Universal Ibogaine Inc. — Management Reports 2021

Nov 30, 2021

CLEAR SKY RECOVERY SOLUTIONS INC.

(formerly Universal Ibogaine Inc.)

Management’s Discussion and Analysis (“MD&A”)

As at and for year ended July 31, 2021

The following MD&A presented for Clear Sky Recovery Solutions Inc. (the “ Company ”) was prepared by management based on information available as at November 29, 2021.

The Company was incorporated in April 2018 as Universal Ibogaine Inc. (“ UI ”), and as described in further detail herein, as part of a go-public listing transaction, later changed its name to Clear Sky Recovery Solutions Inc. (“ CSRS ”) on September 15, 2021.

This MD&A provides a discussion of financial highlights for the Company’s fiscal year ended July 31, 2021 (“ F2021 ”) with totals for the comparative prior fiscal year ended July 31, 2020 (“ F2020 ”).

This MD&A and should be reviewed in conjunction with the Company’s audited consolidated financial statements for the fiscal years ended July 31, 2021 and 2020.

Forward-looking statements

This MD&A may contain forward-looking statements, which include words such as “intends”, “plans”, “anticipates”, “expects”, and “scheduled”. The material factors and assumptions which affect this forwardlooking information include assumptions that the Company will continue to have available the necessary personnel and financial resources to implement its business and development plans as intended.

These forward-looking statements are based on current expectations and plans and are subject to a wide range of known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or the Company's estimates or opinions change.

As described in note 1 to the Company’s consolidated financial statements, they have been prepared on a going concern basis, which assumes that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. This will be dependent on the Company’s ability to integrate the operations acquired, and raise additional future expansion capital following the closing of the Amalgamation which occurred on August 31, 2021, and which is further described herein.

History and development of the business

UI was incorporated in 2018 and until August 31, 2021 was a privately held business. The Company is the initial stages of implementing and financing its business plan, which is to develop, acquire and operate stateof-the-art addiction treatment clinics, as well as to conduct clinical trials research in Canada into the use of ibogaine in addiction treatment.

It is intended that Company clinics would ultimately incorporate ibogaine as a chief therapeutic modality for the interruption and ideally cessation of addictions to primarily opioids such as oxycodone, heroin, fentanyl, as well as alcohol, cocaine, and other stimulants.

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Ibogaine is a naturally derived plant molecule and can be effective in significantly reducing and even eliminating detoxification withdrawal symptoms as part of the overall addiction treatment and therapy process. The use of ibogaine and other psychedelics for medical and addiction treatments is expected to significantly expand globally in the next decade.

CSRS plans to undertake clinical development, and subsequently obtain regulatory authorization for the use of ibogaine as an authorized addiction interruption medicine, initially for the treatment of Opioid Use Disorder(s). The Company plans to submit a Clinical Trial Application (“ CTA ”) to Health Canada in early 2022, with the intent of demonstrating ibogaine safety and efficacy in clinical trials.

The Company’s primary goals are 1) to submit a CTA to Health Canada in the short-term, to be permitted to undertake clinical trials to prove the safety and efficacy of ibogaine assisted detoxification, initially for the treatment of Opioid Use Disorder(s), in order to eventually have ibogaine approved for wide-spread addiction treatment, and 2) to build a foundation of addiction treatment clinics, initially utilizing a combination of innovative non-psychedelic detox methods and holistic treatments, growing from one initial location that was acquired in 2021.

The primary business development activities to date have been related to: 1) undertaking private placement financings to fund business development activities, 2) securing the ClearSky licensing agreement for the use of a future ibogaine based addiction treatment process, 3) researching the process of undertaking clinical trials in Canada, 4) negotiating the acquisition of initial addiction treatment clinics, and 5) advancing the go-public application process with the TSX Venture Exchange (the “ TSXV ”).

In mid-2020 UI entered into an agreement to acquire an initial addiction treatment clinic near Winnipeg, Manitoba, and completed this acquisition on August 31, 2021.

Addiction treatment - psychedelics and ibogaine

Addiction treatment is a growing global business, especially due to deaths and disruption to families and economies resulting from the current opioid crisis. Conventional detox methodologies tend to have low long-term abstinence success rates and novel treatments are urgently required. Research is expanding in the use of psychedelics (LSD, MDMA, psilocybin, ibogaine) in medical applications for a wide spectrum of mental illnesses including addiction, depression, obsessive-compulsive disorder and anxiety.

Ibogaine is a naturally occurring psychoactive substance, derived from the root bark of a shrub found in the Congo basin. Ibogaine may also be semi-synthesized from a variety of other plants, and potentially fully synthesized in the laboratory.

Ibogaine currently has limited legal global recognition for possession and use and is utilized for addiction treatment primarily in countries such as Mexico, the Bahamas, Brazil, South Africa, New Zealand, and Mauritius. Ibogaine is not yet recognized as a registered drug in Canada, which UI intends to address through the commencing of a planned clinical trials application process with Health Canada in 2022.

The company’s development to date reflects the following significant transactions:

1). ClearSky Licensing Agreement

In March 2019, UI entered into a License Agreement (the “ ClearSky Agreement ”) with Clear Sky Recovery Cancun SA de CV (“ ClearSky ”). ClearSky has developed a proprietary addiction treatment protocol which utilizes a natural substance, ibogaine, to detoxify and aid in withdrawal and recovery from addiction to a variety of drugs (the “ ClearSky Protocol ”). UI acquired the exclusive global rights to use the ClearSky Protocol, subject to ClearSky’s right to continue to utilize it at its clinic in Cancun, Mexico. ClearSky was founded in 2003, and its treatment protocol has successfully disrupted opioid and other addictions for over 3,500 treatments to date without incident. Its founder, physician Dr. Alberto Sola, holds the distinction of treating more patients with ibogaine than anyone else in the world.

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As described in the audited F2021 financial statements, the original agreement of March 2019 was subsequently amended twice (in October 2019 and April 2020) such that the terms for the total consideration payable by UI became:

• A total of USD 900,000 cash. Of this total, USD 450,000 was paid in F2019 (in March and April 2019), USD 75,000 in F2020 (in October 2019 and April 2020), and USD 75,000 was paid in F2021 (in September 2020).

• The final balance of USD 300,000 was payable, at UI’s option, by issuing UI common shares at a price of Cdn $0.10 per share. Effective October 26, 2020, UI and ClearSky agreed to the issuance of a total of 4,000,000 UI common shares in settlement of this debt.

• UI was originally to issue a total of 60 million UI common shares to ClearSky. Renegotiating the terms of the ClearSky Agreement in April 2020 served to reduce the total share consideration to 30 million shares, as well as imposing performance-based milestones for the ultimate issuance from escrow of the shares.

• These 30 million common shares were issued to ClearSky on January 31, 2021, and their future releases from escrow will be based on 1) 10% upon closing of the RTO, 2) 30% issuable based on the undertaking of planned Health Canada clinical trials for ibogaine (10% on approval of initial trials and 20% at commencement of Phase 3), and 3) the final 60% issuable at a rate of 10% for each of the first 6 UI clinics which may eventually be approved to utilize the ClearSky ibogaine treatment protocol.

2). RTO / Merger, go-public transaction and acquisition of the Kelburn Clinic

In November 2019, UI entered into an agreement with P Squared Renewables Inc. (“ PSQ ”), whereby PSQ would acquire 100% of the shares of UI and the two parties would merge and allow UI to effectively become a publicly listed company (the “ Resulting Issuer ” or the “ RI ”) on the TSXV.

Effective October 8, 2020, PSQ, UI and 1266855 B.C. Ltd. (“ Subco ”, a wholly-owned subsidiary of PSQ) entered into an amalgamation agreement (the “ Amalgamation Agreement ”) whereby PSQ would acquire all of the outstanding shares of UI by way of a three-cornered amalgamation (the “ Amalgamation ”) among PSQ, UI and Subco.

PSQ was formed in 2017 as a Capital Pool Corporation (“ CPC ”) under the policies of the TSXV, and subject to final approval of the TSXV, the Amalgamation with UI constituted PSQ’s Qualifying Transaction (the “ QT ”), which allowed it to meet the listing requirements of the TSXV.

Conditional approval of the QT was received from the TSXV on July 19, 2021, and the TSXV Exchange Bulletin for final approval of the QT was issued on October 1, 2021. Trading of the common shares of the Resulting Issuer commenced on October 5, 2021.

As further described below, the shareholders of UI received a majority of the shares issued by PSQ on closing of the Amalgamation on August 31, 2021, and the transaction resulted in a reverse-take-over (“ RTO ”) of PSQ by UI, and as such, UI is considered the successor Resulting Issuer entity.

The Amalgamation Agreement and the QT involved 3 main components as follows:

1). Agreement to acquire the Kelburn Clinic

UI finalized an agreement effective February 24, 2021 (with two entities which are arms-length to each of UI and PSQ) as subsequently extended, which allowed UI:

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• (i) to acquire 100% of the shares of 6887016 Manitoba Ltd., which owns and operates the Kelburn Mental Health & Addiction Recovery Centre (the “ Kelburn Clinic ”), an addiction treatment facility operating near Winnipeg, Manitoba, for consideration of $1,500,000 and

• (ii) to separately acquire (subject to receipt of suitable mortgage financing) the land, facility and related buildings utilized by the Kelburn Clinic (the “ Kelburn Property ”) for consideration of $3,500,000.

Closing of these two acquisitions occurred on August 30, 2021 concurrent with completion of the QT, and involved the issuance by UI of share Units (consisting of one UI common share and one common share purchase warrant) at a price of $0.25 per Unit. These common shares and warrants were then exchanged for RI Warrants (as described below) on a 1 for 1 basis on closing of the QT.

Consideration payable for the purchase of the Kelburn Clinic consisted of $1,000,000 cash, of which deposits totaling $625,000 were paid by UI and held in trust at July 31, 2021 and $500,000 was paid on August 30, 2021 in the form of 2,000,0000 UI share Units issued. The final cash balance owing of $375,000 was paid by UI on August 31, 2021.

Consideration payable at closing for the purchase of the Kelburn Property (including transaction costs) consisted of cash of $1,729,051 (which was funded by receipt of a mortgage financing on the Kelburn Property) and the balance of $1,862,186 was paid by way of the issuance of 7,448,745 UI share Units on August 30, 2021.

Deferred acquisition costs of $42,929 include legal, appraisal and other costs incurred to July 31, 2021 related to the acquisition of the Kelburn Property, which was completed on August 30, 2021.

In connection funding the acquisition, UI received a mortgage of $1,630,000 on of the Kelburn Property, with interest at a rate of 3.1% for five years, a term of 15 years, and monthly payments of $11,319.

2). $6 million Subscription Receipt Financing

On August 31, 2021, PSQ and Subco closed a non-brokered financing which was required under the terms of the Amalgamation Agreement, whereby Subco offered $6,000,000 (the “ Offering ”) of Subscription Receipts units’ price of $0.25 per unit (each a “ Subco Unit ”). Each Subco Unit consisted of one Subco common share and one warrant to purchase an additional Subco common share. Each Subco Unit was then exchanged on closing of the Amalgamation for similar units of the Resulting Issuer (each an “ RI Unit ”), and consisted of one RI common share, and one RI common share purchase warrant (each a “ RI Warrant ”), with each RI Warrant entitling the holder to purchase an additional RI common share (at an escalating annual exercise price, rising from $0.50 if exercised in year 1 from issue, to $1.50 in year 5) for a period of 5 years from August 31, 2021.

These RI Warrants have the same terms as the share Unit Warrants that were issued under UI’s private placement of share Units in F2021.

A portion of the proceeds of the Offering were used to complete the closing of the purchase of the Kelburn Clinic on August 31, 2021.

3). Amalgamation of PSQ with UI and Subco and resultant name changes

Pursuant to the terms of the Amalgamation Agreement, effective August 31, 2021 PSQ acquired 100% of the shares of UI by way of a share exchange, and undertook a 3-cornered Amalgamation involving PSQ, UI and Subco, summarized as follows:

1. PSQ completed a share exchange with UI, on a 1 for 1 basis, and UI became a wholly owned subsidiary of PSQ on August 31, 2021;

2. UI amalgamated with Subco (incorporated in 2020 as a wholly-owned subsidiary of PSQ) and the

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amalgamated entity continued as Clear Sky Recovery Solutions Inc. (“ CSRS ”).

1. Effective September 15, 2021, PSQ changed its’ name and continued as Universal Ibogaine Inc., which was the Resulting Issuer that became publicly listed on the TSXV effective October 5, 2021.

Share exchange with UI

Under the terms of the Amalgamation Agreement, PSQ issued common shares (subject to defined maximums, which did not come into play) and issued related replacement options and warrants securities of the Resulting Issuer, on a 1 for 1 basis, to the shareholders of UI.

Completion of the Amalgamation and the QT resulted in an RTO of PSQ by UI, as the Resulting Issuer had a total of 190,167,599 common shares outstanding, comprised of:

Shares held by PSQ shareholders at Amalgamation (6.4% of total)	12,085,850
Shares issued to UI shareholders upon Amalgamation (81.0%)	154,081,749
Shares issued on closing of Subscription Receipt Offering by Subco (12.6%)	24,000,000
	190,167,599

Each of UI’s outstanding warrants, options and any other convertible securities (including promissory notes payable) were exchanged for warrants, options and convertible securities of the Resulting Issuer on substantially the same economic terms and conditions as the existing outstanding warrants, options and other convertible securities of UI.

3). Purchase of Belize island property

When UI was initially formed in 2018, it was intended that it would acquire an undeveloped 20-acre island property in Belize that could be used for the development of a future addiction treatment site. In January 2019, UI drafted an agreement to acquire four separate blocks of raw land (“ Bracilette Cay ”) on an island property which is about 6 miles north-west of the town of San Pedro, Belize. The purchase transaction had not yet formally closed at the end of F2019 and F2020, as it was pending acceptance by the relevant government authorities in Belize.

It was determined in late 2019 that the Belize property was not a preferred short-term site for a treatment operation. However, as the value of neighboring Belize island properties had increased, UI decided to continue with the purchase commitment. Also, it was viewed that long term, the Belize resort property could potentially serve as an “after-care” therapy site for patients who eventually receive ibogaine based detoxification treatment.

UI’s subsidiary company, Universal Ibogaine Belize Ltd. (“ UI Belize ”), finalized an agreement with Bracilette Investment Company Ltd. (“ Bracilette ”) in January 2020 to acquire the property on behalf of UI. Consideration payable by UI consisted of the issuance of 25,000,000 UI common shares, at an agreed value of USD $1,250,000 (Cdn $1,667,000). On closing of the purchase of the property in F2021, the common shares issued by UI were recorded at “fair value” in accordance with IFRS 2.

For purposes of the TSXV approval of the QT, in May 2021 UI obtained an independent valuation of the Belize property, which had an estimated fair value of USD 2,425,000 (approximately Cdn $3,002,611). The Belize land and the related common shares issued were recorded as follows:

Common shares issued	$ 2,857,000
Land transfer taxes and other costs incurred	145,611
Valuation of land acquired	3,002,611

Prepaids and deposits at July 31, 2020 included $142,236 which was paid by UI related to land transfer taxes payable to the government of Belize for the purchase of the Belize property. The acquisition formally closed in October 2020 upon Belize government approval of the land transfer, following which UI issued

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the shares on October 27, 2020 to Bracilette, whose shareholders include two parties related to UI. A total of 22,050,000 shares were issued to related parties as follows:

• a total of 1,550,000 shares issued to entities in which a UI Director holds at least a 50% beneficial interest and 10,000,000 shares issued to an entity in which the Director holds at 25% beneficial interest;

• 250,000 shares issued to one of the Directors of UI Belize, and

• 10,250,000 shares issued to entities which are controlled by the children of a Director of UI Belize

There are no plans to expend funds on the Belize property (other than minor ongoing maintenance capital) at this time. The Company is actively evaluating options to maximize the value of the property, including through a potential sale and assessing joint venture development proposals.

Highlights of the year ended July 31, 2021 and to date

The following additional significant transactions occurred in F2021, and subsequently from August 31, 2021 through the effective date of this MD&A.

Private placement financing of share Units issued at $0.25

In F2021 UI commenced undertaking a private placement financing to raise at least $2 million through the sale of share “ Units ” at $0.25 (the “ Financing ”), and had various closings as noted below. Each Unit issued included one UI common share and a warrant to purchase one additional UI common share (each a “ Unit Warrant ”). These Unit Warrants have a term of 5 years from closing of the Liquidity Event (which was the August 31, 2021 closing of the QT), and an escalating annual exercise price, rising by $0.25 per year, from $0.50 if exercised in year 1, to $1.50 if exercised in year 5.

The following closings occurred to July 31, 2021 under the Financing:

	# Of common	value
Closing date	shares	per share	$ value
August 27, 2020	400,000	$ 0.25	100,000
October 23, 2020	2,230,300	$ 0.25	557,575
November 27, 2020	3,641,140	$ 0.25	910,285
January 14, 2021	3,019,068	$ 0.25	754,767
March 3, 2021	1,443,032	$ 0.25	360,758
March 29, 2021	1,255,700	$ 0.25	313,925
June 11, 2021	1,378,700	$ 0.25	344,675
Total Units issued for cash to July 31, 2021	13,367,940		3,341,985

In addition, UI issued common shares and share Units in F2021 in settlement of amounts owing for services rendered as summarized in the table below.

The increase in the number of common shares outstanding in F2021 is summarized as follows:

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	# Of common	value
Common shares issued pursuant to:	shares	per share	$ value
Purchase of Belize property	25,000,000		2,857,000
Conversion of $50,000 Loan payable	625,000	$ 0.10	62,500
Conversion of USD 300,000 balance
payable to ClearSky	4,000,000	$ 0.10	400,000
ClearSky Agreement	30,000,000	$ 0.077	2,324,835
Private placement of share Units	13,367,940	$ 0.25	3,341,985
Common shares issued for services received	3,891,547		442,896
Share Units issued for services received	4,129,794	$ 0.25	1,032,449
Share Units issued for vehicle purchase	100,000	$ 0.25	25,000
Total shares issued in the Q3-2021 YTD period	81,114,281		10,486,664
Shares outstanding as at July 31, 2020	49,978,287
Shares outstanding as at July 31, 2021	131,092,568
Shares issued in the month of August 2021	294,000
Share outstanding at August 30, 2021	131,386,568

In the month of August 2021, up to the closing of the QT, UI issued additional share Units as follows:

	# of common	value
	shares	per Unit	$ value
Share Units issued August 25, 2021:
Issued pursuant to private placement	190,000	$ 0.25	$ 47,500
Issued in exchange for services provided	104,000	$ 0.25	26,000
	294,000		73,500

Advisory Warrants

In F2021, UI issued a total of 10,000,000 Warrants (the “ Advisor Warrants ”) to three separate firms which have been engaged to act as strategic and financial advisors to UI. The Advisor Warrants are exercisable at a price of $0.25 per common share to December 31, 2024, and the entitlement to exercise is subject to the advisors meeting certain performance-based vesting criteria, as well as approval of issuance of the Advisor Warrants by the TSXV, which was received in conjunction with closing of the QT.

In July and August 2021, one of the advisory agreements was terminated by UI, and one was amended, resulting in a reduction of the maximum number of Advisory Warrants to be issued, which decreased from 10,000,000 to a maximum of 9,000,000.

Loan financings

UI has undertaken various loan financings in F2020 and F2021 to supplement its working capital as follows:

Loan payable to PSQ

As part of the QT, on November 8, 2019, UI had advanced $25,000 to UI as a non-interest bearing, unsecured promissory note (the “ PSQ Loan ”), for which the funds were used by UI in connection with installment payments due under the ClearSky Agreement. The maturity date of the PSQ Loan was later extended to October 31, 2020 or such other date as agreed by the parties. The PSQ Loan was repaid by UI on December 21, 2020.

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Convertible loan payable

In connection with the proposed acquisition of the Kelburn Clinic, in May 2020, UI received a $50,000 loan from an arms-length party, and issued a promissory note payable (the “ Loan ”), bearing interest at 15%, and convertible at UI’s option at a price of $0.10 per common share.

Proceeds from the Loan were used by UI in May 2020 to make a $50,000 non-refundable deposit which was held in trust at July 31, 2020 for the benefit of the lender, pending completion of due diligence by UI, for the purchase the Kelburn Clinic.

On November 9, 2020, UI elected to repay the Loan, and issued at total of 625,000 common shares in settlement of the Loan plus related accrued interest and a conversion bonus.

CEBA Loan

In F2021, UI received a $60,000 Canada Emergency Business Account loan (the “ CEBA Loan ”) under the Canadian Federal government’s Covid-19 support programs. Up to $20,000 of the CEBA Loan may be forgiven if $40,000 is repaid by December 31, 2022, and if not repaid, the balance of $40,000 will be extended for an additional 3-year term bearing interest at 5% per year, payable monthly. The CEBA Loan can be repaid at any time without penalty and if the term is extended, no principal payments will be required until December 31, 2025 when the full amount of the CEBA Loan will become due.

$350,000 convertible promissory notes payable

On May 31, 2021, UI issued short-term promissory notes payable totaling $350,000 (the “ Promissory notes ”) in connection with funds received and used to increase the deposits paid (cumulative total of $625,000 to July 31, 2021) for the acquisition of the Kelburn Clinic.

The Promissory Notes bear interest at 10%, were to be due August 31, 2021, and may be converted at the option of the Lenders at any time on into common shares at a price of $0.25 per common share. Effective October 1, 2021, the maturity dated of the Promissory Notes was extended to February 28, 2022.

Results of Operations

Operating results reflect a net loss for each of F2021 and F2020 as follows:

Year ended July 31	2021	2020
General & administrative expenses (“G&A”)	$ 3,795,030	$ 2,361,785
Depreciation expense	69,856	24,552
Interest expense	15,005	6,479
Foreign exchange loss	19,148	19,772
Finance charge expense (income) on ClearSky debt payable	(31,822)	29,512
Amortization of intangible assets	-	979,343
Impairment of intangible assets	-	2,149,287
Net loss for the period	3,867,217	5,570,730
Other comprehensive loss (income)	(5,023)	169
Comprehensive loss for the period	3,862,194	5,570,899
Net loss per common share	$ 0.03	$ 0.16

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G&A expenses includes the following categories:

Year ended July 31	2021	2020
Consulting & management fees	$ 2,236,035	$ 1,491,616
Salaries & wages	225,970	-
Office and administration	524,097	118,887
Advertising and marketing	200,979	314,567
Professional fees	451,969	296,623
Research & development	63,196	21,434
Travel and business development	92,784	118,658
	3,795,030	2,361,785

Factors related to variances year over year in the above noted totals include:

• There was a substantially increased level of G&A activity in F2021, with more staff and consultants engaged in business development and fund raising activities. A large portion of this was non-cash expenses, as the F2021 total included the granting in August and November 2020 of a significant number of UI common shares and share Units in settlement of the cumulative value of services received by UI.

• In F2020 UI utilized various consultants, and did not have any employees on payroll (included in salaries and wages expense), as compared to several staff who commenced on payroll in fall 2020, and one in March 2021.

• Interest expense increased in F2021 to $69,856 due to $33,000 of additional expense recorded to write-down the net book value of equipment and other assets associated with the Belize property.

• Interest expense for F2020 was primarily on the $50,000 convertible loan, which bore interest at 15% and was outstanding from May 2020 until its conversion to common shares effective November 9, 2020. Interest expense for F2021 also includes $5,945 related to interest at 10% on the $350,000 promissory notes payable which were issued on May 31, 2021.

• Finance charges income recorded in F2021 relates to non-cash charges recognized on the ClearSky debt, for which USD 300,000 was denominated in foreign currency, and also had conversion features (originally at both the option of the holder and UI). This gave rise to embedded “derivative” instruments (both a derivative asset and a derivative liability) necessitating the recording of fair value adjustments over the term to maturity of the debt and to extinguishment of certain of the derivative features in April 2020. The ClearSky debt was paid off in full in F2021 via the conversion of the final USD 300,000 of the debt to UI common shares in October 2020.

• There was no amortization of intangible assets expense in F2021 as compared to F2020, as the net book value of the intangible assets related to the 2019 ClearSky Licensing Agreement was written down to $0 via the $2,149,287 impairment charge which was recorded as at the July 31, 2020 yearend. This impairment charge was based on such factors as ongoing delays in (i) implementing the business plan, including revenue generation from use of the ClearSky Protocol, and (ii) initiating the planned clinical trials process for the use of the ibogaine based ClearSky Protocol for addiction treatment. There were no indicators at July 31, 2021 to lead to a reversal of the prior F2020 impairment write-down.

• Amortization of intangible assets expense of $979,343 for F2020 related to the $3,530,000 cost base of intangible assets that were acquired in March 2019 under the ClearSky Licensing Agreement, for which the two components (intellectual property / license, and trademarks / branding) were initially being amortized over periods of 3 and 5 years respectively.

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Cash flows

The total net changes in UI’s cash position in F2021 and F2020 was as follows:

Year ended July 31	2021	2020
Cash provided by (used in):
Operating activities:
Net loss for the period	(3,867,217)	(5,570,730)
Adjustments for non-cash items:
Depreciation	69,856	24,552
Finance charges expense (income) on ClearSky debt	(31,822)	29,512
Non-cash expenses paid in common shares	858,408	439,300
Unrealized foreign exchange	2,973	(14,310)
Amortization of intangible assets	-	979,343
Impairment of intangible assets	-	2,149,287
Net change in non-cash working
capital balances	(281,927)	(367,922)
Net cash used in Operating activities	(3,249,729)	(2,330,968)
Financing activities:
Proceeds from issue of common shares	3,341,985	1,758,261
Share issue costs	(199,862)	(15,544)
Increase (decrease) in private placement deposits	(46,450)	39,450
Increase in shares to be issued	-	591,936
Proceeds from CEBA loan payable	60,000	-
Proceeds from promissory notes payable	350,000	25,000
Repayment of promissory notes payable	(25,000)	-
Proceeds from convertible loan payable	-	50,000
Repayment of ClearSky debt payable	(98,400)	(74,942)
Cash from Financing activities	3,382,273	2,374,161
Investing activities:
Deferred acquisition costs	(42,929)	-
Net increase in cash	89,615	43,193
Cash, start of the period	52,581	9,388
Cash, end of the period	142,196	52,581

UI’s cash used in operating activities increased in F2021 due to the expanded level of staff and business development activities.

The $89,615 net increase in cash for F2021 was primarily due to the $3,142,123 net proceeds from the issue of common shares, plus $286,600 of net proceeds from the increase in loans payable, which slightly exceeded the $3,249,729 cash used to fund operating activities.

Cash used to fund operating activities was financed in F2021 primarily through placements of common share Units, as follows:

• In F2021, UI closed 7 separate private placement closings, and issued a total of 13,367,940 common share Units at $0.25 per share Unit for gross cash proceeds of $3,341,985 ($3,142,123 net of share issue costs).

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• In addition in F2021, a total of 4,229,794 common share Units were issued valued at $1,057,449 and a total of 3,891,547 common shares were issued valued at $442,896, both in settlement of various accounts payable and for past services rendered to UI.

Liquidity and Capital Resources

UI’s net working capital deficiency position at the end of the last 2 fiscal year ends was as follows:

As at July 31	2021	2020
Current assets	901,543	438,569
Current liabilities	(987,869)	(1,045,598)
Net working capital (deficiency)	(86,326)	(607,029)
Add back USD 300,000 paid in F2021 via share issuance	-	431,822
Adjusted net working capital (deficiency)	(86,326)	(175,207)

The working capital position at July 31, 2021 improved significantly following closing of the $6 million Offering and the Amalgamation with PSQ on August 31, 2021.

The following is noted regarding the working capital balance as at July 31, 2021:

• Current assets includes deposits of $625,000 which were held in trust until paid on August 30, 2021 to complete the acquisition of the Kelburn Clinic.

• Current liabilities includes the $350,000 Promissory notes, which technically could be repaid via conversion to common shares (at $0.25 per share) prior to their maturity on February 28, 2022.

As was previously noted, USD 300,000 of the USD 375,000 (Cdn $431,822) consideration owing to ClearSky at July 31, 2020 was subsequently paid on October 26, 2020 in the form of UI common shares issued at Cdn $0.10 per share. This significant item was therefore effectively excluded from the net working capital for purposes of a liquidity test analysis as at the comparative date of July 31, 2020.

UI does not currently have any material commitments for operating leases on office premises or equipment. UI’s Vancouver office premises were leased under a short-term, 10 month term which expired on April 30, 2021, and was renewed on a short-term, month to month basis until August 31, 2021.

Additional Disclosure - Outstanding Securities

The following table summarizes the number of common shares outstanding and reserved for issuance, as at the current MD&A date (following closing of the QT an Amalgamation on August 31, 2021), and as at the fiscal year ended July 31, 2021:

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	as at	as at
	November 29,	July 31,
	2021	2021
	(unaudited)
Common shares outstanding:		131,092,568
As at July 31, 2021 (i)	131,092,568
Shares issued in August, 2021	294,000
Conversion of Liquidity Warrants on Amalgamation (ii)	13,171,436
Acquisition of the Kelburn Clinic on August 30, 2021	9,448,745
Performance shares issued on closing of Amalgamation	475,000
	154,481,749
Closing of the Offering on August 31, 2021	24,000,000
PSQ shares outstanding at August 31, 2021	12,085,850
Outstanding common shares of the Resulting Issuer	190,567,599
Additional common shares reserved for potential future issue re:
Broker stock options (see (iii))	3,773,000	3,773,000
Share purchase warrants (see (iv))	41,891,734	17,597,734
Performance based common shares (see v))	3,275,000	3,750,000
Stock options (see vii))	16.600,000	-
Advisor warrants (see (viii))	9,000,000	10,000,000
	74,539,734	41,770,734
Fully diluted total	265,107,333	172,863,302

• (i) In April, 2020 the consideration payable by UI under the ClearSky Licensing Agreement was revised, and the number of common shares to be issued by UI was reduced from 60 million to 30 million. These shares were required to be issued to ClearSky by January 31, 2021, which occurred as scheduled. The eventual release from escrow of 90% of these shares is subject to UI achieving various future performance criteria (including clinical trials for the use of ibogaine in addiction treatment, and the opening of UI clinics which utilize the ClearSky Protocol).

• (ii) Pursuant to the terms of a brokered private placement which UI undertook in July 2018, UI was required to issue additional UI common shares to the subscribers to the 2018 private placement pursuant to “ Liquidity Warrants ” which were issued. The total number of UI shares issuable increased by a total of 742,750 common shares every 60 days until such time as UI completed the contemplated “Liquidity Event”, which included completion of the Amalgamation with PSQ. A total of 13,171,436 UI common shares were issued pursuant to conversion of these Liquidity Warrants on closing of the August 31, 2021 Amalgamation.

• (iii) The broker stock options were issued by UI in connection with private placement financings and have an exercise price of $0.10 per common share, and a term to expiry of 2 years (except 22,000 of the total, which had a fixed expiry date of April 21, 2021) from the date of a UI “Liquidity Event”, which occurred effective August 31, 2021 on closing of the QT.

• (iv) As discussed previously, in F2021 UI had numerous closings of a private placement of share Units (one common share and one common share purchase Warrant) at $0.25 per Unit In addition, share Units were issued in settlement of certain accounts payable and for the value of services received.

A total of 17,891,734 share Unit Warrants were issued by UI to August 31, 2021, and a total of 24,000,000 RI Warrants were issued by Subco on closing of the Offering on August 31, 2021. All 41,891,734 of these Warrants have a term of 5-years from the closing of the Amalgamation on August 31, 2021, and an annual escalating exercise price (rising by $0.25 per year, starting at $0.50 if exercised in year 1 to $1.50 if exercised in year 5).

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• (v) On August 19, 2020 UI approved the issuance of a total of 2,250,000 performance based common shares (“ Performance Shares ”) to three members of the UI Board of Directors and entitlement to these shares was to vest (i) 10% upon UI achieving a Liquidity Event and (ii) 15% every 6 months thereafter, provided that the individual remains as a UI Director or Officer. A member of the UI Board of Directors resigned effective March 22, 2021, which resulted in the issuance of a total of 75,000 common shares (at a price of $0.10 per share) and the cancellation of the remaining 675,000 Performance Shares.

As part of the TSXV approval of the QT, the performance criteria were revised in August 2021, such that 15% (or a total of 225,000) were issued on closing of the Amalgamation on August 31, 2021, and the balance will be issuable based on the occurrence of future event milestones, including the Company undertaking clinical trials.

Effective March 1, 2021, UI granted a total of 2,000,000 Performance Shares to an executive of the Company. Entitlement to receive these shares shall vest on the occurrence of future events, including a portion tied to UI undertaking clinical trials and a portion tied to the future opening of clinics for the treatment of opioid use disorder.

On closing of the QT on August 31, 2021, a total of 225,000 of the Performance Shares were released to the two members of the UI Board of Directors. An additional 250,000 Performance shares were released to a consulting advisor to UI following closing of the August 30, 2021 acquisition of the Kelburn Clinic.

Share based compensation expense related to the Performance Shares will be recorded in the future periods in which it becomes reasonably certain that the performance criteria will be met.

• (vi) On May 28, 2021, the UI Board of Directors approved 1) the adoption of a stock option plan which allows for the granting of options to purchase common shares to directors, officers, employees and consultants and 2) the grant of a total of 6,650,000 options to members of its Board of Directors and its CEO. These stock options have an exercise price of $0.25 per common share, an expiry date of May 28, 2026, and entitlement to exercise vesting on the annual anniversary date of the grant at a rate of one-third per year over a period of 3 years.

In addition, PSQ had a total of 1,100,000 stock options (exercise price of $0.10 and expiry date of August 31, 2022) which, similar to the UI Options, were replaced by stock options of the Resulting Issuer on closing of the Amalgamation on August 31, 2021.

On November 26, 2021, the Company granted a total of 8,850,000 Options to Officers, Directors and consultants. These Options have an exercise price of $0.25 per share, a term to expiry of 5 and 10 years, and vesting over a period of 2 to 3 years.

• (vii) As noted previously, in F2021 UI engaged three separate firms to act as strategic and financial advisors to UI and has issued a total of 10,000,000 Warrants (the “ Advisor Warrants ”) as part of their compensation. The Advisor Warrants are exercisable at a price of $0.25 per common share to December 31, 2024, and the entitlement to exercise is subject to the advisors meeting certain performance-based vesting criteria.

In July and August 2021, one of the advisory agreements was terminated by UI, and one was amended, resulting in a reduction of the maximum number of Advisory Warrants to be issued, which decreased from 10,000,000 to maximum of 9,000,000.

Other transactions with related parties

As noted previously herein, and in the notes to the F2021 financial statements, there were various transactions with related parties (members and former members of the management and Board of Directors

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groups) in F2021 and F2020. This included UI common shares which have been issued in settlement of the value of past services received by UI.

Certain related parties received UI common shares in October 2020 on closing of the purchase from them of the undeveloped Belize land property. Also, one of the three principals of ClearSky is currently a member of UI’s Board of Directors, and received a total of 11,333,333 UI common shares in F2021 pursuant to his share of 1) the issuance of common shares on January 31, 2021 under the ClearSky Agreement and 2) conversion of the USD 300,000 ClearSky note payable.

The net balances payable to related parties consisted of:

As at July 31	2021	2020
Balance owing to entity controlled by UI Director	$ -	$ 26,233
Balance payable to Director of subsidiary company, UI Belize	-	16,635
Balances payable to related parties	-	42,868

These amounts are unsecured, non-interest bearing and payable on demand.

Critical accounting estimates

The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (“ IFRS ”). The Company has had limited operations to date, and as such there have been minimal areas of judgments or estimates made by management in the application of IFRS that have a significant effect on its financial statements, other than estimates related to:

• the useful lives / annual amortization expense, and related potential impairment at each period end, of the intangible assets that were acquired in fiscal 2019 under the ClearSky Licensing Agreement.

• share price volatility and other assumptions involved in the calculation of the fair value of stock options issued as part of broker compensation for private placement financings, and the valuation of share purchase warrants issued under such private placements.

Changes in accounting policies including initial adoption

There were no significant changes in accounting policies reflected in UI’s financial statements for F2021 or F2020. There are currently no additional recent accounting pronouncements which are expected to significantly affect the Company’s financial statements in the future, other than IFRS 16 (Leases) which would require the recognition of long term right-of-use assets and related liabilities for any long-term leases which UI may enter into in the future, such as for the use of office space or clinic facilities.

Risk Factors

Future Operations

UI is in the early stages of developing its business plan, and its ability to generate ongoing future cash flows from operations will depend on its ability to 1) successfully integrate the acquisition of the Kelburn Clinic and 2) to identify and acquire or open other future clinic operations.

To date, the Company has not yet generated positive cash flow from operations, and has realized working capital deficiencies.

UI anticipates that it will be able to generate both net income and cash from operations in future years based on its current business model; however, this outcome cannot be predicted with certainty.

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Access to Financing Sources

It is expected that any potential businesses to be acquired or opened by UI will likely require significant future equity and debt financings to fund their business development plans.

UI expects that it will have sufficient ongoing access to equity and debt financings, on commercial terms, to fund any required future acquisitions, capital and operating expenditures, and the planned clinical trials process.

Management, consultants and staff

The Company's success is currently dependent on the performance of a limited group of senior management, its Board of Directors, and various consultants. The loss of the services of such key persons could have an adverse effect on the Company, and there is no assurance that it can maintain the services of qualified personnel that are required to operate and expand our business, as well as to undertake and oversee the planned clinical trials process.

Clinical trials process

There is no certainty that the Company will be able to obtain the necessary approvals from Health Canada to undertake and complete, in a timely basis, the planned future clinical trials process for the use of ibogaine in addiction treatment.

Also, there is no assurance that the Company will be able to successfully undertake and complete the clinical trials process, which is expected to take at least 3 to 5 years, or that ibogaine will ultimately become approved by Health Canada for medical use by CSRS as intended.

As ibogaine is derived from a plant which grows in a limited area of Africa, UI also faces risk in being able to source and obtain sufficient ongoing supplies of certified ibogaine, on reasonable commercial terms, to undertake clinical trials and for use in future addiction treatment operations. CSRS will therefore research alternate and synthetic supply sources.

Internal and Disclosure Controls over Financial Reporting

As a private entity, the Company is exempted from providing certifications regarding its disclosure controls and procedures as well as regarding its internal control over financial reporting. The Company makes no assessment relating to the establishment and maintenance of (i) disclosure controls and procedures or (ii) internal control over financial reporting (as such terms are defined under Multilateral Instrument 52-109) as at July 31, 2021 or July 31, 2020.

Additional Information

Additional information about the Company is available on UI’s website at www.universalibogaine.com.

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