that are not based on observable market data.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy level. The company’s cash and cash equivalents have been valued using Level 1 inputs.

The fair value of the Company’s financial instruments has been classified within the fair value hierarchy as at June 30, 2021 as follows:

		Level 1	Level 2			Level3		Total
Financial Assets
Cash	$	2,415,547	$	-	$	-	$	2,415,547
Cash equivalents		-		-		-		-
Investments				-		400,001		400,001
	$	2,415,547	$	-	$	400,001	$	2,815,548

(b) Credit risk

Credit risk is the loss associated with a counter-party’s inability to fulfil its payment obligations. The Company’s credit risk is attributable to GST receivable from Canadian Federal government and term deposits. The credit risk is minimized by placing cash with major Canadian financial institutions. Management believes that the credit risk concentration with respect to financial instruments above is remote.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company's exposure to liquidity risk is dependent on raising of funds to meet commitments and sustain operations. The Company controls liquidity risk by management of working capital and cash flows. The Company ensures that sufficient funds are raised from private placements or loans to meet its operating requirements, after taking into account existing cash. The Company’s cash and cash equivalents are held in business accounts which are available on demand for the Company’s business and are not invested in any asset-backed deposits or investments. As at June 30, 2021, the Company had cash and cash equivalents of $2,415,547 to settle current liabilities of $727,265. The mortgage of $543,762 is to be due on September 1, 2022 (Note 5).

16

FEEL FOODS LTD. (formerly NHS Industries Ltd.) Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

8. FINANCIAL INSTRUMENTS AND RISK FACTORS (continued)

• (d) Market risk

• Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

• i) Interest rate risk - Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. If interest rates decrease, the Company will generate smaller interest revenue. Presently the Company is not at risk of realizing a loss as a result of a decline in the fair value of its financial instruments because of the short-term nature of the investments. The Company is susceptible to interest rate fair value risk on its mortgages, secured note payable and convertible secured debt payable that bear fixed interest rates.

ii) Foreign currency risk - The Company's functional currency is the Canadian dollar and major expenditures are transacted in Canadian dollars.

9.

ACQUISITION OF PLENTY-FULL

On February 27, 2020, the Company acquired a 100% interest in Plenty-full Food Services Corp. by issuing 11,406,000 (pre-consolidated 45,624,000) common shares of the Company at a fair value of $400,232 with details of fair value of asset and liabilities as below:

Assets acquired, and liabilities assumed Cash GST receivable Investment in 20% of Nova Foods Equipment Accounts payable & accrued liabilities	$ 5,745 9,978 400,000 722 (16,213)
	$ 400,232
Purchase price consideration Consideration issued	$ 400,232

Due to the pandemic resulted from COVID-19, Nova Foods has completely shut down its operation during the year of 2020. As at December 31, 2020, the Company has determined to write down its investment of 20% interest in Nova Foods to a minimal value of $1.

10. ACQUISITION OF BE GOOD

On March 31, 2021, the Company acquired a 100% interest in Be Good Plant Based Foods Ltd. by issuing 22,050,000 common shares of the Company at a fair value of $7,166,250 with details of fair value of asset and liabilities as below. 1,000,000 common shares at a fair value of $325,000 as finders’ fee were also issued:

Assets acquired, and liabilities assumed Cash Amounts receivable Accounts payable & accrued liabilities Due to related parties Subscriptions receivable Net assets acquired Consideration paid in excess of net assets acquired **from acquisition **	$ 50,310 3,381 (26,000) (500) 25,000
	$ 52,191 7,439,059
Purchase price consideration Consideration issued	$ 7,491,250

17

FEEL FOODS LTD. (formerly NHS Industries Ltd.)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements For The Six Months Period Ended June 30, 2021 (expressed in Canadian dollars)

11. LONG TERM LOAN

The Company obtained a CEBA loan in the amount of $60,000 from the Bank of Montreal guaranteed by the Canadian government. This loan is non-interest bearing until December 31, 2022 and repayment of the loan prior to December 31, 2022 will result on loan forgiveness of 25% or $10,000. After January 1, 2023, the loan may be converted into a 3-year term loan at a fixed annual interest rate of 5%.

The CEBA loan was initially fair valued using a discount rate of 15% and was measured at $47,506 with difference of $12,494 being recognized as government grant in the fiscal year of 2020. The accretion expense of $2,171 was recorded on this CEBA loan during the period ended June 30, 2021 (2020 - $Nil).

12. SUBSEQUENT EVENTS

• 1) On August 19, 2021, the Company announced that it has entered into an asset purchase agreement (the “Agreement”) with Canpac Investments Corp. (“Canapac”) for the sale of the Langley Site. Canpac is an investment company focused on health sciences, technology and infrastructure. Pursuant to the Agreement, Canpac shall purchase the property in consideration of $1,500,000 payable in the form of the issuance of 15,000,000 common shares at a deemed price of $0.10 per share. Furthermore, along with the acquisition, Canpac has agreed to assume $912,517 in the Company’s current debt and long-term liabilities. The Company has assembled debt assignment agreements, signed by the creditors, assigning the liabilities to Canpac. FEEL has elected to distribute the shares in the form of a dividend to its stakeholders on a pro rata basis to shareholders of record on September 15, 2021.

18