VEXT Science, Inc. — Interim / Quarterly Report 2020

Jun 1, 2020

Vext Science, Inc.

(formerly Vapen MJ Ventures Corporation)

Condensed Interim Consolidated Financial Statements

March 31, 2020 and 2019

(Expressed in U.S. Dollars)

(Unaudited)

Vext Science, Inc.

(formerly Vapen MJ Ventures Corporation)

Table of Contents

Cover
Table of contents	2
Condensed Interim Consolidated Statements of Financial Position	3
Consolidated Interim Statements of Operations and Comprehensive	4
Income
Consolidated Interim Statements of Changes in Shareholders’ Equity	5
Consolidated Interim Statements of Cash Flows	6
Notes to the Condensed Interim Consolidated Financial Statements	7 - 29

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VEXT SCIENCE, INC (formerly Vapen MJ Ventures Corporation)

Condensed Interim Consolidated Statements of Financial Position (Expressed in U.S. Dollars) (Unaudited)

(Expressed in U.S. Dollars) (Unaudited)
Notes	March 31, 2020 December 31, 2019
ASSETS Current assets Cash Accounts receivable 4 Prepaid expenses, deposits, and other receivables 5 Notes receivable – current 6 Advances to joint ventures 8 Investment in sublease – current 14 Non-current assets Notes receivable 6 Investment 7 Property, plant and equipment 11 Investment in sublease – non-current 14 Investment in Joint Ventures 9 Right-of-use asset 14 Due from related parties 16 Total Assets	$ 5,414,859 $ 7,292,261 16,567,843 15,548,015 323,919 303,402 302,284 1,130,587 250,000 440,830 128,820 122,027
	22,987,725 24,837,122 2,020,182 2,020,182 350,000 350,000 9,183,904 8,526,628 542,866 576,887 779,914 - 280,508 287,890 2,181,785 2,181,785
	$ 38,326,884 $ 38,780,494
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Payables and accrued liabilities 12, 16 Due to Legacy Ventures Hawaii, LLC 7 Notes payable – current portion 13, 16 Lease liability – current portion 14 Income tax payable Total current liabilities Long-term liabilities Notes payable – non-current portion 13, 16 Lease liability – non-current portion 14 Long term loan payable 15 Deferred tax liabilities Total liabilities Shareholders’ equity Subordinated and multiple voting shares 17 Reserves 17 Accumulated other comprehensive income Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity	$ 996,718 $ 1,068,635 106,479 203,000 920,516 920,414 139,796 132,654 45,728 45,728
	2,209,237 2,370,431 339,189 98,894 821,605 858,504 5,323,476 5,280,467 4,499,000 4,499,000
	13,192,507 13,107,296 9,597,465 9,597,465 821,187 733,781 395,531 50,738 14,320,194 15,291,214
	25,134,377 25,673,198
	$ 38,326,884 $ 38,780,494

Nature of operations and going concern (Note 1) Subsequent events (Note 23)

Approved on June 1, 2020 on behalf of the Board of Directors:

“ Jason T. Nguyen” , Director “Eric J. Offenberger” , Director

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

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation)

Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Expressed in U.S. Dollars) (Unaudited)

Notes	For the Three Months Ended March 31, 2020 March 31, 2019
REVENUES Management fees Professional services Product sales Equipment leasing Property leasing 14 COST OF SALES Cost of goods sold Salaries, wages, and contractors 16 Property and equipment leasing, utilities, and property taxes 14 Amortization 11 Gross Profit OPERATING EXPENSES Advertising and promotion Amortization 11, 14 Bank charges and interest 14, 15 Consulting fees 16 Insurance Office and general Professional fees Rent, property taxes, and utilities 14 Repairs and maintenance Research and development Share-based compensation 16 Salaries, wages, and commissions 16 Travel, training, and meals and entertainment Share of profit (loss) of Joint Ventures 9 Loss on asset disposal Foreign exchange gain Interest income Net income (loss) before taxes Income tax expense	$ 600,000 $ 1,200,000 1,402,839 1,479,618 2,005,085 3,228,888 20,752 351,422 67,422 240,000
	4,096,098 6,499,928 1,494,285 1,725,665 1,160,271 1,403,570 23,636 20,914 212,115 178,374
	(2,890,307) (3,328,523)
	1,205,791 3,171,405 117,497 192,460 56,983 34,232 182,512 19,704 280,591 24,208 6,588 26,184 796,655 64,597 264,166 172,462 27,069 21,776 19,952 81,760 30,098 36,562 87,406 67,393 330,590 120,671 110,821 121,670
	(2,310,928) (983,679) (62,520) - (766) - 126,347 - 71,056 -
	(971,020) 2,187,726 - (526,309)
Net income(loss) after taxes	$ (971,020) $1,661,417
Unrealized gain on foreign exchange translation	344,794 5,124
Total comprehensive income(loss)	$ (626,226) $1,666,541
Basic earnings (loss) per common shares	$ (0.01) $0.02
Diluted earnings (loss) per common shares	$(0.01) $ 0.02
Weighted average number of common share outstanding - basic	84,363,326 75,054,661
Weighted average number of common share outstanding - diluted	84,363,326 75,054,661

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

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VEXT SCIENCE, INC

(formerly Vapen MJ Ventures Corporation)

Consolidated Interim Statements of Changes in Shareholders’ Equity (Expressed in U.S. Dollars) (Unaudited)

	Share Capital Number of subordinate d voting shares Amount: subordinate d voting shares Number of multiple voting shares Amount: multiple voting shares Number of special warrants Special warrants Subscriptions receivable – special warrants Subscriptions receivable – subordinated voting shares Reserves: compensatory warrants Reserves: stock options Accumulated other comprehensive income Retained earnings Total shareholders’ equity
Balance at December 31, 2018 Payment of special warrants Private placement Share-based compensation Cumulative catch-up adjustment of recognition of right-of-use assets Other comprehensive income for the Period Net income for theperiod	11,525,961 $4,150,332 625,287 $ 19 1,000,000 $ - $ 183,250 $ 50,000 $ 89,628 $ - $ 4,091 $ 12,523,255 $ 17,000,575 - - - - - 183,250 (183,250) - - - - - - - 50,000 - - - - - (50,000) - - - - - - - - - - - - - - 67,393 - - 67,393 - - - - - - - - - - - (240,701) (240,701) - - - - - - - - - - 5,124 - 5,124 - - - - - - - - - - - 1,661,417 1,661,417
Balance at March 31, 2019	11,525,961 $4,200,332 625,287 $ 19 1,000,000 $183,250 $ - $ - $ 89,628 $ 67,393 $ 9,215 $ 13,943,971 $ 18,493,808
Balance at December 31, 2019 Conversion of multiple voting shares to subordinated voting shares Shares based compensation Other comprehensive income for the period Net income for theperiod	21,834,626 $ 9,597,446 625,287 $ 19 - $ - $ - $ - $ 552,742 $ 181,039 $ 50,738 $ 15,291,214 $ 25,673,198 488,500 - (4,885) - - - - - - - - - - - - - - - - - - 60,850 26,556 - - 87,406 - - - - - - - - - - 344,793 - 344,793 - - - - - - - - - - - (971,020) (971,020)
Balance at March 31, 2020	22,323,126 $ 9,597,446 620,402 $ 19 - $ - $ - $ - $ 613,592 $ 207,595 $ 395,531 $ 14,320,194 $ 25,134,377

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

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VEXT SCIENCE, INC (formerly Vapen MJ Ventures Corporation) Condensed Interim Consolidated Statements of Cash Flows (Expressed in U.S. Dollars) (Unaudited)

VEXT SCIENCE, INC (formerly Vapen MJ Ventures Corporation) Condensed Interim Consolidated Statements of Cash Flows (Expressed in U.S. Dollars) (Unaudited)
	Three months ended March 31, 2020 Three months ended March 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) for the period Items not affecting cash: Amortization Accretion and interest on leases and debt Finance income on subleases Deferred tax liabilities Share-based compensation Foreign exchange Loss on asset disposal Share of loss of Joint Ventures Non-cash working capital item changes: Accounts receivable Inventory Prepaid expenses, deposits and other receivables Payables and accrued liabilities Income tax payable Lease liability Net cash (used in) provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Investment Investment in Joint Ventures Acquisition of property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Issuance of notes receivable (Repayment) issuance of notes payable Lease payments made Sublease payments received Subscription received Net cash provided by financing activities Net change in cash during the period Cash (bank indebtedness), beginning of the period Cash, end of theperiod	$ (971,020) $ 1,661,417 269,098 212,606 195,584 - (22,422) - - 503,418 87,406 67,393 361,688 5,124 766 - 62,520 - (1,019,828) (2,557,986) - (27,522) 229,483 (337,866) 40,526 125,350 - (504,853) - (23,298)
	(1,016,219) (876,218)
	(96,521) - (651,604) - (919,758) (388,413)
	(1,667,883) (388,413)
	828,303 - (9,603) (214,796) (61,650) - 49,650 - - 233,250
	806,700 18,454
	(1,877,402) (1,246,176) 7,292,261 (174,241)
	$ 5,414,859 $ 288,238
Cash paid for Interest Taxes	$ 30,198 $ 28,438 $ - $ 527,744

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

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

Vext Science, Inc. (formerly Vapen MJ Ventures Corporation) (the “Company”) provides management, advisory, cultivation, and dispensary services to non-for-profit entities in the medical cannabis field. The head office and principal address of the Company is located at Suite 2250 – 1055 W. Hastings St., Vancouver, BC V6E 2E9 and the U.S. headquarters is at 4152 N. 39th Ave, Phoenix, Arizona 85019. On December 31, 2018, the Company changed its name from Fabula Exploration Inc. to Calyx Growth Corporation. On March 25, 2019, the Company changed its name from Calyx Growth Corporation to Vapen MJ Ventures Corporation. On November 12, 2019, the Company changed its name from Vapen MJ Ventures Corporation to Vext Science, Inc.

These unaudited condensed interim consolidated financial statements have been prepared using International Financial Reporting Standards applicable to a going concern which assumes the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business. The continuing operations of the Company are dependent upon the Company’s ability to continue to earn adequate revenues from operations, and to raise adequate financing. The Company intends to finance its future requirements through continued operations.

As at March 31, 2020, the Company had working capital of $20,778,488 and retained earnings of $14,320,194. There is uncertainty as the likely effects of the novel coronavirus (“COVID-19”) outbreak which may, among other things, impact the Company’s operations and ability to raise further financing. Management has assessed that this working capital is sufficient for the Company to continue as a going concern beyond one year.

These condensed consolidated interim financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.

2. BASIS OF PRESENTATION

a) Statement of Compliance

These interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting’ using accounting policies consistent with the IFRS issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These interim financial statements follow the same accounting policies and methods of applications as the Company’s most recent audited annual consolidated financial statements. These interim financial statements do not contain all of the information required for full annual financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company’s December 31, 2019 audited annual consolidated financial statements.

b) Basis of Preparation

These interim financial statements have been prepared on a historical cost basis, except for certain financial instruments classified as fair value through profit or loss, and are stated at their fair value. In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for certain cash flow information. The interim financial statements, unless otherwise specified, are presented in United States (“U.S.”) dollars.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

2. BASIS OF PRESENTATION ( CONTINUED…

c) Basis of Consolidation

The interim financial statements include consolidated accounts of the Company and its subsidiaries, including its economic interest in joint ventures. Subsidiaries are those entities that the Company controls. The Company controls an entity when the Company is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and are deconsolidated from the date that control ceases. All intercompany transactions and balances have been eliminated on consolidation.

Entities of the Company are listed below.

Name	Jurisdiction	Ownership
Vext Science, Inc.	BC, Canada	100%
New Gen Holdings, Inc.	Wyoming, USA	100%
Step 1 Consulting, LLC	Arizona, USA	100%
New Gen Admin Services, LLC	Arizona, USA	100%
New Gen Agricultural Services, LLC	Arizona, USA	100%
New Gen Real Estate Services, LLC	Arizona, USA	100%
Hydroponics Solutions, LLC	Arizona, USA	100%
X-Tane, LLC	Arizona, USA	100%
Pure Touch Botanicals, LLC	Arizona, USA	100%
Vapen, LLC	Arizona, USA	100%
Vapen CBD, LLC	Arizona, USA	100%
Joint Ventures:
Vapen Kentucky, LLC	Kentucky, USA	50%
Vapen-Oklahoma, LLC	Oklahoma, USA	25%
Vapen Mass, LLC	Massachusetts, USA	50%

d) Reclassification

Certain prior year amounts have been reclassified to conform with current year’s presentation.

e) Approval of the Condensed Consolidated Interim Financial Statements

These interim financial statements for the three months ended March 31, 2020 and 2019 were approved and authorized for issue by the Board of Directors on June 1, 2020.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

2. BASIS OF PRESENTATION ( CONTINUED… )

• e) Significant Accounting Judgements and Estimates

The preparation of the Company’s condensed interim consolidated financial statements is in conformity with IFRS, which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated interim financial statements and reported revenues and expenses during the reporting period.

Critical Judgements

The preparation of these interim financial statements requires management to make judgements regarding the going concern of the Company, as previously discussed in Note 1, as well as the determination of functional currency, and its classification of joint arrangements. The functional currency is the currency of the primary economic environment in which an entity operates, and has been determined for each entity within the Company. Management has determined that the functional currency of the parent is the Canadian dollar, while the functional currency of the subsidiaries has been determined to be the U.S. dollar.

Joint Arrangements

As at March 31, 2020, the Company holds a 50% interest in two separate joint arrangements and a 25% interest in one joint arrangement. The Company has joint control over these arrangements as under the contractual agreements, unanimous consent is required from all parties to the agreements for certain key strategic, operating, investing and financing policies. The Company’s joint arrangements are structured as a limited liability corporation and provide the Company and its partners (parties to the agreements) with rights to the net assets of the limited liability corporations under the arrangements. Therefore, these arrangements are classified as joint ventures.

Key Sources of Estimation Uncertainty

Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of condensed consolidated interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of these condensed consolidated interim financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant.

Significant estimates made by management affecting these condensed consolidated interim financial statements include:

Allowance for Doubtful Accounts

The Company estimates the amount of accounts receivable that may not be collectable and will allow for a write down of such amounts. Management uses historical information on the recoverability of accounts receivable and also looks at specific account balances in determining the allowance.

Inventory Obsolescence

The Company estimates the amount of inventory on hand that may not be recoverable and will allow for a write down of such amounts.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

2. BASIS OF PRESENTATION ( CONTINUED… )

e) Significant Accounting Judgements and Estimates ( continued…

Deferred Tax Assets & Liabilities

The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income, which in turn is dependent upon the successful management of cannabis operations. To the extent that management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.

Useful Life of Property, Plant and Equipment

Property, plant and equipment are amortized over its estimated useful life. Estimated useful lives are determined based on current facts and past management experience and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations.

Share-Based Payments

Estimating fair value for granted stock options and compensatory warrants requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option or warrant, volatility, dividend yield, and rate of forfeitures and making assumptions about them.

Leases

The Company estimates the lease term by considering the facts and circumstances that can create an economic incentive to exercise an extension option, or not exercise a termination option by assessing relevant factors such as store profitability. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment of the lease term is reviewed if a significant event or a significant change in circumstance occurs, which affects this assessment and that is within the control of the lessee. The Company estimates the incremental borrowing rate used to measure our lease liability for each lease contract. This includes estimation in determining the asset-specific security impact.

COVID-19

Given the ongoing and dynamic nature of the circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the impact of COVID-19, including any responses to it, will be on the global economy and the business of the Company or for how long any disruptions are likely to continue. The extent of such impact will depend on future developments, which are highly uncertain, rapidly evolving and difficult to predict, including new information which may emerge about COVID-19 and additional actions which may be taken to contain it. Such developments could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flow, and exposure to credit risk. The Company is constantly evaluating the situation and monitoring any impacts or potential impacts to its business.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES

These interim financial statements follow the same accounting policies and methods of application s as the most recent audited annual consolidated financial statements of the Company. These condensed interim consolidated financial statements do not contain all of the information required for full annual financial statements. Accordingly, these interim financial statements should be read in conjunction with the Company’s December 31, 2019 annual consolidated financial statements.

Standards newly adopted or issued but not effective

Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.

4. ACCOUNTS RECEIVABLE

The Company’s accounts receivable consist of the following:

		March 31, 2020		December 31, 2019
Accounts receivable (Notes 16, 20)	$	16,296,560	$	15,374,508
Unbilled professional services		256,040		155,984
GST input tax credits		15,243		17,523
	$	16,567,843	$	15,548,015

5. PREPAID EXPENSES, DEPOSITS AND OTHER RECEIVABLES

The Company’s prepaid deposits and other receivables consist of the following:

		March 31, 2020	December	31, 2019
Vendor deposits	$	286,353	$	226,314
Prepaid expense		28,066		71,046
Advances Appalachian Pharm Processing, LLC (1)		5,392		5,392
Interest receivable		2,898		-
Employee advances		1,210		650
	$	323,919	$	303,402

(1) On March 30, 2020, the Company entered into a loan agreement with Appalachian Pharm Processing, LLC (“APP)”, an Ohio limited liability company. The Company agreed to advance APP the aggregate principal sum of $500,000 in two equal installments of $250,000 each for the exclusive purpose of acquiring biomass for the manufacturing and production of cannabis products as well as associated expenses related to this.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

6. NOTE RECEIVABLE

As at March 31, 2020, the Company’s notes receivables consist of the following:

		Current	Non-current	Non-current		Total
Due from Herbal Wellness Centre Inc. (“HWC”),
incurring interest at 10% per annum, on December 31,
2022(1)	$	93,434	$	2,020,182	$	2,113,616
Due from an arm’s length party, accruing interest at
10% per annum, and due on demand		130,000		-		130,000
Due from Organica Patient Group, Inc. This amount is
non-interest bearing, and due on demand (Note 23)		78,850		-		78,850
	$	302,284	$	2,020,182	$	2,322,466

As at December 31, 2019, the Company’s notes receivables consist of the following:

		Current	Non-current	Non-current		Total
Due from Herbal Wellness Centre Inc. (“HWC”),
incurring interest at 10% per annum, on December 31,
2022(1)	$	913,775	$	2,020,182	$	2,933,957
Due from an arm’s length party, accruing interest at
10% per annum, and due on demand		137,962		-		137,962
Due from Organica Patient Group, Inc. This amount is
non-interest bearing, and due on demand (Note 23)		78,850		-		78,850
	$	1,130,587	$	2,020,182	$	3,150,769

(1) On December 31, 2019, the Company and HWC entered into a promissory note, whereby $2,933,957 was reclassified from accounts receivable into an interest-bearing note. The note bears an interest rate of 10% per annum, beginning on January 1, 2020, and is payable as follows: $913,775, as well as accrued interest due on or before December 31, 2020; $1,000,779 as well as accrued interest due on or before December 31, 2021; and $1,019,403, as well as accrued interest due on or before December 31, 2022.

7. INVESTMENT

On August 2, 2019, the Company entered into Restricted Unit Grant Agreement with Legacy Ventures Hawaii, LLC (“Legacy”), whereby the Company subscribed for 350,000 units of Legacy for $350,000. As at March 31, 2020, the Company had paid $243,521, with the remaining $106,479 still owing. Subsequent to the three months ended March 31, 2020, the Company paid $49,000 of the amount outstanding. As a result of this subscription, as at March 31, 2020, the Company had a 12.28% interest in Legacy.

In addition to the 350,000 units subscribed for above, the Company will be granted an additional 350,000 units for services to be provided by the Company to Legacy. 175,000 of these units will be issued in the fiscal year ending December 31, 2020, with the remaining 175,000 to be issued during the year ended December 31, 2021.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

8. ADVANCES TO JOINT VENTURES

At December 31, 2019 the Company held 50% membership interest in Vapen 501 Lab, LLC (“Vapen 501”).

During the period ended March 31, 2020, the Company became 50% member to Vapen Kentucky, LLC (“Vapen KY”), and a 25% member to Vapen Oklahoma, LLC (“Vapen OK”). Refer to Note 9 for further details.

The Company advanced the following amounts to the above joint ventures:

				March	31, 2020	December	31, 2019
Vapen	501		$		250,000	$	250,000
Vapen	KY				-		5,250
Vapen	OK				-		185,580
		$			250,000	$	440,830

9. INVESTMENT IN JOINT VENTURES

Vapen Kentucky, LLC

On February 1, 2020, an operating agreement of Vapen Kentucky, LLC (“Vapen KY”) was signed for the purpose of being engaged in commercial hemp processing, manufacturing, extraction, and distribution activities. The Company holds 50% membership ownership of Vapen KY with Emerald Pointe Hemp, LLC (“EPH”) owning the other 50%. As at March 31, 2020, the Company loaned Vapen KY $463,898 for working capital. The working capital loan is interest free.

Vapen-Oklahoma, LLC

On February 12, 2020, the Company entered into a joint venture term sheet with Texoma Processing and Extraction, LLC (“TPE”) regarding Vapen-Oklahoma, LLC (“Vapen OK”). The Company is a minority member of Vapen OK holding 25% membership ownership, whereas TPE is a majority member owning 75% membership ownership of Vapen-OK and both parties have equal voting rights. The terms of the initial joint venture will be five years, with automatic successive renewal terms of additional five-year periods each. As at March 31, 2020, the Company loaned Vapen OK $169,812 for working capital. The working capital loan is interest free.

Vapen Mass, LLC

At December 31, 2019 the Company held 50% membership interest in Vapen Mass, LLC, with the remaining held by Caregiver Patient Connection, LLC. As at March 31, 2020, Vapen Mass was inactive and no investments were made in the joint venture.

Vapen 501 Lab, LLC

At December 31, 2019 the Company held 50% membership interest in and Vapen 501 Lab, LLC (“Vapen 501”), with the remaining 50% held by Tree of Life Seeds, Inc. On March 26, 2020, the Vapen 501 joint venture was terminated.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

9. INVESTMENT IN JOINT VENTURES ( Continued… )

As at March 30, 2020, the balance of Investment in Joint Ventures comprised of the followings:

		Vapen KY		Vapen OK		Total
Balance as at December 31, 2019	$	-	$	-	$	-
Contributions		463,898		378,536		842,434
Share of loss of the joint ventures during the
period		(54,861)		(7,659)		(62,520)
Balance as atMarch31,2020	$	3,578,750	$	169,812	$	779,914

Summarized financial information for equity accounted investees for the period ended March 31, 2020, is as follows:

	Vapen KY	Vapen OK	Vapen OK
Ownership %	50%	25%
Current assets	$ 690,164	$	641,937
Non-current assets	14,327		-
Total assets	704,491		641,937
Total liabilities	816,799		672,572
Net assets	(112,308)		(30,635)
Expenses	109,721		30,635
Net loss	109,721		30,635

10. LINE OF CREDIT

On January 1, 2020, the Company entered into a $5,000,000 line of credit secured promissory note (“Promissory Note”) with Herbal Wellness Center, Inc. (“HWC”) whereby HWC promises to pay the Company the principal and 10% interest per annum. As at March 31, 2020, no money had been drawn from this line of credit by HWC.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation)

Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

11. PROPERTY, PLANT AND EQUIPMENT

	Land Building Equipment and machinery Leasehold improvements Construction in progress Automobile **Total **
Cost Balance at December 31, 2018 $ 340,779 $ 1,211,196 $ 1,451,177 $ 2,300,453 $ - $ 81,785 $ 5,385,390 Disposals - - - - - (4,750) (4,750) Additions - 112,173 4,385,598 445,550 294,446 21,711 5,259,478 Balance at December 31, 2019 $ 340,779 $ 1,323,369 $ 5,836,775 $ 2,746,003 $ 294,446 $ 98,746 $ 10,640,118 Disposals - - - - - (13,150) (13,150) Additions - 28,590 420,462 49,881 417,525 11,800 928,258 Balance at March 31, 2020 $ 340,779 $ 1,351,959 $ 6,257,237 $ 2,795,884 $ 711,971 $ 97,396 $ 11,555,226 Accumulated Amortization Balance at December 31, 2018 $ - $ 124,619 $ 455,641 $ 708,371 $ - $ 15,114 $ 1,303,745 Disposals - - - - - (1,583) (1,583) Amortization - 82,835 314,581 394,906 - 19,006 811,328 Balance at December 31, 2019 $ - $ 207,454 $ 770,222 $ 1,103,277 $ - $ 32,537 $ 2,113,490 Disposals - - - - - (3,884) (3,884) Amortization - 21,244 125,576 109,240 - 5,656 261,716 Balance at March 31, 2020 $ - $ 228,698 $ 895,798 $ 1,212,517 $ - $ 34,309 $ 2,371,322 Net Book Value December31,2019 $ 340,779 $ 1,115,915 $ 5,066,553 $ 1,642,726 $ 294,446 $ 66,209 $ 8,526,628
	$ 340,779 $ 1,211,196 $ 1,451,177 $ 2,300,453 $ - $ 81,785 $ 5,385,390
	- - - - - (4,750) (4,750) - 112,173 4,385,598 445,550 294,446 21,711 5,259,478
	$ 340,779 $ 1,323,369 $ 5,836,775 $ 2,746,003 $ 294,446 $ 98,746 $ 10,640,118
	- - - - - (13,150) (13,150) - 28,590 420,462 49,881 417,525 11,800 928,258
	$ - $ 124,619 $ 455,641 $ 708,371 $ - $ 15,114 $ 1,303,745 - - - - - (1,583) (1,583) - 82,835 314,581 394,906 - 19,006 811,328
	$ - $ 207,454 $ 770,222 $ 1,103,277 $ - $ 32,537 $ 2,113,490 - - - - - (3,884) (3,884) - 21,244 125,576 109,240 - 5,656 261,716
	$ - $ 228,698 $ 895,798 $ 1,212,517 $ - $ 34,309 $ 2,371,322
	$ 340,779 $ 1,115,915 $ 5,066,553 $ 1,642,726 $ 294,446 $ 66,209 $ 8,526,628
March31,2020	$ 340,779 $ 1,123,261 $ 5,361,439 $ 1,583,367 $ 711,971 $ 63,087 $ 9,183,904

Of the total amortization expense during the three months ended March 31, 2020 - $212,115 (March 31, 2019 - $157,570) was included in the cost of sales and $49,601 (March 31, 2019 - $27,693) was included in operating expense.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

12. PAYABLES AND ACCRUED LIABILITIES

The Company’s payables and accrued liabilities consist of the following:

		March 31, 2020		December 31, 2019
Trade payables (Note 16)	$	262,765	$	322,089
Credit card payable		85,265		184,641
Interest payable		139,325		9,198
Sales tax payable		17,381		12,553
Payroll liabilities		210,256		8,920
Accruedliabilities (Note16)		281,726		531,234
	$	996,718	$	1,068,635

13. NOTES PAYABLE

Current notes payable are made up of the following:

	March 31, 2020 December 31, 2019
Maturing on October 1, 2020 with an interest rate of 12% per annum Maturing on January 5, 2021 with an interest rate of 15% per annum Maturing on February 1, 2021 with an interest rate of 12% per annum Maturing on March 1, 2021 with an interest rate of 12% per annum Current portion of a loan, of which the total amount matures in December 2021 with an interest rate of 3.65% per annum	$ 182,250 $ 182,250 175,000 175,000 272,000 272,000 280,000 280,000 11,266 11,164
	$ 920,516 $ 920,414

Non-current notes payable are made up of the following:

	March	31, 2020	December	31, 2019
Maturing in December 2021 with an interest rate of 3.65% per annum	$	8,723	$	11,578
Maturing on March 31, 2023 with an interest rate of 13% per annum, from
related parties (Note 16)		15,703		21,594
Maturing in 2026, with an interest rate of 13% per annum, from related parties
(Note 16)		64,763		65,722
Due no later than February 27, 2022, non-interest bearing (Note 16)		250,000		-
	$	339,189	$	98,894

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

14. LEASES

Leases on transition:

On January 1, 2019, the Company adopted IFRS 16, Leases. At this date, the Company had two building leases affected by the transition to IFRS 16, Leases. Of the two building leases held at January 1, 2019, one was being subleased by the Company. The second lease was subsequently subleased after transition, during the year ended December 31, 2019, and derecognized from the ROU assets.

The adjustments to record the cumulative effect of the initial application of the new accounting policy on January 1, 2019 are as follows:

a) Set up of Right of use asset (“ROU”) and lease liability:

Right-of-use assets	$	970,458
Accumulated depreciation		(272,145)
Lease liability		(800,031)
Adjustment toretained earnings	$	(101,718)

b) Adjustment to recognize the cumulative effect of the derecognition of the ROU for the property that was being subleased as of January 1, 2019:

Net Investment in sub-lease	$	619,561
Right-of use asset derecognized		(766,881)
Accumulated depreciation derecognized		223,673
Adjustment to retained earnings	$	76,353

The fair value of the lease liability was estimated using level 2 inputs on the date of the lease agreements using the Company’s incremental borrowing rate of 13% and a weighted average lease term of 8.31 years.

The two leases that were recognized as ROU assets on January 1, 2019 were subsequently subleased during the year and derecognized from the ROU assets.

During the period ended March 31, 2020, income of $49,650 from subleasing was included in property leasing.

Right-of-use assets as at March 31, 2020:

As at March 31, 2020, the Company has three lease agreements for its leased premises, consisting of office and warehouse space. Of these three leases, two have terms expiring April 30, 2024, while the third expires September 30, 2029. The two leases ending April 30, 2024 are being subleased by the Company as at March 31, 2020.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

14. LEASES ( CONTINUED… )

ROU	ROU
Cost As at December 31, 2019 and March 31, 2020 $ 295,272 Accumulated Depreciation As at December 31, 2019 $ 7,382 Amortization $ 7,382
As at March 31, 2020 $ 14,764
Net book value December 31, 2019 $ 287,890 March31,2020 $ 280,508
	Right-of-use assets as at March 31, 2020:
	Total ROU
Total ROU at January 1, 2019 $ 970,458 Less accumulated amortization at January 1, 2019 (272,145) Derecognition of subleased ROU at January 1, 2019 (766,881) Derecognition of amortization of subleased ROU at January 1, 2019 223,673
Opening book value of ROU upon adoption of IFRS 16 on January 1, 2019 155,105 Additions 295,272 Amortization (21,922) Derecognition of ROU for the recognition of net investment in sublease (140,565)
At December 31,2019 $ 287,890
Amortization (7,382)
Balance at March 31, 2020 280,508

The total amortization expense during the three months ended March 31, 2020 was included in operating expense.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

14. LEASES ( CONTINUED… )

Lease liability as at March 31, 2020:

The following table presents lease obligations for the Company as of March 31, 2020:

	Total	lease liability
Opening balance as at January 1, 2019	$	800,031
Additions		295,272
Lease payments		(208,800)
Interest expense (included in cost of sales – property and equipment leasing)		98,353
Interest expense(included in bank charges and interest in operatingexpenses)		6,302
At December 31,2019	$	991,158
Less: currentportion	$	(139,796)
Long-term lease liability	$	858,504
Opening balance as at December 31, 2019		991,158
Lease payments		(61,650)
Interest expense (included in cost of sales – property and equipment leasing)		22,510
Interest expense(included in bank charges and interest in operatingexpenses)		9,383
At March 31, 2020		961,401
Less: currentportion	$	(139,796)
Long-term lease liability	$	821,605

The following table discloses the undiscounted cash flow for lease obligations as of March 31, 2020:

Less than one year	$	256,698
One to five years		982,624
More than fiveyears		217,687
Total undiscounted lease obligations	$	1,457,009

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

14. LEASES ( CONTINUED… )

The following table provides a summary of the lease expenses recognized in the statement of operations for the period ended March 31, 2020:

Interest expense (included in cost of sales – property and equipment leasing)	$	22,510
Interest expense (included in bank charges and interest in operating expenses)	$	9,383
Amortization(included in operatingexpenses)	$	7,382

Net investment in subleases as at March 31, 2020:

The Company has two sublease arrangements with its main customer for office and warehouse space. Both subleases expire on the same day the head lease expires, which is on April 30, 2024.

The following table presents sublease payments receivable for the Company for the three months ended March 31, 2020:

Opening balance as at January 31, 2019	$	619,561
Additions		178,694
Lease payments		(177,000)
Finance income (included in revenue from property leasing)		77,659
At December 31, 2019	$	698,914
Less: Current Portion	$	(122,027)
Long-term Lease Liability	$	576,887
Opening balance as at December 31, 2019	$	698,914
Lease payments received		(49,650)
Finance income(included in revenue frompropertyleasing)		22,422
March 31, 2020	$	671,686
Short-term net investment in sub-lease	$	128,820
Long-term term net investment in sub-lease	$	542,866

The following table discloses the undiscounted cash flow for lease payments receivable as of March 31, 2020:

	**March **	31, 2020
Less than one year	$	208,698
One to five years		662,872
Total undiscounted sublease payments receivable	$	871,570

The following table discloses the profit and loss on the sublease:

		March 31, 2020
Finance income (included in revenue from property leasing)	$	22,422
Interest expense (included in cost of sales–property and equipment leasing)		(9,383)
Income on sublease	$	13,039

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

15. LOAN PAYABLE

On December 31, 2019, the Company completed a financing comprising of secured non-convertible debentures (the “Loan”) of $5,500,000. The Loan is secured by a security interest in all of the Company’s assets. The Loan accrues interest at an annual rate of 10%, payable quarterly beginning July 1, 2020 and matures on December 31, 2021. The lenders also received warrants to purchase 980,210 subordinated voting shares of the Company at an exercise price of CAD$1.00 (the “Loan Warrants”) as an incentive. The Loan Warrants can be exercised for two years after closing, subject to the Company’s right to accelerate the expiry of the Loan Warrants if the daily volume weighted average trading price of the Common Shares on the Canadian Securities Exchange is greater than CAD$3.35 for the any five 5 consecutive trading days.

The fair value of the Loan was determined to be $5,496,728 using an annual effective interest rate of 10%. The fair value of the Loan Warrants was determined to be $216,261 using the Black Scholes option pricing model and the following assumptions: Share Price: CAD$0.70; Exercise Price: CAD$1.00; Expected Life: 2 years; Annualized Volatility: 93.50%; Dividend yield: 0%; Discount Rate: 1.69%.

Gross proceeds received	$	5,500,000
Less: Transaction costs		(216,261)
Less:Loandiscount		(3,272)
December 31, 2019	$	5,280,467
Accretion		26,134
Effect of change in exchange rate		16,875
March31,2020	$	5,323,476

16. RELATED PARTY TRANSACTIONS

Related parties and related party transactions impacting the condensed consolidated interim financial statements not disclosed elsewhere in these interim financial statements are summarized below and include transactions with the following individuals or entities:

Key management personnel

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Executive Chairman, Chief Executive Officer, Chief Operating Officer, and President and Chief Financial Officer.

Remuneration attributed to key management personnel for the three months ended March 31, 2020 and 2019 is summarized as follows:

		March 31, 2020		March 31, 2019
Share-based compensation (Note 17)	$	16,582	$	25,809
Salaries and wages included in cost of sales		219,445		144,961
Salaries, wages and commissions included in operating expenses		11,550		7,629
Former officer and director settlement included in operatingexpenses		500,000		-
	$	747,577	$	178,399

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

16. RELATED PARTY TRANSACTIONS ( CONTINUED… )

Other related parties

Other related parties include close family members of the Company’s Executive Chairman and the former CFO, President, and Director and a company that is controlled by a Director.

Remuneration attributed to other related parties for the three months ended March 31, 2020 and 2019 is summarized as follows:

		March 31, 2020		March 31,2019
Salaries and wages included cost of sales	$	42,019	$	32,562
Salaries, wages and commissions included in operating expenses		2,211		1,714
Consultingfees included in operatingexpenses		34,074		-
	$	78,304	$	34,276

Balances with related parties:

Due from related parties:

					March	31, 2020	December	31, 2019
Non-interest bearing, due on December	31,	2021	from the Executive
Chairman				$		537,151	$	537,151
Non-interest bearing, due on December	31,	2022	from the Executive
Chairman						316,251		316,251
Non-interest bearing, due on December	31,	2023	from the Executive
Chairman						1,328,383		1,328,383
				$		2,181,785	$	2,181,785

Due from other related parties:
	March	31, 2020		December 31,
				2019
Non-interest bearing advances to Joint Ventures (Note 8)	$	250,000	$	440,830

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

16. RELATED PARTY TRANSACTIONS ( CONTINUED… )

Due to related parties:

Amounts due to related parties as at March 31, 2020 and December 31, 2019 included the following:

• Included in payables and accrued liabilities as at March 31, 2020 is $338,049 (2019 - $338,198) owing to the Executive Chairman, companies controlled by him, and his close family members. Most of this amount is made up of accrued salary (Note 12).

• Included in payables and accrued liabilities as at March 31, 2020 is $11,900 (2019 - $nil) owing to a company controlled by a director and $114,583 (2019 – $nil) owing to the former CFO, President, Corporate Secretary, and Director of the Company (Note 12).

• Included in the long-term loans payable as at March 31, 2020 is $80,466 (2019 - $87,316) due to the Executive Chairman of the Company, his spouse, and a company controlled by him. These loans bear interest of 13% per annum, and are due between 2022 – 2026 (Note 13).

• Included in the long-term payables as at March 31, 2020 is $250,000 (2019 - $nil) due to the former CFO, President, Corporate Secretary, and Director of the Company. This obligation bears no interest and is due the earlier of any change of control of the Company, a debt or equity financing greater than $10 million of the Company on or after February 7, 2020, or no later than February 27, 2022 (Note 13).

17. SHARE CAPITAL

(a) Share Capital

The Company is authorized to issue the following shares:

• Unlimited subordinated voting common shares (“Subordinated Voting Shares” or “Common Shares”) without par value; and

• Unlimited super voting shares with multiple voting rights, each convertible into 100 Subordinated Voting Shares.

Period ended March 31, 2020:

• On March 18, 2020, 4,885 super voting shares were converted into 488,500 subordinated voting common shares.

Fiscal year ended December 31, 2019:

• The Company received $50,000 for Subordinated Voting Shares that were issued during the year ended December 31, 2018.

• The Company received $183,250 for special warrants from a private placement that closed on December 24, 2018. These special warrants were converted during the year, which resulted in the issuance of 1,000,000 Common shares and 500,000 warrants. The warrants were exercisable at CAD$0.25 with an expiry date of December 24, 2019, and were exercised during the year ended December 31, 2019.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

17. SHARE CAPITAL ( CONTINUED… )

• On May 22, 2019, the Company closed a private placement of 6,148,665 Common Shares at a price of CAD$1.00 per share for a total of $4,585,134 (CAD$6,148,665). The Company paid $31,841 and issued 42,700 finder’s warrants with an exercise price of CAD$1.30 per share of a period of one year as finder’s fees. The finder’s warrants were valued at $8,340 using the Black-Scholes Option Pricing Model with the following assumption at the issue date: risk free interest rate of 1.69%; dividend yield of 0%; expected volatility of 87.93% and expected life of one year.

• On October 8, 2019, the Company issued 150,000 Common Shares valued at CAD$0.84 per share, for a total value of $100,881 to settle debt valued at $204,973 with arm’s length creditors, resulting in the Company recognizing a $104,092 gain on the statements of operations and comprehensive income.

• 3,000,000 warrants were exercised at CAD$0.25 each for a total of $568,030.

(b) Special warrants

• As of March 31, 2019, the Company has 1,000,000 special warrants outstanding. These warrants are convertible into 1,000,000 units, with each unit consisting of one (1) subordinated voting share and one-half of one (1/2) subordinated voting share purchase warrant. Each whole purchase warrant entitles the holder to purchase one (1) additional subordinated voting share from the Company at an exercise price of CAD$0.25 per subordinated voting share for a period of one (1) year from issuance.

• On April 25, 2019, the Company converted 1,000,000 Special Warrants into 1,000,000 Subordinated Voting Shares and 500,000 share purchase warrants at an exercise price of CAD$0.25 per Subordinated Voting Share, which were all exercised before the expiration on December 24, 2019.

(c) Share purchase warrants

The following table reflects the continuity of warrants for the period ended March 31, 2020 and December 31, 2019:

2019:
	Number of	Weighted average
	warrants	exercise price
Outstanding, December 31, 2018	4,500,000
Issued	1,522,910	CAD $0.76
Expired	(2,000,000)	CAD $1.00
Exercised	(3,000,000)	CAD $0.25
Outstanding, December 31, 2019	1,022,910	CAD $1.01
Outstanding, March 31, 2020	1,022,910	CAD $1.01

As at March 31, 2020 the Company had the following share purchase warrants outstanding:

		Weighted Average
Outstanding	Exercise Price	Remaining Life (Years)	Expiry Date
42,700	CAD$1.30	0.01	May 22, 2020
980,210	CAD$1.00	1.68	December 31, 2021
1,022,910	**CAD$1.01 **	1.69

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

17. SHARE CAPITAL ( CONTINUED… )

(d) Stock options

The Company has adopted a Stock Option Plan (the “Plan”) pursuant to which options may be granted to directors, officers, employees, and consultants of the Company. Under the terms of the Plan, the Company can issue a maximum of 10% of the issued and outstanding Common Shares at the time of the grant, and the exercise price of each option is equal to or above the market price of the Common Shares on the grant date. Options granted under the Plan including vesting and the term, are determined by, and at the discretion of, the Board of Directors.

The continuity of stock options for the three months ended March 31, 2020 is as follows:

	Number of	Weighted average
	options	exercise price
Outstanding, December 31, 2019	1,043,000	CAD $1.00
Cancelled	(60,000)	CAD $1.00
Outstanding, March 31, 2020	983,000	CAD $1.00

As at March 31, 2020 the Company had the following stock options outstanding:

			Weighted
Number	Number	Exercise	Average
Outstanding	Exercisable	Price	Life(years)	Expiry Date
783,000	323,521	CAD$1.00	7.27	January 3, 2029
200,000	66,668	CAD$1.00	1.56	May13,2029
983,000	390,189	CAD$1.00	8.83

(e) Special Advisory Warrants

On May 13, 2019, the Company granted 1,000,000 special advisory warrants (the “Advisory Warrants”) to consultants of the Company. The Advisory Warrants are exercisable at CAD$1.00 and expire on December 31, 2024. The fair value of the special advisory warrants was calculated to be CAD$0.82 per warrant. The Company recorded a share-based compensation expense of $238,513 during the year ended December 31, 2019 for warrants vested. The Company used the Black-Scholes Option Pricing Model to estimate the fair value of the Advisory Warrants using the following assumptions: risk free interest rate of 1.54%; dividend yield of 0%; expected volatility of 111.51%; and expected life of 5.5 years.

(f) Escrow Securities

As at March 31, 2020, the Company had 1,379,151 Subordinated Voting Shares (2018 – nil), 468,965 super voting shares (2018 – nil), and 112,500 stock options (2018 - nil) held in escrow.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

18. CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to support the growth and development of its operations and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In the management of capital, the Company includes its components of equity.

The Company manages the capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets.

In order to maximize ongoing development efforts, the Company does not pay out dividends. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable given the relative size of the Company.

The Company currently is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the period.

19. ECONOMIC DEPENDENCE

The Company had one main customer for the three months ended March 31, 2020 which accounted for 92% of the Company’s revenues, and 95% of the Company’s accounts receivable as at March 31, 2020. As the majority of the Company’s income is derived from the sale of services and products, its ability to continue operations is dependent upon the relationship with and the sustainability of the customer. Any significant disruption in the customer’s business could result in a material adverse effect on the operations of the Company. The loss of this significant customer will adversely impact the operations of the Company.

20. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

The fair value of the Company’s accounts receivable, current notes receivable, advances to joint ventures, deposits and other receivables, payables, accrued liabilities, and amount due to Legacy Ventures Hawaii, LLC, approximate carrying value, due to their short-term nature. The carrying amounts of the long-term notes receivable and amount due from related parties approximate fair value. The fair values of the investment in sublease, right of use asset, and lease liability have been recorded as discussed in Note 14. The long-term loan payable is recorded at fair value as discussed in Note 15. The Company’s cash and investment in Legacy are measured at fair value under the fair value hierarchy based on Level 1 quoted prices in active markets for identical assets or liabilities.

The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, interest rate risk, price risk, and currency risk.

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company is subject to credit risk on its receivables. As at March 31, 2020, the Company was dependent on one major customer from its consulting business segment (Note 19). The majority ($15,667,852) of the Company’s accounts receivable are from this customer.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

20. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS ( CONTINUED…

Credit risk (continued…)

The Company is of the opinion that it is not exposed to significant credit risk from this customer as at March 31, 2020 as it continues to collect accounts receivable routinely. The Company has no investments in asset-backed commercial paper.

The Company records an allowance for doubtful accounts related to accounts receivable that are considered to be non-collectible. The allowance is based on the Company’s knowledge of the financial condition of its customer, current business environment, customer and industry concentrations, and historical experience. To reduce credit risk, cash is only held at major financial institutions.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

The Company manages liquidity risk through its capital management as outlined in Note 18. As at March 31, 2020, the Company had cash, accounts receivable and short-term notes receivable of $22,284,986 to settle its current liabilities of $2,209,237. During the three months ended March 31, 2020, the maturity dates of $727,000 of current loans were extended for an additional year to help reduce liquidity risk. Management believes the Company has sufficient funds to support ongoing operating expenditures and meet its liabilities as they fall due.

Market risk

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

• a) Interest rate risk

Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company does not hold any financial instruments with variable interest rates, and as a result, is subject to insignificant interest rate risk.

• b) Price risk

The Company is not exposed to significant price risk as it does not hold investments in publicly traded securities.

• c) Currency risk

The Company’s expenditures are predominantly in U.S. dollars, and any future equity raised is expected to be predominantly in U.S. dollars. As at March 31, 2020, the Company had CAD$(14,729) net financial assets denominated in Canadian currencies. A 10% change in the foreign exchange rate between the U.S. dollar and the Canadian dollar would result in a change on approximately $1,038 in other comprehensive income.

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

21. SEGMENT INFORMATION

The Company operates in the United States, and had two major segments of operations in 2019, being its management and advisory services to non-for-profit entities in the medical marijuana field, and its sale of various types of low-pressure liquid gas.

Segment information over these two operating segments is as follows:

As at March 31, 2020:

		Services and
		products relating to
		the medical		Liquid gas
		marijuana field		sales		**Total **
Assets	$	38,327,717	$	-	$	38,327,717
Liabilities	$	10,946,051	$	36,375	$	10,982,426

For the three months ended March 31, 2020:

		Services and
		products
		relating to the
		medical		Liquid gas
		marijuana field		sales		Total
Sales	$	4,096,098	$	-	$	4,096,098
Cost of Sales		2,867,798		-		2,867,798
Operating expenses		2,199,894		-		2,199,894
Income tax expense		-		-		-
Net income / (loss)	$	(971,594)	$	-	$	(971,594)

As at December 31, 2019:

		Services and
		products relating to
		the medical		Liquid gas
		marijuana field		sales		Total
Assets	$	38,780,494	$	-	$	38,780,494
Liabilities	$	13,070,921	$	36,375	$	13,107,296

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VEXT SCIENCE, INC. (formerly Vapen MJ Ventures Corporation) Notes to Condensed Interim Consolidated Financial Statements March 31, 2020 (Expressed in U.S. Dollars) (Unaudited)

21. SEGMENT INFORMATION ( CONTINUED… )

For the three months ended March 31, 2019:

		Services and
		products relating
		to the medical		Liquid gas
		marijuana field		sales		Total
Sales	$	6,459,284	$	40,644	$	6,499,928
Cost of Sales		(3,257,584)		(70,939)		(3,328,523)
Operating expenses		(978,524)		(5,155)		(983,679)
Income tax expense		(526,309)		-		(526,309)
Netincome	$	1,696,867	$	(35,450)	$	1,661,417

22. SUBSEQUENT EVENTS

• On April 6, 2020, the Company acquired RDF Management, LLC and Firebrand, LLC, Arizona based companies, in order to provide exclusive services for the management, administration and operation of Organica Patient Group, Inc. (“Organica”), an Arizona not for profit corporation, which was issued and holds in good standing, a Medical Marijuana Dispensary Registration Certificate, by the Arizona Department of Health Services in the State of Arizona and certain intangible assets (collectively the “Transaction”).

In consideration for the Transaction, the Company issued:

• (i) 67,000 multiple voting shares;

• (ii) a promissory note of $5,500,000 for a period of 18 months. No interest will accrue on the promissory note during the 18-month period, and thereafter, interest will accrue at 10% per annum; and

• (iii) an undertaking to assist RDF Management, LLC in settling and resolving certain existing liabilities, allocating a total maximum of $3,500,000 in funds to settle such liabilities.

As part of the closing of the Transaction, the Company entered into a $3,000,000 line of credit secured promissory note (“Promissory Note”) with Organica whereby Organica promises to pay the Company the principal and 10% interest per annum. As at the date of the financial statements, no money had been drawn from this line of credit by Organica.

• On May 12, 2020, the Company granted 1,083,334 stock options at an exercise price of CAD$0.75 to directors, officer and consultants. The stock options are exercisable for a term of 10 years.

• On May 22, 2020, 42,700 warrants expired.

• On May 26, 2020, 2,931 multiple voting shares were converted to 293,100 subordinated voting shares.

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