The following discussion relates to the historical operations and financial
statements of Allied Corp. for the nine months ended May 31, 2021 and 2022.
Forward-Looking Statements
The following Management's Discussion and Analysis should be read in conjunction
with our financial statements and the related notes thereto included elsewhere
in this Quarterly Report. The Management's Discussion and Analysis contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. Any statements
that are not statements of historical fact are forward-looking statements. When
used, the words "believe," "plan," "intend," "anticipate," "target," "estimate,"
"expect," and the like, and/or future-tense or conditional constructions
("will," "may," "could," "should," etc.), or similar expressions, identify
certain of these forward-looking statements. These forward-looking statements
are subject to risks and uncertainties that could cause actual results or events
to differ materially from those expressed or implied by the forward-looking
statements in this Annual Report. Our actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include, without limitation, those specifically addressed
under the heading "Risks Factors" in our various filings with the Securities and
Exchange Commission. We do not undertake any obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of this Annual Report.
The following discussion highlights the Company's results of operations and the
principal factors that have affected its consolidated financial condition as
well as its liquidity and capital resources for the periods described, and
provides information that management believes is relevant for an assessment and
understanding of the Company's consolidated financial condition and results of
operations presented herein. The following discussion and analysis are based
upon Allied Corp's unaudited financial statements contained in this Current
Report on Form 10-Q, which have been prepared in accordance with generally
accepted accounting principles in the United States. You should read the
discussion and analysis together with such financial statements and the related
notes thereto.
Overview
Allied Corp. ("Allied" or the "Company") is a Nevada corporation, based in
Kelowna, British Columbia, Canada. Allied is an international medical cannabis
production company with a mission to address today's medical issues by
researching, creating and producing targeted cannabinoid health solutions.
Allied uses what it considers to be an evidence-informed scientific approach to
make this mission possible, through cutting-edge pharmaceutical research and
development, innovative plant-based production and unique development of
therapeutic products.
References in this periodic report on Form 10-Q to "Allied" or the "Company" may
include references to the operations of our subsidiaries AM (Advanced Micro)
Biosciences, Inc., Allied Colombia S.A.S., Baleno Ltd., Tactical Relief, LLC,
and Allied US Products, LLC. Each of these corporations is a 100% wholly owned
subsidiary of Allied and consequentially reports quarterly financials up to a
consolidated quarterly submission.
Allied's focus is on the development of medicinal cannabis and psilocybin
products for patients with conditions potentially suitable for treatment
therewith. Such conditions include anxiety, insomnia, anorexia, chronic pain,
epilepsy, chemotherapy-induced nausea and vomiting, post-traumatic stress
disorder (PTSD), Parkinson's disease, Tourette syndrome, irritable bowel
syndrome (IBS) and spasticity associated with multiple sclerosis (MS) and spinal
cord injury (SCI)1.
Allied's objective is to be a company that controls its own international
vertically integrated supply chain or CBD, cannabis, and psilocybin products in
order to maximize cash flow and profit margins. Our management team believes
that having control over our supply chain should enable us to provide a
consistent, rolling-harvest supply to the global cannabis community.
Given the average cost of production in North America being approximately $1.00
to $2.00 per gram, we believe our anticipated significantly lower cash cost of
cannabis production based on historical production of our operations and other
companies growing raw flowers in Columbia afforded by our Colombian production
and cultivation should provide us a competitive advantage.
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In addition to what we consider our demonstrated ability to cultivate low-cost,
high margin cannabis in Colombia primarily for use in proprietary cannabinoid
drug and natural health products for international distribution, we have hemp
derived CBD natural health products for sale in the United States, have received
commercial approval for sale of medical cannabis being produced in Colombia for
export to nations other than the United States, and have initiated human
clinical phase I trial for our psilocybin-based pharma products ALID 11, ALID 12
and Psilonex™ which are protected under provisional patent and trademarks in the
United States.
Effects of COVID-19
In March 2020, the World Health Organization declared COVID-19 a global
pandemic. This contagious disease outbreak and the related adverse public health
developments have adversely affected workforces, economies, and financial
markets globally, leading to an economic downturn. While COVID-19 delayed
shipment of some of our products, management has determined that there has been
no significant impact to the Company's operations, however management continues
to monitor the situation.
Critical Accounting Policies
Business Presentation
The unaudited condensed consolidated interim financial statements and related
notes in this Quarterly Report on Form 10-Q are presented in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP"), and are expressed in United States dollars. The Company's fiscal year
end is August 31.
The unaudited condensed consolidated interim financial statements have been
prepared in accordance with US GAAP for interim financial information and with
the instructions to Securities and Exchange Commission ("SEC") Form 10-Q. They
do not include all of the information and footnotes required by US GAAP for
complete financial statements. Therefore, the unaudited condensed consolidated
interim financial statements should be read in conjunction with the Company's
audited financial statements and notes thereto for the year ended August 31,
2021 included in the Company's Annual Report on Form 10-K filed with the SEC.
The unaudited condensed consolidated interim financial statements included
herein are unaudited; however, they contain all normal recurring accruals and
adjustments that, in the opinion of management, are necessary to present fairly
the Company's financial position at May 31, 2022, and the results of its
operations for the three and nine months ended May 31, 2022, and cash flows for
the three and nine months ended May 31, 2022. The results of operations for the
period ended May 31, 2022 are not necessarily indicative of the results to be
expected for future quarters or the full year.
The significant accounting policies followed are:
a) Principles of consolidation
The consolidated financial statements include accounts of Allied Corp. and its
majority owned subsidiaries. Subsidiaries are consolidated from the date of
acquisition and control and continue to be consolidated until the date that such
control ceases. Control is achieved when the Company is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability
to affect these returns through its power over the investee. All intercompany
balances, income, expenses, and unrealized gains and losses resulting from
intercompany transactions are eliminated on consolidation.
b) Cash and cash equivalents
Cash is comprised of cash on hand, cash held in trust accounts and demand
deposits. Cash equivalents are short-term, highly liquid investments with
maturities within three months when acquired. The Company did not have any cash
equivalents as of May 31, 2022 and August 31, 2021.
c) Property, plant and equipment
Property, plant and equipment are stated at cost. The Company depreciates the
cost of property, plant and equipment over their estimated useful lives at the
following annual rates and methods:
Farm facility and equipment 1 - 10 years straight-line basis
Office and computer equipment 5 - 10 years straight-line basis
Land equipment 10 years straight-line basis
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d) Inventory
Inventory is comprised of raw materials, supplies, vegetative and flowering
plants, dried flower, diluted crude and CBD isolates available for sale, and
purchased cannabis products.
Inventory is stated at the lower of cost or net realizable value, determined
using weighted average cost. Net realizable value is defined as the estimated
selling price in the ordinary course of business, less reasonably predictable
costs of completion, disposal and transportation. At the end of each reporting
period, the Company performs an assessment of inventory and records write-downs
for excess and obsolete inventories based on the Company's estimated forecast of
product demand, production requirements, market conditions, regulatory
environment, and spoilage. Actual inventory losses may differ from management's
estimates and such differences could be material to the Company's consolidated
balance sheets, statements of net loss and comprehensive loss and statements of
cash flows.
e) Intangible assets
Intangible assets include licenses which are being amortized over their
estimated useful lives of 10 years. The Company's licenses are amortized over
their economic or legal life on a straight-line basis, whichever is shorter. The
licenses have been amortized from the date of acquisition.
The Company periodically evaluates the reasonableness of the useful lives of
these assets. Once these assets are fully amortized, they are removed from the
accounts. These assets are reviewed for impairment or obsolescence when events
or changes in circumstances indicate that the carrying amount may not be
recoverable. If impaired, intangible assets are written down to fair value based
on discounted cash flows or other valuation techniques. The Company has no
intangibles with indefinite lives.
For long-lived assets, impairment losses are only recorded if the asset's
carrying amount is not recoverable through its undiscounted,
probability-weighted future cash flows. The Company measures the impairment loss
based on the difference between the carrying amount and the estimated fair
value. When an impairment exists, the related assets are written down to fair
value.
f) Long-lived assets
In accordance with ASC 360, Property, Plant and Equipment, the Company tests
long-lived assets or asset groups for recoverability when events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Circumstances which could trigger a review include, but are not limited to:
significant decreases in the market price of the asset; significant adverse
changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end of its estimated useful
life. Recoverability is assessed based on the carrying amount of the asset and
its fair value, which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount is not recoverable and
exceeds fair value.
g) Foreign currency translation and functional currency conversion
Items included in the consolidated financial statements of each of the Company's
entities are measured using the currency of the primary economic environment in
which the entities operate (the "functional currency").
Prior to September 10, 2019, the Company's functional currency was the Canadian
dollar. Translation gains and losses from the application of the U.S. dollar as
the reporting currency during the period that the Canadian dollar was the
functional currency are included as part of cumulative currency translation
adjustment, which is reported as a component of shareholders' equity under
accumulated other comprehensive loss.
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The Company re-assessed its functional currency and determined as at September
10, 2019, its functional currency changed from the Canadian dollar to the U.S.
dollar based on management's analysis of changes in our organization. The change
in functional currency was accounted for prospectively from September 10, 2019
and prior period financial statements were not restated for the change in
functional currency.
For periods commencing September 10, 2019, monetary assets and liabilities
denominated in foreign currencies are translated into U.S. dollars using
exchange rates in effect at the balance sheet date. Opening balances related to
non-monetary assets and liabilities are based on prior period translated
amounts, and non-monetary assets and non-monetary liabilities incurred after
September 10, 2019 are translated at the approximate exchange rate prevailing at
the date of the transaction. Revenue and expense transactions are translated at
the approximate exchange rate in effect at the time of the transactions. Foreign
exchange gains and losses are included in the statement of operations and
comprehensive loss as foreign exchange gains.
The Company assessed the functional currency for Allied Colombia to be the
Colombian peso. The functional currency for all other subsidiaries is the U.S.
dollar.
h) Share issuance costs
Costs directly attributable to the raising of capital are charged against the
related share capital. Costs related to shares not yet issued are recorded as
deferred share issuance costs. These costs are deferred until the issuance of
the shares to which the costs relate, at which time the costs will be charged
against the related share capital or charged to operations if the shares are not
issued.
i) Research and development costs
Research and development costs are expensed as incurred.
j) Revenue recognition
The Company's revenue is comprised of sales of cannabis products.
The Company's revenue-generating activities have a single performance obligation
and revenue is recognized at the point in time when control of the product
transfers and the Company's obligations have been fulfilled. This generally
occurs when the product is shipped or delivered to the customer, depending upon
the method of distribution and shipping terms set forth in the customer
contract. Revenue is measured as the amount of consideration the Company expects
to receive in exchange for the sale of the Company's product. Certain of the
Company's customer contracts may provide the customer with a right of return. In
certain circumstances the Company may also provide a retrospective price
adjustment to a customer. These items give rise to variable consideration, which
is recognized as a reduction of the transaction price based upon the expected
amounts of the product returns and price adjustments at the time revenue for the
corresponding product sale is recognized. The determination of the reduction of
the transaction price for variable consideration requires that the Company make
certain estimates and assumptions that affect the timing and amounts of revenue
recognized.
Sales of products are for cash or otherwise agreed-upon credit terms. The
Company's payment terms vary by location and customer; however, the time period
between when revenue is recognized and when payment is due is not significant.
The Company estimates and reserves for its bad debt exposure based on its
experience with past due accounts and collectability, write-off history, the
aging of accounts receivable and an analysis of customer data.
k) Net income (loss) per common share
Net income (loss) per share is calculated in accordance with ASC 260, Earnings
per Share. The weighted-average number of common shares outstanding during each
period is used to compute basic earning or loss per share. Diluted earnings or
loss per share is computed using the weighted average number of shares and
diluted potential common shares outstanding to the extent the effect would not
be antidilutive. Dilutive potential common shares are additional common shares
assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number
of shares of common stock outstanding.
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l) Income taxes
The Company accounts for income taxes under ASC 740, Income Taxes. Under the
asset and liability method of ASC 740, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
ASC 740, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period the enactment occurs. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.
m) Related party transactions
Related parties are any entities or individuals that, through employment,
ownership or other means, possess the ability to direct or cause the direction
of the management and policies of the Company. The Company discloses related
party transactions that are outside of normal compensatory agreements, such as
salaries. Related party transactions are measured at the exchange amounts.
n) Significant accounting estimates and judgments
The preparation of the financial statements in conformity with US GAAP requires
management to make judgments, estimates and assumptions that affect the reported
amounts in the financial statements and accompanying notes. Although management
uses historical experience and its best knowledge of the amount, events or
actions to for the basis for judgments and estimates, actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and further periods if the review affects both current and future
periods.
Significant estimates and assumptions included in these financial statements
relate to the valuation assumptions related to the estimated useful lives and
recoverability of long-lived assets, stock-based compensation, and deferred
income tax assets and liabilities. Judgments are required in the assessment of
the Company's ability to continue to as going concern.
o) Financial instruments
ASC 825, Financial Instruments, requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 825 establishes a fair value hierarchy based on the level of
independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument's categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value
measurement. ASC 825 prioritizes the inputs into three levels that may be used
to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in
active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than
quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs
to the valuation methodology that are significant to the measurement of the fair
value of the assets or liabilities.
The financial instruments consist principally of cash, due from related parties,
accounts payable, note payable, and convertible notes payable. The fair value of
cash when applicable is determined based on "Level 1" inputs, which consist of
quoted prices in active markets for identical assets. The Company believes that
the recorded values of all other financial instruments which are categorized as
loans and receivables approximate their current fair values because of their
nature and respective relatively short maturity dates or current market rates of
interest for similar instruments.
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For certain of the Company's financial instruments, including accounts payable,
due from related parties, notes and loans payable, the carrying amounts
approximate their fair values due to the short maturities.
The Company does not have any assets or liabilities measured at fair value on a
recurring basis presented on the Company's balance sheet as of May 31, 2022 and
August 31, 2021 other than cash.
Financial instruments that potentially subject the Company to a concentration of
credit risk consist primarily of cash. The Company limits its exposure to credit
loss by placing its cash with high credit quality financial institutions.
p) Leases
The Company determines if an arrangement contains a lease in whole or in part at
the inception of the contract. Right-of-use ("ROU") assets represent the
Company's right to use an underlying asset for the lease term while lease
liabilities represent our obligation to make lease payments arising from the
lease. All leases with terms greater than twelve months result in the
recognition of a ROU asset and a liability at the lease commencement date based
on the present value of the lease payments over the lease term. Unless a lease
provides all of the information required to determine the implicit interest
rate, the Company uses its incremental borrowing rate based on the information
available at the commencement date in determining the present value of the lease
payments. The Company uses the implicit interest rate in the lease when readily
determinable.
Our lease terms include all non-cancelable periods and may include options to
extend (or to not terminate) the lease when it is reasonably certain that we
will exercise that option. Leases with terms of twelve months or less at the
commencement date are expensed on a straight-line basis over the lease term and
do not result in the recognition of an asset or liability.
q) Reverse Acquisitions
Identification of the accounting acquirer
The Company considers factors in ASC 805-10-55-10 through 55-15 in identifying
the accounting acquirer. The Company uses the existence of a controlling
financial interest to identify the acquirer - the entity that obtains control of
the acquiree. Other pertinent facts and circumstances also shall be considered
in identifying the acquirer in a business combination effected by exchanging
equity interests, including the following: (a) The relative voting rights in the
combined entity after the business combination, where the acquirer usually is
the combining entity whose owners as a group retain or receive the largest
portion of the voting rights in the combined entity taking into consideration
the existence of any unusual or special voting arrangements and options,
warrants, or convertible securities; (b) the existence of a large minority
voting interest in the combined entity if no other owner or organized group of
owners has a significant voting interest, and where the acquirer usually is the
combining entity whose single owner or organized group of owners holds the
largest minority voting interest in the combined entity; (c) the composition of
the governing body of the combined entity, where the acquirer usually is the
combining entity whose owners have the ability to elect or appoint or to remove
a majority of the members of the governing body of the combined entity; (d) the
composition of the senior management of the combined entity, where the acquirer
usually is the combining entity whose former management dominates the management
of the combined entity; and (e) the terms of the exchange of equity interests,
where the acquirer usually is the combining entity that pays a premium over the
pre-combination fair value of the equity interests of the other combining entity
or entities, where the acquirer usually is the combining entity whose relative
size (measured in, for example, assets, revenues, or earnings) is significantly
larger than that of the other combining entity or entities.
Pursuant to ASC Paragraph 805-40-05-2, as one example of a reverse acquisition,
a private operating entity may arrange for a public entity to acquire its equity
interests in exchange for the equity interests of the public entity. In this
situation, the public entity is the legal acquirer because it issued its equity
interests, and the private entity is the legal acquiree because its equity
interests were acquired. However, application of the guidance in ASC
805-10-55-11 through 55-15 results in identifying: (a) The public entity as the
acquiree for accounting purposes (the accounting acquiree); and (b) the private
entity as the acquirer for accounting purposes (the accounting acquirer).
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Measuring the consideration transferred
Pursuant to ASC 805-40-30-2 and 30-3 in a reverse acquisition, the accounting
acquirer usually issues no consideration for the acquiree. Instead, the
accounting acquiree usually issues its equity shares to the owners of the
accounting acquirer. Accordingly, the acquisition-date fair value of the
consideration transferred by the accounting acquirer for its interest in the
accounting acquiree is based on the number of equity interests the legal
subsidiary would have had to issue to give the owners of the legal parent the
same percentage equity interest in the combined entity that results from the
reverse acquisition. The fair value of the number of equity interests calculated
in that way can be used as the fair value of consideration transferred in
exchange for the acquiree. The assets and liabilities of the legal acquiree are
measured and recognized in the consolidated financial statements at their
pre-combination carrying amounts (see ASC 805-40-45-2(a)).
Presentation of consolidated financial statements post reverse acquisition
Pursuant to ASC 805-40-45-1 and 45-2, consolidated financial statements
following a reverse acquisition are issued under the name of the legal parent
(accounting acquiree) but described in the notes as a continuation of the
financial statements of the legal subsidiary (accounting acquirer), with one
adjustment, which is to retroactively adjust the accounting acquirer's legal
capital to reflect the legal capital of the accounting acquiree. That adjustment
is required to reflect the capital of the legal parent (the accounting
acquiree). Comparative information presented in those consolidated financial
statements also is retroactively adjusted to reflect the legal capital of the
legal parent (accounting acquiree). The consolidated financial statements
reflect all of the following: (a) The assets and liabilities of the legal
subsidiary (the accounting acquirer) recognized and measured at their
pre-combination carrying amounts; (b) the assets and liabilities of the legal
parent (the accounting acquiree) recognized and measured in accordance with the
guidance in Topic 805 "Business Combinations"; (c) the retained earnings and
other equity balances of the legal subsidiary (accounting acquirer) before the
business combination; (d) the amount recognized as issued equity interests in
the consolidated financial statements determined by adding the issued equity
interest of the legal subsidiary (the accounting acquirer) outstanding
immediately before the business combination to the fair value of the legal
parent (accounting acquiree) determined in accordance with the guidance in this
topic applicable to business combinations. However, the equity structure (that
is, the number and type of equity interests issued) reflects the equity
structure of the legal parent (the accounting acquiree), including the equity
interests the legal parent issued to effect the combination.
Accordingly, the equity structure of the legal subsidiary (the accounting
acquirer) is restated using the exchange ratio established in the acquisition
agreement to reflect the number of shares of the legal parent (the accounting
acquiree) issued in the reverse acquisition; and (e) the non-controlling
interest's proportionate share of the legal subsidiary's (accounting acquirer's)
pre-combination carrying amounts of retained earnings and other equity interests
as discussed in ASC 805-40-25-2 and 805-40-30-3.
Pursuant to ASC 805-40-45-4 and 45-5, in calculating the weighted-average number
of common shares outstanding (the denominator of the earnings-per-share ("EPS")
calculation) during the period in which the reverse acquisition occurs: (a) The
number of common shares outstanding from the beginning of that period to the
acquisition date shall be computed on the basis of the weighted-average number
of common shares of the legal acquiree (accounting acquirer) outstanding during
the period multiplied by the exchange ratio established in the merger agreement;
and (b) the number of common shares outstanding from the acquisition date to the
end of that period shall be the actual number of common shares of the legal
acquirer (the accounting acquiree) outstanding during that period.
The basic EPS for each comparative period before the acquisition date presented
in the consolidated financial statements following a reverse acquisition shall
be calculated by dividing (a) by (b): (a) The income of the legal acquiree
attributable to common shareholders in each of those periods; and (b) the legal
acquiree's historical weighted average number of common shares outstanding
multiplied by the exchange ratio established in the acquisition agreement.
As a result of the controlling financial interest of the former stockholders of
AMBI, for financial statement reporting purposes, the asset acquisition has been
treated as a reverse acquisition with AMBI deemed the accounting acquirer and
the Company deemed the accounting acquiree under the acquisition method of
accounting in accordance with ASC 805-10-55 of the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC). The reverse
acquisition is deemed a capital transaction and the net assets of AMBI (the
accounting acquirer) are carried forward to the Company (the legal acquirer and
the reporting entity) at their carrying value before the acquisition. The
acquisition process utilizes the capital structure of the Company and the assets
and liabilities of AMBI which are recorded at their historical cost. The equity
of the Company is the historical equity of AMBI.
These consolidated financial statements include the financial statements of the
Company and its wholly owned subsidiaries, AM Biosciences effective from the
date of the reverse take-over transaction on September 10, 2019 and Allied
Colombia (from the date of acquisition, February 18, 2020). All intercompany
balances and transactions have been eliminated upon consolidation.
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r) Recent accounting pronouncements
The Company does not expect that recent accounting pronouncements or changes in
accounting pronouncements during the nine months ended May 31, 2022, are of
significance or potential significance to the Company.
Financial Condition and Results of Operations
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss for
the nine months ended May 31, 2022 of $15,038,613, has generated minimal revenue
and as at May 31, 2022 has a working capital deficit of $6,462,833. These
factors raise substantial doubt regarding the Company's ability to continue as a
going concern. The Company's ability to continue as a going concern is dependent
upon the Company's ability to raise sufficient financing to acquire or develop a
profitable business. Management intends on financing its operations and future
development activities largely from the sale of equity securities with some
additional funding from other traditional financing sources, including related
party loans until such time that funds provided by future planned operations are
sufficient to fund working capital requirements.
Results of Operations
Comparison of Unaudited Results for the Three Months Ended May 31, 2022 compared
to the Three Months Ended May 31, 2021
Sales and Revenue
For the three-month periods ended May 31, 2022 we had $6,628 in revenue compared
to no revenue for the three-month period ended May 31, 2021. We are just at the
beginning of sales of our products which we expect to improve during the current
fiscal year.
Operating Expenses
Operating expenses for the three-month period ended May 31, 2022 totaled
$2,406,658 compared to $2,179,481 for the three month period ended May 31, 2021.
Operating expenses for the three-month period ended May 31, 2022 is mainly a
result of stock-based compensation (options) of $1,028,835, inventory write-off
to net realizable value of $264,865, office and miscellaneous expense of
$242,676, professional fees of $316,643, and consulting fees of $262,467.
Operating expenses for the three-month period ended May 31, 2021 is mainly a
result of stock-based compensation (options) of $430,478, office and
miscellaneous expense of $727,565, professional fees of $223,106 and consulting
fees of $232,651.
Net Loss
As a result of the changes described above, net loss from operations after
income taxes decreased to $2,645,387 during the three months ended May 31, 2022
compared to $2,753,489 during the three-month period ended May 31, 2021.
Comparison of Unaudited Results for the Nine Months Ended May 31, 2022 compared
to the Nine Months Ended May 31, 2021
Sales and Revenue
For the nine-month periods ended May 31, 2022 we had $49,184 in revenue compared
to $5,260 for the nine-month period ended May 31, 2021. We are just at the
beginning of sales of our products which we expect to improve during the current
fiscal year.
Operating Expenses
Operating expenses for the nine-month period ended May 31, 2022 totaled
$14,598,325 compared to $5,625,633 for the nine-month period ended May 31, 2021.
Operating expenses for the nine-month period ended May 31, 2022 is mainly a
result of stock-based compensation (bonus shares) of $4,585,425, stock-based
compensation (consulting services) of $3,584,392, stock-based compensation
(options) of $2,262,773, office and miscellaneous expense of $947,589 and
consulting fees of $832,124. Operating expenses for the nine-month period ended
May 31, 2021 is mainly a result of stock-based compensation (options) of
$1,810,598, office and miscellaneous expense of $1,073,027 and consulting fees
of $724,386. The increase in operating expense during the quarter ended May 31,
2022 is principally the result of an increase in stock-based compensation (bonus
shares) of $4,585,425 and stock-based compensation (consulting services) of
$3,584,392.
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Net Loss
As a result of the changes described above, net loss from operations after
income taxes increased to $15,038,613 during the nine months ended May 31, 2022
compared to $6,648,787 during the nine-month period ended May 31, 2021.
Liquidity and Capital Resources
The following table sets forth the major components of our statements and
consolidated statements of cash flows for the periods presented.
Nine Months Nine Months
Ended Ended
May 31, May 31,
2022 2021
Cash used in operating activities $ (3,255,262 ) $ (3,094,232 )
Cash from financing activities $ 4,250,633 $ 3,803,557
Cash used in investing activities $ (1,232,051 ) $ (77,606 )
Change in cash during the period $ (236,680 ) $ 631,719
Effect of exchange rate change $ (102,451 ) $ 96,820
Cash, beginning of period
$ 419,825 $ 94,047
Cash, end of period $ 80,694 $ 822,586
As of May 31, 2022, the Company had $349,809 in current assets, consisting of
$80,694 in cash, $229,675 in inventory, $14,495 in receivables, and $24,945 in
prepaid expenses. Other assets mainly include deposits and advances of
$2,830,542 (principally related to our building to be located in Nevada),
property, plant and equipment of $1,654,345, right-of-use assets of $229,290 and
intangible assets of $50,444.
To date, the Company has financed its operations through equity sales and
through the sale of convertible notes as reflected below.
On May 17, 2021 the Company commenced a private placement pursuant to Rule
506(c) promulgated under Regulation D of the Securities Exchange Act of 1934, as
amended. The private placement terminated on November 5, 2021. The private
placement sought to raise $5,250,000 through the sale of Units at $0.75 per
Unit, each consisting of one share of common stock and one warrant to purchase
one share of common stock for two years at an exercise price of $1.25 per share.
Boustead Securities LLC acted as the exclusive Placement Agent for this offering
on a best efforts basis. Boustead received compensation in cash of 10 percent of
the proceeds from such Offering up to $1,000,000 and 7 percent of the proceeds
from such Offering thereafter. We obtained $3,178,572 in gross proceeds from
this offering.
In February 2022, the Company completed a private placement pursuant to Rule
506(c) promulgated under Regulation D. of the Securities Exchange Act of 1934,
as amended. Pursuant to this private placement, the Company obtained $127,000 in
gross proceeds from this offering and issued 141,601 shares of common stock and
141,601 warrants to purchase one share of common stock for two years at an
exercise price of $1.25 per share.
From February 10, 2022 through March 31, 2022, the Company completed a private
placement pursuant to Rule 506(c) promulgated under Regulation D. of the
Securities Exchange Act of 1934, as amended. Pursuant to this private placement,
the Company obtained $970,000 in gross proceeds from this offering and issued
776,000 shares of common stock and 776,000 warrants to purchase one share of
common stock for two years at an exercise price of $1.25 per share.
Convertible Notes during the Quarter ended May 31, 2021
The Company has granted each and every one of the secured convertible note
holders referenced below a continuing security interest in, a general lien upon,
and a right of setoff against all existing and future assets and property under
the terms of a security agreement.
On September 29, 2020, the Company issued a convertible note with a fair value
of $163,341 and warrants to purchase 130,673 shares of the Company's common
stock at $1.25 per share for 2 years. The note bears interest at 10% per annum.
The note was due on demand after March 27, 2021. The note was convertible into
shares of the Company's common stock at any time prior to March 27, 2021 at a
conversion price of $1.25 per share. On March 31, 2021, the Company amended
the note. Pursuant to the amendment, the note bears simple interest at 10% per
annum and is due on demand on or before September 30, 2021. In consideration for
extending the maturity date, the Company issued to the convertible note holder
8,268 common shares of the Company. On June 1, 2021, the Company again amended
the note. Pursuant to the amendment, the note bears simple interest at 10% per
annum and was due on demand on or before November 30, 2021 for no additional
consideration. On November 1, 2021, the Company again amended the note. Pursuant
to the amendment, the note bears simple interest at 10% per annum and is due on
demand on or before March 31, 2022 for no additional consideration. On March
31, 2022, the Company again amended the note. Pursuant to the amendment, the
note bears simple interest at 10% per annum and is due on demand on or before
September 30, 2022 for no additional consideration.
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On October 26, 2020, the Company issued a convertible note with a face value of
$37,613 and warrants to purchase 30,090 shares of the Company's common stock at
$1.25 per share for 2 years. The note bears interest at 10% per annum. The note
was due on demand after April 23, 2021. The note was convertible into shares of
the Company's common stock at any time prior to April 23, 2021 at a conversion
price of $1.25 per share. On June 1, 2021, the Company amended the note.
Pursuant to the amendment, the note bears simple interest at 10% per annum and
was due on demand on or before November 30, 2021 for no additional
consideration. On November 1, 2021, the Company again amended the note.
Pursuant to the amendment, the note bears simple interest at 10% per annum and
is due on demand on or before March 31, 2022 for no additional consideration. On
March 31, 2022, the Company again amended the note. Pursuant to the amendment,
the note bears simple interest at 10% per annum and is due on demand on or
before September 30, 2022 for no additional consideration.
On November 11, 2020, the Company issued a convertible note with a face value of
$85,937 and warrants to purchase 68,750 shares of the Company's common stock at
$1.25 per share for 2 years. The note bears interest at 10% per annum and is
due on demand after May 9, 2021. The note was convertible into shares of the
Company's common stock at any time prior to April 23, 2021 at a conversion price
of $1.25 per share. On June 1, 2021, the Company amended the note. Pursuant to
the amendment, the notes bears simple interest at 10% per annum and was due on
demand on or before November 30, 2021 for no additional consideration. On
November 1, 2021, the Company again amended the note. Pursuant to the amendment,
the convertible notes bear simple interest at 10% per annum and is due on demand
on or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
On December 2, 2020, the Company issued a convertible note with a face value of
$600,000 and warrants to purchase 240,000 shares of the Company's common stock
at $1.25 per share for 2 years. The note bears interest at 10% per annum and is
due on demand after November 27, 2021. The note is convertible into shares of
the Company's common stock at any time prior to November 27, 2021 at a
conversion price of $1.25 per share. On October 1, 2021, the Company amended
the note. Pursuant to the amendment, the note bears simple interest at 10% per
annum and is due on demand on or before March 31, 2022 for no additional
consideration. On March 31, 2022, the Company again amended the note. Pursuant
to the amendment, the note bears simple interest at 10% per annum and is due on
demand on or before September 30, 2022 for no additional consideration.
On January 7, 2021, the Company issued a convertible note with a face value of
$300,000. The note bears interest at 10% per annum and is due on demand after
November 27, 2021. The note is convertible into shares of the Company's common
stock at any time prior to November 27, 2021 at a conversion price of $1.25 per
share. On October 1, 2021, the Company amended the note. Pursuant to the
amendment, the note bears simple interest at 10% per annum and is due on demand
on or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
On March 26, 2021, the Company issued a convertible note with a face value of
$18,000 and warrants to purchase 18,000 shares of the Company's common stock at
$0.50 per share for one year. The Note bears interest at 10% per annum and is
due on demand on September 26, 2021. The Note is convertible into shares of the
Company's common stock at any time at a conversion price of $1.25 per share. On
November 1, 2021, the Company amended the note. Pursuant to the amendment, the
convertible notes bear simple interest at 10% per annum and is due on demand on
or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
On March 26, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company's common stock
at $0.50 per share for one year. The Note bears interest at 10% per annum and is
due on demand on September 26, 2021.The Note is convertible into shares of the
Company's common stock at any time at a conversion price of $1.25 per share. On
November 1, 2021, the Company amended the note. Pursuant to the amendment, the
convertible notes bear simple interest at 10% per annum and is due on demand on
or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
On April 29, 2021, the Company issued a convertible note with a face value of
$180,000 and warrants to purchase 180,000 shares of the Company's common stock
at $1.00 per share for one year. The Note bears interest at 10% per annum and is
due on demand on October 29, 2021.The Note is convertible into shares of the
Company's common stock at any time at a conversion price of $1.00 per share. On
November 1, 2021, the Company amended the note. Pursuant to the amendment, the
convertible notes bear simple interest at 10% per annum and is due on demand on
or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
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On April 30, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company's common stock
at $1.00 per share for one year. The Note bears interest at 10% per annum and is
due on demand on October 31, 2021.The Note is convertible into shares of the
Company's common stock at any time at a conversion price of $1.00 per share. On
November 1, 2021, the Company amended the note. Pursuant to the amendment, the
convertible notes bear simple interest at 10% per annum and is due on demand on
or before March 31, 2022 for no additional consideration. On March 31, 2022,
the Company again amended the note. Pursuant to the amendment, the note bears
simple interest at 10% per annum and is due on demand on or before September 30,
2022 for no additional consideration.
Convertible Notes during the Quarter ended May 31, 2022
On October 1, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company's common stock
at $1.25 per share for 1 year. The note bears interest at 10% per annum and is
due on demand after March 31, 2022. The note is convertible into shares of the
Company's common stock at any time prior to March 31, 2022 at a conversion price
of $1.25 per share. On November 1, 2021, the Company amended the note. Pursuant
to the amendment, the convertible notes bear simple interest at 10% per annum
and is due on demand on or before March 31, 2022 for no additional
consideration. On March 31, 2022, the Company again amended the note. Pursuant
to the amendment, the note bears simple interest at 10% per annum and is due on
demand on or before September 30, 2022 for no additional consideration.
On October 25, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company's common stock
at $1.25 per share for 1 year. The note bears interest at 10% per annum and is
due on demand after March 31, 2022. The note is convertible into shares of the
Company's common stock at any time prior to March 31, 2022 at a conversion price
of $1.25 per share. On March 31, 2022, the Company amended the note. Pursuant to
the amendment, the note bears simple interest at 10% per annum and is due on
demand on or before September 30, 2022 for no additional consideration.
On December 23, 2021, the Company issued two convertible notes with a face value
of $100,000 each. The notes bears interest at 10% per annum and is due on demand
after June 23, 2022. The note is convertible into shares of the Company's common
stock at any time prior to June 23, 2022 at a conversion price of $1.25 per
share.
On January 11, 2022, the Company issued a convertible note with a face value of
$150,000. The note bears interest at 10% per annum and is due on demand after
July 10, 2022. The note is convertible into shares of the Company's common stock
at any time prior to July 10, 2022 at a conversion price of $1.25 per share.
On January 31, 2022, the Company issued a convertible note with a face value of
$100,000. The note bears interest at 10% per annum and is due on demand after
July 31, 2022. The note is convertible into shares of the Company's common stock
at any time prior to July 31, 2022 at a conversion price of $1.25 per share.
On March 29, 2022, the Company issued a convertible note with a face value of
$500,000. The note bears interest at 10% per annum and is due on demand after
September 30, 2022. The note is convertible into shares of the Company's common
stock at any time prior to September 30, 2022 at a conversion price of $1.25 per
share.
Equity Transactions during the Quarter ended May 31, 2021
On September 21, 2020, the Company issued 80,000 shares of common stock at $1.25
per share for gross cash proceeds of $100,000.
On September 30, 2020, the Company issued 120,000 shares of common stock at
$1.25 per share for gross cash proceeds of $150,000.
On March 1, 2021, the Company re-issued 100,000 common shares from treasury with
fair value of $90,000 for the promissory note of $300,000.
On March 5, 2021, the Company re-issued 200,000 shares of common stock with fair
value of $160,000 from treasury for acquisition of Pacific Sun Fungi Inc.
On March 17, 2021, the Company issued 500,000 shares of common stock at $0.50
per share for gross proceeds of $250,000.
On March 17, 2021, the Company issued 86,044 shares of common stock with a fair
value of $70,164 to settle $87,483 of accounts payable, which resulted in a gain
on settlement of debt of $17,319.
On March 22, 2021, the Company issued 25,000 shares of common stock with a fair
value of $22,500 to settle $25,000 of accounts payable, which resulted in a gain
on settlement of debt of $2,500.
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On April 7, 2021, the Company issued 100,000 shares of common stock at $0.50 per
share for gross proceeds of $50,000.
On April 20, 2021, the Company issued 250,000 shares of common stock at $0.50
per share for gross proceeds of $125,000.
On May 7, 2021, the Company issued 50,000 shares of common stock at $0.50 per
share for gross proceeds of $25,000.
On May 12, 2021, the Company issued 31,746 shares of common stock with a fair
value of $31,746 to settle $31,746 of accounts payable, which resulted in a gain
on settlement of debt of $nil.
On May 13, 2021, the Company received 1,200,000 shares of common stock from the
counterparties of certain previous cancelled asset acquisitions for no
consideration. The shares were cancelled upon being returned to treasury.
On May 14, 2021, the Company issued 200,000 shares of common stock at $0.50 per
share for gross proceeds of $100,000.
On May 14, 2021, the Company issued 300,001 shares of common stock at $0.75 per
share for gross proceeds of $225,000.
On May 17, 2021, the Company issued 800 shares of common stock as a finder's
fee.
On May 27, 2021, the Company issued 136,000 shares of common stock with a fair
value of $149,952 in connection with modifications of a convertible note
payable.
Equity Transactions during the Quarter ended May 31, 2022
On September 2, 2021, the Company issued 2,175,933 common shares at fair value
of $ 2,447,925 on issuance date from treasury to the CFO and COO and 1,900,000
common shares at fair value of $2,137,500 to certain employees of the Company as
bonuses for past services, which is expensed as a total of $4,585,425 for
stock-based compensation - bonus shares.
On September 2, 2021, the Company issued 2,997,237 common shares measured at
fair value on issuance date of $3,371,892 from treasury for consulting services
related to business development for a 12-month period from the issuance date. As
the future benefit of the consulting services to be performed cannot be
determined, the entire amount was expensed during the nine months ended May 31,
2022. The total $3,584,392 stock-based compensation - consulting services is
comprised of this $3,371,892 share issuance plus the $212,500 described in the
next paragraph below.
During the year ended August 31, 2021, the Company re-issued 750,000 shares of
common stock with total fair value of $637,500 for consulting services, out of
which, $425,000 was expensed as consulting fees during the prior year and
$212,500 was expensed during the nine months ended May 31, 2022.
On October 20, 2021, the Company issued 3,853,121 units at $0.75 per unit for
proceeds of $2,889,841, of which $865,467 was received during the year ended
August 31, 2021. Each unit consists of one common share of the Company and one
warrant to purchase the Company's one common shares at $1.25 for a period of two
years. In connection with the financing, the Company incurred brokerage
commission fees and other share issuance costs of $210,736.
On November 5, 2021, the Company issued 705,000 units at $0.75 per unit for
proceeds of $528,750. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company issued 8,000 shares of
common stock with a fair value of $6,000 as a finder's fee and incurred other
finders' fees and other share issuance costs of $42,654.
On November 30, 2021, the Company issued 8,268 shares as consideration for
extending the maturity date of a convertible note.
On January 20, 2022, the Company issued 75,000 units at $0.75 per unit for
proceeds of $56,250 which was received during the year ended August 31, 2021.
Each unit consists of one common share of the Company and one warrant to
purchase the Company's one common shares at $1.25 for a period of two years.
On January 20, 2022, the Company issued 46,834 units at $0.75 per unit for
proceeds of $35,126 which was received during the period ended November 30,
2021. Each unit consists of one common share of the Company and one warrant to
purchase the Company's one common shares at $1.25 for a period of two years. The
Company adjusted the effective issuance date to October 20, 2021.
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On January 24, 2022, the Company issued 36,000 units at $0.75 per unit for
proceeds of $27,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. The Company adjusted the effective issuance date to October 20, 2021.
The Company adjusted the effective issuance date to November 24, 2021.
On January 28, 2022, the Company issued 66,667 units at $0.75 per unit for
proceeds of $50,000 which was received during the period ended November 30,
2021. Each unit consists of one common share of the Company and one warrant to
purchase the Company's one common shares at $1.25 for a period of two years.
On February 7, 2022, the Company issued 66,667 units at $0.75 per unit for
proceeds of $50,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years.
On February 10, 2022, the Company issued 33,334 units at $0.75 per unit for
proceeds of $25,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years.
On February 10, 2022, the Company issued 80,000 units at $1.25 per unit for
proceeds of $100,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $8,000.
On February 20, 2022, the Company issued 40,000 units at $1.25 per unit for
proceeds of $50,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $4,000.
On February 21, 2022, the Company issued 300,000 units at $1.25 per unit for
proceeds of $375,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $30,000.
On February 22, 2022, the Company issued 80,000 units at $1.25 per unit for
proceeds of $100,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $8,000.
On February 24, 2022, the Company issued 41,600 units at $0.75 per unit for
proceeds of $31,200. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years.
On February 24, 2022, the Company issued 40,000 units at $1.25 per unit for
proceeds of $50,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $4,000.
On February 25, 2022, the Company issued 96,000 units at $1.25 per unit for
proceeds of $120,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $9,600.
On February 28, 2022, the Company issued 120,000 units at $1.25 per unit for
proceeds of $150,000. Each unit consists of one common share of the Company and
one warrant to purchase the Company's one common shares at $1.25 for a period of
two years. In connection with the financing, the Company incurred finder's fee
of $12,000.
On May 26, 2022, the Company issued 161,066 units at $0.75 per unit for proceeds
of $120,800. Each unit consists of one common share of the Company and one
warrant to purchase the Company's one common shares at $1.25 for a period of two
years. In connection with the financing, the Company incurred finder's fee of
$2,000.
On May 26, 2022, the Company issued 40,000 units at $1.25 per unit for proceeds
of $50,000. Each unit consists of one common share of the Company and one
warrant to purchase the Company's one common shares at $1.25 for a period of two
years.
During the nine months ended May 31, 2022, the Company issued 728,001 common
shares to certain investors for no consideration by error. The Company is in the
process of retracting the shares.
At May 31, 2022, the Company had received $25,000 in cash for share
subscriptions.
Future Financing
In connection with its proposed business plan and currently ongoing and proposed
acquisitions, in addition to the possible proceeds from this offering the
Company will be required to complete substantial and significant additional
capital formation. Such formation could be through additional equity offerings,
debt, bank financings or a combination of any source of financing. There can be
no assurance that the Company will be successful in completion of such
financings.
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Plan of Operations
As noted above, the continuation of our current plan of operations requires us
to raise significant additional capital. If we are successful in raising capital
through the sale of convertible notes or common shares, we believe that we will
have sufficient cash resources to fund our plan of operations through 2022. If
we are unable to do so, we may have to curtail and possibly cease some
operations. We intend to use the net proceeds from the offering for operating
capacity in Colombia, Canada and the United States, regulatory compliance,
intellectual property, working capital and general corporate purposes.
We continually evaluate our plan of operations to determine the manner in which
we can most effectively utilize our limited cash resources. The timing of
completion of any aspect of our plan of operations is highly dependent upon the
availability of cash to implement that aspect of the plan and other factors
beyond our control. There is no assurance that we will successfully obtain the
required capital or revenues, or, if obtained, that the amounts will be
sufficient to fund our ongoing operations.
Capital Expenditures
As of May 31, 2022, the Company had purchased property plant and equipment of
$1,219,940 and intangible assets of $12,111. As of August 31, 2021, the Company
purchased property plant and equipment of $267,835 and paid net cash of
$3,156,163 in deposits and advances for an asset acquisition.
Xtreme Cubes Building
In June 2019, AM Biosciences signed the production and manufacturing contract to
begin the manufacturing of a building for an extraction and production facility.
This building will be a fully scalable, modular building. The Company made an
upfront payment of $230,000 USD in June 2019, an additional payment of $903,385
in August 2019 and an additional payment of $92,000 in March 2020. At May 31,
2022, Company had deposits of $2,656,695 to purchase prefabricated buildings. As
of May 31, 2022, the Company had not yet received the building and the amounts
have been recorded as deposits.
Commitments and Contractual Obligations
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Going Concern
As reflected in the accompanying financial statements, the Company had an
accumulated deficit of $34,432,425 at May 31, 2022 and a net loss of $15,038,613
for the nine months ended May 31, 2022.
The Company does not yet have a history of financial stability. Historically,
the principal source of liquidity has been the issuance of convertible notes and
equity securities. In addition, the Company has generated no revenues since
inception. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
The ability of the Company to continue operations is dependent on the success of
Management's plans, which include the raising of capital through the issuance of
equity securities, until such time that funds provided by operations are
sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current
and expected future operations as well as to achieve its strategic objectives.
The Company believes its current available cash will be sufficient to meet its
cash needs for the near future. There can be no assurance that financing will be
available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
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