UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2023

or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number: 000-55940

BODY AND MIND INC.

(Exact name of registrant as specified in its charter)

Nevada	98-1319227
(State or other jurisdiction of organization)	(I.R.S. employer identifiCAtion no.)

750 – 1095 West Pender Street Vancouver, British Columbia, Canada	V6E 2M6
(Address of principal executive offices)	(Zip code)

(800) 361-6312

(Registrant’s telephone number, including area code)

None

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 146,636,974 shares of common stock outstanding as of June 20, 2023.

BODY AND MIND INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		3
ITEM 1 –	FINANCIAL STATEMENTS	3
ITEM 2 –	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
ITEM 3 –	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	64
ITEM 4 –	CONTROLS AND PROCEDURES	64
	(a) Evaluation of Disclosure Controls and Procedures	64
	(b) Internal control over financial reporting	64
PART II – OTHER INFORMATION		65
ITEM 1 –	LEGAL PROCEEDINGS	65
ITEM 1A.	RISK FACTORS	65
ITEM 2 –	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65
ITEM 3 –	DEFAULTS UPON SENIOR SECURITIES	65
ITEM 4 –	MINE SAFETY DISCLOSURES	65
ITEM 5 –	OTHER INFORMATION	65
ITEM 6 –	EXHIBITS	66
SIGNATURES		67

2

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Body and Mind Inc.	Statement 1
Condensed Consolidated Interim Balance Sheets
(U.S. Dollars)

ASSETS	As of 30 April 2023			As of 31 July 2022
	(unaudited)
Current
Cash	$	2,665,516		$	1,854,277
Accounts receivable		782,238			475,578
Interest receivable on convertible loan (Note 6)		276,000			222,000
Prepaids		751,148			775,701
Inventory (Note 5)		2,711,626			3,880,000
Loan receivable (Note 7)		20,804			789,984
Total Current Assets		7,207,332			7,997,540
Deposit		50,519			113,828
Convertible loan receivable (Note 6)		1,609,088			1,250,000
Property and equipment, net (Note 8)		5,347,159			5,640,534
Operating lease right-of-use assets (Note 13)		7,509,730			4,162,647
Brand and licenses, net (Note 10)		10,888,159			11,861,315
TOTAL ASSETS	$	32,611,987		$	31,025,864
LIABILITIES
Current
Accounts payable	$	3,839,554		$	2,489,353
Accrued liabilities		318,568			325,385
Income taxes payable		5,277,165			3,021,539
Due to related parties (Note 11)		148,339			163,862
Loans payable (Note 12)		28,656			12,535
Current portion of operating lease liabilities (Note 13)		1,138,855			604,445
Total Current Liabilities		10,751,137			6,617,119
Long-term operating lease liabilities (Note 13)		8,756,001			5,514,928
Loans payable (Note 12)		7,766,060			7,393,636
Convertible debentures – related parties, net (Note 12)		2,450,671			-
Income taxes payable		966,992			966,992
Deferred tax liability		342,137			427,770
TOTAL LIABILITIES		31,032,998			20,920,445
STOCKHOLDERS’ EQUITY
Capital Stock– Statement 3 (Note 14)
Authorized:
900,000,000 Common Shares – Par Value $0.0001
Issued and Outstanding:
146,636,974 (31July2022–113,668,613) Common Shares		14,663			11,366
Additional paid-in capital		55,018,951			52,344,573
Shares to be issued		-			1,853,403
Accumulated other comprehensive income		1,176,006			1,224,093
Accumulated Deficit		(55,462,822	)		(45,803,026	)
TOTAL STOCKHOLDERS’ EQUITY ATTRIBUTABLE TO BAM STOCKHOLDERS		746,798			9,630,409
NON-CONTROLLING INTEREST		832,191			475,010
TOTAL STOCKHOLDERS’ EQUITY		1,578,989			10,105,419
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	32,611,987		$	31,025,864

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

3

Body and Mind Inc.	Statement 2
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss (unaudited)
(U.S. Dollars)

	Three Month Period Ended 30 April						Nine Month Period Ended 30 April
	2023			2022			2023			2022
Sales	$	7,312,697		$	7,876,674		$	22,886,446		$	23,494,016
Cost of sales		(5,235,500	)		(5,319,992	)		(16,903,718	)		(15,151,681	)
Gross profit		2,077,197			2,556,682			5,982,728			8,342,335
Operating Expenses
Accounting and legal		219,553			147,289			884,052			698,133
Business development		340,106			390,555			754,364			565,630
Consulting fees		99,553			259,722			502,920			650,929
Depreciation		351,247			445,656			1,075,985			1,214,981
Lease expense		416,988			252,945			1,006,189			536,794
Licenses, utilities and office administration		952,734			1,198,893			3,523,126			3,121,116
Management fees		100,195			49,778			304,152			338,815
Salaries and wages		1,224,761			1,151,407			3,300,611			3,210,964
Total Operating Expenses		(3,705,137	)		(3,896,245	)		(11,351,399	)		(10,337,362	)
Net Operating Loss		(1,627,940	)		(1,339,563	)		(5,368,671	)		(1,995,027	)
Other Income (Expenses)
Foreign exchange, net		(1,153	)		10			1,013			324
Gain on fair value adjustment of convertible loan (Note 6)		359,088			-			359,088			-
Interest expense		(484,522	)		(338,185	)		(1,291,069	)		(1,016,969	)
Interest income		18,000			18,000			54,000			54,000
Loss on impairment (Note 8 and 13)		(944,015	)		-			(944,015	)		-
Other income		10,800			18,952			72,203			34,906
Total Other Expenses		(1,041,802	)		(301,223	)		(1,748,780	)		(927,739	)
Net Loss Before Income Tax	$	(2,669,742	)	$	(1,640,786	)	$	(7,117,451	)	$	(2,922,766	)
Income tax expense		(939,028	)		(821,317	)		(2,185,164	)		(2,939,139	)
Net Loss		(3,608,770	)		(2,462,103	)		(9,302,615	)		(5,861,905	)
Other Comprehensive Income
Foreign currency translation adjustment		32,315			(71,041	)		(48,087	)		(69,920	)
Comprehensive Loss	$	(3,576,455	)	$	(2,533,144	)	$	(9,350,702	)	$	(5,931,825	)
Net income (loss) attributable to:
Body and Mind Inc.		(3,758,834	)		(2,530,064	)		(9,659,796	)		(6,195,975	)
Non-controlling interest		150,064			67,961			357,181			334,070
Comprehensive loss attributable to:
Body and Mind Inc.		(3,726,519	)		(2,601,105	)		(9,707,883	)		(6,265,895	)
Non-controlling interest		150,064			67,961			357,181			334,070
Loss per Share – Basic and Diluted	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.05	)
Weighted Average Number of Shares Outstanding - Basic and Diluted		146,636,974			113,349,464			130,203,817			111,806,303

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

4

Body and Mind Inc.	Statement 3
Condensed Consolidated Interim Statements of Changes in Stockholders’ Equity (unaudited)
(U.S. Dollars)

	Share Capital				Additional						Accumulated Other						Non-
	Common Shares				paid-in			Shares to be			comprehensive			Accumulated			controlling
	Share		Amount		capital			issued			income			Deficit			interest		Total
Balance – 31 July 2022		113,668,613	$	11,366	$	52,344,573		$	1,853,403		$	1,224,093		$	(45,803,026	)	$	475,010	$	10,105,419
Stock-based compensation (Note 14)		-		-		32,458			-			-			-			-		32,458
Foreign currency translation adjustment		-		-		-			-			(70,060	)		-			-		(70,060	)
Net loss		-		-		-			-			-			(3,054,841	)		102,046		(2,952,795	)
Balance – 31 October 2022		113,668,613	$	11,366	$	52,377,031		$	1,853,403		$	1,154,033		$	(48,857,867	)	$	577,056	$	7,115,022
Common stock issued in acquisition of Canopy		16,301,694		1,630		1,851,773			(1,853,403	)		-			-			-		-
Common stock issued in merger of CraftedPlants NJ		16,666,667		1,667		(1,667	)		-			-			-			-		-
Warrants issued in convertible debentures financing		-		-		592,159			-			-			-			-		592,159
Stock-based compensation (Note 14)		-		-		22,013			-			-			-			-		22,013
Foreign currency translation adjustment		-		-		-			-			(10,342	)		-			-		(10,342	)
Net loss		-		-		-			-			-			(2,846,121	)		105,071		(2,741,050	)
Balance – 31 January 2023		146,636,974	$	14,663	$	54,841,309		$	-		$	1,143,691		$	(51,703,988	)	$	682,127	$	4,977,802
Stock-based compensation (Note 14)		-		-		177,642			-			-			-			-		177,642
Foreign currency translation adjustment		-		-		-			-			32,315			-			-		32,315
Net loss		-		-		-			-			-			(3,758,834	)		150,064		(3,608,770	)
Balance – 30 April 2023		146,636,974	$	14,663	$	55,018,951		$	-		$	1,176,006		$	(55,462,822	)	$	832,191	$	1,578,989
Balance – 31 July 2021		109,077,778	$	10,907	$	50,312,013		$	-		$	1,127,713		$	(17,126,510	)	$	26,598	$	34,350,721
Common stock issued for lease liabilities		1,543,530		154		546,872			-			-			-			-		547,026
Stock-based compensation (Note 14)		-		-		145,175			-			-			-			-		145,175
Foreign currency translation adjustment		-		-		-			-			36,281			-			-		36,281
Net loss		-		-		-			-			-			(789,089	)		111,835		(677,254	)
Balance – 31 October 2021		110,621,308	$	11,061	$	51,004,060		$	-		$	1,163,994		$	(17,915,599	)	$	138,433	$	34,401,949
Common stock issued in acquisition of Canopy		2,728,156		273		939,271			-			-			-			-		939,544
Stock-based compensation (Note 14)		-		-		149,769			-			-			-			-		149,769
Foreign currency translation adjustment		-		-		-			-			(35,160	)		-			-		(35,160	)
Net loss		-		-		-			-			-			(2,876,822	)		154,274		(2,722,548	)
Balance – 31 January 2022		113,349,464	$	11,334	$	52,093,100		$	-		$	1,128,834		$	(20,792,421	)	$	292,707	$	32,733,554
Stock-based compensation (Note 14)		-		-		91,383			-			-			-			-		91,383
Foreign currency translation adjustment		-		-		-			-			(71,041	)		-			-		(71,041	)
Net loss		-		-		-			-			-			(2,530,064	)		67,961		(2,462,103	)
Balance – 30 April 2022		113,349,464	$	11,334	$	52,184,483		$	-		$	1,057,793		$	(23,322,485	)	$	360,668	$	30,291,793

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

5

Body and Mind Inc.	Statement 4
Condensed Consolidated Interim Statements of Cash Flows (unaudited)
(U.S. Dollars)

	Nine Month Period Ended 30 April
Cash Resources Provided By (Used In)	2023			2022
Operating Activities
Net loss for the period	$	(9,302,615	)	$	(5,861,905	)
Items not affecting cash:
Amortization of debt discount		415,254			356,732
Accrued interest expense		186,521			-
Accrued interest income		(54,000	)		(54,000	)
Amortization of intangible assets		973,156			1,061,202
Amortization of operating lease ROU assets		1,200,728			719,096
Depreciation		800,844			709,241
Gain on fair value adjustment of convertible loan		(359,088	)		-
Loss on impairment		944,015			-
Stock-based compensation		232,113			386,327
Accounts receivable and prepaids		(243,160	)		493,515
Inventory		1,168,374			(731,072	)
Deposits		63,309			(113,828	)
Trade payables and accrued liabilities		1,156,863			127,827
Income taxes payable and deferred taxes		2,169,993			2,938,139
Due to related parties		(15,523	)		(5,354	)
Operating lease liabilities		(1,222,258	)		(583,427	)
Cash used in operating activities		(1,885,474	)		(557,507	)
Investing Activities
Investment in NMG Ohio, LLC , net of cash received		-			(54,415	)
Cash paid in acquisition of Canopy, net of cash received		-			(2,121,497	)
Purchase of property and equipment		(1,001,554	)		(619,613	)
Proceeds from loan receivable		769,180			(244,436	)
Cash used in investing activities		(232,374	)		(3,039,961	)
Financing Activities
Proceeds from convertible debenture financing		3,000,000			-
Proceeds from loans payable		-			88
Payments on loans payable		(22,826	)		-
Cash provided by financing activities		2,977,174			88
Effect of exchange rate changes on cash		(48,087	)		(69,920	)
Net Increase (Decrease) in Cash		811,239			(3,667,300	)
Cash– Beginning of Period		1,854,277			7,374,194
Cash– End of Period	$	2,665,516		$	3,706,894

Supplemental Disclosures with Respect to Cash Flows (Note 16)

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

6

Body and Mind Inc.

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Months ended 30 April 2023

(U.S. Dollars)

1. Nature and Continuance of Operations

Body and Mind Inc. (the “Company”) was incorporated on 5 November 1998 in the State of Delaware, USA, under the name Concept Development Group, Inc. In May 2004, the Company acquired 100% of Vocalscape, Inc. and changed its name to Vocalscape, Inc. On October 28, 2005, the Company changed its name to Nevstar Precious Metals Inc. On October 23, 2008, the Company changed its name to Deploy Technologies Inc. (“Deploy Tech”) and, on September 15, 2010, the Company incorporated a wholly-owned subsidiary, Deploy Acquisition Corp. (“Deploy”) under the laws of the State of Nevada, USA. On September 17, 2010, the Company merged with and into Deploy under the laws of the State of Nevada. Deploy, as the surviving corporation of the merger, assumed all the assets, obligations and commitments of Deploy Tech, and we were effectively re-domiciled in the State of Nevada. Upon the completion of the merger, Deploy assumed the name “Deploy Technologies Inc.”, and all of the issued and outstanding common stock of Deploy Tech was automatically converted into and became Deploy’s issued and outstanding common stock.

On 14 November 2017, the Company acquired Nevada Medical Group, LLC (“NMG”) and changed its name to Body and Mind Inc. The Company is now a supplier and grower of medical and recreational cannabis in the state of Nevada, and has retail operations in California, Ohio, Arkansas, Michigan and Illinois.

Principles of Consolidation

These consolidated financial statements include the financial statements of the Company and its subsidiaries as follows:

Name	Jurisdiction	Ownership	Date of acquisition or formation
DEP Nevada Inc. (“DEP Nevada”)	Nevada, USA	100%	10 August 2017
Nevada Medical Group LLC (“NMG”)	Nevada, USA	100%	14 November 2017
NMG Long Beach LLC (“NMG LB”)	California, USA	100%	18 December 2018
NMG San Diego LLC (“NMG SD”)	California, USA	60%	30 January 2019
NMG Ohio LLC (“NMG Ohio”)	Ohio, USA	100%	27 April 2017
NMG OH 1, LLC (“NMG OH 1”)	Ohio, USA	100%	29 January 2020
NMG OH P1, LLC (“NMG OH P1”)	Ohio, USA	100%	29 January 2020
NMG MI 1, Inc. (“NMG MI 1”)	Michigan, USA	100%	24 June 2021
NMG MI C1 Inc.	Michigan, USA	100%	24 June 2021
NMG MI P1 Inc.	Michigan, USA	100%	24 June 2021
Canopy Monterey Bay, LLC (“Canopy”)	California, USA	100%	1 December 2021
NMG CA P1, LLC (“NMG CA P1”)	California, USA	100%	7 January 2020
NMG CA C1, LLC (“NMG CA C1”)	California, USA	100%	7 October 2020
BaM Body and Mind Dispensary NJ, Inc. (“BAM NJ”)	New Jersey, USA	100%	21 December 2022
NMG IL4, LLC (“NMG IL 4”) *	Illinois, USA	100%	25 April 2023

* Pending state approval.

All inter-company transactions and balances are eliminated upon consolidation.

2. Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after 15 December 2022. The Company does not anticipate this amendment to have a significant impact on the consolidated financial statements.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

7

3. Significant Accounting Policies

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.

Reclassification

Certain amounts of operating expenses in the prior period financial statements have been reclassified to conform to the presentation of cost of goods sold in the current period financial statements. These reclassifications had no effect on the previously reported net loss.

Basis of presentation

These condensed consolidated interim financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is 31 July.

In the opinion of management, the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s fiscal year 2022 Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on 17 January 2023.

Accounts receivable

Amounts receivable represents amounts owed from customers for sale of medical and recreational cannabis and sales tax recoverable. Amounts are presented net of the allowance for doubtful accounts, which represents the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines the allowance for doubtful accounts based on historical experience and current economic conditions. The Company reviews the adequacy of its allowance for doubtful accounts on a quarterly basis. As of 30 April 2023 and 31 July 2022, the Company has no allowance for doubtful accounts.

Revenue recognition

The Company recognizes revenue from product sales when our customers obtain control of our products. This determination is based on the customer specific terms of the arrangement for wholesale operations. Upon transfer of control, the Company has no further performance obligations. All retail sales are considered cash on delivery.

Due to the nature of the Company’s revenue from contracts with customers, the Company does not have material contract assets or liabilities that fall under the scope of ASC 606.

The Company’s revenues accounted for under ASC 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.

See Note 15 for revenue disaggregation table.

8

Inventory and cost of goods sold

Inventory consists of work in progress (live plants and plants in the drying process), finished goods, and consumables. The Company values its finished goods and consumables at the lower of the actual costs or its current estimated market value less costs to sell. The Company values its work in progress at cost using the average cost method.

Costs incurred during the growing and production process are capitalized as incurred to the extent that cost is less than net realizable value. These costs include materials, labor and manufacturing overhead used in the growing and production processes. The Company capitalizes pre-harvest costs.

The Company periodically reviews its inventory for obsolete and potentially impaired items. Any identified slow moving and obsolete items are written down to its net realizable value through a charge to cost of goods sold. As of 30 April 2023 and 31 July 2022, the Company has no allowance for inventory obsolescence.

Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles and concentrates, packaging and other supplies, fees for services and processing, and allocated overhead, such as allocations of rent, administrative salaries, utilities and related costs.

Loans receivable

The Company carries its loans receivable at cost and are reviewed for indicators of impairment at least annually.

Property and equipment

Property and equipment are stated at cost and are amortized over their estimated useful lives on a straight-line basis as follows:

Office equipment	7 years
Cultivation equipment	7 years
Production equipment	7 years
Kitchen equipment	7 years
Vehicles	7 years
Vault equipment	7 years
Leasehold improvements	shorter of useful life or the term of the lease

Intangible assets

Intangible assets acquired from third parties are measured initially at fair value and either classified as indefinite life or finite life depending on their characteristics. Intangible assets with indefinite lives are tested for impairment at least annually and intangible assets with finite lives are reviewed for indicators of impairment at least annually. The Company’s brands and licenses acquired from NMG have indefinite lives; therefore, no amortization is recognized. The Company’s brands and licenses acquired by NMG SD have a finite life of 10 years, brands and licenses acquired by NMG LB and NMG OH 1 have a finite life of 10 years, customer relationships acquired by NMG OH 1 have a finite life of five years, licenses acquired by Canopy have a finite life of 10 years and are amortized over these estimated useful lives on a straight-line basis. Brands acquired by Canopy have indefinite lives.

9

Goodwill

Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired in our business combinations. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could trigger an impairment review include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, additional impairment testing is not required. The Company tests for goodwill impairment annually during its fourth quarter on 31 July.

Impairment of long-lived assets

The Company reviews long-lived assets, including property and equipment and definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group.

Income taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the consolidated financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. 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. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense in the consolidated statements of operations and comprehensive income.

Basic and diluted net income (loss) per share

The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive. As of 30 April 2023, potential common shares are comprised of 17,326,000 outstanding options and 33,215,284 outstanding warrants.

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Comprehensive loss

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive income/loss and its components in the consolidated financial statements. As of 30 April 2023 and 31 July 2022, the Company reported foreign currency translation adjustments as other comprehensive income or loss and included a schedule of comprehensive income/loss in the consolidated financial statements.

Foreign currency translation

The Company’s functional currency is the Canadian dollar and its reporting currency is in U.S. dollars. The Company’s subsidiaries have a functional currency in U.S. dollars. The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. Exchange gains and losses on inter-company balances that form part of the net investment in foreign operations are included in other comprehensive income. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. The exchange rates used to translate Canadian dollar to U.S. dollar was 0.7374 for monetary assets and liabilities and 0.7440 as an average rate for transactions occurred during the period ended 30 April 2023. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of net loss.

Stock-based compensation

The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes Option Pricing Model. The fair value determined represents the cost for the award and is recognized over the required service period, generally defined as the vesting period. The Company’s accounting policy is to recognize forfeitures as they occur.

Fair value measurements

The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

· Level 1 – inputs are based upon unadjusted quoted prices for identical instruments in active markets.

· Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies.

· Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Our Level 3 assets and liabilities include investments in other private entities, and goodwill and intangible assets, when they are recorded at fair value due to an impairment charge. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

The Company measures equity investments without readily determinable fair values on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

The convertible loan receivable was valued using Level 3 inputs.

Other current financial assets and current financial liabilities have fair values that approximate their carrying values.

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Use of estimates and assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities, if any, at the date of the consolidated financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

Lease accounting

Under ASC 842, leases are separated into two classifications: operating leases and financial leases. Lease classification under ASC 842 is relatively similar to ASC 840. For a lease to be classified as a finance lease, it must meet one of the five finance lease criteria: (1) transference of title/ownership to the lessee, (2) purchase option, (3) lease term for major part of the remaining economic life of the asset, (4) present value represents substantially all of the fair value of the asset, and (5) asset specialization. Any lease that does not meet these criteria is classified as an operating lease. ASC 842 requires all leases to be recognized on the Company’s balance sheet. Specifically, for operating leases, the Company recognize a right-of-use asset and a corresponding lease liability upon lease commitment.

Non-controlling Interest

Non-controlling interests (“NCI”) represent equity interests owned by outside parties. NCI may be initially measured at fair value or at the NCI’s proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement is made on a transaction-by-transaction basis. The Company has elected to measure each NCI at its proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The share of net assets attributable to NCI are presented as a component of equity. NCI's share of net income or loss is recognized directly in equity. Total income or loss of subsidiaries is attributed to the shareholders of the Company and to the NCI, even if this results in the NCI having a deficit balance.

4. Financial Instruments

The following table represents the Company’s assets that are measured at fair value as of 30 April 2023 and 31 July 2022:

	As of 30 April 2023		As of 31 July 2022
Financial assets at fair value
Cash	$	2,665,516	$	1,854,277
Convertible loan receivable		1,609,088		1,250,000
Total financial assets at fair value	$	4,274,604	$	3,104,277

Management of financial risks

The financial risk arising from the Company’s operations include credit risk, liquidity risk, interest rate risk and currency risk. These risks arise from the normal course of operations and all transactions undertaken are to support the Company’s ability to continue as a going concern. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company reduces its exposure to credit risk by maintaining its cash with major financial institutions. Credit risk associated with the convertible loans receivable arises from the possibility that the principal and/or interest due may become uncollectible. The Company mitigates this risk by managing and monitoring the underlying business relationship.

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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 ensures, as far as reasonably possible, that it will have sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and the Company’s holdings of cash. The Company had working capital deficit of $3,543,805 at 30 April 2023 and the Company required additional financing to meet all current and future financial obligations which caused substantial doubt about its ability to continue as a going concern for a period of one year from the issuance of these financial statements. The Company anticipates that cash on hand and working capital will ensure coverage for all expenses associated with current operations for at least the next 12 months from the issuance of these financial statements. Management believes that the Company has access to capital resources through potential public or private issuances of debt or equity securities to further contribute to the growth.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as it does not hold financial instruments that will fluctuate in value due to changes in interest rates.

Currency risk

Currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is exposed to currency risk by incurring expenditures and holding assets denominated in currencies other than its functional currency.

5. Inventory

	30 April 2023		31 July 2022
Work in progress	$	670,783	$	610,030
Finished goods		623,466		1,961,244
Consumables		1,417,377		1,308,726
Total	$	2,711,626	$	3,880,000

6. Convertible loan receivable

Effective March 15, 2019, the Company, through its wholly owned subsidiaries, DEP Nevada and NMG, entered into a convertible loan agreement and a management agreement with Comprehensive Care Group LLC (“CCG”), an Arkansas limited liability company, with respect to the development of a medical cannabis dispensary facility in West Memphis, Arkansas. The convertible loan agreement can be extended by either party and the current agreement has a maturity date of 30 March 2024. Under no circumstances the maturity date of the convertible loan agreement shall extend beyond the expiration of the management agreement as described below.

Pursuant to the management agreement, NMG will provide operations and management services, including management, staffing, operations, administration, oversight, and other related services. Under the management agreement, NMG will be required to obtain approval from CCG for any key decisions as defined in the agreement and accordingly the Company does not control CCG. NMG will be paid a monthly management fee equal to 66.67% of the monthly net profits of CCG, subject to conversion of the convertible loan as discussed below upon which the monthly management fee shall be $6,000 per month, unless otherwise agreed by the parties in writing. The management agreement has an expiration of 15 March 2024 and can be mutually extendable.

The convertible loan agreement is for an amount up to $1,250,000 from DEP to CCG with proceeds to be used to fund construction of a facility, working capital and initial operating expenses. The loan bears interest at a fixed rate of $6,000 per month until the parties mutually agree to increase the interest. Upon the latter of one year of granting of a medical cannabis dispensary license by the appropriate authorities or one year after entering into the convertible loan agreement, DEP may elect to convert the loan into preferred units of CCG equal to 40% of all outstanding preferred units of CCG that carry 66.7% voting interest, subject to approval of the Arkansas Medical Marijuana Commission.

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The Company had advanced $1,250,000 (31 July 2022 - $1,250,000) at 30 April 2023, and accrued interest income of $18,000 (2022 - $18,000) and $54,000 (2022 - $54,000) for the three and nine months ended 30 April 2023, respectively. As of 30 April 2023, total interest receivable was $276,000 (31 July 2022 - $222,000).

The Company evaluated the convertible loan receivable’s settlement provisions and elected the fair value option in accordance with ASC 825 “Financial Instruments”, to value this instrument. Under such election, the loan receivable is measured initially and subsequently at fair value, with any changes in the fair value of the instrument being recorded in the consolidated financial statements as a change in fair value of the financial instruments. The Company estimates the fair value of this instrument by first estimating the fair value of the straight debt portion, excluding the embedded conversion option, using a discounted cash flow model. The Company then estimates the fair value of the embedded conversion option using the Black-Scholes Option Pricing Model.

The discounted cash flow model for the straight debt portion uses four different scenarios as follows: The Company discounts the principal amount of $1,250,000, monthly interest payment of $6,000 using these four different maturity dates: (1) March 30, 2024, (2) March 30, 2025, (3) March 30, 2026 and (4) March 30, 2027, whereby each scenario is given 25% probability of occurring since the actual conversion date is uncertain. The discount rate used is 23.02%.

The assumptions used in the Black-Scholes Option Pricing Model for the conversion option are as follows: (i) equity price of $35,252 per unit calculated as BAM’s portion of the future projected profits, on a per unit basis, discounted using Weighted Average Cost of Capital of 15%; (ii) exercise price of $31,250 per unit as there are 40 units in total, (iii) volatility of 86% using BAM as benchmark, (iv) expected life of 2.40 years and (v) risk-free rate of 4.01%.

The sum of these two valuation models resulted in an estimated fair value of the loan receivable balance of $1,609,088 as of 30 April 2023. The change in the fair value of the convertible loan receivable has been recorded as a gain on fair value adjustment of convertible loan during the period ended 30 April 2023.

7. Loan receivable

In addition to the convertible loan receivable (Note 6), the Company provides operating loans to CCG that are non-interest bearing, unsecured and due on demand. During the nine months ended 30 April 2023, the Company advanced $1,054,844 (2022 - $869,435) to CCG and received repayments totaling $1,824,025 (2022 - $625,000) for a net decrease in loan receivable of $769,181 (2022 – net increase of $244,435). At 30 April 2023, the amount receivable from CCG was $20,804 (31 July 2022 - $789,984).

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8. Property and Equipment

	Office Equipment		Cultivation Equipment		Production Equipment		Kitchen Equipment		Vehicles		Vault Equipment		Leasehold Improvements			Total
Cost:
Balance, 31 July 2022	$	638,987	$	466,110	$	581,335	$	63,102	$	38,717	$	10,335	$	6,510,191		$	8,308,777
Additions		33,853		-		-		-		-		-		967,701			1,001,554
Impairment		-		-		-		-		-		-		(540,209	)		(540,209	)
Balance, 30 April 2023		672,840		466,110		581,335		63,102		38,717		10,335		6,937,683			8,770,122
Accumulated Depreciation:
Balance, 31 July 2022		123,591		318,856		290,729		29,880		29,859		3,266		1,872,062			2,668,243
Depreciation		70,084		51,094		60,825		6,742		4,137		1,104		606,858			800,844
Impairment		-		-		-		-		-		-		(46,124	)		(46,124	)
Balance, 30 April 2023		193,675		369,950		351,554		36,622		33,996		4,370		2,432,796			3,422,963
Net Book Value:
At 31 July 2022		515,396		147,254		290,606		33,222		8,858		7,069		4,638,129			5,640,534
At 30 April 2023	$	479,165	$	96,160	$	229,781	$	26,480	$	4,721	$	5,965	$	4,504,887		$	5,347,159

For the nine months ended 30 April 2023, a total depreciation of $102,829 (2022 - $152,317) was included in General and Administrative Expenses and a total depreciation of $698,015 (2022 - $556,924) was included in Cost of Sales.

Based on the fact that the NMG MI 1 is planned to be disposed of at a nominal amount in accordance with the Stock Purchase Agreement (Note 17), the fair value of the asset group of NMG MI 1 was estimated to be $nil as at April 30, 2023. As a result, the Company impaired property and equipment of NMG MI 1 resulting in a loss of $944,015 during the period ended April 30, 2023.

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9. Acquisitions

Canopy Monterey Bay, LLC

On 30 November 2021, the Company entered into two definitive agreements with Canopy Monterey Bay, LLC (“Canopy”) and the membership interest owners (the “Sellers”) of Canopy to acquire an aggregate of 100% of Canopy, which owns a retail dispensary in the limited license jurisdiction of Seaside, California, to expand our retail operations.

The first purchase agreement (“PA #1”) between DEP and Canopy and all of the Sellers provides for the assignment of 80% of the membership interests of Canopy to DEP in exchange for a purchase price of $4,800,000 comprised of $2,500,000 in cash (the “Cash Purchase Price”) and a secured promissory note in the amount of $2,300,000 bearing interest at a rate of 10% per annum compounded annually and having a maturity date of five years from the effective date of PA #1. Interest is payable for the first 6 months with the principal and accrued interest due at maturity. There are no prepayment penalties. The Cash Purchase Price is to be paid into escrow pursuant to an escrow agreement between the parties to PA #1 and Secured Trust Escrow, which Cash Purchase Price is to be released to the Sellers upon the receipt of city and state approval and completion of the audited annual financial statements (the “Financial Statements”) of Canopy, or returned to DEP in the event of the denial of city or state approval or failure to complete the Financial Statements and the agreement is terminated, in which case the 80% membership interests will be transferred back to the Sellers and the promissory note will automatically be terminated. As of the date hereof, the city and state approvals have been received and the formal closing of the purchase of the 80% of the membership interests in Canopy closed in June 2022.

The second purchase agreement (“PA #2”) between DEP and the one continuing Seller provides for the assignment of the remaining 20% of the membership interests of Canopy to DEP following the receipt of the city and state approval and completion of the Financial Statements under PA #1 in exchange for $1,000,000 to be paid in either shares of common stock of the Company (the “Consideration Shares”) or in cash at DEP’s sole option if such payment takes place within six (6) months following the execution of PA #1. If DEP elects to pay the purchase price in Consideration Shares, the amount of Consideration Shares shall be determined based on the 10 day volume weighted average price (“VWAP”) ending on 30 November 2021, which is US$0.3665 per share for a total of 2,728,156 shares (issued) (Note 14). In the event that six (6) months following the execution of PA #1, the value of the Consideration Shares have decreased such that total value of the Consideration Shares is less than ninety percent (90%) of its value, DEP agrees to cause the Company to issue an additional $100,000 worth of shares of common stock of the Company (the “Additional Shares”) to be issued to the one continuing Seller based on the ten day VWAP calculated as of six (6) months following the closing of PA #1. This was included as contingent consideration in the purchase price and $100,000 was recorded in accounts payable at 31 July 2022. PA #2 contains a working capital adjustment provision, which provides that if there is a working capital deficiency as of the closing date of PA #1, then the purchase price under PA #2 shall be reduced by the amount of the deficiency, and if there is a working capital surplus as of the closing date of PA #1, then the purchase price under PA #2 shall be increased by the amount of the surplus.

On or around 1 December 2021, 80% of the membership interests of Canopy were transferred to DEP for purposes of applying for city and state approvals of the change in ownership of Canopy, however, the purchase price consideration of (i) $2.5 million in cash, and (ii) a promissory note in the amount of $2.3 million to be paid by DEP, were placed in escrow and not to be released to the sellers of the 80% membership interests in Canopy until the city and state approvals have been received and the Financial Statements of Canopy are completed. If the city or state approvals are not received, or the Financial Statements of Canopy are not completed, then the Buyer may terminate the membership interest purchase agreement requiring the membership interests in Canopy to be transferred back to the sellers and the escrow agent to deliver back to DEP the cash consideration and the promissory note shall automatically be terminated. As of the date hereof, the city and state approvals have been received and the formal closing of the purchase of the 80% membership interests in Canopy closed in June 2022.

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On 17 June 2022, the Company, through its wholly owned subsidiary, DEP Nevada, Inc., entered into the first amendment to PA #1 and PA #2 (the “First Amendment”) whereby the cash purchase price under PA #1 will be reduced from $2.5 million to $1.25 million and the Company will issue $1.25 million in shares of common stock of the Company to the Sellers based on the 10 day volume weighted average price (“VWAP”) for the ten (10) consecutive trading days prior to the effective date of the First Amendment (the “Effective Date”) and subject to compliance with the policies of the Canadian Securities Exchange (the “CSE”), which equates to 9,328,358 shares of common stock. The Company will also issue additional shares to Cary Stiebel equal to the difference between the amount of the shares of common stock of the Company that were issued by the Company to Mr. Stiebel on December 3, 2021 (the “PA #2 Shares”) and the amount of shares that Mr. Stiebel would have received had the VWAP for the PA #2 Shares been calculated as of the Effective Date (the “Additional PA #2 Shares”) which equates to 4,734,530 shares of common stock. Additionally, on the date that is eighteen (18) months (548 days) following the Effective Date of this First Amendment (the “Additional Share Issuance Date”) the Company will issue $100,000 worth of shares to the Sellers based on the ten (10) day VWAP and subject to compliance with the policies of the CSE, calculated as of the Additional Share Issuance Date. This $100,000 was recorded as consulting fees for the year ended 31 July 2022. Furthermore, DEP shall cause the Company to issue to Mr. Stiebel $300,000 worth of shares of common stock of the Company within three (3) days following the Effective Date of this First Amendment, and subject to compliance with the policies of the CSE (the “Additional True up Shares”) which equates to 2,238,806 shares of common stock. Prior to the conclusion of the calculation of the actual working capital in accordance with PA #1 and PA #2, Sellers shall complete, execute and deliver to DEP Schedule D to the First Amendment, which shall set forth the amount of Additional True-up Shares each Seller is entitled to (as applicable) and such Additional True-up Shares shall be retitled in accordance with Schedule D to the First Amendment. In the event Schedule D to the First Amendment is not completed, executed and delivered to DEP prior to the conclusion of the calculation of the actual working capital, DEP shall have no obligation to retitle the shares and all Sellers hereby waive any claims against DEP and the Company in connection with such issuance made in accordance with Section 2(b)(v) of the First Amendment. Upon conclusion of the calculation of the actual working capital in accordance with PA #1 and PA #2, the parties agree as follows:

(a) If the actual working capital is less than the target working capital of $nil, the Purchase Price (as defined in PA #2) shall be reduced by an amount equal to the difference between the target working capital and the actual working capital and all of the Additional True-up Shares shall be forfeited and retuned to Company for cancellation;

(b) If the actual working capital is greater than the target working capital of $nil and the Additional True-up Shares are sufficient to cover the difference between the actual working capital and the target working capital (the “DEP Deficit”), the parties agree that all or a portion of the Additional True-up Shares (valued at the ten (10) day VWAP calculated as of the Effective Date of the First Amendment and subject to compliance with the policies of the CSE) shall be issued to Sellers to satisfy the DEP Deficit owed by DEP to the Sellers in accordance with Section 2.02(b) of PA #2;

(c) If the actual working capital is greater than the target working capital and the Additional True-up Shares are insufficient to cover the DEP Deficit, all of the Additional True-up Shares shall be issued to Sellers and the parties agree that any additional amounts owed to the Sellers shall be paid by DEP to the Sellers via additional shares of common stock of the Company.

In addition to the terms of the First Amendment, the parties have agreed that the release of any Additional True-up Shares hereunder shall be subject to the Sellers providing written direction to DEP for the release of the Additional True-up Shares payable under the First Amendment.

On December 7, 2022, pursuant to the previously announced (i) membership interest purchase agreement (“MIPA #1”), dated November 30, 2021, as amended on June 17, 2022, entered into between the Company’s wholly-owned subsidiary, DEP Nevada, Inc. (“DEP”), Canopy Monterey Bay, LLC (“Canopy”) and the membership interest owners of Canopy, Carey Stiebel (the “Continuing Owner”), Jana Stiebel, Jayme Rivard, Adrian Dermicek and Laurie Johnson (collectively, the “Sellers”) to purchase eighty percent (80%) of the issued and outstanding membership interests of Canopy, and (ii) membership interest purchase agreement (“MIPA #2”), dated November 30, 2021, as amended on June 17, 2022, entered into between DEP and the Continuing Owner to purchase the remaining twenty percent (20%) of the issued and outstanding membership interests of Canopy, the Company through DEP completed the acquisition of all of the membership interests of Canopy from the Sellers and closed MIPA #1, as amended, and MIPA #2, as amended.

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Pursuant to the closing of MIPA #1, as amended, and MIPA #2, as amended, the Company issued an aggregate of 16,301,694 shares of common stock to the Sellers in accordance with their instructions at a deemed price of US$0.134 per share. 2,238,806 of the 16,301,694 shares are being held in escrow pending the results of a working capital adjustment in accordance with MIPA #1 and MIPA #2.

The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. For accounting purposes, the acquisition date is the date that the Company obtained full control over the operations, although not all conditions for closing the acquisition had occurred as of 1 December 2021. The following table summarizes the fair value of the assets acquired and the liabilities assumed, which were recorded as of the acquisition date, as well as the aggregate consideration for the acquisition of Canopy made by the Company:

Purchase consideration
Cash	$	1,250,000
Promissory note		2,300,000
Shares of common stock (Note 14)		2,189,544
Contingent consideration		100,000
Total consideration		5,839,544
Assets acquired:
Cash		378,503
Prepaid expenses		241,449
Inventory		630,039
Liabilities assumed:
Trade payable and accrued liabilities		(266,307	)
Income taxes payable		(1,229,213	)
Net assets acquired		(245,529	)
Brand and licenses		1,240,000
Goodwill		4,845,073
TOTAL	$	5,839,544

During the year ended 31 July 2022, the Company also recorded a loss on settlement of contingent consideration of $503,179 resulting from the fair value adjustment of the Company’s shares of common stock that have not been issued at 31 July 2022 and also recorded a consulting fee of $100,000 to be paid to the sellers in shares that was not included in the purchase consideration.

Pro Forma

The following table summarizes our consolidated results of operations for the nine months ended 30 April 2022 as though the acquisition of Canopy had occurred on 1 August 2021:

	Nine months ended 30 April 2022
	As Reported			Pro Forma (unaudited)
Revenue	$	23,494,016		$	26,026,951
Net loss		(5,861,905	)		(5,928,245	)

The unaudited pro forma information set forth above is for informational purposes only and include all adjustments necessary for the fair presentation, in all material respects, of the Company’s combined operations including Canopy as if the business combinations occurred on 1 August 2021. No adjustments have been made to reflect potential cost savings that may occur subsequent to completion of the transactions. The unaudited pro forma financial information is not intended to reflect the results of operations of the Company which would have actually resulted had the proposed transaction been effected on the date indicated above. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The actual pro forma adjustments will depend on a number of factors, and could result in a change to the unaudited pro forma financial information.

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CraftedPlants NJ Corp (“Merger”)

On December 21, 2022, the Company, its wholly owned subsidiary, DEP Nevada, Inc. (“DEP”), BaM Body and Mind Dispensary NJ Inc., a New Jersey corporation and wholly owned subsidiary of DEP (the “Merger Sub”), CraftedPlants NJ Corp., a New Jersey corporation (the “Surviving Entity”) and those certain shareholders of the Surviving Entity (the “Sellers”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby the Merger Sub merged with and into the Surviving Entity, and following the consummation of the merger, which occurred on December 21, 2022, the Surviving Entity became a wholly owned subsidiary of DEP and changed its name to BaM Body and Mind Dispensary NJ, Inc. (the “Merged Entity”).

CraftedPlants NJ Corp. had a lease in Lawrenceville, New Jersey that was already zoned for cannabis retail store. There is no operational history for CraftedPlants NJ Corp. and is essentially comprised of one operating lease asset. The lease agreement does not include any provision that would revoke the approval for a cannabis retail store in a change of ownership of CraftedPlants NJ. Management is not aware of any laws and regulations that would revoke the zoning approval upon change of ownership. The purpose of the merger is expansion into the New Jersey adult use market through merging with an entity with a lease in New Jersey with local preapproval for an adult us cannabis location. The compensation for merger is contingent on success milestones including granting of pending license approval from the State of New Jersey Cannabis Regulatory Commission and opening of the business as a recreational cannabis dispensary.

The Company also entered into a three-year strategic advisory services agreement with Bengal Impact Partners, LLC (“Bengal Capital”) dated 5 January 2023 (“Bengal Advisory Agreement”). The Company shall pay Bengal Capital $240,000 on each anniversary, of which $60,000 is to be paid in cash and $180,000 is to be paid in cash, common stock, or warrants to purchase shares of the Company’s common stock, in such proportions as are determined by the Company. In addition, if the Company successfully obtains a cultivation license in New Jersey during the term of the Bengal Advisory Agreement, the Company will owe a fee of $1,000,000, which will be payable in the form of the Company’s common stock or a warrant to purchase shares of the Company’s common stock, in either case as requested by Bengal Capital.

Bengal Catalyst Funds and CraftedPlants NJ Corp were both owned or managed by the principals of the Bengal Capital Group and Bengal Catalyst Fund also participated in the 19 December 2022 convertible debenture financings (Note 12). Joshua Rosen is a managing principal of the Bengal Capital Group and he was involved in both transactions of the convertible note investment and the merger acquisition of Crafted Plants NJ Corp. Joshua Rosen was appointed as a director of the Company effective 1 February 2023.

Pursuant to the terms of the Merger Agreement, on the closing DEP delivered a cash payment of $50,000 to the Sellers, with a delayed payment of approximately $120,000 to be paid to the Sellers upon funding of the project buildout which is anticipated to occur after receipt of the New Jersey state license and local construction approvals.

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Further, pursuant to the terms of the Merger Agreement, on December 21, 2022, the Company issued to the Sellers an aggregate of 16,666,667 shares of its common stock (the “Merger Consideration Shares”). The Merger Consideration Shares will be held in escrow and will not be released to the Sellers until the Surviving Entity achieves certain milestones, however, the Sellers will still maintain the voting and participation rights with respect to the Merger Consideration Shares while being held in escrow. The post-closing milestones are as follows:

1.	If, within two (2) years of the closing date, the Surviving Entity’s application is approved and is granted pending license approval from the New Jersey Cannabis Regulatory Commission (the “CRC”), 70% of the Merger Consideration Shares will be release from escrow.
2.	If, within three (3) years of the closing date, the Surviving Entity opens for business as a recreational cannabis dispensary, 30% of the Merger Consideration Shares will be released from escrow.

If either or both of the milestones are not achieved within the time periods after the closing date (the “Milestone Dates”), the Company shall have the option to cancel the Merger Consideration Shares attributable to the failed milestone by delivering written notice to Sellers and in the event of such cancellation, the portion of the Merger Consideration Shares attributable to the failed milestone shall be surrendered and cancelled without any further action required by the parties. Notwithstanding the foregoing, if either or both of the milestones are not achieved (or if it becomes obvious that they will not be achieved) by their respective Milestone Dates because of delays that are not caused by the Sellers, the Sellers may, before the applicable Milestone Dates, provide notice to the Company, and the applicable Milestone Date will be extended to such date as is reasonably necessary for the milestone to be achieved. The parties will work together in mutual good faith to determine the dates by when the milestones can be reasonably achieved. If the Company fails to diligently pursue issuance of the state recreational licenses at any time prior to the second anniversary, and the Company fails to cure such failures in accordance with the Merger Agreement, the Company will owe to Sellers a termination fee equal to 25% of the Merger Consideration Shares.

The likelihood of achieving both milestones is uncertain at this time and, as such, the Company recorded the Merger Consideration Shares at par value.

The acquisition was accounted for as an asset acquisition since the Surviving Entity did not meet the definition of a business in accordance with ASC 805, as it had no outputs and did not have a substantive process that could significantly contribute to the ability to create outputs. In accordance with ASC 805-50 and measurement of share-based payment in ASC 718, the acquisition should be measured on the date on which the acquirer obtains control of the acquiree. The date on which the acquirer obtains control of the acquiree generally is the date on which the acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree.

The Company obtained 100% ownership and control over the Merged Entity and the lease asset on 21 December 2022. The purchase price, as measured on 21 December 2022, was $175,000 which was included in the lease liability and right-of-use assets calculation for the lease acquired in the State of New Jersey (see Note 13).

NMG IL 4, LLC

In 2019, the Company’s wholly owned subsidiary, DEP Nevada, Inc. (“DEP”), executed definitive agreements with NMG Illinois, LLC (“Management Company”), IL Resident, LLC (“IL Resident”), an entity which is controlled by our social equity partner, and other NMG entities in Illinois, NMG IL 1, LLC (“NMG IL 1”) and NMG IL 4, LLC (“NMG IL 4”), in connection with a proposed business combination (the “Transaction”). NMG IL 1 and NMG IL 4 were originally owned by Tall Bird, LLC (“Tall Bird”), a company owned by our social equity partner to meet local licensing application requirements and to compensate our social equity partner for role in obtaining the licenses, and Big Stone, LLC (“Big Stone”), a company controlled by the Company’s Chief Operating Officer.

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The Transaction with NMG IL 4 expands our retail operation in the limited license jurisdiction and ownership has been transferred to DEP, which is pending state regulatory approval, however, the Company through DEP controls NMG IL 4 and is consolidating the financial information from NMG IL 4 from the opening day of the dispensary on April 25, 2023, which commensurate with the date the Company obtained control over the NMG IL 4 operations, as described in more detail below.

a)	DEP entered into a Convertible Credit Facility Agreement (“the Convertible Note”) with NMG IL 4 on December 26, 2019 to build-out the facility for up to $1,500,000 in lieu of converting into 99,900 membership units of NMG IL 4;
b)	DEP also entered into a Membership Interest Purchase Agreement (“the MIPA”) on December 26, 2019 with both Tall Bird and Big Stone to purchase the remaining 100 units for $10 per unit;
c)	Upon receipt of the Illinois license, NMG IL 4 entered into a management agreement with Management Company and would be paid a management fee equal to 30% of net profits;
d)	On April 25, 2023, DEP converted the Convertible Note for 99,900 units and purchased 100 units for $1,000 pursuant to the MIPA, after the opening of the Markham dispensary on or about April 25, 2023;
e)	On April 25, 2023, DEP converted the Convertible Note for 99,900 units and purchased 100 units for $1,000, after the opening of the Markham dispensary on or about April 25;
f)	Upon the conversion, DEP obtained 100% ownership (or 100,000 units) of NMG IL 4, subject to regulatory approval (pending);
g)	The Management Agreement has been dissolved concurrently with the conversion, in the meanwhile, the Company took control of operations of NMG IL 4.

The acquisition of NMG IL 4 was accounted for as an asset acquisition with a related party since NMG IL 4 did not meet the definition of a business in accordance with ASC 805-10-20, which defines a business as an integrated set of inputs and processes that are capable of providing a return, primarily due to the fact that additional processes were needed on the acquisition date in the form of a trained work force in order to produce outputs.

The purchase price, as measured on 25 April 2023, was $995,035. The following table summarizes the assets acquired and the liabilities assumed, which were recorded as of the acquisition date, as well as the aggregate consideration for the acquisition of NMG IL 4 made by the Company:

Purchase consideration
Cash	$	1,000
Conversion of Convertible Note		994,035
Total consideration		995,035
Assets acquired:
Cash		100,707
Prepaid and deposits		70,230
Inventory		194,075
Property and equipment		918,492
Liabilities assumed:
Trade payable and accrued liabilities		(288,469	)
Net assets acquired	$	995,035

As the acquisition of NMG IL 4 was from a related party (as described above, given the significant influence of entities controlled by the Company’s COO), the Company did not recognize any fair value increase in assets acquired or liabilities assumed, nor recognized any intangible assets. To pay for the acquisition, the Company converted a portion of the amounts advanced to NMG IL 4 during the period for build-out pursuant to the terms of the convertible credit facility. The excess of the amount advanced under the convertible credit facility during the period over the book value of the net assets acquired was included in Business Development expenses during the current period.

10. Intangible Assets, Net

					As of 30 April 2023
	Gross carrying amount		Weighted average life (years)		Accumulated amortization			Net carrying amount
Amortizable intangible assets:
Brand	$	425,000		-	$	-		$	425,000
Licenses		13,813,508		10.0		(3,392,638	)		10,420,870
Customer relationships		90,000		5.0		(47,711	)		42,289
Total intangible assets	$	14,328,508			$	(3,440,349	)	$	10,888,159

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					As of 31 July 2022
	Gross carrying amount		Weighted average life (years)		Accumulated amortization			Net carrying amount
Amortizable intangible assets:
Brand	$	425,000		-	$	-		$	425,000
Licenses		13,813,508		10.0		(2,432,938	)		11,380,570
Customer relationships		90,000		5.0		(34,255	)		55,745
Total intangible assets	$	14,328,508			$	(2,467,193	)	$	11,861,315

Amortization expense for intangible assets was $973,156 and $1,061,201 for the nine months ended 30 April 2023 and 2022, respectively.

During the year ended 31 July 2022, the Company recorded an impairment loss of $42,000 and $7,925,000 related to NMG’s brand and licenses, respectively.

The expected amortization of the intangible assets, as of 30 April 2023, for each of the next five years and thereafter is as follows:

2023 (remaining)	$	327,950
2024		1,304,671
2025		1,301,106
2026		1,284,841
2027		1,283,116
Thereafter		4,961,475
	$	10,463,159

11. Related Party Balances and Transactions

In addition to those disclosed elsewhere in these consolidated financial statements, related party transactions paid/accrued for the three and the nine months ended 30 April 2023 and 2022 are as follows:

	For the three months ended 30 April 2023		For the three months ended 30 April 2022		For the nine months ended 30 April 2023		For the nine months ended 30 April 2022
A company controlled by the President, Chief Executive Officer and a director Management fees	$	52,727	$	55,429	$	159,948	$	228,425
A company controlled by the Chief Financial Officer and a director Management fees		30,667		23,895		93,030		102,473
A company controlled by the Corporate Secretary Management fees		16,801		18,754		51,174		56,217
	$	100,195	$	98,078	$	304,152	$	387,115

On 25 April 2023, the Company granted an aggregate of 3,050,000 stock options (the “Options”) in accordance with the Company’s stock option plan at an exercise price of CAD$0.065 per share for a term of five years expiring on 25 April 2028 (Note 14). The Options are subject to vesting provisions such that 25% of the Options vest six (6) months from the date of grant, 25% of the Options vest twelve (12) months from the date of grant, 25% of the Options vest eighteen (18) months from the date of grant and 25% of the Options vest twenty-four (24) months from the date of grant.

On 25 April 2023, the Company granted an aggregate of 5,323,000 stock options (the “Options”) in accordance with the Company’s stock option plan at an exercise price of CAD$0.065 per share for a term of five years expiring on 25 April 2028 (Note 14). The Options vest immediately.

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Amounts owing to related parties at 30 April 2023 and 31 July 2022 are as follows:

a)	As of 30 April 2023, the Company owed $66,971 (31 July 2022 - $102,480) to the Chief Executive Officer of the Company and a company controlled by him.
b)	As of 30 April 2023, the Company owed $31,704 (31 July 2022 - $31,704) to the Chief Operating Officer.
c)	As of 30 April 2023, the Company owed $32,023 (31 July 2022 - $10,780) to the Chief Financial Officer of the Company and a company controlled by him.
d)	As of 30 April 2023, the Company owed $17,641 (31 July 2022 - $18,898) to the Corporate Secretary of the Company and a company controlled by him.
e)	See also Note 9 for merger agreement and Note 12 for convertible debentures financing with entities controlled by a new Company Director.
f)	See also Note 9 for the acquisition of NMG IL 4.

The above amounts owing to related parties are unsecured, non-interest bearing and are due on demand.

12. Loans Payable and Convertible Debenture

As of 30 April 2023 and 31 July 2022, the following loans payable are outstanding:

	30 April 2023			31 July 2022
FocusGrowth loan	$	6,666,667		$	6,666,667
Long Beach loan		16,564			12,535
Canopy loan
Secured promissory note		2,300,000			2,300,000
Unsecured loan balance		12,092			-
Total principal amount	$	8,995,323		$	8,979,202
Debt discount		(1,200,607	)		(1,573,031	)
Outstanding balance, net	$	7,794,716		$	7,406,171
Current portion		(28,656	)		(12,535	)
Long-term portion	$	7,766,060		$	7,393,636

FocusGrowth loan

On 19 July 2021, the Company entered into and closed a loan agreement (the “Loan Agreement”) with FG Agency Lending LLC (the “Agent”) and Bomind Holdings LLC (the “Lender”). Upon entering into the Loan Agreement, the Lender provided the initial term loan (the “Initial Term Loan”) in the face amount of $6,666,667 of which $6,000,000 was advanced to the Company with the 10% representing an origination discount as consideration for the use or forbearance of money. The Company may draw upon the remaining face amount of $4,444,444 (the “Delayed Draw Term Loan”) upon providing a 30-day request to the Agent by 1 December 2021, whereby $4,000,000 will be advanced to the Company after applying the 10% origination discount. The Initial Term Loan and the Delayed Draw Term Loan mature on 19 July 2025 and bear interest at a rate of 13% per annum payable on the first day of each month hereafter.

Pursuant to the Loan Agreement, the Company issued an aggregate of 8,000,000 common stock purchase warrants (each, a “Warrant”) to the Agent of which (i) 4,800,000 Warrants will entitle the holder to acquire shares of common stock (each, a “Warrant Share”) at an exercise price of $0.40 per Warrant Share until July 19, 2025, and (ii) 3,200,000 Warrants was held in escrow to be released to the Agent at the time the Company draws on the Delayed Draw Term Loan, or cancelled if we do not draw on the Delayed Draw Term Loan, which will entitle the holder to acquire a Warrant Share at an exercise price of $0.45 per Warrant Share until July 19, 2025. The Company did not draw on the Delayed Draw Term Loan, and the warrants were cancelled.

The Company also paid agent fees, legal fees and other fees in the amount of $175,758. The 4,800,000 Warrants had a relative fair value of $1,037,146 and when combined with the $175,758 in fees and the $666,667 origination discount, resulted in a debt discount of $1,883,901.

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The Initial Term Loan is secured by certain of the Company’s assets, equity interest in subsidiaries and various agreements, under the Security Agreement, the Pledge Agreement and the Omnibus Collateral Assignment.

On 15 June 2022, the Company entered into a second amendment to the Loan Agreement (“Amendment No. 2 to Loan Agreement”) to extend the maturity date by one year to 19 July 2026. Additionally, Amendment No. 2 to Loan Agreement allows the outside date for the Company to draw on the delayed draw term loan of US$4.44 million to be extended from June 1, 2022 to March 31, 2023, whereby US$4 million in funds will be advanced to the Company. The ability of the Company to draw on the delayed draw term loan was subject to compliance with certain provisions in Loan Agreement including provision of a satisfactory budget approved at the sole discretion of the Lender. The Company did not draw or extend the Delayed Draw Term Loan and has expired. The Amendment No. 2 to Loan Agreement increases the interest rate on the advanced funds from 13% to 15% per annum, which additional 2% interest may be paid in kind, with the interest being payable on the first day of each month. Amendment No. 2 to Loan Agreement provides for an exit fee equal to 1.5% of the principal balance, which is due and payable upon any payment, in part or in full, of the initial term loan and the delayed draw term loan. As partial consideration for Amendment No. 2 to Loan Agreement, the Company has issued 1,000,000 common stock purchase warrants (each, a “Warrant”) to the Lender. Each Warrant entitles the holder to acquire one share of common stock (each, a “Warrant Share”) at an exercise price of US$0.16 per Warrant Share until June 14, 2027.

The Amendment No. 2 to Loan Agreement was accounted for as a modification consistent with ASC 470-50, Debt Modification, where the lender fees, including 1,000,000 additional common stock purchase warrants valued at $79,585 and the exit fee of $100,000, are capitalized as additional debt discount and amortized as par to the effective yield.

On December 12, 2022, the Company, the Guarantors (collectively, the “Loan Parties”) the Agent and the Lender entered into a Limited Waiver and Amendment to Loan Agreement (the “Limited Waiver and Amendment to Loan Agreement”) to deal with certain events of default that occurred under the Loan Agreement, as amended, with respect to (i) the Company’s failure to deliver to Agent the audited annual financial statements of the Company and its subsidiaries for the fiscal year ended July 31, 2022, on or before ninety (90) days after the end of such fiscal year in accordance with Section 7.2(c) of the Loan Agreement (the “First Specified Default”) and (ii) the Agent being informed that the Company anticipates that it will fail to deliver the quarterly financial statements of the Company and its subsidiaries for the fiscal quarter ending October 31, 2022, in form and substance acceptable to Agent, on or before forty-five (45) days after the end of such fiscal quarter, in accordance with Section 7.2(b) (the “Second Specified Default”, and together with the First Specified Default, the “Specified Defaults”).

Pursuant to the Limited Waiver and Amendment to Loan Agreement, the Agent and the Lender each waive the Specified Defaults on a limited one-time basis subject to the terms and conditions thereof until (i) with respect to the First Specified Default, 5:00 PM EST on December 30, 2022, and (ii) with respect to the Second Specified Default, 5:00 PM EST on January 13, 2023 (the “Waiver Period”); provided that if the Loan Parties do not deliver each of the Amended Deliverables (as defined below) on or before expiration of their respective Waiver Period; the waiver shall no longer be of any effect, and the Lender shall be entitled to enforce all remedies set forth in the Loan Agreement as of the date each Specified Default first occurred.

Subsequent to entering into the Limited Waiver and Amendment to Loan Agreement, the parties verbally agreed and confirmed via email on December 20, 2022, that Waiver Period for the First Specified Default shall be extended from December 30, 2022 to January 17, 2023, and the Waiver Period for the Second Specified Default shall be extended from January 13, 2023 to January 27, 2023; and that the corresponding amendments shall be made to sections 7.2(b) and 7.2(c) of the Loan Agreement as set forth above.

During the nine months ended 30 April 2023, the Company recorded $372,424 related to the amortization of debt discount and $763,159 related to the interest expense.

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Long Beach loan

The loan payable at 30 April 2023 in the amount of $16,564 (31 July 2022 - $12,535) assumed from NMG LB is unsecured, non-interest bearing and has no set terms of repayment.

Canopy loan

On 30 November 2021, the Company completed PA #1 related to the Company’s acquisition of initial 80% interest in Canopy (Note 9). In connection with PA #1, DEP entered into secured promissory note (the “Promissory Note”) promising to pay $2,300,000 to the Sellers bearing interest at a rate of 10% per annum compounded annually and having a maturity date of 30 November 2026. The Promissory Note was delivered as partial consideration for DEP’s agreement to purchase 80% of the issued and outstanding membership interests (the “Purchased Interests) of Canopy from the Sellers.

The loan payable at 30 April 2023 in the amount of $12,092 (31 July 2022 - $nil) assumed from Canopy is unsecured, non-interest bearing and has no set terms of repayment.

Convertible Debenture Financing

As of 30 April 2023 and 31 July 2022, the following convertible debentures are outstanding:

	30 April 2023			31 July 2022
BAM I, A Series of Bengal Catalyst Fund SPV, LP (related party – Note 9)	$	2,750,000		$	-
Mindset Value Fund LP		150,000			-
Mindset Value Wellness Fund LP		100,000			-
Total principal amount	$	3,000,000		$	-
Debt discount		(549,329	)		-
Outstanding balance, net	$	2,450,671		$	-

On December 19, 2022, the Company entered into Securities Purchase Agreements (“SPAs”) with each of BAM I, A Series of Bengal Catalyst Fund SPV, LP, a Delaware limited partnership, Mindset Value Fund LP, a Delaware limited partnership, and Mindset Value Wellness Fund LP, a Delaware limited partnership (collectively, the “Investors”) pursuant to which the Company issued to the Investors unsecured five-year convertible debentures in the aggregate principal amount of US$3,000,000 (the “Debentures”) bearing interest at 8% per annum, compounded annually, and common stock purchase warrants (the “Warrants”) to acquire 15,000,000 shares of common stock of the Company (each, a “Warrant Share”). The proceeds from the sale of the Debentures and the Warrants will be used for business development purposes.

In addition, pursuant to the SPAs, following the closing and until the later of (a) the repayment or conversion of the Debentures, and (b) Bengal Impact Partners, LLC (“Bengal Capital”) (or any of its affiliates) ceasing to own at least 10% of the issued and outstanding shares of common stock on an as-converted basis in the aggregate, Bengal Capital shall be entitled to nominate one (1) director to the Company’s Board and one (1) Board observer, provided that the nominee director must meet the requirements of applicable corporate, securities and other applicable laws, and the policies of the Canadian Securities Exchange. Joshua Rosen was appointed to the Board of Directors on 1 February 2023. Bengal Capital and CraftedPlants NJ Corp. were both owned and managed by the principals of the Bengal Capital. As Joshua Rosen is a managing principal of the Bengal Capital Group, he was involved in both transactions of the convertible note investment and the merger acquisition of Crafted Plants NJ.

The Debentures have a maturity date of December 19, 2027 (the “Maturity Date”) and the accrued interest shall be payable on the Maturity Date. The Investors have the right at any time prior to the Maturity Date, to convert all or any portion of the principal amount and/or any interest amount, into shares of common stock of the Company at US$0.10 per share, subject to customary adjustments, and subject to a beneficial ownership limitation by each Investor and their respective affiliates of 9.99% of the outstanding shares of common stock of the Company, provided, however, that the beneficial ownership limitation on conversion may be waived by the Investor upon providing not less than 61 days’ prior notice to the Company.

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The Warrants will entitle the holders to acquire Warrant Shares until December 19, 2026, at an exercise price of US$0.10 per Warrant Share, subject to customary adjustments. The Warrants can be exercised on a cash basis or on a cashless (net exercise) basis. The Warrants contain the same beneficial ownership limitation as the Debentures.

During the nine months ended 30 April 2023, the Company recorded the interest expense of $129,625 related to the Debentures. The loan balance as at 30 April 2023 was $3,000,000, net of remaining debt discount of $549,329 (31 July 2022 - $nil).

13. Operating Leases

a)	On 10 November 2017, Nevada Medical Group, LLC entered a ten-year lease agreement with Resort Holdings 5, LLC, a Nevada limited liability company, for the property located at 3375 Pepper Lane, Las Vegas, NV, containing approximately 18,000 square feet. We have four options to extend the lease agreement and each option is for five years. In July 2018, Resort Holdings 5, LLC, the landlord, sold the property to a third party and assigned the lease to Minor Street Properties, LLC. All lease terms remained the same. On 9 May 2022, we amended the lease agreement which exercised our first option to extend the lease for an additional five years with rent during the option term subject to a 3% increase on each anniversary date of the lease. The monthly rent was $13,663 + common area expenses and increased to $13,936 + common area expenses on 1 December 2022. Currently, the guaranteed minimum monthly rent is subject to a 2% increase on each anniversary date of the lease.
b)	On 7 May 2019, Nevada Medical Group, LLC entered into a five-year lease agreement with Haigaz and Nora Atamian, commercial property owners, for the property located at 6420 Sunset Corporate Drive, Las Vegas, NV, containing approximately 7,700 square feet. We have two options to extend the lease for an additional three-year term and an option to purchase the property at any point during the initial term. The monthly rent was $6,478 + common area expenses, increased to $6,780 + common area expenses on 1 May 2022 and increased to $7,081 + common area expenses on 1 May 2023. The guaranteed minimum monthly rent is subject to a $0.03 per square foot, per month, increase on each anniversary date of the lease for years one through three of the term and $0.04 per square foot, per month, increase on each anniversary date of the lease for years four through five of the term.
c)	On 1 December 2018, SGSD, LLC entered into a five-year lease agreement with Green Road, LLC, a California limited liability company, for the property located at 7625 Carroll Road, San Diego, California, containing approximately 4,600 square feet. On June 13, 2019, SGSD, LLC assigned the lease to NMG San Diego, LLC. Under the terms of the assignment and first amendment to the original lease agreement dated 13 June 2019, we have three options to extend the lease and each option is for five years. The monthly base rent was $15,913 + common area expenses, increased to $16,390 + common area expenses on 1 January 2021 and increased to $16,883 on 1 January 2022. The guaranteed monthly rent is subject to a 6% increase on each anniversary date of the lease, based on increases in the Consumer Price Index for San Diego County. The lease contains a sale bonus provision of $1,000,000 or 10% of the purchase price of the entire business, whichever is greater, in the event of sale or assignment of the lease.
d)	On 2 August 2018, NMG Ohio, LLC entered into a three-year lease agreement with MMCA Development, LLC, an Ohio limited liability company, for the property located at 709 Sugar Lane, Elyria, Ohio 44035, containing approximately 4,100 square feet. The Company has three options to extend the lease and each option is for three years. On 14 August 2020, NMG Ohio, LLC assigned the lease agreement to NMG OH 1, LLC. On 11 May 2021, we exercised our option to extend the lease agreement for an additional three years. The rent was $4,000 per month and increased to $4,200 per month on 1 July 2021. The minimum monthly rent is subject to a 5% increase for each option period.

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e)	On 10 January 2017, SJK Services, LLC entered into a five-year lease agreement with Meng Lin Zhang, a commercial property owner, for the property located at 3411 E. Anaheim St., Long Beach, California, containing approximately 1,856 square feet. On 7 September 2018, SJK Services, LLC amended its lease agreement with Meng Lin Zhang. On 14 December 2018, SJK Services, LLC assigned the amended lease agreement to The Airport Collective, Inc., a California corporation. On 8 March 2019, The Airport Collective, Inc. assigned the amended lease agreement to NMG Long Beach, LLC. On 14 June 2021, we exercised our option to extend the lease agreement for one additional term of five years. On 1 March 2022, we amended the lease agreement to include two additional options to extend the lease agreement for five years each and expanded the lease agreement to include 3413 E. Anaheim St., Long Beach, California, containing approximately 816 square feet. The guaranteed minimum monthly base rent was $7,316 + common area expenses for unit 3411, increased to $7,682 + common area expenses in January 2022, increased to $8,067 + common area expenses in January 2023, and is subject to a 5% increase on each anniversary date of the lease. The guaranteed monthly base rent for unit 3413 was $1,632 + common area expenses, increased to $1,681 + common area expenses on 1 April 2023 and is subject to a 3% increase on each anniversary date of the lease agreement.
f)	On 1 October 2019, NMG Ohio, LLC entered into a three-year lease agreement with MMCA Development, LLC, an Ohio limited liability company, for the property located at 719 Sugar Lane, Elyria, Ohio 44035, containing approximately 4,000 square feet. We have three options to extend the lease agreement for an additional three-year term. The guaranteed minimum monthly rent is subject to 5% increase for each option period. On 1 September 2021, the lease agreement was assigned to NMG OH P1, LLC with the same terms. On 18 October 2022, NMG OH P1, LLC extended the lease agreement with MMCA Development, LLC for one additional term of three years. The base rent is $4,200 plus common area expenses.
g)	On 23 April 2021, NMG MI 1, Inc. entered into a five-year lease agreement with Kendal Properties, LLC, a Michigan limited liability company, for the property located at 885 E. Apple Ave., Muskegon, Michigan 49442, containing approximately 2,500 square feet. The base rent was $5,000 during the operational period, which began after the rent abatement and reduced rent periods, increased to $5,100 on 1 May 2022 and increased to $5,202 on 1 May 2023. The lease agreement includes 2% annual base rent increases and three options to extend for five-years each.
	Upon NMG MI 1 receiving one or more licenses, NMG MI 1 agrees to cause the Company to issue common shares having a value of up to $150,000 to Kendal, with portions of the common shares to be issued upon the achievement of certain milestones as follows:

i.	25% of the common shares to be issued within 30 days following NMG MI 1’s receipt of a local commercial medical marihuana retail license from the city of Muskegon, MI and a state commercial medical marihuana retail license from the state of Michigan;
ii.	25% of the common shares to be issued within 30 days following NMG MI 1 passing final inspections at the Leased premises regarding the commercial medical marihuana retail license and receiving its local operating permit allowing NMG MI 1 to begin medical marihuana operations at the premises;
iii.	25% of the common shares to be issued within 30 days following NMG MI 1’s receipt of a local commercial adult-use marihuana retail license from the city of Muskegon, MI and a state commercial adult-use marihuana retail license from the state of Michigan;
iv.	25% of the common shares to be issued within 30 days following NMG MI 1 passing final inspections at the Leased premises regarding the commercial adult-use marihuana retail license and receiving its local operating permit allowing NMG MI 1 to begin adult-use marihuana operations at the premises;

During the year ended 31 July 2022, the Company accrued $151,480 as all milestones were met and later issued the necessary common shares to settle $75,000 of this liability (Note 14).

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	On 3 March 2022, the Company’s subsidiary, NMG MI 1, Inc. entered into an Amendment No. 1 to Lease Agreement with Kendal Properties, LLC with respect to the premises located at 885 E. Apple Ave., Muskegon, Michigan, whereby the parties amended the original Lease Agreement to provide that two of the milestone payments that were to be made in the form of the Company’s shares are to now be made in the form of cash. At 31 July 2022, the accrued liabilities for the above milestones are fully settled. Based on the fact that the NMG MI 1 is planned to be disposed of at a nominal amount in accordance with the Stock Purchase Agreement (Note 17), the fair value of the asset group of NMG MI 1 was estimated to be $nil as at April 30, 2023. As a result, the Company impaired the right-of-use asset related to NMG MI 1 during the period ended April 30, 2023. The lease liability at 30 April 2023 related to NMG MI 1 was $339,204.
h)	On 10 February 2021, NMG MI C1, Inc. entered into a five-year lease agreement with 254 River Street, LLC, a Michigan limited liability company, for the property located at 254 River St., Manistee, Michigan 49660, containing approximately 30,000 square feet. The base rent is $22,500 during the operational period, beginning after the rent abatement and reduced rent periods. The lease agreement includes 2% annual base rent increases and three options to extend for five-years each. The license(s) would allow NMG MI C1 to operate a cultivation facility for adult-use and/or medical marihuana and all activities permissible under the Michigan and Manistee Marihuana Laws.
	Upon NMG MI C1 receiving one or more Licenses, NMG MI C1 agrees to cause the Company to issue common shares having a value of up to $600,000 to River Street, with portions of the Common Shares to be issued upon the achievement of certain milestones as follows:

i.	US$200,000 of common shares to be issued within 30 days of NMG MI C1 receiving local and state commercial marihuana cultivation licenses;
ii.	US$200,000 of common shares to be issued within 30 days of passing final inspections at the premises with respect to cultivation and receiving local operating permit to begin commercial marihuana cultivation operations at the premises;
iii.	US$100,000 of common shares to be issued within 30 days of NMG MI C1 receiving local and state commercial marihuana retail licenses; and
iv.	US$100,000 of common shares to be issued within 30 days of passing final inspections at the premises with respect to retail operations and receiving local operating permit to begin commercial marihuana retail operations at the premises.

	On 21 September 2021, the Company issued the necessary common shares to settle milestone (i) above (Note 14). During the year ended 31 July 2022, the Company accrued an additional $231,374 and were included in the related operating lease liability for milestone (ii) above. Milestones (iii) and (iv) have not yet been achieved as of 30 April 2023. At 31 July 2022, in order to better utilize its resources, it was deemed unlikely that the Company will continue to pursue the opportunity for a cultivation facility in Michigan. As a result, the Company impaired the right-of-use asset related to this lease during the year ended 31 July 2022. The lease liability at 30 April 2023 related to NMG MI C1 was $1,460,994.
i)	On 10 February 2021, NMG MI P1, Inc. entered into a five-year lease agreement with 254 River Street, LLC, a Michigan limited liability company, for the property located at 254 River St., Manistee, Michigan 49660, containing approximately 30,000 square feet. The base rent is $7,500 during the operational period, beginning after the rent abatement and reduced rent periods. The lease agreement includes 2% annual base rent increases and three options to extend for five-years each. The license(s) would allow NMG MI P1 to operate a production facility for adult-use and/or medical marihuana and all activities permissible under the Michigan and Manistee Marihuana Laws.
	Upon NMG MI P1 receiving one or more Licenses, NMG MI P1 agrees to cause the Company to issue common shares having a value of up to $400,000 to River Street, with portions of the Common Shares to be issued upon the achievement of certain milestones as follows:

i.	US$200,000 of common shares to be issued within 30 days of NMG MI P1 receiving local and state commercial marihuana processing licenses; and
ii.	US$200,000 of common shares to be issued within 30 days of passing final inspections at the premises with respect to processing and receiving local operating permit to begin commercial marihuana processing operations at the premises.

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	During the year ended 31 July 2022, a total deposit $470,546 for prior year shares were reclassified and incorporated into the right-of-use asset and lease liabilities related to the Company’s leases for the River Street. On 21 September 2021, the Company issued the necessary common shares to settle milestone (i) above (Note 14). During the year ended 31 July 2022, the Company accrued an additional $239,173 and were included in the related operating lease liability for milestone (ii) above. At 31 July 2022, in order to better utilize its resources, it was deemed unlikely that the Company will continue to pursue the opportunity for a production facility in Michigan. As a result, the Company impaired the right-of-use asset related to this lease during the year ended 31 July 2022. The lease liability at 30 April 2023 related to NMG MI P1 was $486,998. The value of the common shares will be calculated based on the lesser of: (1) the closing market price on the respective milestone achievement date and (2) a ten percent discount to the twenty-day volume weighted average price for the twenty days immediately prior to the respective milestone achievement date(s). Leases for 254 River St., Manistee, Michigan 49660 and 885 E. Apple Ave., Muskegon, Michigan 49442 were subject to the Company subsidiaries receiving approval by the State of Michigan and could be cancelled by the Company if licences were not awarded. The licenses for NMG MI P1 and NMG MI C1 were issued on 19 July 2021 and license for NMG MI 1 was issued on 3 August 2021.
j)	On 1 July 2021, the Company’s subsidiary Canopy Monterey Bay, LLC assumed and entered into a three-and-a-half-year lease agreement for the property located at 1900 Fremont Blvd., Seaside, California 93955. On 1 December 2021, Canopy Monterey Bay, LLC entered into a second amendment that includes three options to extend the lease agreement for five years each with 3% annual base rent increases. The base rent is now $9,000 per month until June 2023. In March 2023, the Company and the landlord agreed to extend the lease for until 30 June 2028.
	Canopy Monterey Bay, LLC agreed to pay the landlord a maintenance fee equal to 1.5% of gross sales each month.
k)	On 7 April 2022, DEP Nevada, Inc. entered into a three-year lease agreement with 2625 GV, LLC, a Nevada limited liability company, for the property located at 2625 N. Green Valley Pkwy., Ste 150, Henderson, Nevada 89014, containing approximately 5,059 square feet. The base rent was $4,482 per month plus common area expenses and increased to $4,662 per month plus common area expenses on 1 June 2023. The lease agreement includes 4% annual base rent increases and two options to extend for three years each.
l)	On 4 December 2020, NMG CA P1, LLC entered into a five-year lease agreement with Cat City 2, LLC, a California limited liability company, for the property located at 68945 Perez Rd., Suite 1, Cathedral City, California 92234, containing approximately 5,840 square feet. The lease agreement includes 3% annual base rent increases and two options to extend for five-years each. We amended the lease agreement on 27 January 2022, which extended the term to 31 December 2026 and rent commencement date. The base rent is $6,028 plus common area expenses for the first six months, increases to $9,590 plus common area expenses on the seventh month and increases to $9,878 plus common area expenses on 1 March 2023.

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m)	On 1 December 2020, NMG CA C1, LLC entered into a five-year lease agreement with Cat City 2, LLC, a California limited liability company, for the property located at 68945 Perez Rd., Suite 2,3&4, Cathedral City, California 92234, containing approximately 13,023 square feet. The lease agreement includes a rent abatement period, 3% annual base rent increases and two options to extend for five-years each. We amended the lease agreement on 2 February 2022, which extended the term to 31 December 2026. The base rent increased to $22,790 plus common area expenses effective January 1, 2023 and increases to $23,474 plus common area expenses effective March 1, 2023.
n)	On 15 February 2022, CraftedPlants NJ Corp. (“Tenant”) entered into a lease agreement (the “Lease”) with Simone Investment Group, LLC, a New Jersey limited liability company, for the property located at 3191 U.S. Route 1, Lawrenceville, New Jersey 08648, containing approximately 6,923 square feet. The term of this Lease consists of Phase I commencing on 15 February 2022 (the “Lease Commencement Date”) and ending on the earlier of (i) twelve months from the Lease Commencement Date, (ii) upon issuance to Tenant of the Class 5 Cannabis Retail License by the Commission plus thirty days, or (iii) the date when the Tenant opens for business; and Phase II of ten years from the earlier of (i) the date when the Tenant opens for business, (ii) twelve months from February 15, 2022, or (iii) thirty days after the issuance to Tenant of the Class 5 Cannabis Retail License by the Commission. Tenant has four options to extend the lease and each option is for five years. On 21 December 2022, the Company acquired the rights to the lease agreement from the merger with CraftedPlants NJ Corp. for consideration of $175,000 (Note 9). The rent for Phase I was $10,000 per month for the first eight months and increased to $14,000 per month on the nineth month. The rent for Phase II was $25,146 annually for the first five years and increased to $29,583 annually on the sixth year.
o)	On 4 January 2022, NMG IL 4, LLC entered into a ten-year lease agreement with CB Chicago Partners, Ltd., a Texas limited partnership, for the property located at 2941 W. 159th Street, Markham, Illinois, containing approximately 20,000 square feet with a building containing approximately 2,832 square feet. This lease includes two (2) options to extend for ten-years each. Concurrently with the execution of this lease, NMG IL 4 paid the sum of $92,234 consisting of twelve (12) months’ minimum rent in the sum of $84,960 plus one (1) fiscal year’s real estate taxes in the sum of $63,914 less the minimum rent credit in the sum of $56,640. On 12 October 2022, NMG IL 4 amended the lease agreement to relocate to certain premises containing approximately 3,400 square feet located at 3,063 W. 159th Street, Markham, Illinois. The term of the lease as to relocated premises commenced on 12 October 2022 and as amended shall end on 31 January 2032. The Company acquired the rights to the lease agreement with NMG IL 4 on 25 April 2023 (Note 9). The base rent is currently $13,600 plus common area expenses until 31 January 2024.

During the nine months ended 30 April 2023, the Company recorded a total lease expense of $1,200,729 related to the amortization of right-of-use assets, of which $1,006,189 was included in Operating Expenses and $194,540 was included in Cost of Sales.

Supplemental cash flow information related to leases was as follows:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,172,258
Weighted-average remaining lease term – operating leases		7.17 years
Weighted-average discount rate – operating leases		12	%

The discount rate of 12% was determined by the Company as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

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Maturities of lease liabilities were as follows:

Year Ending 31 July	Operating Leases
2023 (remaining)	$	531,760
2024		2,278,134
2025		2,193,441
2026		2,149,252
2027		1,845,474
2028 and thereafter		6,032,819
Total lease payments	$	15,030,880
Less imputed interest		(5,136,024	)
Total	$	9,894,856
Less current portion		(1,138,855	)
Long term portion	$	8,756,001

14. Capital Stock

The Company’s authorized share capital comprises 900,000,000 Common Shares, with a $0.0001 par value per share.

On 21 September 2021, the Company issued 238,929 common shares to one entity based on the terms and conditions of the certain lease agreement for the Muskegon, Michigan premises and issued an aggregate of 1,304,601 common shares to another entity based on the terms and conditions of the two lease agreements for the Manistee, Michigan premises (Notes 13 and 16).

Pursuant to the ShowGrow Long Beach Purchase Agreement, the Company issued 2,681,006 common shares in escrow. The share consideration remains subject to reduction with reference to the liabilities of the business that will be outstanding on the closing date, which is expected to occur in the near future (Note 17).

Pursuant to the PA #2 for the acquisition of Canopy’s membership interest, the Company issued 2,728,156 common shares on 3 December 2021 in escrow (Note 9).

On 15 July 2022, the Company issued 319,149 common shares to one entity based on the terms and conditions of the certain lease agreement for the Muskegon, Michigan premises.

Pursuant to the closing of MIPA #1, as amended, and MIPA #2, as amended, for the acquisition of Canopy’s membership interest, the Company issued an aggregate of 16,301,694 shares of common stock on 7 December 2022, of which 2,238,806 are being held in escrow ending the results of a working capital adjustment in accordance with MIPA #1 and MIPA #2 (Note 9).

Pursuant to the terms of the Merger Agreement with CraftedPlants, NJ, the Company issued an aggregate of 16,666,667 common shares on 21 December 2022 in escrow (Note 9).

Stock options

The Company previously approved an incentive stock option plan, pursuant to which the Company may grant stock options up to an aggregate of 10% of the issued and outstanding common shares in the capital of the Company from time to time.

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	Number of options			Weighted average exercise price	Weighted average contractual term remaining (in years)		Aggregate intrinsic value
Outstanding at 31 July 2021		9,855,000		CAD$0.71		2.76	CAD$	-
Granted		848,000		CAD$0.37			CAD$	-
Cancelled		(1,250,000	)	CAD$