IDP Holdings (USA) Corp. - Quarter Report: 2022 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission file number: 333-216292

5500 North Service Road, Suite 301

Burlington, Ontario, L7L 6W6

(Address of principal executive offices, including zip code)

Registrant’s Telephone number, including area code: (800) 701-4342

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. 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 (section 232.406 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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the part 90 days. Yes

 ☒     No ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained hereof, and will not be contained, to will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.

If an emerging growth company, indicate by check mark 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 Exchange Act). Yes ☐ No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. The market value of the registrant’s voting $0.0001 par value common stock held by non-affiliates of the registrant at July 31, 2021, was approximately $125,000.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant’s only class of common stock, as of May 9, 2022, was 531,933,749 shares of its $0.0001 par value common stock.

No documents are incorporated into the text by reference.

Instadose Pharma Corp.

Form 10-Q

For the Three and Nine Months Ended February 28, 2022

Table of Contents

PART I

ITEM 1. Condensed Financial Statements 

Instadose Pharma Corp. and Subsidiaries   

INSTADOSE PHARMA CORP

BLANCE SHEETS

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

INSTADOSE PHARMA CORP

STATEMENT OF OPERATIONS

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

INSTADOSE PHARMA CORP

STATEMENTS OF STOCKHOLDER DEFICITS

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

INSTADOSE PHARMA CORP

STATEMENTS OF CASH FLOWS

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

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Note 1 - Organization and Nature of Operations

Organization and Nature of Operations

Instadose Pharma Corp (the “Company”), a Nevada corporation is organized as a holding company. The following business description describes the background and activities of its wholly owned subsidiary, Instadose Pharma Corp., a British Columbia corporation (“Instadose Canada”).

The Company, through its wholly owned subsidiary, Instadose Canada is seeking to create a global distribution platform for medicinal cannabis and cannabinoid oil (“Global Distribution Platform”). Instadose Canada endeavors to utilize the Global Distribution Platform to open the commercial gateway to a new wholesale marketplace capable of providing pharmaceutical industry companies (“Big Pharma”) with large, sustainable, consistent, diverse, and low‑cost supplies of high‑quality medicinal cannabis and cannabinoid oil for use in bulk as an active pharmaceutical ingredient.

Instadose Canada’s Global Distribution Platform spans five (5) continents to date, including Africa, Europe, Asia, South America, and North America. Within each continent, Instadose Canada is establishing large‑scale operational subsidiaries and joint venture partnerships to secure access to government‑issued licenses and permits in countries such as The Democratic Republic of the Congo (“DRC”), North Macedonia, Portugal, India, Colombia, Mexico, Cameroon, and Canada, each seeking to increase their level of participation within the global medicinal cannabis industry.

Instadose Canada was incorporated under the BCBCA as Cannabec Medical Corp. (“Cannabec”) on July 13, 2017, with an authorized share structure of 1,000 Class A common shares. On December 11, 2017, Cannabec filed a Form 11 Notice of Alteration with B.C. Registrar of Companies amending the authorized share structure to an unlimited number of common shares without par value, special rights, or restrictions. A Notice of Articles was issued by British Columbia Registry Services on the same date reflecting the amended share structure. On August 13, 2018, Cannabec changed its corporate name to Excellence Health Group Inc. (“EHG”). On January 31, 2019, EHG entered into a share exchange agreement with Grant F. Sanders and Instadose Canada. On February 5, 2019, EHG changed its corporate name to Instadose Pharma Corp. as contemplated by the share exchange agreement. The share exchange agreement was completed on February 8, 2019.

The EHG Share Exchange

Prior to completion of the share exchange, Grant F. Sanders, a former officer and director of the Company was actively engaged in seeking official authorization to cultivate medicinal cannabis in the DRC exclusively for medicinal and scientific purposes. Once secured, Instadose Canada would be granted exclusive rights to assist in monetizing these medicinal cannabis rights. Pursuant to the terms of the share exchange, EHG agreed to acquire all of the issued and outstanding common shares of Instadose Canada from Mr. Sanders in exchange for EHG common shares. After the closing, EHG (as Instadose Canada) would carry on the business previously conducted by Instadose Canada. As a condition to completing the share exchange agreement, EHG agreed to cancel certain issued and outstanding EHG common shares following the EHG closing, as well as several outstanding stock options issued to EHG directors and officers.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Maribec

Maribec Health Products Inc. (“Maribec”) is a Quebec corporation, which was registered with Registraire des Entreprises Québec on June 20, 2017. Following its registration, ownership of Maribec was held in the name of a director and officer of EHG pursuant to a declaration of trust in favour of EHG. On March 13, 2018, the declaration of trust was cancelled and ownership of Maribec was transferred to EHG. On December 20, 2017, Maribec, then a wholly owned subsidiary of EHG, submitted its application to Health Canada to become a licensed cannabis produce under the Access to Cannabis for Medical Purposes Regulations which would allow Maribec to establish operations at its production facility located at 433‑435 Boul. Industriel in the town of Asbestos (now Val‑des‑Sources), Quebec. Maribec’s license application would eventually be converted into an application for a standard cultivation license (under the new cannabis regulations which came into effect in Canada on October 17, 2018).

As at the date of the share exchange agreement, Maribec was still awaiting receipt of its cultivation license from Health Canada. On February 7, 2019, and prior to the EHG closing, EHG sold and transferred all of EHG’s right, title, and interest in and to the issued and outstanding shares of Maribec to Desmond Ste. Marie for one dollar ($1.00) pursuant to the terms of a share purchase agreement dated February 7, 2019. Completion of the Maribec Sale was driven by EHG’s desire to avoid potential delays in receiving its cultivation license that may have been caused by the pending completion of the share exchange. But for the Maribec Sale, completion of the share exchange would have required Health Canada to expand the scope of its due diligence screening to include the entirety of Instadose Canada’s incoming management team thereby almost certainly extending the timeline for Health Canada’s issuance of the cultivation license. Simultaneously with the execution of the Maribec share purchase agreement, EHG and Mr. Ste. Marie executed an option agreement also dated February 7, 2019. Pursuant to the terms of the option agreement, Mr. Ste. Marie granted to EHG an irrevocable option exercisable by EHG to re‑purchase the Maribec shares from Mr. Ste. Marie upon (i) EHG, its directors and officers obtaining the requisite consents, approvals, and security clearances from Health Canada and (ii) payment to Mr. Ste. Marie of one dollar. Under the option agreement, Instadose Canada was permitted to notify Mr. Ste. Marie of its desire to commence the process of exercising the option at any time.

On September 4, 2020, Health Canada issued the cultivation license to Maribec. The cultivation license is valid for three (3) years expiring on September 4, 2023. On October 2, 2020, Maribec submitted an application with Health Canada’s Cannabis Licensing and Security Division for a Standard Processing License under the Cannabis Regulations. The standard processing license was granted on February 25, 2021 and expires on September 4, 2023.

On March 11, 2021, Instadose Canada (formerly EHG) delivered the option notice to Mr. Ste. Marie regarding their election to exercise the option. To date, Instadose Canada has not completed that exercise. Instadose Canada will commence the process of obtaining all the Health Canada Approvals and completing their repurchase of Maribec in the second half off 2022.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Subsidiaries

Instadose Canada has the following subsidiaries

 ____________

Notes:

⁽¹⁾ IDP Macedonia is a North Macedonia company. Fifty percent (50%) ownership interest in IDP Macedonia is held by Grant F. Sanders as trustee for the Company pursuant to the terms of a trust declaration dated March 2, 2021.

⁽²⁾ IDP Macedonia operates the North Macedonia production facility. Ownership of the North Macedonia production facility is held in the name of Kanabiko Doo, Strumica (“Kanabiko”). Ownership of Kanabiko is registered fifty percent (50%) in the name of Grant F. Sanders as a trustee in trust for Instadose Canada on terms set out in a declaration of trust executed by Mr. Sanders on March 3, 2021. The remaining fifty percent (50%) ownership interest in Kanabiko is registered in the name of the North Macedonia partner.

⁽³⁾ Ninety‑five percent (95%) ownership interest in IDP Portugal is held by Aldo Vidinha and/or his personal corporation as trustee for Instadose Canada pursuant to the terms of a trust declaration dated March 4, 2021.

⁽⁴⁾ IDP India is an Indian company fifty-five percent (55%) owned by Instadose Canada. The remaining forty‑five percent (45%) equity ownership in IDP India is held by Instadose Canada’s joint venture partner in India, Sanctum Healthcare Remedies Private Limited.

Global Medicinal Cannabis Industry

Today’s global medicinal cannabis industry remains fractured as it struggles to define itself as a profitable and viable commercial business. The global production, sale, and distribution of medicinal cannabis and cannabinoid oil is monopolized by licensed producers with minimal participation to date from Big Pharma, who require sustainable, consistent, diverse, and low‑cost bulk supplies of high‑quality medicinal cannabis and cannabinoid oil to make entrance into the medicinal cannabis industry possible. Today’s licensed producers cannot meet the demands of Big Pharma due to several global challenges facing them. These challenges include the expensive cost of constructing and expanding indoor facilities, high manual labor costs, inefficient production process limiting product output, and strict government regulation limiting production capacity. In addition, there are substantial logistical challenges transporting medicinal cannabis from one international jurisdiction to another that require international policing authorities to participate in the process. Notwithstanding the foregoing, the demand for medicinal cannabis and cannabinoid oil continues to grow at a rapid pace. This is especially true as the rise in the volume of critical trials and scientific studies on medicinal cannabis and cannabinoid oil continue to uncover new and greater benefits to product consumption.

In Instadose Canada’s opinion, full participation in medicinal cannabis industry by Big Pharma will be required to satisfy the ever‑increasing global product demand, accelerate the volume of clinical trials and scientific studies aimed at uncovering new and greater benefits to medicinal cannabis and cannabinoid oil consumption, and unlock the market value potential of the medicinal cannabis industry predicted to reach US$ 84.0 Billion in market value by 2028¹. For this reason, Instadose Canada has committed to creating a large global distribution platform for medicinal cannabis and cannabinoid oil. Instadose Canada plans to utilize this global distribution platform to create a new wholesale marketplace and mass‑scale supply chain for medicinal cannabis and cannabinoid oil capable of providing Big Pharma with sustainable, consistent, diverse, and low‑cost supplies of high‑quality medicinal cannabis and cannabinoid oil for use in bulk as an active pharmaceutical ingredient.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Instadose Canada’s Global Distribution Platform spans five (5) Continents to date, including Africa, Europe, Asia, South America, and North America. Within each Continent, Instadose Canada is establishing large‑scale operational subsidiaries and joint venture partnerships to apply for and/or secure access to government‑issued licenses, permits, and joint venture partnerships. Currently, Instadose Canada is focused on securing licenses and establishing partnerships in the DRC, North Macedonia, Portugal, India, Colombia, Mexico, Cameroon, and Canada, each seeking to increase their level of participation within the global medicinal cannabis industry.

____________

Notes:

¹ Grandview Research Inc. (March 2021) ‑ Legal Marijuana Market Worth $84.0 Billion by 2028 I CAGR 14.3% (https://www.grandviewresearch.com/press‑release/global‑legal‑marijuana‑market).

Global Distribution Platform

Instadose Canada is fueling the Global Distribution Platform by seeking to establish large-scale operational subsidiaries and joint venture partnerships (the “Participants”) throughout each continent engaging in medicinal cannabis cultivation and/or cannabinoid oil production. Participants engaged in medicinal cannabis cultivation are responsible for growing, cultivating, packaging, and exporting medicinal cannabis to Participants engaged in cannabinoid oil production, whom, upon receipt of medicinal cannabis, sell it or utilize it in the production and sale of cannabinoid oil to pharmaceutical industry companies sourced by Instadose Canada or others.

Instadose Canada, as creator of the Global Distribution Platform, is responsible for the platform’s continued maintenance and growth. In doing so, Instadose Canada supplements the operational work performed by Global Distribution Platform Participants by performing the following key functions:

The Transportation of Medicinal Cannabis throughout the Global Distribution Platform

The ability to transport medicinal cannabis safely and efficiently from one continent to another throughout the Global Distribution Platform is a critical component of Instadose Canada’s global business model. On January 6, 2021, Instadose Canada entered into a three-year logistics and procurement services agreement with Project Management Resources Inc. (“PMR”), a Canadian company. Since 1993, the principals of PMR have been actively involved in the transportation of goods within the African Continent. Under the Logistics and Procurement Services Agreement, PMR agreed to assume all responsibility for the management and procurement of those services required for, among other things, the international warehousing, customs clearing, and transportation of medicinal cannabis in and from, among other continents, Africa, Europe, South America, Asia and North America. PMR also agreed to perform the logistics and procurement services exclusively for Instadose Canada to the exclusion of any other company participating in medicinal cannabis industry. Payment for all logistics and procurement services is made by Instadose Canada to PMR on a fixed rate basis in accordance with applicable industry standards.

The Logistics and Procurement Services Agreement is supported by individual independent consulting agreements dated January 6, 2021, entered into between Instadose Canada and PMR principals.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Risk Mitigation Strategies

Instadose Canada is in the process of implementing numerous risk mitigation strategies to protect the company from events of force majeure as well as other possible risks affecting Instadose Canada’s business model. These strategies include the following:

Notwithstanding Instadose Canada’s efforts to mitigate risk at all levels of its business operations, certain situations can arise where Instadose Canada will be required to terminate, or delay the commencement of a joint venture agreement, or terminate, or delay the commencement of a purchase or supply agreement.

Participant Activities by Continent 

The following chart summarizes those Participant activities (i.e., medical cannabis cultivation and/or cannabinoid oil production) in the process of being or to be conducted on behalf of Instadose Canada and the Global Distribution Platform within each Continent:

Notes:

____________

⁽¹⁾ Final structure is subject to change.

⁽²⁾ Following the repurchase of Maribec.

Impact of COVID-19

The ongoing COVID-19 global and national health emergency has caused significant disruption in international economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic has the potential to significantly impact the Company’s supply chain, distribution centers, or logistics and other service providers.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

In addition, a severe prolonged economic downturn could result in a variety of risks to the business, including weakened demand for products and services and a decreased ability to raise additional capital when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. 

To date, we have maintained uninterrupted business operations with normal turnaround times for servicing our customers. We have implemented adjustments to our operations designed to keep employees safe and comply with federal, state, and local guidelines, including those regarding social distancing. The extent to which COVID19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence. In response to COVID-19, the United States government has passed legislation and taken other actions to provide financial relief to companies and other organizations affected by the pandemic.

The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations.

Any resulting financial impact cannot be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition, and results of operations.

Basis of Presentation

The consolidated financial statements have been presented in Canadian dollars and are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Instadose Pharma Corp. has determined that the Canadian dollar is the most relevant and appropriate reporting currency as, despite continuing shifts in the relative size of our operations across multiple geographies, the majority of our operations are conducted in Canadian dollars and our financial results are prepared and reviewed internally by management in Canadian dollars.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the consolidated financial statements for the fiscal year ended May 31, 2021 included in the Company’s year-end consolidated financial statements on Form 8-K filed by Instadose Pharma Corp. (formerly known as Mikrocoze, Inc.), filed with the United States Securities and Exchange Commission. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 8-K.

In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended February 28, 2022, are not necessarily indicative of the results that may be expected for the year ending May 31, 2022.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Liquidity, Going Concern and Management’s Plans

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying consolidated financial statements, for the nine months ended February 28, 2022, the Company had:

Additionally, at February 28, 2022, the Company had:

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand of $5,328 at February 28, 2022.

Once business operations commence during fiscal year end May 31, 2023, the Company expects to generate sufficient revenues and positive cash flows from operations to meet its current obligations. However, the Company may seek to raise debt or equity-based capital at favorable terms, though such terms are not certain. Currently, the Company expects to incur losses from operations and have negative cash flows from operating activities for the near-term.

See Note 9 regarding the conversion of loan payable with the Company’s Former Chairman and Chief Executive Officer totaling $39,531,029.

As the Company begins its business operations, we note that in recent years, the actions of governments around the world have signaled a significant change in attitudes towards cannabis, have either formally legalized medical cannabis access or established government efforts to explore the legalization of medical cannabis access. Therefore, opportunities continue to exist for the Company to operate in jurisdictions where governments have established, or are actively moving towards, a legal framework.

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Management’s strategic plans include the following:

Risks and Uncertainties

In general, the following represents a non-exhaustive listing of some, but not all, expected future risks and uncertainties related to the Cannabis industry:

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

Significant estimates during the nine months ended February 28, 2022, and 2021 include the borrowing rate considered for operating lease right-of-use asset and related operating lease liability, valuation of intangible rights – related party, uncertain tax positions, and the valuation allowance on deferred tax assets.

Principles of Consolidation and Non-Controlling Interest

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and both its wholly owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Non-controlling interest is recorded in total stockholders’ deficit in the consolidated financial statements. For the nine months ended February 28, 2022, and 2021, none of the Company’s subsidiaries were operational, as a result, non-controlling interest has a balance of $0.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Variable Interest Entities

A variable interest entity (“VIE”) is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to control the entity’s activities or do not substantially participate in the gains and losses of the entity. Upon inception of a contractual agreement, and thereafter, if a reconsideration event occurs, the Company performs an assessment to determine whether the arrangement contains a variable interest in an entity and whether that entity is a VIE. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Under Accounting Standards Codification (“ASC”) 810 – Consolidations, where the Company concludes that it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE. At February 28, 2022 and May 31, 2021, respectively, the Company has no VIE’s.

Equity Method Investments

Investments accounted for using the equity method include those investments where the Company (i) can exercise significant influence over the other entity and (ii) holds common stock and/or in-substance common stock of the other entity. Under the equity method, investments are carried at cost, and subsequently adjusted for the Company’s share of net income (loss), comprehensive income (loss) and distributions received from the investee. If the current fair value of an investment falls below its carrying amount, this may indicate that an impairment loss should be recorded. Any impairment losses recognized are not reversed in subsequent periods. At February 28, 2022 and May 31, 2021, respectively, the Company has no equity method investments.

Due from Related Party

From time to time, the Company may advance funds to an entity (IDP Macedonia) that is 50% controlled by our Former Chairman and Chief Executive Officer. While management believes the advances are expected to be recoverable, the recoverability of these advances depends on, amongst other things, Instadouz’s ability to generate positive cash flows through operations. In the event that Instadouz does not generate sufficient cash flows to support ongoing operations, the Company may be required to fund additional expenses. As a result of this and other uncertainties, the Company may ultimately not be able to recover some, or all, of the value of these advances.

The IDP Macedonia collaboration is a revenue and expense sharing arrangement. Revenues generated from Instadouz’s sale of Medicinal Cannabis or Cannabinoid Oil is to be split 49% to the Company’s operating partner in the DRC (Instadouz DRC), 49% to the Company, and 2% to IDP Macedonia.

During the years ended May 31, 2021 and 2020, the Company has advanced IDP Macedonia a total of $929,313 and $150, respectively, of which all amounts were directly contributed by our Former Chairman and Chief Executive Officer, thereby, increasing loan payable – related party.

During the nine months ended February 28, 2022, the Company has advanced IDP Macedonia a total of $579,031, of which all amounts were directly contributed by our Chairman and Chief Executive Officer, thereby, increasing loan payable – related party.

Subsequent to February 28, 2022, the Company has not advanced any funds to IDP Macedonia. See Note 6.

Joint Venture - Portugal

In October 2020, the Company executed a joint venture in Portugal with a third party, which created an entity known as IDP Portugal. The purpose of this joint venture was to secure licenses to import Medicinal Cannabis into Portugal to be sold or processed into Cannabinoid Oil and then sold to pharmaceutical industry companies located predominantly in the European Union.

Effective March 1, 2021, under the terms of this arrangement, ownership of IDP Portugal is split 95% to the Company and 5% to the third party. IDP Portugal has not yet had any operations since its formation.

During the year ended May 31, 2021, the Company advanced $29,106, all of which was directly contributed by our Chairman and Chief Executive Officer, thereby, increasing loan payable – related party.

During the nine months ended February 28, 2022, the Company did not advance any funds to IDP Portugal.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Joint Venture/Majority Owned Subsidiary - India

In January 2021, Instadose, along with its local partner in India, Sanctum Healthcare Remedies Private Limited (“Sanctum”), commenced official discussions with State government officials in Uttarakhand with a goal to secure a legal commercial license to grow, cultivate, process, and produce Medicinal Cannabis and Cannabinoid Oil (the “Uttarakhand License”) on agricultural lands located within the State of Uttarakhand (the “Uttarakhand Lands”).

In February 2021, Instadose and Sanctum agreed to a plan of joint venture that would see the parties work together in India to secure multiple State‑issued licenses to, among other rights, grow, cultivate, process, produce, export, and sell Medicinal Cannabis (according to India Law) and Cannabinoid Oil (the “India JV Licenses”) on certain agricultural lands in India (the “India JV Lands”) starting with the Uttarakhand License and Uttarakhand Lands (the “India Joint Venture”).

On February 18, 2021, Instadose and Sanctum executed a joint venture agreement (the “India JV Agreement”) formalizing their relationship under the India Joint Venture. In doing so, the India Joint Venture would serve the Global Distribution Platform as both a Medicinal Cannabis Cultivation Participant and Cannabinoid Oil Production Participant. The term of the India Joint Venture was agreed at twenty‑five (25) years, with a mutual option to extend the India Joint Venture for one additional twenty‑five (25) year term.

The India JV Agreement provided Instadose with exclusive rights to market and sell all of the Medicinal Cannabis and Cannabinoid Oil produced under the India Joint Venture with those net profits generated under the India Joint Venture to be shared as follows: Instadose 55%; Sanctum 45%.

On March18, 2021, Instadose and Sanctum incorporated a Subsidiary in India, Instadose Pharma India Private Limited (“IDP India”) to manage the India Joint Venture. IDP India is ownership is as follows: Instadose 55%; Sanctum 45%.

On August 6, 2021, the District Magistrate of Haridwar, in the State of Uttarakhand granted IDP India with its initial approval for the cultivation of Medicinal Cannabis, operating under the laws of India, on up to five hundred (500) acres of Uttarakhand Lands. IDP India is working to secure the Uttarakhand Lands. Once secured, approval to commence the official cultivation of Medicinal Cannabis in India (as well as receipt of the other applicable India JV Licenses) will be provided to IDP India.

During the nine months ended February 28, 2022 and the year ended May 31, 2021, the Company has advanced $0 and $775 to the joint venture.

Joint Venture – Mexico

In April 2021, Instadose and representatives of Instadose’s new third‑party partner in Mexico (the “Mexico Partner”) commenced discussions on a plan of joint venture/partnership that would see the parties work together in Mexico for the purposes of (i) growing, processing, purchasing, exporting, and selling Medicinal Cannabis, and (ii) utilizing Medicinal Cannabis to produce, export, and sell Cannabinoid Oil (collectively, the “Mexico Project”).

On July 29, 2021, Instadose and its Mexico Partner executed a letter agreement (the “Mexico Letter Agreement”) formalizing the scope of the Mexico Project which included the parties working together in Mexico.

During the nine months ended February 28, 2022 and the year ended May 31, 2021, there has been no activity with this joint venture.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Joint Venture – Colombia

In May 2021, Instadose and representatives of Instadose’s new third-party joint venture partner in Colombia (the “Colombia Partner”) commenced discussions on a plan of joint venture (the “Colombia Joint Venture”) that would see the Colombia Partner become an exclusive supplier to Instadose of no less than one million kilograms (1,000,000 kg) of Medicinal Cannabis per year throughout the term of the Colombia Joint Venture. The Colombia Partner is a Colombian company fully licensed in Colombia to cultivate and produce Medicinal Cannabis and its related derivatives.

On August 5, 2021, Instadose and its Colombia Partner executed a joint venture agreement (the “Colombia JV Agreement”) formalizing the scope of the Colombia Joint Venture. Under the Colombia JV Agreement, all of the Medicinal Cannabis to be supplied by the Colombia Partner to one or more Cannabinoid Oil Production Participants shall be determined in accordance with the terms of the supply agreements entered into between the applicable parties. Instadose and its Colombia Partner agreed to an initial five (5) year term for the operation of the Colombia Joint Venture subject to the right of the parties (absent the existence of a default) to extend the initial term for up to four (4) additional five (5) year terms.

During the nine months ended February 28, 2022 and the year ended May 31, 2021, there has been no activity with this joint venture.

Foreign Currency Translation

In preparing the financial statements of individual entities, transactions in currencies other than the entity’s functional currency are recognized at exchange rates in effect on the date of the transactions. At each reporting date monetary assets and liabilities denominated in foreign currencies are re-translated at the exchange rates applicable at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Realized and unrealized exchange gains and losses are recognized through net income (loss).

For the purposes of presenting consolidated financial statements the assets and liabilities of foreign operations, are translated into Canadian dollars at the exchange rates applicable at the balance sheet date. Income and expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates. Exchange differences resulting from translating foreign operations are recognized in accumulated other comprehensive income (loss). At February 28, 2022 and May 31, 2021, respectively, there were no accounts that required translation from a currency other than the Company’s functional currency (Canadian dollars).

Business Combinations

The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.

Significant judgments are used in determining fair values of assets acquired and liabilities assumed, as well as intangibles. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows, and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.

Business Segments and Concentrations

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as one identifiable and reportable segment.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

The Company’s financial instruments, including cash, and accounts payable and accrued expenses, are carried at historical cost. At February 28, 2022, and May 31, 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At February 28, 2022, and May 31, 2021, respectively, the Company did not have any cash equivalents.

Sales Tax Receivables

Sales taxes in Canada are imposed at two levels.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

The federal government levies a national sales tax, the GST. Several provinces – British Columbia, Saskatchewan, Manitoba, Quebec, and Prince Edward Island – levy a separate retail sales tax often known as PST or combined to create the HST.

The GST is collected at a different rate when the related sale is made in Newfoundland and Labrador, Nova Scotia, New Brunswick, and Ontario. Tax collected at this rate is commonly referred to as the ‘harmonized sales tax’ or HST. It is important to note, however, that although the rates are different this tax is the same tax as the GST.

Impairment of Long-lived Assets

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy.

In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

For the nine months ended February 28, 2022, and 2021, respectively, the Company did not recognize any impairment loss.

At February 28, 2022, and May 31, 2021, respectively, none of the Company’s capitalized property, plant and equipment had been placed into service. Once operations begin, all assets will be depreciated over their estimated useful lives. See Note 4.

Right of Use Assets and Lease Obligations

The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the performance of the business remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. At February 28, 2022, the Company’s operating lease did not contain any lease renewal options.

As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Intangible Rights – Related Party

Intangible assets consist of accessible license rights to cultivate Medicinal Cannabis in the DRC and is stated at cost less accumulated amortization. Amortization is provided for on the straight-line basis over the estimated useful life of the agreement which is twenty-five (25) years. See Notes 5 and 6.

Income Taxes

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 ”Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of May 31, 2021, and 2020, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the nine months ended February 28, 2022, and 2021, respectively.

As of February 28, 2022, all tax years remain open for audit.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

The Company recognized US$300,000 in marketing and advertising costs during the nine months ended February 28, 2022. The advertising costs were with respect to a media contract with Stellar Media entered into Instadose Pharma Corp. (USA) as previously disclosed in the 10-k filing on March 15, 2022.

Stock-Based Compensation

We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

When determining fair value, the Company considers the following assumptions in the Black-Scholes model:

At February 28, 2022, and May 31, 2021, the Company had 3,000,000 and 0 options outstanding (subject to vesting), respectively.

Common Stock Awards

The Company may grant common stock awards to employees and consultants in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by employees and consultants is recorded on the consolidated statement of operations in the same manner and charged to the same account as if such settlements had been made in cash.

Stock Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance if there is not a service period.

There were no warrant grants during the nine months ended February 28, 2022, and the year ended May 31, 2021, respectively.

Basic and Diluted Earnings (Loss) per Share

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.

During the nine months ended February 28, 2022, the Company granted 3,000,000 stock options (See Note 8). These options vest 1,000,000 each in June 2022 (fiscal year May 2023), June 2023 (fiscal year May 31, 2024) and June 2024 (fiscal year May 31, 2025). At February 28, 2022, none of these stock options had vested and were not exercisable, therefore, at February 28, 2022, there are no related common stock equivalents.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. See Notes 5 and 6 regarding the purchase of intangible rights and related loan payable with the Company’s Former Chairman and Chief Executive Officer.

Recent Accounting Standards

In September 2016, FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard will be effective for the Company in the first quarter of fiscal year June 1, 2023, and early adoption is permitted. The Company has not completed its review of the impact of this standard on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We adopted this pronouncement on March 1, 2021; however, the adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the potential impact of this standard on our financial statements.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Note 3 – Disposal of Subsidiary – Related Party

On February 7, 2019, the Company disposed of its 100% owned subsidiary Maribec. The Company retained an irrevocable option to repurchase Maribec at a future time. On February 25, 2021, Maribec received its cannabis processing license. This license expires on September 4, 2023.

On March 11, 2021, the Company elected its option to repurchase Maribec, this transaction has not yet closed. The Company has determined that the reacquisition of Maribec is not subject to the business combination rules, rather this was deemed an asset purchase.

After the disposal of the subsidiary, during the nine months ended February 28, 2022, and the year ended May 31, 2021, the Company incurred additional expenses totaling $0 and $42,636, respectively. The advances were never repaid and resulted in a reduction to paid in capital.

Note 4 – Property, Plant and Equipment

The components of property, plant and equipment are as follows:

* As of February 28, 2022 and May 31, 2021, none of the assets have been placed into service.

All of the Company’s property, plant and equipment will be placed into service upon commencement of operations, which is expected during the fiscal year ended May 2023.

Note 5 – Intangible Rights – Related Party

In October 2018, an affiliate of the Company’s Former Chairman and Chief Executive Officer, The Maye International Group SARL, (“TMIG”) entered into a business partnership with the DRC. On October 1, 2018, the DRC issued a registration certificate to TMIG for the cultivation of medicinal and food plants anywhere in the DRC for subsequent transformation into pharmaceutical products.

Under the terms of the agreement, TMIG committed $25,000,000 to the DRC to be used for the employment of agricultural professionals, building of infrastructure to grow and process cannabis, and to establish the exportation of product. The payment also allows the Company access to the Bukanga Lonzo Agro-Industrial Park to execute its operations, which primarily include the growing, transport, storing, processing, packaging and purchase of medicinal plants and medicinal plant derivatives for international export and sale.

The Company paid an additional $10,000,000 to TMIG to acquire the exclusive international rights to monetize the medicinal plant rights granted to TMIG by the DRC.

Total payments of $35,000,000 were made in USD and have been translated into Canadian dollars with a total valuation of $45,825,775.

The total payment of $45,825,775 to TMIG was paid directly from our Former Chairman and Chief Executive Officer during the period August 2018 to December 31, 2018. The Company effectively had acquired all rights associated with this agreement on January 1, 2019.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

In the accompanying consolidated balance sheets, amounts paid by our Former Chairman and Chief Executive Officer on behalf of the Company were recorded as a loan payable, which is non-interest bearing, unsecured and due on demand. The loan was converted into 4,517,831 common shares on November 30 at a deemed price of Cdn$8.76 per common share. See Note 8.

The term of the agreement is for 25 years and, contingent upon the renewal of the DRC joint venture agreement with TMIG shall be renewable automatically for one additional twenty-five (25) year term. The Company has capitalized these intangible rights and will amortize the asset ratably over the term of the agreement.

The Company's intangible asset is as follows:

Amortization expense for the nine months ended February 2022 and 2021 was $1,374,773 and $1,374,333, respectively.

See Note 6 regarding associated loan with related party.

Estimated amortization expense for each of the five (5) succeeding years and thereafter is as follows:

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Note 6 – Loan Payable – Related Party

In connection with the Company acquiring rights to operate in the DRC, the Company’s Former Chairman and Chief Executive Officer paid all related amounts. See Note 5.

The following represents a summary of the Company’s loan payable – related party, key terms, and outstanding balances at February 28, 2022, and May 31, 2021, respectively:

* See 8 regarding debt conversion to common stock                     

The Company’s Current Interim Chairman and Interim Chief Executive Officer advanced $51,831 for the nine months ended February 28, 2022.

Note 7 – Commitments and Contingencies

Operating Lease

We have entered into an operating lease agreement for our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee.

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

We have a lease agreement with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

Our lease, where we are the lessee, does not include an option to extend the lease term. Our lease also includes an option to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.

Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.

At February 28, 2022 and May 31, 2021, respectively, the Company has no financing leases as defined in ASC 842, "Leases."

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

The tables below present information regarding the Company's operating lease assets and liabilities at February 28, 2022 and May 31, 2021, respectively. 

Future minimum lease payments required under leases that have initial or remaining non-cancelable lease terms in excess of one year at February 28, 2022:

INSTADOSE PHARMA CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2022

(UNAUDITED)

Employment Agreements

The Company entered into several employment agreements with officers and directors, the terms were as follows: