UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 28, 2021

Commission File Number 000-56002

ALLIED CORP.

(Exact name of registrant as specified in its charter)

Nevada	33-1227173
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1405 St. Paul St., Suite 201, Kelowna, BC, Canada V1Y 9N2

(Address of principal executive offices) (Zip Code)

877-255-4337

(Registrant’s telephone number, including area code)

_____________________________________________

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

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

Title of Each Class	Trading Symbol(s)	Name of each Exchange on which registered
N/A	N/A	N/A

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

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

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

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

If an emerging growth company, indicate by 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

As of April 14, 2021, there were 85,916,824 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings.	17
Item 1A.	Risk Factors.	17
Item 2.	Unregistered Sales of Securities and Use of Proceeds.	18
Item 3.	Defaults Upon Senior Securities.	18
Item 4.	Mining Safety Disclosure.	18
Item 5.	Other Information.	18
Item 6.	Exhibits.	19

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ALLIED CORP.

CONSOLIDATED FINANCIAL STATEMENTS

Condensed consolidated interim balance sheets at February 28, 2021 (unaudited) and August 31, 2020	F-1
Condensed consolidated interim statements of operations and comprehensive loss for the three and six months ended February 28, 2021 and February 29, 2020 (unaudited)	F-2
Condensed consolidated interim statements of stockholders’ deficit for the three and six months ended February 28, 2021 and February 29, 2020 (unaudited)	F-3
Condensed consolidated interim statements of cash flows for the three and six months ended February 28, 2021 and February 29, 2020 (unaudited)	F-5
Notes to the unaudited condensed consolidated interim financial statements	F-6

3

ALLIED CORP.

Condensed Consolidated Balance Sheets

(Expressed in US Dollars)

	February 28, 2021			August 31, 2020
	(Unaudited)
Assets
Current assets
Cash	$	148,984		$	94,047
Inventory (Note 4)		103,972			52,585
Amounts due from related parties (Note 12)		11,738			-
Prepaid expenses		25,189			51,682
Total current assets		289,883			198,314
Deposits and advances (Note 5)		2,829,286			3,008,246
Right-of-use assets (Note 8)		73,758			374,997
Property, plant and equipment (Note 6)		228,914			223,020
Intangible assets (Note 7)		3,118,112			3,300,000
Total assets	$	6,539,953		$	7,104,577
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	1,379,647		$	1,396,495
Current portion of lease liabilities (Note 8)		4,127			17,073
Loan payable (Note 9)		1,253,772			1,253,772
Convertible notes payable (Note 10)		1,328,535			400,000
Total current liabilities		3,966,081			3,067,340
Lease liabilities, net of current portion (Note 8)		69,631			333,073
Total liabilities	$	4,035,712		$	3,400,413
Stockholders’ equity
Preferred stock – 50,000,000 shares authorized, $0.0001 par value Nil shares issued and outstanding	$	-		$	-
Common stock – 300,000,000 shares authorized, $0.0001 par value; 85,305,780 shares issued and outstanding (85,105,780 – par value $0.0001 – August 31, 2020)		8,531			8,511
Additional paid in capital		14,308,501			12,226,382
Common stock issuable		472,616			19,952
Accumulated deficit		(11,803,864	)		(7,908,566	)
Accumulated other comprehensive loss		(481,543	)		(642,115	)
Total stockholders’ equity		2,504,241			3,704,164
Total liabilities and stockholders’ equity	$	6,539,953		$	7,104,577

Nature of operations and going concern (Note 1)

Commitments (Note 15)

Subsequent events (Note 20)

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statement.

F-1

ALLIED CORP.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Expressed in US dollars)

(Unaudited)

	For the Three Months Ended February 28, 2021			For the Three Months Ended February 29, 2020			For the Six Months Ended February 28, 2021			For the Six Months Ended February 29, 2020
Revenue		1,060			-			5,260			-
Expenses
Amortization		196,341			33,980			366,021			33,980
Charitable donations		15,000			26,254			15,000			99,543
Consulting fees		163,892			317,074			491,735			491,214
Stock-based compensation		1,380,120			-			1,380,120			-
Foreign exchange		(11,291	)		67,215			(16,256	)		(3,919	)
Interest expense		145,588			-			258,428			-
Office and miscellaneous		436,017			268,578			541,829			349,549
Professional fees		242,148			192,802			372,779			339,350
Rent		10,058			4,611			30,890			8,940
Research and development		-			-			-			8,009
Travel		4,265			25,355			5,606			67,370
Operating expenses		2,582,138			935,869			3,446,152			1,394,036
Loss from operations		(2,581,078	)		(935,869	)		(3,440,892	)		(1,394,036	)
Other expenses
Loss on termination of lease		-			-			(65,565	)		-
Settlement payments		-			-			(105,000	)		-
Gain (loss) on debt extinguishment		19,820			-			(90,180	)		-
Write-off of receivables		-			(55,983	)		-			(55,983	)
Accretion		(138,178	)		(44,417	)		(193,661	)		(44,417	)
Total other expense		(118,358	)		(100,400	)		(454,406	)		(100,400	)
Net loss		(2,699,436	)		(1,036,269	)		(3,895,298	)		(1,494,436	)
Other comprehensive income (loss)
Foreign currency translation adjustments		42,354			11,419			160,572			5,739
Comprehensive loss		(2,657,082	)		(1,024,850	)		(3,734,726	)		(1,488,697	)
Basic and diluted loss per share		(0.03	)		(0.01	)		(0.05	)		(0.02	)
Weighted average number of common shares outstanding		85,276,609			79,040,099			85,305,780			77,161,058

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

F-2

ALLIED CORP.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Expressed in US dollars)

(Unaudited)

	Common stock						Treasury Stock						Additional					Stock						Accumulated Other
	Number ofshares			Amount			Number ofshares			Amount			Paid in Capital		Stock issuable			subscription receivable			Accumulated Deficit			Comprehensive Income (loss)			Total
Balance, August 31, 2019		51,200,014		$	5,120			-		$	-		$	912,965	$	24,135		$	(364	)	$	(1,300,803	)	$	(30,491	)	$	(389,438	)
Cancellation of common stock		(10,459,220	)		(1,046	)		-			-			1,046		-			-			-			-			-
Effect of reverse acquisition		42,027,986			4,203			-			-			3,925,542		65,092			364			-			-			3,995,201
Shares reacquired by treasury		(4,500,000	)		(450	)		4,500,000			450			-		-			-			-			-			-
Common stock subscribed		-			-			-			-			-		275,908			-			-			-			275,908
Comprehensive loss for the period		-			-			-			-			-		-			-			(458,167	)		(5,680	)		(463,847	)
Balance, November 30, 2019		78,768,780		$	7,827			4,500,000			450		$	4,839,553	$	365,135		$	-		$	(1,758,970	)	$	(36,171	)	$	3,417,824
Shares issued for cash		370,000			37			-			-			340,963		(341,000	)		-			-			-			-
Shares issued on acquisition of assets		4,500,000			450			(4,500,000	)		(450	)		4,500,000		-			-			-			-			4,500,000
Share subscriptions received		-			-			-			-			-		200,000			-			-			-			200,000
Beneficial conversion feature		-			-			-			-			247,066		-			-			-			-			247,066
Comprehensive loss for the period		-			-			-			-			-		-			-			(1,036,269	)		11,419			(1,024,850	)
Balance, February 29, 2020		83,138,780		$	8,314			-			-		$	9,927,582	$	224,135		$	-		$	(2,795,239	)	$	(24,752	)	$	7,340,040

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

F-3

ALLIED CORP.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Expressed in US dollars)

(Unaudited)

	Common stock				Additional				Stock					Accumulated Other
	Number of shares		Amount		Paid in Capital		Stock issuable		subscription receivable		Accumulated Deficit			Comprehensive Income (loss)			Total
Balance, August 31, 2020		85,105,780		8,511		12,226,382		19,952		-		(7,908,566	)		(642,115	)		3,704,164
Shares issued for cash		200,000		20		249,980		-		-		-			-			250,000
Detachable warrants issued with convertible notes payable		-		-		153,764		-		-		-			-			153,764
Shares issuable upon modification of debt		-		-		133,127		-		-		-			-			133,127
Common stock subscribed		-		-				110,000		-		-			-			110,000
Comprehensive loss for the period		-		-				-		-		(1,195,862	)		118,923			(1,076,939	)
Balance, November 30, 2020		85,305,780		8,531		12,763,253		129,952		-		(9,104,428	)		(523,192	)		3,274,116
Detachable warrants issued with convertible notes payable		-		-		142,564		-		-		-			-			142,564
Beneficial conversion feature		-		-		22,564		-		-		-			-			22,564
Stock-based compensation		-		-		1,380,120		-		-		-			-			1,380,120
Common stock issuable to settle debt		-		-		-		92,664		-		-			-			92,664
Common stock subscribed for cash		-		-		-		250,000		-		-			-			250,000
Comprehensive loss for the period		-		-		-		-		-		(2,699,436	)		41,649			(2,657,787	)
Balance, February 28, 2021		85,305,780		8,531		14,308,501		472,616		-		(11,803,864	)		(481,543	)		2,504,241

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

F-4

ALLIED CORP.

Condensed Consolidated Statement of Cash Flows

(Expressed in US dollars)

	For the Six Months Ended February 28, 2021			For the Six Months Ended February 29, 2020
	$			$
Cash provided by (used in):
Operating activities
Net loss for the period	$	(3,895,298	)	$	(1,494,436	)
Adjustment to net loss for the period for non-cash items
Accretion		193,661			44,416
Amortization		366,021			33,980
Loss on debt extinguishment		90,180			-
Write-off of receivables		-			55,983
Loss on termination of lease		65,566			-
Stock-based compensation		1,380,120			-
Changes in non-cash working capital balance:
Increase in other receivables		-			(75,584	)
Decrease (increase) in prepaid expenses		34,179			(21,096	)
Increase in due from related parties		(11,738	)		(14,185	)
Increase in accounts payable and accrued liabilities		95,637			28,362
Increase in inventory		(51,388	)		-
		(1,733,060	)		(1,442,560	)
Investing activities
Refund (payment) of deposits		129,897			(504,866	)
Purchase of property, plant and equipment		(33,209	)		(32,190	)
Cash obtained from acquisition of assets		-			12,894
		96,688			(524,162	)
Financing activities
Proceeds of convertible notes		1,186,892			588,000
Repayment of finance lease obligations		(16,315	)		-
Proceeds from the issuance of common stock		250,000			276,000
Proceeds for subscriptions of stock issuable		250,000			200,000
		1,670,577			1,064,000
Effect of exchange rate on changes of cash		20,732			4,136
Increase (decrease) in cash		54,937			(902,722	)
Cash, beginning of period		94,047			1,080,882
Cash, end of period	$	148,984		$	178,160
Supplemental cash flow disclosures:
Income taxes paid	$	-		$	-
Interest paid	$	225,679		$	-

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

F-5

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

1.	Nature of operations, reverse take-over transaction and going concern
	a)	Nature of operations
		Allied Corp. (the “Company or Allied”) was incorporated in the State of Nevada on February 3, 2013. On July 1, 2019, the Company changed its name to Allied Corp.
		The Company’s business plan is to discover new medical technologies some of which are cannabis derived to target full scope therapy and support for trauma survivors, military veterans and first responders, however the Company has not begun any operations or obtained the required permits to begin operations. The head office and the registered office of the Company are located at 1405 St. Paul Street, Kelowna BC V1Y 2E4.
		On September 10, 2019, the Company was acquired in a reverse takeover (“RTO”) transaction (see Note 1b) and the RTO is considered a purchase of the Company’s net assets (see Note 3) by AM (Advanced Micro) Biosciences, Inc. (“AM Biosciences”). For accounting purposes, the legal subsidiary, AM Biosciences has been treated as the acquirer and Allied Corp., the legal parent, has been treated as the acquiree.
		On February 18, 2020, the Company acquired all the issued and outstanding share capital of a Colombian company, Allied Colombia S.A.S (formerly Medicolombia’s Cannabis S.A.S) (“Allied Colombia”).
	b)	Reverse take-over transaction (RTO)
		On July 25, 2019, as amended effective August 27, 2019, the Company entered into a reorganization and stock purchase agreement (the “Reorganization Agreement”) to acquire 100% of the issued and outstanding equity of AM (Advanced Micro) Biosciences, Inc (“AM Biosciences”). Effective September 10, 2019, the parties closed the Reorganization Agreement (the “Acquisition”). As part of the transaction, Pacific Capital Investment Group, Inc., the then majority shareholder of Allied (the “Allied Shareholder”) delivered 51,200,014 shares of common stock, representing approximately 65.42% of the outstanding equity of Allied Corp. to SECFAC Exchange Corp. on behalf of the prior shareholders of AM Biosciences and certain other designees of AM Biosciences as a consideration to acquire 100% of the issued and outstanding equity of AM Biosciences. Further, as part of the transaction, the Allied Shareholder submitted for cancellation and return to treasury 10,459,220 and 4,500,000 shares of common stock. As a consequence, immediately subsequent to the close of the Reorganization Agreement, Allied had 78,268,780 shares of common stock outstanding.
		The Reorganization Agreement constitutes a reverse merger, such that AM Biosciences acquired control of Allied Corp. At the time of the Reorganization Agreement, the operations of Allied Corp. did not constitute businesses under ASC 805 Business Combinations and accordingly the transaction is considered a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). Under this method of accounting, AM Biosciences was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the acquisition: (i) AM Biosciences’ stockholders owned a substantial majority of the voting rights in the combined company, (ii) AM Biosciences designated a majority of the members of the initial board of directors of the combined company, and (iii) AM Biosciences’ senior management holds all key positions in the senior management of the combined company. As a result, as of the closing date of the acquisition, the net assets of the Company were recorded at their acquisition-date relative fair values in the consolidated financial statements of the Company and the reported operating results prior to the acquisition will be those of AM Biosciences. See Note 3 for details on the reverse acquisition.

F-6

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

1.	Nature of operations, reverse take-over transaction and going concern (continued)
	c)	Going concern
		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 six months ended February 28, 2021 of $3,895,298, has generated minimal revenue and as at February 28, 2021 has a working capital deficit of $3,676,198. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable 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, refer to note 14 for details.
	d)	COVID-19 impact
		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.
	e)	Business Risks
		While some states in the United States have authorized the use and sale of cannabis, it remains illegal under federal law and the approach to enforcement of U.S. federal laws against cannabis is subject to change. Because the Company plans to engage in cannabis-related activities in the United States, it assumes certain risks due to conflicting state and federal laws. The federal law relating to cannabis could be enforced at any time and this would put the Company at risk of being prosecuted and having its assets seized.
		On January 4, 2018, United States Attorney General Jeff Sessions issued a memorandum to United States district attorneys (the ““Sessions Memorandum”) which rescinded previous guidance from the United States Department of Justice specific to cannabis enforcement in the United States, including the Cole Memorandum. With the Cole Memorandum rescinded, United States federal prosecutors no longer have guidance relating to the exercise of their discretion in determining whether to prosecute cannabis related violations of United States federal law. In response to the Sessions Memorandum, on April 13, 2018, the United States President Donald Trump promised Colorado Senator Cory Gardner that he will support efforts to protect states that have legalized cannabis. Nevertheless, a significant change in the federal government’s enforcement policy with respect to current federal laws applicable to cannabis could cause significant financial damage to the Company. The Company may be irreparably harmed by a change in enforcement policies of the federal government depending on the nature of such change.
		Given the current illegality of cannabis under United States federal law, the Company’s ability to access both public and private capital may be hindered by the fact that certain financial institutions are regulated by the United States federal government and are thus prohibited from providing financing to companies engaged in cannabis related activities. The Company’s ability to access public capital markets in the United States is directly hindered as a result. The Company may, however, be able to access public and private capital markets in Canada in order to support continuing operations.

F-7

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies
	Business Presentation
	These unaudited condensed consolidated financial statements 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 February 28, 2021, and the results of its operations for the three and six months ended February 28, 2021, and cash flows for the six months ended February 28, 2021. The results of operations for the period ended February 28, 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.
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 February 28, 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

F-8

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies (continued)
	d)	Inventory
		Inventory is comprised of raw materials, and work-in-progress. 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. Pre-harvest costs include labor and direct materials to grow cannabis, which includes water, electricity, nutrients, integrated pest management, growing supplies and allocated overhead. As of February 28, 2021 and August 31, 2020, the Company does not have material harvested cannabis inventory.
		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 February 28, 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.

F-9

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies (continued)
	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 is 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 costs
		Research and development costs are expensed as incurred.

F-10

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies (continued)
	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 six months ended February 28, 2021, the Company generated sales of $5,260.
	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.
	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.

F-11

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies (continued)
	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.

F-12

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

2.	Significant accounting policies (continued)
	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.
	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 February 28, 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 six months ended February 28, 2021, are of significance or potential significance to the Company.

F-13

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

3.	Reverse Take-over Transaction
	Pursuant to the Reorganization Agreement (see Note 1(b)), effective on September 10, 2019, the Company acquired 100% of the issued and outstanding equity of AM Biosciences (the “Acquisition”). As consideration for the equity of AM Biosciences, the Allied Shareholder issued and delivered 51,200,014 shares of common stock, representing approximately 62.12% of the outstanding equity of the Company to SECFAC Exchange Corp. on behalf of the previous shareholders of AM Biosciences and other designees of AM Biosciences.
	The Acquisition, was accounted for as a reverse asset acquisition pursuant to Topic 805, Business Combinations, as substantially all of the fair value of the assets acquired were concentrated in a group of similar non-financial assets, and the acquired assets did not have outputs or employees.
4.	Inventory
	Inventory is comprised of the following items:

	February 28, 2021		August 31, 2020
Raw materials	$	27,680	$	52,585
Work in progress		76,292		-
Total inventory	$	103,972	$	52,585

5. Deposits and advances

	February 28, 2021		August 31, 2020
a) Towards the purchase of prefabricated buildings	$	2,585,540	$	2,600,720
b) Refundable deposits towards future land acquisitions		-		174,030
c) Vitalis equipment deposit		233,496		233,496
Other		10,250		-
Total deposits and advances	$	2,829,286	$	3,008,246

a)	In 2019, the Company entered to a separate modular building purchase agreement to acquire and construct an 8,700 square foot facility to be used as a certified Cannabis Cultivation and extraction facility. At February 28, 2021, Company had deposits of $2,585,540 (August 31, 2020 - $2,600,720) to purchase prefabricated buildings. As of February 28, 2021, the Company had not yet received the buildings and the amounts have been recorded as deposits.
b)	At February 28, 2021, the Company has entered into two purchase and sale agreements to acquire land as described in note 15(a). At February 28, 2021, Company had deposits totaling $Nil (August 31, 2020 - $174,030).
c)	At February 28, 2021 and August 31, 2020, the Company had paid $233,496 to purchase equipment as described in Note 15(b). At February 28, 2021, the Company had not yet received the equipment and the amount paid has been recorded as a deposit.

F-14

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

6.	Property, plant and equipment
	At February 28, 2021, property, plant and equipment consisted of:

	Construction in process			Farm facility and equipment		Office and computer equipment		Land equipment		Total
Cost
August 31, 2020	$	136,114		$	79,956	$	3,161	$	6,000	$	225,231
Additions		14,303			11,118		7,788		-		33,209
Transfer		(144,735	)		144,735		-				-
Foreign exchange		4,523			5,730		134		196		10,583
November 30, 2020	$	10,205		$	241,539	$	11,083	$	6,196	$	269,023
Accumulated depreciation
August 31, 2020	$	-		$	2,211	$	-	$	-	$	2,211
Additions		-			33,309		1,330		516		35,155
Foreign exchange		-			2,735		6		2		2,743
November 30, 2020	$	-		$	38,255	$	1,336	$	518	$	40,109
Net book value
August 31, 2020	$	136,114		$	77,745	$	3,161	$	6,000	$	223,020
November 30, 2020	$	10,205		$	203,284	$	9,747	$	5,678	$	228,914

	As of February 28, 2021, the construction in process has not been in use.
7.	Intangible assets
	At February 28, 2021, intangible assets consisted of:

	Cost $		Foreign exchange $			Accumulated amortization $			Impairment $			February 28, 2021 Net carrying value $		August 31, 2020 Net carrying value $
Cannabis licenses		5,435,334		(408,526	)		(794,724	)		(1,113,972	)		3,118,112		3,300,000
		5,435,334		(408,526	)		(794,724	)		(1,113,972	)		3,118,112		3,300,000

	On February 17, 2020, the Company acquired $5,435,334 of licenses as part of the acquisition of Medicolumbia. The licenses acquired are issued by the Republic of Colombia and include the use of seeds for growing Cannabis, production of derivatives from Cannabis for medicinal and scientific use, cultivation of Cannabis plants, and producer of seeds. The Company has recorded amortization of these licenses of $169,954 and $330,866 for the three and six months ended February 28, 2021, respectively.
8.	Leases
	In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability, measured on a discounted basis, on the balance sheet for all leases with terms longer than 12 months. The Company also elected to keep all leases with an initial term of 12 months or less off the balance sheet.
	The Company did not have any leases until the acquisition of Allied Colombia during the year ended August 31, 2020. The acquisition resulted in the addition of $82,398 of operating lease assets and liabilities.

F-15

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

8.	Leases (continued)
	The Company entered into an agreement to lease the land described in Note 4(b) and 14(a) with a commencement date of June 1, 2020. The lease requires the Company to make monthly payments of $4,501 (CAD$5,870) per month. The lease is for a 10-year term, expiring on May 31, 2030, with one 10-year renewal option and an option for the Company to purchase the land for approximately $920,000 (CAD$1,200,000).Effective November 1, 2020, the Company terminated the lease. Pursuant to ASC 842-20 upon the termination of the lease, the Company derecognized the lease related asset and liability and included any consideration paid or received upon termination that was not already included in the lease payments in the gain or loss on termination of the lease.After recording the proceeds from the landlord and derecognizing the capitalized building costs as well as the right of use asset and liability, the Company recorded a loss of $65,565 on the termination of the lease.
	ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term.For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term.For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term.ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. At February 28, 2021, the Company did not have any finance leases.
	At February 28, 2021, the weighted average remaining operating lease term was 9.00 years and the weighted average discount rate associated with operating leases was 15%.
	The Components of lease expenses were as follows:

	$
Operating lease cost:
Amortization of right-of-use assets		4,543
Interest on lease liabilities		12,413
Total operating lease cost		16,956

The following table provides supplemental cash flow and other information related to leases for the six months ended February 28, 2021:

	$
Lease payments	16,315

Supplemental balance sheet information related to leases as of February 28, 2021 are as below:

	$
Cost		387,573
Accumulated amortization		(9,627	)
Lease termination		(299,089	)
Foreign exchange		(5,099	)
Net carrying value at February 28, 2021		73,758

F-16

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

8.	Leases (continued)
	Future minimum lease payments related to lease obligations are as follows:

	$
2021	7,457
2022	14,915
2023	14,915
2024	14,915
Thereafter	83,272
Total minimum lease payments	135,474
Less: amount of lease payments representing effects of discounting	(61,716	)
Present value of future minimum lease payments	73,758
Less: current obligations under leases	(4,127	)
Lease liabilities, net of current portion	69,631

9.	Loan payable
	In June 2020, the Company entered into a financing agreement to finance the buildings described in Note 5(a). Pursuant to the agreement, the Company financed $1,253,772 of the purchase price. The Company paid $71,023 at commencement date on May 29, 2020, and will make six monthly interest payments of $37,613 commencing June 20, 2020 and repay the principal of $1,253,772 on November 20, 2020. During the three months ended February 28, 2021, the Company amended the loan agreement to extend the repayment due date to May 20, 2021. During the six months ended February 28, 2021, the Company paid interest in the amount of $225,679.
10.	Convertible notes payable

a)

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 (the “Notes”) 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 mature 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.

The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features and warrants would not meet derivative classification.

F-17

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

10.	Convertible notes payable (continued)
		The relative fair values of the convertible note and the warrants were $470,467 and $117,533 respectively. The effective conversion price was then determined to be $0.98. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature (“BCF”). The Company recognized the relative fair value of the BCF of $115,383 and an equivalent discount. The Company then recognized the relative fair value of the warrants of $108,100 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $364,517. The beneficial conversion feature of $115,383, the original issue discount of $12,000 and the relative fair value of the warrants of $108,100 discounted the carrying value of the convertible debt on the date of issue. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan using effective interest rate method. On June 30, 2020, the Company repaid $200,000 of the $600,000 note which left $400,000 outstanding on each note.
		i. First Modification:
		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.
		The Company evaluated the transaction under the guidance found in ASC 470-50 Modification and Extinguishment. The Company concluded that the Company is experiencing financial difficulty and that a concession was not granted. As the creditor has not granted a concession, the guidance contained in ASC 470-60 was applied. As present value of the cash flows under the new debt instrument differed by more than 10% from the present value of the remaining cash flows under the terms of the original debt instrument, it was determined that the debt was substantially different which resulted in extinguishment accounting.
		The extended convertible notes had a total carrying value of $400,000. As the common shares and warrants were issued as consideration for extending the convertible notes, the fair value of the common share and warrants of $218,397 were expensed under extinguishment accounting. The fair value of these costs were included in the calculation of the loss on extinguishment of $220,065.
		ii. Second Modification:
		On November 1, 2020, the Company entered into 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.
		The Company evaluated the transaction under the guidance found in ASC 470-50 Modification and Extinguishment. The Company concluded that the Company is experiencing financial difficulty and that a concession was not granted. As the creditor has not granted a concession, the guidance contained in ASC 470-60 was applied. As present value of the cash flows under the new debt instrument differed by more than 10% from the present value of the remaining cash flows under the terms of the original debt instrument, it was determined that the debt was substantially different which resulted in extinguishment accounting.

F-18

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

10.	Convertible notes payable (continued)
		The extended convertible notes had a total carrying value of $400,000. As the common shares were issued as consideration for extending the convertible notes, the fair value of the common share of $110,000 were expensed under extinguishment accounting. The fair value of these costs were included in the calculation of the loss on extinguishment of $110,000 and as the common shares had not been issued as of February 28, 2021 and have been recorded as common shares issuable.
		As at February 28, 2021, the Company has recorded accrued interest of $26,575, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.
	b)	On September 29, 2020, the Company issued a convertible note with a fair value of $163,341 (the “Note”) 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 prior to March 27, 2021 at a conversion price of $1.25 per share.
		The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features and warrants do not meet derivative classification.
		The relative fair values of the convertible note and the warrants were $85,330 and $78,011 respectively. The effective conversion price was then determined to be $0.65. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature (“BCF”). The Company recognized the relative fair value of the BCF of $85,330 and an equivalent discount. The Company then recognized the relative fair value of the warrants of $78,011 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $Nil. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan using effective interest rate method.
		As at February 28, 2021, the Company has recorded accrued interest of $6,803, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.
	c)	On October 26, 2020, the Company issued a convertible note with a face value of $37,613 (the “Note”) 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 prior to April 23, 2021 at a conversion price of $1.25 per share.

F-19

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

10.	Convertible notes (continued)
		The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features and warrants do not meet derivative classification.
		The relative fair values of the convertible note and the warrants were $20,176 and $17,437 respectively. The effective conversion price was then determined to be $0.65. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature (“BCF”). The Company recognized the relative fair value of the BCF of $20,176 and an equivalent discount. The Company then recognized the relative fair value of the warrants of $17,437 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $Nil. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan using effective interest rate method.
		As at February 28, 2021, the Company has recorded accrued interest of $1,288, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.
	d)	On November 11, 2020, the Company issued a convertible note with a face value of $85,937 (the “Note”) 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 prior to April 23, 2021 at a conversion price of $1.25 per share.
		The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features and warrants do not meet derivative classification.
		The relative fair values of the convertible note and the warrants were $48,258 and $37,679 respectively. The effective conversion price was then determined to be $0.70. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature (“BCF”). The Company recognized the relative fair value of the BCF of $48,258 and an equivalent discount. The Company then recognized the relative fair value of the warrants of $37,679 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $Nil. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan using effective interest rate method.
		As at February 28, 2021, the Company has recorded accrued interest of $2,566, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.

F-20

10.	Convertible notes payable (continued)
	e)	On December 2, 2020, the Company issued a convertible note with a face value of $600,000 (the “Note”) 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 prior to April 23, 2021 at a conversion price of $1.25 per share.
		The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features and warrants do not meet derivative classification.
		The relative fair values of the convertible note and the warrants were $457,436 and $142,564 respectively. The effective conversion price was then determined to be $0.95. As the stock price at the issuance date was greater than the effective conversion price, it was determined that there was a beneficial conversion feature (“BCF”). The Company recognized the relative fair value of the BCF of $457,436 and an equivalent discount. The Company then recognized the relative fair value of the warrants of $22,564 as additional-paid-in capital and an equivalent discount that further reduced the carrying value of the convertible debt to $Nil. The discount is being expensed over the term of the loan to increase the carrying value to the face value of the loan using effective interest rate method.
		As at February 28, 2021, the Company has recorded accrued interest of $14,466, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.
	f)	On January 7, 2021, the Company issued a convertible note with a face value of $300,000 (the “Note). 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 prior to April 23, 2021 at a conversion price of $1.25 per share.
		The Company has evaluated whether separate financial instruments with the same terms as the conversion features above would meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25. The Company determined that there was no derivative liability associated with the debenture or warrants under ASC 815-15 Derivatives and Hedging. The terms of the contracts do not permit net settlement, as the shares delivered upon conversion are not readily convertible to cash. The Company’s trading history indicated that the shares are thinly traded and the market would not absorb the sale of the shares issued upon conversion without significantly affecting the price. As the conversion features would not meet the characteristics of a derivative instrument as described in paragraphs ASC 815-15-25, the conversion features are not required to be separated from the host instrument and accounted for separately. As a result, at February 28, 2021, the conversion features do not meet derivative classification.
		As the stock price at the issuance date was less than the conversion price, it was determined that there was no beneficial conversion feature (“BCF”). As at February 28, 2021, the Company has recorded accrued interest of $4,274, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.

F-21

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

11.	Equity
	During the six months ended February 29, 2020:
	Pursuant to the Acquisition described in Note 1, the Allied Shareholder submitted for cancellation and return to treasury 10,459,220 shares of common stock.
	On September 9, 2019, the Company returned 4,500,000 common shares to treasury and reserved for acquisition of Allied Colombia. On February 14, 2020, the 4,500,000 common shares were re-issued to the previous shareholders of Allied Colombia with a fair value of $4,500,000.
	On December 1, 2019, the Company issued 130,000 common shares at $0.50 per share, for which gross cash proceeds of $265,000 had previously been received.
	On January 21, 2020, the Company issued 240,000 common shares at $1.25 per share for total net proceeds of $276,000 in cash.
	During the six months ended February 28, 2021:
	On September 30, 2020, the Company issued 120,000 shares of common stock at $1.25 per share for gross cash proceeds of $150,000.
	In connection with the extension of convertible notes payable, as of February 28, 2021, the Company has common stock issuable of $129,952 (August 31, 2020 - $19,952).
	At February 28, 2021, the Company had received $250,000 for the purchase of 500,000 common shares which were issued subsequent to February 28, 2021.
	At February 28, 2021, the Company had agreed to settle $112,484 of accounts payable through the issuance of 107,044 common shares with a fair value of $92,664 which resulted in a gain on settlement of debt of $19,820. The shares were issued subsequent to February 28, 2021.
12.	Related party transactions and balances
	All transactions with related parties have occurred in the normal course of operations and are recorded at the exchange amount which is the amount agreed to by the Company and the related party.
	a)	Key management compensation and related party transactions
		The Company has identified its directors and certain senior officers as its key management personnel. The compensation costs for key management personnel were as follows:

	February 28, 2021		August 31, 2020
Consulting fees and benefits	$	221,213	$	310,220

b)

Amounts due to/from related parties

In the normal course of operations, the company shares certain administrative resources with companies related by common management and directors. The administrative resources and services, which were provided in the normal course of operations, were measured at the exchange. All amounts payable and receivable are non-interest bearing, unsecured and due on demand. The following table summarizes the amounts were due from related parties:

F-22

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

12. Related party transactions and balances (continued)

	February 28, 2021			August 31, 2020
CEO and Director	$	(46,525	)	$	(12,588	)
COO and Director		(86,273	)		(42,059	)
An entity controlled by the CFO		(13,327	)		(10,797	)
An entity controlled by a director		-			(5,142	)
	$	(146,125	)	$	(70,586	)

As of February 28, 2021, the Company advanced $11,738 to related parties for future expenses. As of February 28, 2021, the Company had $146,125 (August 31, 2020 - $70,586) payable to related parties for expenses incurred or expensed paid on behalf of the Company by the parties which has been presented in accounts payable and accrued liabilities.

13.	Financial risk factors
	The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
	a)	Credit risk:
		Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash account. Cash accounts are held with major banks in Canada. The Company has deposited its cash with a bank from which management believes the risk of loss is low.
	b)	Liquidity risk:
		Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to meet liabilities when due. Accounts payable are due within the current operating period. The Company has a working capital deficit and requires additional financing to meet its current obligations (see Note 1).
	c)	Market risk:
		Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company is not exposed to market risk.
	d)	Interest rate risk:
		Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk, from time to time, on its cash balances. Surplus cash, if any, is placed on call with financial institutions and management actively negotiates favorable market related interest rates.
	e)	Foreign exchange risk:
		Foreign currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar. The Company has not entered into any foreign currency contracts to mitigate risk, but manages the risk my minimizing the value of financial instruments denominated in foreign currency. The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Canadian dollars:

F-23

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

13. Financial risk factors (continued)

	February 28, 2021
Balance in Canadian dollars:
Cash and cash equivalents	$	-
Accounts payable		(393,478	)
Net exposure		(393,478	)
Balance in US dollars:	$	(308,810	)

A 10% change in the US dollar to the Canadian dollar exchange rate would impact the Company’s net loss by approximately $30,881 for the six months ended February 28, 2021 (February 29, 2020 – $4,860).

The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Colombian Pesos:

	February 28, 2021
Balance in Colombian Pesos dollars:
Cash and cash equivalents	$	51,687,241
Accounts payable		(5,356,061,524	)
Net exposure		(5,304,374,282	)
Balance in US dollars:	$	(740,719	)

A 10% change in the US dollar to the Colombian Peso exchange rate would impact the Company’s net loss by approximately $74,072 for the three months ended February 28, 2021 (February 29, 2020 - $2,731).

14.	Capital management
	The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the business and continue as a going concern. The Company considers capital to be all accounts in equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company has a working capital deficit and requires additional capital to finance is future business plans. The Company is not subject to any externally imposed capital requirements.
15.	Commitments
	a)	On November 6, 2018, the Company signed an assignment to purchase two separate lots located at 8999 Jim Bailey Road in Kelowna, British Columbia, Canada. The land is zoned I2 General Industrial and allow for “Cannabis Production Facilities” as a principal use.
		The total commitment for the two parcels of land are CAD$1,942,250 (US$1,457,367) (Lot 1 - $988,550, Lot 2 - CAD$953,700). During the year ended August 31, 2019, the Company executed several “offer to purchase amendments” to defer the assignment and close of the two parcels of land. On November 11, 2019, the Company executed an additional offer to purchase amendment to extend the assignment and close of the land parcels no later than February 10, 2020 and there was an additional amendment to extend the close of the purchase to May 2020. On May 7, 2020, the Company assigned the purchase of Lot 1 to a third party. In June 2020, the Company entered into a lease agreement to lease Lot 1 from the third party for an annual rent of CAD$70,442 for 10 years commencing June 1, 2020 until May 31, 2030. On November 1, 2020, the lease agreement was terminated.

F-24

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

15.	Commitments (continued)
		In November 2019, the board of directors determined the Company would not close on Lot 2 as the parcel of land will not be required for future operations. As a result, the Company does not have a commitment to pay the value of CAD$953,700 for the land and will eligible to receive or assign the initial refundable deposit of CAD$10,000. During the year ended August 31, 2020, this contract of purchase and sale for LOT 2 – 8999 Jim Bailey Road was assigned to another non-related party.
	b)	On August 30, 2019, the Company entered into sales agreement to purchase an extraction system to be use in future at its operation in Colombia. The equipment has a value of CAD$658,260. The terms of the agreement require the Company to pay the full amount in monthly installments starting September 1, 2019 and will continue to February 2020. The equipment will be paid in full before the equipment is shipped to Colombia and title transfers to the Company. At February 28, 2021, the $233,496 (Note 5(c)) has been recorded as a deposit until the remaining purchase price is paid and the equipment is received.
	c)	As of February 28, 2021, the Company recorded a contingent liability of $536,727 for expenses in connection with Allied Colombia acquisition, which is included in the balance of accounts payable and accrued liabilities on the consolidated balance sheets.
16.	Share purchase warrants
	The following table summarizes the continuity of share purchase warrants:

	Number of warrants			Weighted average exercise price $
Balance, August 31, 2020		560,000			1.25
Issued		469,513			1.25
Expired		(240,000	)		1.25
Balance, February 28, 2021		789,513			1.25

As at February 28, 2021, the following share purchase warrants were outstanding:

Number of warrants		Exercise price $		Expiry date
	320,000		1.25	October 31 2021
	130,673		1.25	September 29, 2022
	30,090		1.25	October 16, 2022
	68,750		1.25	November 11, 2020
	240,000		1.25	November 27, 2020

F-25

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

17.	Stock Options
	On February 1, 2021, the Company granted 4,900,000 stock options to directors, officers and employees of the Company. The options expire five years after the grant date and 1,200,000 options are exercisable at $0.825 per share and 3,700,000 exercisable at $0.75 per share. The options vest one third on the grant date and one third on the first and second years after the grant date. The weighted average grant date fair value of stock options granted was $0.77 per share. During the six months ended February 28, 2021, the Company recorded stock-based compensation of $1,380,120 on the consolidated statement of operations.
	A summary of the Company’s stock option activity is as follow:

	Number of Options		Weighted Average Exercise Price $		Weighted Average  Remaining Contractual Term		Aggregate Intrinsic Value $
Balance, August 31, 2020		–		–		–		–
Granted		4,900,000		0.77		4.93
Outstanding, February 28, 2021		4,900,000		0.77		4.93		1,086,000
Exercisable, February 28, 2021		1,633,333		0.77		4.93		362,000

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Six Months Ended February 28, 2021			Six Months Ended February 29, 2020
Expected dividend yield		0	%		-
Expected volatility		182	%		-
Expected life (in years)		5			-
Risk-free interest rate		0.42	%		-

At February 28, 2021, there was $2,150,832 of unrecognized compensation costs related to non-vested stock-based compensation arrangements granted under the Plan.

F-26

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

18. Non-cash activities

	For the Six Months Ended February 28, 2021		For the Six Months Ended February 29, 2020
Non-cash activities:
Common stock issued pursuant to asset acquisitions		-		4,500,000
Debt settled with shares issuable		112,484		-
Beneficial conversion feature		176,328		129,533
Relative fair value of warrants issued with convertible note		275,691		117,533
Original debt discount against convertible notes		-		12,000
Net liabilities acquired in Medicolombias Acquisition		-		(222,837	)
Relative fair value of shares issued on modification of convertible notes		110,000		-

19.	Segment disclosure
	The Company has two operating segments including:

a)	Allied Columbia SAS, a Columbian based company through which the Company intends to commence commercial production in Colombia. (Allied Colombia)
b)	Allied Corp. which consists of the rest of the Company’s operations. (Allied)
Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates the Allied reporting segment in one geographical area (Canada), and the Allied Colombia reporting segment in one geographical area (Colombia).
Financial statement information by operating segment for the three months ended February 28, 2021 is presented below:

	Allied $			Allied Colombia $			Total $
Net sales		1,060			-			1,060
Net loss		(2,186,773	)		(512,663	)		(2,699,436	)
Accretion		138,178			-			138,178
Depreciation and amortization		-			196,341			196,341
Total assets as of February 28, 2021		2,782,106			3,757,847			6,539,953

F-27

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

19.	Segment disclosure (continued)
	Financial statement information by operating segment for the six months ended February 28, 2021 is presented below:

	Allied $			Medicolombia $			Total $
Net Sales		5,260			-			5,260
Net loss		(3,055,772	)		(839,526	)		(3,895,298	)
Accretion		193,661			-			193,661
Depreciation and amortization		-			366,021			366,021

Financial statement information by operating segment for the three months ended February 29, 2020 is presented below:

	Allied $			Medicolombia $			Total $
Net loss		(997,484	)		(38,785	)		(1,036,269	)
Accretion		44,417			-			44,417
Depreciation and amortization		-			33,980			33,980

Financial statement information by operating segment for the six months ended February 29, 2020 is presented below:

	Allied $			Medicolombia $			Total $
Net loss		(1,455,651	)		(38,785	)		(1,494,436	)
Accretion		44,417			-			44,417
Depreciation and amortization		-			33,980			33,980

Geographic information for the six months ended and as at February 28, 2021 is presented below:

	Revenues $		Total Assets $
Canada		5,260		2,782,106
Colombia		-		3,757,847
Total		5,260		6,539,953

F-28

ALLIED CORP.

Notes to the unaudited condensed consolidated financial statements

February 28, 2021

(Expressed in US dollars)

20.	Subsequent events
	a)	On January 24, 2021, the Company entered into an acquisition agreement to acquire all common shares of Pacific Sun Fungi Inc. (“PSF”) for $85,500 in cash and 200,000 common shares of the Company. In March 2021, the Company issued a promissory note in the amount of $85,500 to the shareholders of PSF. As of April 14, 2021, the promissory note remains unpaid. The Company has not received any common shares of PSF. The transaction has not been closed.
	b)	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 prior to September 26, 2021 at a conversion price of $1.25 per share.
	c)	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 prior to September 26, 2021 at a conversion price of $1.25 per share.
	d)	On March 30, 2021, the Company entered into an asset purchase agreement (“APA”) to acquire two privileged licenses issued by the Nevada Department of Taxation purposed for the cultivation of cannabis (the “Licenses”). In consideration for the licenses, the Company agreed to pay $150,000, issue a $1,350,000 promissory note and assume certain liabilities.
		The promissory note bears interest at the Short Term Applicable Federal Rate of 0.11% per annum and shall be repaid through quarterly payments of a minimum of 50% of the net operating income received in connection with the Nevada cannabis operation associated with the acquired Licenses. All outstanding principal and accrued interest is due two years after issuance of the note.
		As of April 14, 2021, the Company has not issued any considerations under the APA. The Company has not received any assets outlined in the APA. The asset purchase has not been closed.
		Concurrent with the APA, the Company entered into a services agreement (the “Services Agreement”) and a land lease agreement (the “Lease Agreement”) with the seller of the Licenses. Pursuant to the Services agreement the seller of the licenses will provide consulting services to the Company in exchange for the reimbursement of expenses incurred.
		Pursuant to the Lease Agreement, the Company leased land in North Las Vegas to accommodate an approximately 9,000 square foot building to be used for the cultivation, marketing or sale of cannabis for a period of 25 years. Lease payments shall commence on the date which the first cannabis plant is planted, and monthly lease payments are as follows:

· $1,500 per month for the first five years.

· $1,800 per month for years 6 to 10 of the lease.

· $2,025 per month for years 11 to 15 of the lease.

· $2,280 per month for years 16 to 20 of the lease.

· $2,565 per month for years 21 to 25 of the lease.

	In addition, for the term of the lease, the Company shall pay the landlord 50% of the net operating income derived from the cannabis cultivation operation located at the leased premises.
e)	Subsequent to February 28,, 2021, the Company received proceeds of $175,000 for the purchase of 350,000 common shares of the Company.

F-29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion relates to the historical operations and financial statements of Allied Corp. for the three months ended February 29, 2020 and February 28, 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 (or “Allied” or “the Company”) is a public Nevada corporation focused on bringing to market medical cannabis in Canada initially, via our wholly-owned subsidiary AM (Advanced Micro) Biosciences, Inc. that has end stage national license applications.

In the United States market, Allied’s wholly owned subsidiary Tactical Relief LLC has signed a 25-year land lease in the Las Vegas area with Marapharm Las Vegas LLC, a wholly owned subsidiary of Fiore Cannabis. This land has ample space to install Allied’s building and further space for future expansion. Further, Allied’s wholly owned subsidiary, Allied US Natural Health Products LLC, a Nevada limited liability company has entered into an asset purchase agreement with Marapharms for the purchase of a Nevada State US-based cannabis license. US Natural Health Products LLC, has signed a master services agreement with Marapharms to operate the facility. Marapharms will manage all activities that involve touching the plant. This includes all activities and actions needed to operate and manage the facility and equipment and perform all cannabis cultivation, production, sales and distribution activities. Allied Corp has sought expert legal opinion regarding corporate structuring in order to structure these agreements such that Allied Corp, as a publicly traded company, will not directly own nor engage in any activities that involve touching the plant. Allied has completed the construction of a $3.5 million, approximate 9,000 square foot, GMP-complaint facility that is ready to be deployed from the Las Vegas site. The building has ample space for cannabis cultivation and research as well as large scale product packaging and fulfillment.

Allied has expanded internationally into South America via acquisitions of national license holders in Colombia. As a research and development company, Allied’s focus is on creating and providing targeted cannabinoid health solutions for today’s medical issues. One of our top R&D priorities is developing effective Post Traumatic Stress Disorder (PTSD)/Post Traumatic Stress Injury (PTSI) solutions.

Led by a team of experienced Industry experts, Allied will use that valuable data to properly select and secure the appropriate products and business activities to ensure the company’s success.

4

The Company’s vertically integrated approach focuses on sufferers of PTSD. This market includes:

· Canadian Veterans, with initially an approximate 6,000 veterans available for first contact and onboarding, and a veteran base of approximately 650,000 in Canada from the War Service and Canadian Armed Forces

· An additional 2,000,000+ Canadian veterans who also suffer in certain numbers from PTSD, including estimates of:

· 740,000 RCMP/Police Officers

· 925,000 Correctional Services Canada/Canadian Border Services Agency/Canadian Peace Officers

· 280,000 Firefighters (not including volunteers)

· 75,000 Paramedics

· Potential South American market

· Potential United States market: approximately 15 million veterans.

The Company’s additional focus is on neutraceutical products for veterans and general public through bringing hemp derived nano-technology products to market in the United States. Differentiators from our competitors potentially include the low cost, high margin production that Allied has available via Colombian Production.

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

Basis of presentation

These unaudited condensed consolidated interim financial statements 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 condensed consolidated 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 to complete financial statements. Therefore, these unaudited condensed consolidated 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 February 28, 2021, and the results of its operations for the three and six months ended February 28, 2021, and cash flows for the six months ended February 28, 2021. The results of operations for the period ended February 28, 2021 are not necessarily indicative of the results to be expected for future quarters or the full year.

5

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.

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 February 28, 2021 and August 31, 2020.

c) Property and equipment

Property and equipment are stated at cost. The Company depreciates the cost of property 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, and work-in-progress. Cost includes expenditures directly related to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity.

Cannabis: Inventory costs include pre-harvest, costs. 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 February 28, 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.

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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.

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 S.A.S, a wholly-owned subsidiary acquired by the Company on February 18, 2020 to be the Colombian peso.

The functional currency for Tactical Relief LLC 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 costs

Research and development costs are expensed as incurred.

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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 six months ended February 28, 2021, the Company generated sales of $5,260.

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.

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.

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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.

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.

The financial instruments consist principally of cash, due from related parties, accounts payable, note payable, convertible notes payable, and a loan payable to Allied. The fair value of cash when applicable is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all other financial instruments which are categorized as loans and receivables approximate their current fair values because of their nature and respective relatively short maturity dates or current market rates of interest for similar instruments.

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.

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 February 28, 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.

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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.

q) Reclassification

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

r)  Recent accounting pronouncements

The Company does not expect that recent accounting pronouncements or changes in accounting pronouncements during the three months ended February 28, 2021, are of significance or potential significance to the Company.

The unaudited condensed consolidated interim financial statements include accounts of Allied Corp. and its 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.

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 six months ended February 28, 2021 of $3,895,298, has generated minimal revenue and as at February 28, 2021 has a working capital deficit of $3,676,198. 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 February 28, 2021 compared to the Three Months Ended February 29, 2020

Sales and Revenue

For the three-month period ended February 28, 2021 we had $1,060 in revenue. We had no revenue for the three-month period ended February 29, 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 February 28, 2021 totaled $2,582,138. Operating expenses for the three-month period ended February 28, 2021 is principally related to $1,380,120 in share-based compensation in connection with the development of our products. Operating expense also consisted of office and miscellaneous expense of $436,017, professional fees of $242,148 and interest expense of $145,588. Operating expenses for the three-month period ended February 29, 2020 totaled $935,869. The increase in operating expense during the quarter ended February 28, 2021 is principally the result of an increase in share-based compensation of $1,380,120 which was necessary to develop our product lines. Other operating expenses for the three-month period ended February 29, 2020 was office and miscellaneous expense of $268,578 and professional fees of $192,802.

Net Loss

As a result of the changes described above, net loss from operations after income taxes increased to $2,699,436 during the three months ended February 28, 2020 compared to $1,036,269 during the three-month period ended February 29, 2020.

Comparison of Unaudited Results for the Six Months Ended February 28, 2021 compared to the Six Months Ended February 29, 2020

Sales and Revenue

For the six-month period ended February 28, 2021 we had $5,260 in revenue. We had no revenue for the six-month period ended February 29, 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 six-month period ended February 28, 2021 totaled $3,446,152. Operating expenses for the six-month period ended February 28, 2021 is principally related to $1,380,120 in share-based compensation in connection with the development of our products. Operating expense also consisted of office and miscellaneous expense of $541,829, professional fees of $372,779 and interest expense of $258,428. Operating expenses for the six-month period ended February 29, 2020 totaled $1,394,036. The increase in operating expense during the quarter ended February 28, 2021 is principally the result of an increase in share-based compensation of $1,380,120 which was necessary to develop our product lines. Other operating expenses for the six-month period ended February 29, 2020 was office and miscellaneous expense of $349,549 and professional fees of $339,350. The overall increase in operating expenses during the six-month period ended February 28, 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 $3,895,298 during the six months ended February 28, 2021 compared to $1,494,436 during the six-month period ended February 29, 2020.

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Liquidity and Capital Resources

As of February 28, 2021, the Company had $289,883 in current assets, consisting of $148,984 in cash, $103,972 in inventory, $11,738 in receivables and $25,189 in prepaid expenses. Other assets mainly include deposits and advances of $2,829,286 (principally related to our cannabis cultivation building to be located in Nevada), property plant and equipment of $228,914 and intangible assets of $3,118,112 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 on April 8, 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 28,268 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 prior to March 27, 2021 at a conversion price of $1.25 per share.

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 prior to April 23, 2021 at a conversion price of $1.25 per share.

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 prior to April 23, 2021 at a conversion price of $1.25 per share.

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 prior to April 23, 2021 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 prior to April 23, 2021 at a conversion price of $1.25 per share.

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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 prior to September 26, 2021 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 prior to September 26, 2021 at a conversion price of $1.25 per share.

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.

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

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.

Future Financing

In connection with its proposed business plan and currently ongoing and proposed acquisitions, 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.

Capital Expenditures

As of February 28, 2021 the company had purchased property plant and equipment of $228,914 and paid net cash of $2,829,286 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.

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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 Allied Colombia S.A.S. (previously Medicolombia Cannabis S.A.S.) (“Allied Colombia”). Allied Colombia 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 Allied Colombia in exchange for $700,000 and 4,500,000 shares of Allied. The Company closed and completed the acquisition on February 17, 2020.

Assumption of contract of purchase and sale of 8999 Jim Bailey Rd.

On November 6, 2018, the Company through AM Biosciences signed an assignment to purchase two separate lots located at 8999 Jim Bailey Road in Kelowna, British Columbia, Canada. The land is zoned I2 General Industrial and allow for “Cannabis Production Facilities” as a principal use.

The total commitment for the two parcels of land is CAD$1,942,250 (US$1,457,367) (Lot 1 - $988,550, Lot 2 - CAD$953,700). During the year ended August 31, 2019, the Company executed several “offer to purchase amendments” to defer the assignment and close of the two parcels of land. On November 11, 2019, the Company executed an additional offer to purchase amendment to extend the assignment and close of the land parcels no later than February 10, 2020 and there was an additional amendment to extend the close of the purchase to May 2020.On May 7, 2020, the Company assigned the purchase of Lot 1 to a third party. In June 2020, the Company entered into a lease agreement to lease Lot 1 from the third party for an annual rent of CAD$70,442 for 10 years commencing June 1, 2020 until May 31, 2030.

In November 2019, the board of directors determined the Company would not close on Lot 2 as the parcel of land will not be required for future operations. As a result, the Company does not have a commitment to pay the value of CAD$953,700 for the land and will eligible to receive or assign the initial refundable deposit of CAD$10,000. During the year ended August 31, 2020, this contract of purchase and sale for LOT 2 – 8999 Jim Bailey Road was assigned to another non related party.

During the three months ended November 30, 2020, the Company terminated the lease. Pursuant to the agreement the Landlord accepts the surrender of the lease and payment of the sum of CAD$176,000 by the Landlord to the Company in return for the Company agreeing to relinquish, transfer and assign to the Landlord, any and all rights either of them has or may have in the site preparation work completed in the current year. Upon the termination of the lease there were no further commitments to this project.

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.

Xtreme Cubes Building

In June 2019, AM Biosciences signed the production and manufacturing contract to begin the manufacturing of the full building for the Canada extraction and production facility. This building will be a fully scalable, modular building.We anticipate being able to extract and produce additional strain development in this building beginning June 1, 2021.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 February 28, 2021, Company had deposits of $2,829,286 (August 31, 2020 - $2,600,720) to purchase prefabricated buildings. As of February 28, 2021, the Company had not yet received the building and the amounts have been recorded as deposits.

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United States Footprint in Las Vegas, Nevada

On or about March 30, 2021 the Company’s wholly owned subsidiary Tactical Relief, LLC, a Delaware limited liability company, entered into a 25-year land lease in the Las Vegas area (the “Land Lease”) with a wholly-owned subsidiary of FIORE Cannabis, Marapharm Las Vegas, LLC, a Nevada limited liability company (“Marapharm”). This land has ample space to install Allied’s building and further space for future expansion. Allied has completed the construction of an approximate $3.5 million, 9,000 square foot, GMP-complaint facility that is ready to be deployed from the Las Vegas construction factory to this land location. The building has ample space for cannabis cultivation and research as well as large scale product packaging and fulfillment. This building will be deployed to the location in the Las Vegas area and is ready for production.

In addition, the Company’s wholly owned subsidiary, Allied US Products LLC, a Nevada limited liability company, entered into an asset purchase agreement (the “Asset Purchase Agreement”) for the purchase of a Nevada State US-based cannabis license from Marapharm. As Nevada is not issuing any new licenses this asset is a key piece of Allied’s business plan and international vertifically integrated supply chain. The Asset Purchase Agreement provides for a purchase price of $1,500,000, payable $150,000 within 45 days and the balance paid pursuant to a promissory note (the “Promissory Note”) from 50% of the net operating income from the facility.

Allied US Products LLC, also entered into a master services agreement (the “Services Agreement”) with Marapharm, a Nevada registered company that has the required licenses to operate the facility and will manage all activities that involve touching the plant. This includes all activities and actions needed to operate and manage the facility and equipment, as well as, perform all cannabis cultivation, production, sales and distribution activities. Allied Corp has sought expert legal opinion regarding corporate structuring in order to structure these agreements such that Allied Corp, as a publicly traded company, will not directly engage in any activities that involve touching the plant.

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 $11,803,864 at February 28, 2021 and a net loss of $3,895,298 for the six months ended February 28, 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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Risks

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management evaluated the effectiveness of the Company’s internal control over financial reporting as of February 28, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management concluded that, as of February 28, 2021, our internal control over financial reporting was effective.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this quarterly report.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the period from August 31, 2020 through February 28, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties other than the following:

On or about April 30, 2020 the Company filed a complaint entitled ALLIED CORP., a Nevada corporation, Plaintiff, v. MALCOLM DAVIDSON, an individual, ANTHONY ZELEN, an individual, and DAVID WEINKAUF, an individual, Defendants, and TACTICAL RELIEF, LLC, a Delaware limited liability company, Nominal Party, filed in the Delaware Chancery Court as Case No. 2020-0321 – PAF (the “Delaware Action”).

On or about May 28, 2020 the Company filed that a complaint entitled ALLIED CORP., a Nevada corporation, and AM (ADVANCED MICRO) BIOSCIENCES, INC., an ALLIED CORP., a Nevada corporation, and AM (ADVANCED MICRO) BIOSCIENCES, INC., a British Columbian corporation, Plaintiffs, vs. MALCOLM DAVIDSON, an individual, ANTHONY ZELEN, an individual, and DAVID WEINKAUF, an individual, Defendants filed on May 28, 2020 in the District Court of Clark County Nevada as Case No. A-20-815610-B (The “Nevada Action”, and collectively with the Delaware action the “CLAIMS”).

On or about September 30, 2020 but effective September 21, 2020 the parties entered into three separate settlement agreements resolving the claims of both the Delaware Action and the Nevada Action.

In December 2018, the Company’s subsidiary AM Biociences had issued 5,000,000 shares of its common stock to both Mr. Zelen and Mr. Weinkauf as an investment at $0.0001cents. These were converted to 4,311,585 shares (the “SECFAC Shares”) of SECFAC Exchange Corp. (“SECFAC”) at the time of the acquisition of AM Biosciences by Allied Corp. Pursuant to the settlement agreements, Mr. Zelen and Mr. Weinkauf both returned 4,061,585 of the SECFAC Shares to be immediately returned to SECFAC’s treasury.

Further, in March 2019, Mr. Calum Hughes and each of Mr. Zelen and Mr. Weinkauf entered into an agreement for the sale of 6,250,000 shares of common stock of AM Biosciences to be sold to Mr. Zelen and Mr. Weinkauf from Mr. Calum Hughes for $0.0001cents each (the “Repudiated Shares”). These were issued back to Calum Hughes after the non-payment and issuance of a letter of acceptance of repudiation in April 2020. (the “Repudiation Letter”).As part of the settlement, each of Mr. Zelen and Mr. Weinkauf acknowledged and accepted the repudiation letter.

Pursuant to the settlement with Mr. Zelen, Allied agreed to pay through his counsel a total of USD$30,000 as a flat fee settlement cash portion, payable in three installments as follows: a. The first installment of $10,000.00 USD is to be paid on or before October 31, 2020, b. The second installment of $10,000 USD is to be paid on or before November 30, 2020; and c. The third installment of $10,000USD is to be paid on or before December 30, 2020. These payments have not been made as of the date of this report on Form 10-Q.

Pursuant to the settlement with Mr. Weinkauf, Allied agreed to pay through his counsel a total of USD$60,000 as a flat fee settlement cash portion, payable in three installments as follows: a. The first installment of $30,000.00 USD is to be paid on or before October 31, 2020, b. The second installment of $20,000 USD is to be paid on or before November 30, 2020; and c. The third installment of $10,000USD is to be paid on or before December 30, 2020. These payments have not been made as of the date of this report on Form 10-Q.

Pursuant to the original settlement with Mr. Davidson, Allied agreed to pay through his counsel a total of USD$15,000 as a flat fee settlement cash portion payable on or before October 31, 2020. This was paid during the period ending February 28, 2021.

In addition, each of the defendants agreed to certain confidentiality and non-solicitation covenants in addition to other terms.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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.

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

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.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information.

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Item 6. Exhibits.

31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer
31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
101	Interactive data files pursuant to Rule 405 of Regulation S-T.

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SIGNATURES*

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Allied Corp. (Registrant)
Date: April 14, 2021	By:	/s/ Calum Hughes
		Calum Hughes
		Chief Executive Officer and Director Principal and Executive Officer
Date: April 14, 2021	By:	/s/ Ryan Maarschalk
		Ryan Maarschalk
		Chief Financial Officer Principal Financial Officer Principal Accounting Officer

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