6. INTANGIBLE ASSETS

Intangible assets include $7,832,200 (December 31, 2023 - $12,733,885) for intellectual property (“Manna IP”) acquired under an asset purchase agreement with Manna Nutritional Group, LLC (“Manna”) dated September 10, 2021. The Manna IP encompasses patented technologies to naturally process and convert grains, pulses, and root vegetables, into low-starch, low-sugar, high-protein, fiber-rich baking flour products, as well as a wide range of breakfast cereals, juices, natural sweeteners, and baking enhancers. The Company paid $1,475,000 in cash and issued 147,600 prefunded warrants valued at $12,106,677 (the “Purchase Price”). Subject to a 9.99% blocker and SEC Rule 144 restrictions, the prefunded warrants vested in tranches up until March 10, 2024, at which time all tranches were fully vested. When vested the tranches of prefunded warrants became convertible into an equal number of common shares.

On January 3, 2023, Manna satisfied all of its contractual obligations when the patent was approved by the US Patent and Trademark Office and the title was transferred to the Company. During the year ended December 31, 2023, the Company issued 141,175 shares in relation to this transaction. As at September 30, 2024 all prefunded warrants had been converted (December 31, 2023 - 6,425 unconverted prefunded warrants).

Based on the terms above and in conformity with US GAAP, the Company accounted for purchase as an asset acquisition. The asset was available for use on January 3, 2023. The asset has a useful life of 20 years. The Company recorded $488,752 in amortization expense related to the Manna IP for the nine months ended September 30, 2024 (September 30, 2023 - $492,220).

As at September 30, 2024, the Company determined that there was an indicator of impairment for the intangible assets due to the significant decline in the Company’s stock price as at September 30, 2024. As a result, the Company performed an interim intangible impairment test and determined that the fair value of the intangible asset was $7,832,200 based on an income approach using the Company’s estimated discounted cashflows. For valuing the Manna IP, the Company used the following assumption: discount rate 28%. The Company recorded an asset impairment loss of $4,137,271 in operating expenses.

The Company acquired intangible assets from RCS as part of the business combination (Note 3). The following intangible assets were acquired from RCS:

SCHEDULE OF INTANGIBLE ASSETS ACQUIRED FROM RCS

The estimated annual amortization expense for the next five years are as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSE