On October 4, 2023, the Company announced that it signed a definitive agreement with an option to acquire 70% of ABCO, pending regulatory approval from the New Jersey Cannabis Regulatory Commission (“CRC”). On May 31, 2024, the Company executed the first option to acquire a 44% membership interest in ABCO for total consideration of $1,257,142. ABCO received licensing approval from the CRC and has an annual New Jersey cultivation license with local zoning, planning approvals and sufficient power supply. Also on May 31, 2024, the Company exercised the second option to purchase an additional 26% membership interest in ABCO for total consideration of $722,858. Closing of the second purchase option will occur on regulatory approval, two years after operations commence. Operations commenced in September 2024. While the Company legally owns 44% of ABCO prior to closing the second purchase option, the Company consolidates ABCO as a variable interest entity as (1) the Company through its ‘Investor Director’ (the Company’s Chief Executive Officer) has power equivalent to unilateral control over ABCO and (2) closing on the second purchase option is a requirement of the passage of time, and cannot be blocked.

The acquisition of ABCO is accounted for as an asset acquisition due to the absence of identifiable processes and the inability of the acquired assets alone to operate as a business as at May 31, 2024.

The allocation of the purchase price to the acquired assets is as follows:

The fair value of acquired long-term debt approximates its carrying amount as the interest rate approximately Company’s incremental borrowing rate. The acquired long-term debt is payable to GR Unlimited and therefore eliminated on consolidation.

Fair value of prepaid expenses and accounts payable approximate their fair value due to the short-term nature of these balances.

Fair value of property, plant, and equipment was determined by utilizing current market information for similar equipment, adjusted for the specific design, mechanical condition and marketability of such equipment. Key assumptions underlying management’s estimate of fair value include expectations as to future market conditions in the cannabis industry and expected useful lives of equipment. Acquired property and equipment has an assessed useful life of 5-10 years.

The acquired right of use asset and lease liability relates to the ABCO facility which is leased through June 1, 2033.

Intangible asset consists of a license which permits the Company to cultivate cannabis in the State of New Jersey which has an indefinite life. The fair value of the license was determined using a market approach which involves comparing the license to similar licenses that have been sold or are available for sale.