Strainwise, Inc.

Accounts Receivable – Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases, an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods.

The allowance for doubtful accounts, if any, is recorded as an expense within general and administrative expenses. As of October 31, 2019, and January 31, 2019, the Company’s allowance for doubtful accounts was $67,165 and nil, respectively. The Company recorded bad debt expense during the three and nine months ended October 31, 2019 of $67,165.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases (“ASU 2016-02”). The guidance in this new standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to the current accounting and eliminates the current real estate-specific provisions for all entities. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the standard effective February 1, 2019 by recording an immaterial transition adjustment and right of use assets and lease liabilities of approximately $500,000.

^{If the Company prepays the Note within 30 days of the date of the Note, the Company must pay all of the principal at a cash redemption premium of 110%; if the prepayment is made between the 31st day and the 60th day after the date of the Note, then the redemption premium is 115%; if the prepayment is made from the 61st to the 90th day after date of the Note, then the redemption premium is 120%; if the prepayment is made from the 91st to the 120th day after the date of the Note, then the redemption premium is 125%; if the prepayment is made from the 121st to the 150th day after the date of the Note, then the redemption premium is 130%; and if the prepayment is made from the 151st to the 180th day after the date of the Note, then the redemption premium is 135%. The Note cannot be prepaid after the 180th} day following the date of the Note.

The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, expected time to a liquidity event, exercise patterns, and post-vesting forfeitures. The Company estimates volatility based on the historical volatility of comparable company’s common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent term equal to the expected life of the award. The Company uses historical data to estimate pre-vesting option forfeitures and record unit-based compensation for those awards that are expected to vest. The Company adjusts unit-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.