Orchid Ventures : Audited annual Financial Statements - Jun 2020

ORCHID VENTURES, INC.

(DBA "ORCHID ESSENTIALS")

CONSOLIDATED FINANCIAL STATEMENTS

AS AT AND FOR THE THIRTEEN MONTH PERIOD ENDED JUNE 30, 2020

(Expressed in US dollars)

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Orchid Ventures, Inc. (DBA "Orchid Essentials"),

Opinion

We have audited the consolidated financial statements of Orchid Ventures, Inc. (DBA "Orchid Essentials") (the "Company"), which comprise the consolidated statements of financial position as at June 30, 2020 and May 31, 2019, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity (deficit) and cash flows for the thirteen month period ended June 30, 2020 and the year ended May 31, 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2020 and May 31, 2019, and its financial performance and its cash flows for the thirteen month period ended June 30, 2020 and the year ended May 31, 2019 in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes events or conditions that indicate a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process. (cont'd…)

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Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Rakesh Patel.

DALE MATHESON CARR-HILTON LABONTE LLP

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC

January 15, 2021

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ORCHID VENTURES. INC. (DBA "ORCHID ESSENTIALS") CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in US dollars)

		As at	May 31,
	Note	June 30, 2020	2019
Current assets		$	$
Cash		76,017	111,671
Trade receivables	14	69,750	2,273,289
GST receivable		194	17,849
Prepaids		172,288	231,813
Inventory	7	567,157	1,381,836
Asset held for sale	9, 20	50,000	-
Total current assets		935,406	4,016,458
Non-current assets
Equipment	8	6,060	62,721
Trademarks and licenses	9	87,682	253,796
Deposits		80,756	36,148
Right-of-use assets	16	378,117	-
Total assets		552,615	352,665
	1,488,021	4,369,123
Current liabilities
Trade payables	6	1,145,754	838,468
Accrued liabilities		70,749	126,000
Wages payable	6	300,751	87,400
Loans payable	12	-	324,115
Obligation to issue shares	9	60,000	60,000
Warrant liability	18	185,959	-
Advances	19	130,688	-
Deferred revenue	20, 22	600,050	-
Lease liability - current	16	227,608	-
Total current liabilities		2,721,559	1,435,983
Non-current liabilities
Lease liability - non-current	16	211,896	-
Total liabilities		2,933,455	1,435,983
Shareholders' equity (deficit)
Share capital	11	10,667,287	8,466,628
Exchangeable units	11	1,062,097	1,667,303
Reserve	11	2,553,167	1,475,737
Deficit		(15,727,985)	(8,676,528)
Total shareholders' equity (deficit)		(1,445,434)	2,933,140
Total liabilities and shareholders' equity (deficit)		1,488,021	4,369,123

Note 1 - Nature of operations and going concern

Notes 13 and 20 - Commitments and contingencies

Note 23 - Subsequent events

On behalf of the Board of Directors on January 15, 2021.

/s/ Corey Mangold		/s/ Rick Brown
Mr. Corey Mangold, CEO		Mr. Rick Brown, Director

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

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ORCHID VENTURES, INC. (DBA "ORCHID ESSENTIALS") CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in US dollars)

			Thirteen Months
			Ended June 30,	Year Ended
	Note	2020	May 31, 2019
		$	$
Sales	17	1,568,276	5,514,593
Cost of sales	7	1,704,190	3,541,475
Gross profit (loss)			(135,914)	1,973,118
Operating expenses
Administrative		226,196	228,978
Bad debt expense	12	493,091	42,610
Consulting	10	79,027	88,181
Depreciation and amortization	8,9,16	267,157	13,601
Insurance		52,874	77,150
Legal and professional fees		491,071	813,966
Management fees	10	304,650	425,650
Rent and utilities	6	72,946	339,692
Sales, marketing, and advertising	6	118,124	423,785
Software and information technology		41,664	145,682
Shipping and packaging		16,552	49,127
Share-based payments	10,11,20	1,105,474	2,171,891
Travel		181,932	130,193
Wages and benefits		2,014,659	1,925,321
Total operating expenses			5,465,417	6,875,827
Loss before other items		(5,601,331)	(4,902,709)
Other expenses (income)
Interest expense	12,16	149,096	56,203
Impairment of asset acquisition	13	905,881	-
Impairment of license	9	111,000	-
Foreign exchange		237,157	24,385
Fair value change in warrant liability	18	63,243	-
Listing expense	5	-	2,169,728
Lease modification	16	(31,867)	-
Expense recovery	13	-	(370,444)
Loss on sale of equipment	8	15,616	-
Other income		-	(90,000)
			1,450,126	1,789,872
Net and comprehensive loss		(7,051,457)	(6,692,581)
Net loss per share - basic and diluted		(0.08)	(0.85)
Weighted average number of common
shares outstanding - basic and diluted		85,889,932	7,896,096

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

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