ALID Allied Corp (QB)

These financial statements include accounts of Allied Corp. and its wholly-owned subsidiaries, including AM Biosciences, Allied US Products LLC, Tactical Relief LLC, Baleno Ltd. and Allied Colombia. 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.

Foreign currency transactions are translated into U.S. dollars at exchange rates in effect on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate at the reporting date. All differences are recorded in the consolidated statements of income and comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Assets and liabilities of foreign operations are translated into U.S. dollars at year-end exchange rates and any revenue and expenses are translated at the average exchange rate for the year. The resulting exchange differences are recognized in other comprehensive income.

Cash is comprised of cash on hand, cash held in trust accounts and demand deposits.

Taxes receivable represent payments of VAT and are presented as part of other receivables. On a periodic basis, the Company assess recoverability of these balances based on the probability of the Colombian government to reimburse these amounts.

Inventory includes work-in-progress and finished goods. Work-in-progress comprises raw materials, supplies, pre-harvest cannabis plants, and diluted crude. Finished goods consist of dried flower, CBD isolates available for sale, and purchased cannabis products.

Property, plant, and equipment are recorded at cost, net of accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis over the assets’ estimated useful lives, which are as follows:

Intangible assets consist of licenses, amortized on a straight-line basis over the shorter of their estimated economic life of 10 years or their legal life. Amortization of licenses begins from the acquisition date.

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.

Long-lived assets include property and equipment, right-of-use assets, and intangible assets with finite useful lives.

At each balance sheet date or when triggering events arise, the Company assesses long-lived assets for potential impairment. Assets are grouped at the lowest level of separately identifiable cash flows, or asset groups. Circumstances that may trigger an impairment review include significant declines in the asset's market price, adverse changes in business climate or legal factors, substantially higher than expected acquisition or construction costs, current period or projected operating losses associated with the asset, and expectations of early asset disposal.

If impairment indicators are present, the Company conducts an undiscounted cash flow analysis to assess recoverability. Impairment losses are recognized in profit or loss to the extent that an asset’s carrying amount exceeds its fair value.

At the start of a contract containing a lease, the Company classifies leases other than short-term leases as either operating or finance leases, following the criteria outlined in ASU 2016-02 Leases. Lease classification is only reassessed when: (a) the contract is modified and not treated as a separate contract, or (b) there is a change in the lease term or a reassessment of whether the lessee is likely to exercise a purchase option for the underlying asset. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases with terms of 12 months or less.

For both finance and operating leases, right-of-use assets and lease liabilities are initially measured as the present value of future lease payments plus initial direct costs, discounted at the lease's implicit interest rate, or, if not available, the Company’s incremental borrowing rate.

Subsequent measurements differ by lease type:

As at November 30, 2024, the Company has one lease which is classified as an operating lease.

The Company measures equity-settled share-based payments at fair value on the grant date, recognizing share-based compensation expense over the vesting period based on the estimated number of equity instruments expected to vest and uses Plain Vanilla for calculating the expected terms of options. Any consideration received from stock option exercises is recorded as an increase to common stock and additional paid-in capital.

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.

Under the simplified guidance of ASU 2020-06, the Company accounts for convertible debt instruments, including its secured convertible notes payable as a single unit of account unless the conversion feature requires bifurcation in accordance with derivative accounting under ASC 815. Secured convertible notes payable are initially recorded at fair value adjusted for issuance costs and subsequently measured at amortized cost using the effective interest method. Convertible note interest expense includes the stated interest rate and any applicable amortized discounts. Upon conversion, the debt's carrying amount is reclassified to equity with no gain or loss recognized.

Financial instruments represent contracts that create a financial asset for one party and a financial liability or equity instrument for another. Initially, financial instruments are recorded at fair value, reflecting 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. Subsequent measurement depends on the classification of the financial instrument, with values measured at either fair value or amortized cost. For instruments measured at fair value, the Company uses quoted market prices when available to determine fair value.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy, based on the reliability of the lowest level of inputs used in estimating fair values. The three levels of the fair value hierarchy are as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

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.

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.

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.

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.

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.

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.

Issuance of ASU 2020-06:

In August 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-06 - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging and Contracts in Entity’s Own Equity (Subtopic 815-40), aimed at simplifying the accounting for certain financial instruments. ASU 2020-06 eliminates the existing models that require the separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the guidance on the derivative scope exception related to the equity classification of contracts in an entity’s own equity.

Additionally, the new standard introduces enhanced disclosures for convertible debt and freestanding instruments indexed to and settled in an entity’s own equity. It also amends the diluted earnings per share guidance, mandating the use of the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2022, and must be applied on a full or modified retrospective basis, with early adoption allowed starting January 1, 2021. 

Certain amounts on the Condensed Consolidated Interim Statements of Operations and Comprehensive Loss of the prior year have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.