ALLIED : Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of Operations. (type 10-Q)

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The following discussion relates to the historical operations and financial
statements of Allied Corp. for the three and nine months ended May 31, 2020 and
May 31, 2021.

Forward-Looking Statements

The following Management’s Discussion and Analysis should be read in conjunction
with our financial statements and the related notes thereto included elsewhere
in this Annual Report. The Management’s Discussion and Analysis contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. Any statements
that are not statements of historical fact are forward-looking statements. When
used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,”
“expect,” and the like, and/or future-tense or conditional constructions
(“will,” “may,” “could,” “should,” etc.), or similar expressions, identify
certain of these forward-looking statements. These forward-looking statements
are subject to risks and uncertainties that could cause actual results or events
to differ materially from those expressed or implied by the forward-looking
statements in this Annual Report. Our actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include, without limitation, those specifically addressed
under the heading “Risks Factors” in our various filings with the Securities and
Exchange Commission. We do not undertake any obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of this Annual Report.

The following discussion highlights the Company’s results of operations and the
principal factors that have affected its consolidated financial condition as
well as its liquidity and capital resources for the periods described, and
provides information that management believes is relevant for an assessment and
understanding of the Company’s consolidated financial condition and results of
operations presented herein. The following discussion and analysis are based
Allied Corp’s audited and unaudited financial statements contained in this
Current Report, which have been prepared in accordance with generally accepted
accounting principles in the United States. You should read the discussion and
analysis together with such financial statements and the related notes thereto.

Overview

Allied Corp. (“Allied” or the “Company”) is a Nevada corporation, based in
Kelowna, British Columbia, Canada. Allied Corp. (“Allied”) is an international
medical cannabis production company with a mission to address today’s medical
issues by researching, creating and producing targeted cannabinoid health
solutions. Allied Corp. uses what it considers to be an evidence-informed
scientific approach to make this mission possible, through cutting-edge
pharmaceutical research and development, innovative plant-based production and
unique development of therapeutic products.

References in this periodic report on Form 10-Q to “Allied” or the “Company” may
include references to the operations of our subsidiaries AM (Advanced Micro)
Biosciences, Inc., Allied Colombia S.A.S., Tactical Relief, LLC, Allied US
Products, LLC, and Pacific Sun Fungi Inc. Each of these corporations is a 100%
wholly owned subsidiary of Allied and consequentially reports quarterly
financials up to a consolidated quarterly submission.

Allied’s focus is on the development of medicinal cannabis and psilocybin
products for patients with conditions potentially suitable for treatment
therewith. Such conditions include anxiety, insomnia, anorexia, chronic pain,
epilepsy, chemotherapy-induced nausea and vomiting, post-traumatic stress
disorder (PTSD), Parkinson’s disease, Tourette syndrome, irritable bowel
syndrome (IBS) and spasticity associated with multiple sclerosis (MS) and spinal
cord injury (SCI)1.

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Allied’s objective is to be a company that controls its own international
vertically integrated supply chain or CBD, cannabis, and psilocybin products in
order to maximize cash flow and profit margins. Our management team believes
that having control over our supply chain should enable us to provide a
consistent, rolling-harvest supply to the global cannabis community.

Given the average cost of production in North America being approximately $1.00
to $2.00 per gram, we believe our anticipated cash cost of $0.05 per gram
(non-GAAP) of cannabis production based on historical production of our
operations and other companies growing raw flowers in Columbia afforded by our
Colombian production and cultivation should provide us a competitive advantage.

In addition to what we consider our demonstrated ability to cultivate low-cost,
high margin cannabis in Colombia primarily for use in proprietary cannabinoid
drug and natural health products for international distribution, we have hemp
derived CBD natural health products for sale in the United States, have received
commercial approval for sale of medical cannabis being produced in Colombia for
export to nations other than the United States, and have initiated human
clinical phase I trial for our psilocybin-based pharma products ALID 11, ALID 12
and Psilonex™ which are protected under provisional patent and trademarks in the
United States.

Effects of COVID-19

In March 2020, the World Health Organization declared COVID-19 a global
pandemic. This contagious disease outbreak and the related adverse public health
developments have adversely affected workforces, economies, and financial
markets globally, leading to an economic downturn. Management has determined
that there has been no significant impact to the Company’s operations, however
management continues to monitor the situation.

Critical Accounting Policies

Business Presentation

The unaudited condensed consolidated financial statements included in this
Quarterly Report and related notes are presented in accordance with accounting
principles generally accepted in the United States of America (“US GAAP”), and
are expressed in United States dollars. The Company’s fiscal year end is August
31.

These interim unaudited financial statements have been prepared in accordance
with US GAAP for interim financial information and with the instructions to
Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of
the information and footnotes required by US GAAP for complete financial
statements. Therefore, these interim financial statements should be read in
conjunction with the Company’s audited financial statements and notes thereto
for the year ended August 31, 2020 included in the Company’s Annual Report on
Form 10-K filed with the SEC.

The financial statements included herein are unaudited; however, they contain
all normal recurring accruals and adjustments that, in the opinion of
management, are necessary to present fairly the Company’s financial position at
May 31, 2021, and the results of its operations for the three and nine months
ended May 31, 2021, and cash flows for the nine months ended May 31, 2021. The
results of operations for the period ended May 31, 2021 are not necessarily
indicative of the results to be expected for future quarters or the full year.

The significant accounting policies followed are:

a) Principles of consolidation

The consolidated financial statements include accounts of Allied Corp. and its
majority owned subsidiaries. Subsidiaries are consolidated from the date of
acquisition and control and continue to be consolidated until the date that such
control ceases. Control is achieved when the Company is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability
to affect these returns through its power over the investee. All intercompany
balances, income, expenses, and unrealized gains and losses resulting from
intercompany transactions are eliminated on consolidation.

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b) Cash and cash equivalents

Cash is comprised of cash on hand, cash held in trust accounts and demand
deposits. Cash equivalents are short-term, highly liquid investments with
maturities within three months when acquired. The Company did not have any cash
equivalents as of May 31, 2021 and August 31, 2020.

c) Property, plant and equipment

Property and equipment are stated at cost. The Company depreciates the cost of
property, plant and equipment over their estimated useful lives at the following
annual rates and methods:

Farm facility and equipment 1 – 10 years straight-line basis
Office and computer equipment 5 years straight-line basis
Land equipment 10 years straight-line basis

d) Inventory

Inventory is comprised of raw materials, work-in-progress and finished goods.
Cost includes expenditures directly related to the manufacturing process as well
as suitable portions of related production overheads, based on normal operating
capacity.

Inventory costs include pre-harvest costs or cost of purchase for purchased
inventory. Pre-harvest costs include labor and direct materials to grow
cannabis, which includes water, electricity, nutrients, integrated pest
management, growing supplies and allocated overhead.

Inventory is stated at the lower of cost or net realizable value, determined
using weighted average cost. Net realizable value is defined as the estimated
selling price in the ordinary course of business, less reasonably predictable
costs of completion, disposal and transportation. At the end of each reporting
period, the Company performs an assessment of inventory and records write-downs
for excess and obsolete inventories based on the Company’s estimated forecast of
product demand, production requirements, market conditions, regulatory
environment, and spoilage. Actual inventory losses may differ from management’s
estimates and such differences could be material to the Company’s balance
sheets, statements of net loss and comprehensive loss and statements of cash
flows.

e) Intangible assets

At May 31, 2021 and August 31, 2020, intangible assets include licenses which
are being amortized over their estimated useful lives of 10 years. The Company’s
licenses are amortized over their economic or legal life on a straight-line
basis, whichever is shorter. The licenses have been amortized from the date of
acquisition.

The Company periodically evaluates the reasonableness of the useful lives of
these assets. Once these assets are fully amortized, they are removed from the
accounts. These assets are reviewed for impairment or obsolescence when events
or changes in circumstances indicate that the carrying amount may not be
recoverable. If impaired, intangible assets are written down to fair value based
on discounted cash flows or other valuation techniques. The Company has no
intangibles with indefinite lives.

For long-lived assets, impairment losses are only recorded if the asset’s
carrying amount is not recoverable through its undiscounted,
probability-weighted future cash flows. The Company measures the impairment loss
based on the difference between the carrying amount and the estimated fair
value. When an impairment exists, the related assets are written down to fair
value.

f) Long-lived assets

In accordance with ASC 360, Property, Plant and Equipment, the Company tests
long-lived assets or asset groups for recoverability when events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Circumstances which could trigger a review include, but are not limited to:
significant decreases in the market price of the asset; significant adverse
changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or
construction of the asset; current period cash flow or operating losses combined
with a history of losses or a forecast of continuing losses associated with the
use of the asset; and current expectation that the asset will more likely than
not be sold or disposed significantly before the end of its estimated useful
life. Recoverability is assessed based on the carrying amount of the asset and
its fair value, which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An
impairment loss is recognized when the carrying amount is not recoverable and
exceeds fair value.

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g) Foreign currency translation and functional currency conversion

Items included in these consolidated financial statements of each of the
Company’s entities are measured using the currency of the primary economic
environment in which the entities operate (the “functional currency”).

Prior to September 10, 2019, the Company’s functional currency was the Canadian
dollar. Translation gains and losses from the application of the U.S. dollar as
the reporting currency during the period that the Canadian dollar was the
functional currency are included as part of cumulative currency translation
adjustment, which is reported as a component of shareholders’ equity under
accumulated other comprehensive loss.

The Company re-assessed its functional currency and determined as at September
10, 2019, its functional currency changed from the Canadian dollar to the U.S.
dollar based on management’s analysis of changes in our organization. The change
in functional currency was accounted for prospectively from September 10, 2019
and prior period financial statements were not restated for the change in
functional currency.

For periods commencing September 10, 2019, monetary assets and liabilities
denominated in foreign currencies are translated into U.S. dollars using
exchange rates in effect at the balance sheet date. Opening balances related to
non-monetary assets and liabilities are based on prior period translated
amounts, and non-monetary assets and non-monetary liabilities incurred after
September 10, 2019 are translated at the approximate exchange rate prevailing at
the date of the transaction. Revenue and expense transactions are translated at
the approximate exchange rate in effect at the time of the transactions. Foreign
exchange gains and losses are included in the statement of operations and
comprehensive loss as foreign exchange gains.

The Company assessed the functional currency for Allied Colombia, a wholly-owned
subsidiary acquired by the Company on February 18, 2020 to be the Colombian
peso.

The functional currency for Tactical Relief LLC, Allied U.S. Products LLC and
Pacific Sun Fungi, Inc. is the U.S. dollar.

h) Share issuance costs

Costs directly attributable to the raising of capital are charged against the
related share capital. Costs related to shares not yet issued are recorded as
deferred share issuance costs. These costs are deferred until the issuance of
the shares to which the costs relate, at which time the costs will be charged
against the related share capital or charged to operations if the shares are not
issued.

i) Research and development cost

Research and development costs are expensed as incurred.

j) Revenue recognition

The Company’s revenue is comprised of sales of cannabis products.

The Company’s revenue-generating activities have a single performance obligation
and revenue is recognized at the point in time when control of the product
transfers and the Company’s obligations have been fulfilled. This generally
occurs when the product is shipped or delivered to the customer, depending upon
the method of distribution and shipping terms set forth in the customer
contract. Revenue is measured as the amount of consideration the Company expects
to receive in exchange for the sale of the Company’s product. Certain of the
Company’s customer contracts may provide the customer with a right of return. In
certain circumstances the Company may also provide a retrospective price
adjustment to a customer. These items give rise to variable consideration, which
is recognized as a reduction of the transaction price based upon the expected
amounts of the product returns and price adjustments at the time revenue for the
corresponding product sale is recognized. The determination of the reduction of
the transaction price for variable consideration requires that the Company make
certain estimates and assumptions that affect the timing and amounts of revenue
recognized.

Sales of products are for cash or otherwise agreed-upon credit terms. The
Company’s payment terms vary by location and customer; however, the time period
between when revenue is recognized and when payment is due is not significant.
The Company estimates and reserves for its bad debt exposure based on its
experience with past due accounts and collectability, write-off history, the
aging of accounts receivable and an analysis of customer data.

For the nine months ended May 31, 2021, the Company generated sales of $9,502.

k) Net income (loss) per common share

Net income (loss) per share is calculated in accordance with ASC 260, Earnings
per Share. The weighted-average number of common shares outstanding during each
period is used to compute basic earning or loss per share. Diluted earnings or
loss per share is computed using the weighted average number of shares and
diluted potential common shares outstanding to the extent the effect would not
be antidilutive. Dilutive potential common shares are additional common shares
assumed to be exercised.

Basic net income (loss) per common share is based on the weighted average number
of shares of common stock outstanding.

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l) Income taxes

The Company accounts for income taxes under ASC 740, Income Taxes. Under the
asset and liability method of ASC 740, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
ASC 740, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period the enactment occurs. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.

m) Related party transactions

Related parties are any entities or individuals that, through employment,
ownership or other means, possess the ability to direct or cause the direction
of the management and policies of the Company. The Company discloses related
party transactions that are outside of normal compensatory agreements, such as
salaries. Related party transactions are measured at the exchange amounts.

n) Significant accounting estimates and judgments

The preparation of the financial statements in conformity with US GAAP requires
management to make judgments, estimates and assumptions that affect the reported
amounts in the financial statements and accompanying notes. Although management
uses historical experience and its best knowledge of the amount, events or
actions to for the basis for judgments and estimates, actual results may differ
from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and further periods if the review affects both current and future
periods.

Significant estimates and assumptions included in these financial statements
relate to the valuation assumptions related to the estimated useful lives and
recoverability of long-lived assets, stock-based compensation, and deferred
income tax assets and liabilities. Judgments are required in the assessment of
the Company’s ability to continue to as going concern as described in Note 1.

o) Financial instruments

ASC 825, Financial Instruments, requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 825 establishes a fair value hierarchy based on the level of
independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument’s categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the fair value
measurement. ASC 825 prioritizes the inputs into three levels that may be used
to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in
active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than
quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs
to the valuation methodology that are significant to the measurement of the fair
value of the assets or liabilities.

For certain of the Company’s financial instruments, including accounts payable,
due from related parties, notes and loans payable, the carrying amounts
approximate their fair values due to the short maturities.

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The Company does not have any assets or liabilities measured at fair value on a
recurring basis presented on the Company’s balance sheet as of May 31, 2021 and
August 31, 2020 other than cash.

Financial instruments that potentially subject the Company to a concentration of
credit risk consist primarily of cash. The Company limits its exposure to credit
loss by placing its cash with high credit quality financial institutions.

p) Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU
2016-02”), which requires lessees to put most leases on their balance sheets but
recognize the expenses on their income statements in a manner similar to current
practice. The standard states that a lessee would recognize a lease liability
for the obligation to make lease payments and a right-to-use asset for the right
to use the underlying asset for the lease term. The standard is effective for
fiscal years and interim periods within those fiscal years beginning after
December 15, 2018. The Company adopted ASU 2016-02 on September 1, 2019, using
the transition relief to the modified retrospective approach, presenting prior
year information based on the previous standard. The Company did not have any
leases until the acquisition of its wholly owned subsidiary, Allied Colombia
S.A.S. on February 18, 2020.

The Company determines if an arrangement contains a lease in whole or in part at
the inception of the contract. Right-of-use (“ROU”) assets represent the
Company’s right to use an underlying asset for the lease term while lease
liabilities represent our obligation to make lease payments arising from the
lease. All leases with terms greater than twelve months result in the
recognition of a ROU asset and a liability at the lease commencement date based
on the present value of the lease payments over the lease term. Unless a lease
provides all of the information required to determine the implicit interest
rate, the Company uses its incremental borrowing rate based on the information
available at the commencement date in determining the present value of the lease
payments. The Company uses the implicit interest rate in the lease when readily
determinable.

Our lease terms include all non-cancelable periods and may include options to
extend (or to not terminate) the lease when it is reasonably certain that we
will exercise that option. Leases with terms of twelve months or less at the
commencement date are expensed on a straight-line basis over the lease term and
do not result in the recognition of an asset or liability. See Note 7 – Leases.

q) Reclassification

Certain reclassifications have been made to conform the prior period’s
consolidated financial statements and notes to the current period’s
presentation.

r) Recent accounting pronouncements

The Company does not expect that recent accounting pronouncements or changes in
accounting pronouncements during the nine months ended May 31, 2021, are of
significance or potential significance to the Company.

Financial Condition and Results of Operations

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss for
the nine months ended May 31, 2021 of $6,648,787, has generated minimal revenue
and as at May 31, 2021 has a working capital deficit of $3,256,017. These
factors raise substantial doubt regarding the Company’s ability to continue as a
going concern. The Company’s ability to continue as a going concern is dependent
upon the Company’s ability to raise sufficient financing to acquire or develop a
profitable business. Management intends on financing its operations and future
development activities largely from the sale of equity securities with some
additional funding from other traditional financing sources, including related
party loans until such time that funds provided by future planned operations are
sufficient to fund working capital requirements.

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Results of Operations

Comparison of Unaudited Results for the Three Months Ended May 31, 2021 compared
to the Three Months Ended May 31, 2020

Sales and Revenue

For the three-month period ended May 31, 2021 we had no revenue. We had no
revenue for the three-month period ended May 31, 2020.

We are just at the beginning of sales of our products which we expect to improve
during the current fiscal year.

Operating Expenses

Operating expenses for the three-month period ended May 31, 2021 totaled
$2,179,481. Operating expenses for the three-month period ended May 31, 2021 is
related to $696,103 in stock-based compensation in connection with the
development of our products, and also consisted of office and miscellaneous
expense of $721,234, professional fees of $223,106 and interest expense of
$153,942. Operating expenses for the three-month period ended May 31, 2020
totaled $1,083,853. The increase in operating expense during the quarter ended
May 31, 2021 is principally the result of an increase in stock-based
compensation of $696,103 which was necessary to develop our product lines and
office and miscellaneous expense of $382,385.

Net Loss

As a result of the changes described above, net loss from operations after
income taxes increased to $2,753,489 during the three months ended May 31, 2021
compared to $1,214,224 during the three-month period ended May 31, 2020.

Comparison of Unaudited Results for the Nine Months Ended May 31, 2021 compared
to the Nine Months Ended May 31, 2020

Sales and Revenue

For the nine-month period ended May 31, 2021 we had $5,260 in revenue. We had no
revenue for the nine-month period ended May 31, 2020. We are just at the
beginning of sales of our products which we expect to improve during the current
fiscal year.

Operating Expenses

Operating expenses for the nine-month period ended May 31, 2021 totaled
$5,625,633. Operating expenses for the nine-month period ended May 31, 2021 is
principally related to $2,076,223 in stock-based compensation in connection with
the development of our products. Operating expense also consisted of office and
miscellaneous expense of $1,035,806, production costs of $227,257, professional
fees of $595,885 and interest expense of $412,370. Operating expenses for the
nine-month period ended May 31, 2020 totaled $2,479,107. The increase in
operating expense during the nine months ended May 31, 2021 is principally the
result of an increase in office and miscellaneous expense to $346,490,
production costs of $227,257 and decrease in professional fees of $29,280. The
overall increase in operating expenses during the nine-month period ended May
31, 2021 is the result of acquisitions, a change of business and an increase in
business activities.

Net Loss

As a result of the changes described above, net loss from operations after
income taxes increased to $6,648,787 during the nine months ended May 31, 2021
compared to $2,708,660 during the nine-month period ended May 31, 2020.

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Liquidity and Capital Resources

The following table sets forth the major components of our statements and
consolidated statements of cash flows for the periods presented.

Nine Months
Year Ended Year Ended Ended
August 31, August 31, May 31,
2020 2019 2021

Cash used in operating activities $ (3,160,802 ) $ (1,316,256 ) $ (3,094,232 )
Cash from financing activities

$ 4,017,681 $ 4,800,894 $ 3,803,557

Cash from (used in) investing activities $ (1,820,598 ) $ (2,345,551 ) $ (77,606 )
Effect of exchange rate change

$ (23,116 ) $ (58,205 ) $ 96,820
Change in cash during the period $ (986,835 ) $ 1,080,882 $ 728,539
Cash, beginning of period $ 1,080,882 $ – $ 94,047
Cash, end of period $ 94,047 $ 1,080,882 $ 822,586

As of May 31, 2021, the Company had $1,574,558 in current assets, consisting of
$822,586 in cash, $299,379 in inventory, $4,487 in receivables, $11,498 in due
from related parties and $436,608 in prepaid expenses. Other assets mainly
include deposits and advances of $2,968,516 (principally related to our building
to be located in Nevada), property plant and equipment of $209,269, right-of-use
assets of $71,295 and intangible assets of $2,888,583. Our intangible assets are
cannabis licenses.

To date, the Company has financed its operations through equity sales and
through the sale of convertible notes. The Company has recently entered into an
agreement with a broker-dealer to complete a public offering of shares.

Convertible Notes

On January 23, 2020, the Company issued two convertible notes with principal
amounts of $400,000 and $200,000, respectively, with a total face value of
$600,000 and warrants to purchase 240,000 shares of the Company’s common stock
at $1.25 per share for 1 year. The Notes were issued with an original discount
of $12,000, and bear interest at 10% per annum compounded monthly. The notes
initially matured on July 20, 2020 and are convertible into shares of the
Company’s common stock at any time prior to maturity at a conversion price of
$1.25 per share. On July 1, 2020, the Company entered into amendments to the
convertible notes. Pursuant to the amendments, beginning on July 1, 2020, the
convertible notes bear simple interest at 5% per annum. The maturity date of the
convertible notes was amended to due on demand on or before October 31, 2020. In
consideration for extending the maturity date, the Company issued to the
convertible note holders 16,000 common shares of the Company and warrants to
purchase additional 320,000 common shares of the Company at $1.25 per share
expiring October 31, 2021. Each note holder received 8,000 common shares and
160,000 warrants. On November 1, 2020, the Company entered into further
amendments to the convertible notes. Pursuant to the amendments, the maturity
date of the convertible notes was amended to due on demand on or before March
31, 2021. In consideration for extending the maturity date, the Company agreed
to issue to the convertible note holders 100,000 common shares of the Company.
Each note holder will receive 50,000 common shares. Finally effective on March
31, 2021, the Company entered into further amendments to the convertible notes.
Pursuant to the amendments, the maturity date of the convertible notes was
amended to due on demand on or before September 30, 2022. In consideration for
extending the maturity date, the Company agreed to issue to the convertible note
holders 20,000 common shares of the Company.

On September 29, 2020, the Company issued a convertible note with a fair value
of $163,341 and warrants to purchase 130,673 shares of the Company’s common
stock at $1.25 per share for 2 years. The Note bears interest at 10% per annum.
The Note is due on demand after March 27, 2021.The Note is convertible into
shares of the Company’s common stock at any time at a conversion price of $1.25
per share. Effective April 1, 2021, the Company entered into an amendment to the
convertible note. Pursuant to the amendment, the maturity date of the
convertible notes was amended to due on demand on or before October 31, 2021.
In consideration for extending the maturity date, the Company agreed to issue to
the convertible note holders 8,268 common shares of the Company.

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On October 26, 2020, the Company issued a convertible note with a face value of
$37,613 and warrants to purchase 30,090 shares of the Company’s common stock at
$1.25 per share for 2 years. The Note bears interest at 10% per annum. The Note
is due on demand after April 23, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.25 per share.
Effective June 1, 2021, the Company entered into an amendment to the convertible
note. Pursuant to the amendment, the maturity date of the convertible notes was
amended to due on demand on or before November 30, 2021.

On November 11, 2020, the Company issued a convertible note with a face value of
$85,937 and warrants to purchase 68,750 shares of the Company’s common stock at
$1.25 per share for 2 years. The Note bears interest at 10% per annum. The Note
is due on demand after May 9, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.25 per share.
Effective June 1, 2021, the Company entered into an amendment to the convertible
note. Pursuant to the amendment, the maturity date of the convertible notes was
amended to due on demand on or before November 30, 2021.

On December 2, 2020, the Company issued a convertible note with a face value of
$600,000 and warrants to purchase 240,000 shares of the Company’s common stock
at $1.25 per share for 2 years. The Note bears interest at 10% per annum. The
Note is due on demand after November 27, 2021.The Note is convertible into
shares of the Company’s common stock at any time at a conversion price of $1.25
per share.

On January 7, 2021, the Company issued a convertible note with a face value of
$300,000. The Note bears interest at 10% per annum and is due on demand after
November 27, 2021.The Note is convertible into shares of the Company’s common
stock at any time at a conversion price of

$1.25 per share.

On March 26, 2021, the Company issued a convertible note with a face value of
$18,000 and warrants to purchase 18,000 shares of the Company’s common stock at
$0.50 per share for one year. The Note bears interest at 10% per annum and is
due on demand on September 26, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.25 per share.

On March 26, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company’s common stock
at $0.50 per share for one year. The Note bears interest at 10% per annum and is
due on demand on September 26, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.25 per share.

On April 29, 2021, the Company issued a convertible note with a face value of
$180,000 and warrants to purchase 180,000 shares of the Company’s common stock
at $1.00 per share for one year. The Note bears interest at 10% per annum and is
due on demand on October 29, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.00 per share.

On April 30, 2021, the Company issued a convertible note with a face value of
$100,000 and warrants to purchase 100,000 shares of the Company’s common stock
at $1.00 per share for one year. The Note bears interest at 10% per annum and is
due on demand on October 31, 2021.The Note is convertible into shares of the
Company’s common stock at any time at a conversion price of $1.00 per share.

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Equity Transactions

On September 21, 2020, the Company issued 80,000 shares to an accredited
investor who purchased such shares in a private placement at a purchase price of
$1.25 per share for gross cash proceeds of $100,000.

On September 30, 2020, the Company issued 120,000 shares to two accredited
investors who purchased such shares in a private placement at a purchase price
of $1.25 per share for gross cash proceeds of $150,000.

During the nine month ended May 31, 2021, the Company received 8,123,170 shares
of common stock from previous management for no consideration, and the shares
were returned to treasury.

During the nine-month period, the Company re-issued 750,000 shares of common
stock with total fair value of $637,500 for consulting services, out of which,
$265,625 was expensed as consulting fees and $371,875 was deferred compensation
included in prepaid expenses on the consolidated interim balance sheet.

On February 15, 2021 the Company issued 66,146 shares to three accredited
investors in consideration for foregiveness of debt of $66,146.

On February 25, 2021 the Company issued 100,000 shares to an accredited investor
who purchased such shares in a private placement at a purchase price of $0.50
per share for gross cash proceeds of $50,000.

On March 1, 2021, the Company re-issued 100,000 common shares from treasury with
fair value of $90,000 for the promissory note of $300,000.

On March 4, 2021 the Company issued 25,000 shares to an affiliate of the Company
in consideration for foregiveness of debt of $25,000,

On March 5, 2021, the Company re-issued 200,000 shares of common stock with fair
value of $160,000 from treasury for acquisition of Pacific Sun Fungi Inc.

On March 8, 2021 the Company issued 19,898 shares to an affiliate of the Company
investor in consideration for forgiveness of debt of $19,898.

On March 17, 2021, the Company issued 500,000 shares of common stock at $0.50
per share for gross proceeds of $250,000.

On March 17, 2021, the Company issued 86,044 shares of common stock with a fair
value of $70,164 to settle $87,483 of accounts payable, which resulted in a gain
on settlement of debt of $17,319.

On March 22, 2021, the Company issued 25,000 shares of common stock with a fair
value of $22,500 to settle $25,000 of accounts payable, which resulted in a gain
on settlement of debt of $2,500.

On March 22, 2021 the Company issued 100,000 shares to an accredited investor
who purchased such shares in a private placement at a purchase price of $0.50
per share for gross cash proceeds of $50,000.

On April 6, 2021 the Company issued 250,000 shares to an accredited investor who
purchased such shares in a private placement at a purchase price of $0.50 per
share for gross cash proceeds of $125,000.

On May 12, 2021, the Company issued 31,746 shares of common stock with a fair
value of $31,746 to settle $31,746 of accounts payable, which resulted in a gain
on settlement of debt of $nil.

On May 13, 2021, the Company received 1,200,000 shares of common stock from the
counterparties of certain previous cancelled asset acquisitions for no
consideration. The shares were cancelled upon being returned to treasury.

On May 14, 2021, the Company issued 200,000 shares of common stock at $0.50 per
share for gross proceeds of $100,000.

On May 14, 2021, the Company issued 300,000 shares of common stock at $0.75 per
share for gross proceeds of $225,000.

On May 17, 2021, the Company issued 800 shares of common stock as a finder’s
fee.

On May 17, 2021 the Company commenced a private placement pursuant to Rule
506(c) promulgated under Regulation D of the Securities Exchange Act of 1934, as
amended. The private placement sought to raise $5,250,000 through the sale of
Units at $0.75 per Unit, each consisting of one share of common stock and one
warrant to purchase one share of common stock for two years at an exercise price
of $1.25 per share. Boustead Securities LLC has acted as the exclusive Placement
Agent for this offering on a best efforts basis. Boustead receives compensation
in cash of 7 percent of the proceeds from such Offering, and also receives
warrants to purchase common stock equal to 7 percent of the Units sold,
exercisable for five years at $1.25 per share. As of May 31, 2021, the date of
this Quarterly Report on Form 10-Q, the Company had not yet sold Units in this
offering but has subsequently resulted in funding.

On May 27, 2021, the Company issued 136,000 shares of common stock with a fair
value of $149,952 in connection with modifications of a convertible note
payable.

At May 31, 2021, the Company had received $935,000 for the purchase of 1,246,666
common shares which were issued subsequent to May 31, 2021.

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Future Financing

In connection with its proposed business plan and currently ongoing and proposed
acquisitions, in addition to the possible proceeds from this offering the
Company will be required to complete substantial and significant additional
capital formation. Such formation could be through additional equity offerings,
debt, bank financings or a combination of any source of financing. There can be
no assurance that the Company will be successful in completion of such
financings.

Plan of Operations

As noted above, the continuation of our current plan of operations requires us
to raise significant additional capital. If we are successful in raising capital
through the sale of Common Shares offered for sale in our current private
placement as well as a proposed public offering, we believe that we will have
sufficient cash resources to fund our plan of operations through 2022. If we are
unable to do so, we may have to curtail and possibly cease some operations. We
intend to use the net proceeds from the offering for operating capacity in
Colombia, Canada and the United States, regulatory compliance, intellectual
property, working capital and general corporate purposes.

We continually evaluate our plan of operations to determine the manner in which
we can most effectively utilize our limited cash resources. The timing of
completion of any aspect of our plan of operations is highly dependent upon the
availability of cash to implement that aspect of the plan and other factors
beyond our control. There is no assurance that we will successfully obtain the
required capital or revenues, or, if obtained, that the amounts will be
sufficient to fund our ongoing operations.

Capital Expenditures

As of May 31, 2021 the company had purchased property plant and equipment of
$209,269 and paid net cash of $2,968,516 in deposits for an asset acquisition.
As of August 31, 2020, the Company purchased property plant and equipment of
$223,020 and paid net cash of $3,008,246 in deposits and advances for an asset
acquisition.

MediColombias Acquisition (Colombia Licensed Producer)

On August 29, 2019, the Company entered into a Share Purchase Agreement
(“Purchase Agreement”) with Dorson Commercial Corp. (“Dorson”) as the sole owner
of Baleno Ltd. to purchase all of the issued and outstanding shares of Baleno
Ltd., the sole owner of Medicolombia Cannabis S.A.S. (“Medicolombia”).
Medicolombia is based in Colombia with a full set of licenses and a lease
agreement in place to begin production on a 5 hectare parcel of land. We have
the ability to scale production to over hundreds of hectares. This is located in
the area of Bucamaranga, Colombia.

This acquisition includes a team of experts and significant expenditures spent
on an irrigation holding pond, security towers, fencing, etc. to meet the
Colombia minister of justice and minister of agriculture requirements.

Pursuant to the agreement the Company acquired all of the issued and outstanding
shares of Medicolombia in exchange for $700,000 and 4,500,000 shares of Allied.
The Company closed and completed the acquisition on February 17, 2020.
Medicolombia has subsequently changed its name to Allied Colombia S.A.S.

Natural Health Products Acquisition

In May 2019 the management team of AM Biosciences were able to negotiate the
inclusion of a natural health products catalogue of products. This includes 50
products in the natural health vertical market. Three of these products are of
particular interest as they have Natural Health Products registration numbers
with Health Canada. AM Biosciences can add these to the product offerings both
in Canada and the United States.

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Xtreme Cubes Building

In June 2019, AM Biosciences signed the production and manufacturing contract to
begin the manufacturing of a building for an extraction and production facility.
This building will be a fully scalable, modular building. The Company made an
upfront payment of $230,000 USD in June 2019, an additional payment of $903,385
in August 2019 and an additional payment of $92,000 in March 2020. At May 31,
2021, Company had deposits of $2,968,516 (August 31, 2020 – $2,600,720) to
purchase prefabricated buildings. As of May 31, 2021, the Company had not yet
received the building and the amounts have been recorded as deposits.

Pacific Sun Fungi Inc.

On March 5, 2021, the Company acquired all the issued and outstanding common
shares of Pacific Sun Fungi Inc. for re-issuance of 200,000 common shares of the
Company from treasury and a promissory note of $85,500.

Commitments and Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information.

Off-balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Going Concern

As reflected in the accompanying financial statements, the Company had an
accumulated deficit of approximately $14,557,353 at May 31, 2021 and a net loss
of $6,648,787 for the nine months ended May 31, 2021.

The Company does not yet have a history of financial stability. Historically,
the principal source of liquidity has been the issuance of convertible notes and
equity securities. In addition, the Company has generated no revenues since
inception. These factors raise substantial doubt about the Company’s ability to
continue as a going concern.

The ability of the Company to continue operations is dependent on the success of
Management’s plans, which include the raising of capital through the issuance of
equity securities, until such time that funds provided by operations are
sufficient to fund working capital requirements.

The Company will require additional funding to finance the growth of its current
and expected future operations as well as to achieve its strategic objectives.
The Company believes its current available cash will be sufficient to meet its
cash needs for the near future. There can be no assurance that financing will be
available in amounts or terms acceptable to the Company, if at all.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.

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