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ABAXX TECHNOLOGIES INC. (Formerly New Millennium Iron Corp.)

CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2020 AND 2019 (EXPRESSED IN CANADIAN DOLLARS)

Independent Auditor's Report

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To the Shareholders of Abaxx Technologies Inc. (formerly New Millennium Iron Corp.):

Opinion

We have audited the consolidated financial statements of Abaxx Technologies Inc. (formerly New Millennium Iron Corp.) and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2020 and December 31, 2019, and the consolidated statements of operations and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2020 and December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Brock Stroud.

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Toronto, Ontario March 31, 2021

Chartered Professional Accountants Licensed Public Accountants

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Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Financial Position (Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
		December 31,		December 31,
	Note		2020		2019
ASSETS
Current assets
Cash and cash equivalents		$	8,861,671	$	1,707,372
Marketable securities	4		3,089,731		-
Subscription receivables			200,000		-
Funds held in Trust	5		1,326,450		-
Other receivables			590,550		35,672
Prepaid and other assets			54,167		5,022
Convertible note receivable	11		800,976		152,919
			14,923,545		1,900,985
Non-current assets					March
Investment in associate	9		-		2,633,710
Investments at fair value	10		2,084,853		1,000,000
Total Assets		$	17,008,398	$	5,534,695
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		$	3,211,564	$	2,227,230
Amount due to shareholders	17		-		2,032,657
Convertible debenture - derivative liability	12		-		2,939,705
Total liabilities			3,211,564		7,199,592
Shareholders' Equity
Share capital-common shares	13		36,795,082	10,533,138
Share capital-preferred shares	13		-		1,132,000
Contributed surplus	14		2,443,061		1,101,026
Accumulated translation adjustment			(25,376)		(15,305)
Warrants	15		-		438,868
Retained deficit		(23,695,679)		(12,239,466)
Total equity of Abaxx Technologies Inc.			15,517,088		950,261
Non-controlling interest	6		(1,720,254)	(2,615,158)
Total shareholders' equity (deficiency)			13,796,834	(1,664,897)
Total Shareholders' Equity and Liabilities		$	17,008,398	$	5,534,695

The accompanying notes are an integral part of these consolidated financial statements

Nature of operations (note 1) Subsequent events (note 21)

Approved on behalf of the Board:

"Joshua Crumb", Director

"Scott Leckie", Director

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Operations and Comprehensive Loss (Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
			For the year		ended
		December 31,		December 31,
	Note		2020		2019
Operating expenses
Development			2,676,727		7,049,385
Salaries and wages			1,047,953		1,326,858
Professional fees			1,917,491		775,947
Travel, marketing and promotion			242,556		290,057
General and administrative			216,937		85,639
Regulatory expenses			9,749		4,087
Loss on investment under equity method	9		7,145		218,444
Interest and accretion expenses	12		2,318,831		62,172
Share-based compensation	14		1,421,173		635,485
Total operating expenses			9,858,562		10,448,074
Operating loss for the year			(9,858,562)		(10,448,074)
Foreign exchange gain (loss)			443,875		(64,006)
Fair value adjustment on derivative liability	12		988,696		(307,705)
Fair value adjustment on note receivable	11		648,057		(28,969)
Gain on investments at fair value	10		1,084,853		136,815
Investment income			27,982		-
Listing expense	3		(1,137,205)		-
Impairment of investment in associate	9		(2,748,934)		-
Net loss for year		$	(10,551,238)	$	(10,711,939)
Net loss attributable to:
Shareholders of the Company			(9,381,293)		(8,412,398)
Non-controlling interest			(1,169,945)		(2,299,541)
Net loss for year		$	(10,551,238)	$	(10,711,939)
Cumulative translation adjustment			(10,071)		(134,341)
Comprehensive loss for theyear		$	(10,561,309)	$	(10,846,280)
Comprehensive loss attributable to:
Shareholders of the Company		$	(9,391,364)	$	(8,546,739)
Non-controllinginterest	6	$	(1,169,945)	$	(2,299,541)
Comprehensive loss for the year		$	(10,561,309)	$	(10,846,280)

Basic and diluted net loss per share	16	$	(0.24)	$	(0.24)
Basic and diluted weighted average number of common shares	16		39,607,037		35,422,734

The accompanying notes are an integral part of these consolidated financial statements

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Cash Flows (Expressed in Canadian Dollars)

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Cash Flows (Expressed in Canadian Dollars)
Note	For the year ended
	December 31, December 31, 2020 2019
Cash provided by (used in): Operating Activities Net loss for year Adjustment for: Fair value adjustment on derivative liability 12 Share-based compensation 14 Loss on investment in associate 9 Interest on shareholders loan Fair value adjustment on convertible note receivable 11 Fair value adjustment on investments at fair value 10 Impairment of investment in associate 9 Foreign exchange gain Listing expense 3 Accretion expense 12 Interest expense Accrued investment income Shares issued for consulting fees Changes in operating assets and liabilities: Other receivables Prepaid expenses Accounts payable and accrued liabilities	(10,551,238) $ (10,711,939) $ (988,696) 307,705 1,421,173 635,485 7,145 218,444 22,292 62,172 (648,057) 28,969 (1,084,853) (136,815) 2,748,934 - (392,280) - 628,836 - 1,957,789 - 338,750 - (26,266) - 777,813 - (141,741) (17,027) 10,897 1,096,299 607,158 2,006,264
Net cash used in operating activities	(5,312,344) (6,510,443)
Investing Activity Cash acquired on RTO	7,683,226 -
Net cash provided by investing activity	7,683,226 -
Financing Activities Proceeds from private placements, net of issue costs 13 Convertible debentures issued 12 Amounts (paid to) received from shareholder Proceeds from exercise of warrants	5,187,216 2,112,227 352,350 2,632,000 (756,149) 1,970,485 - 600,000
Net cash provided by financing activities	4,783,417 7,314,712
Increase in cash and cash equivalents Change in cash related to foreign exchange Cash and cash equivalents, beginning of year	7,154,299 804,269 - (13,197) 1,707,372 916,300
Cash and cash equivalents, end ofyear	8,861,671 $ 1,707,372 $

The accompanying notes are an integral part of these consolidated financial statements

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Changes in Equity (Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
							Accumulated							Non-
		Common		Preferred	Contributed			translation					Controlling		Shareholders'
		shares		shares		surplus	adjustment			Warrants		Deficit		interest		Equity
Balance, December 31, 2018	$	6,923,040	$	1,132,000	$	465,541	$	119,036	$	1,261,739	$	(3,827,068)	$	(315,617)	$	5,758,671
Net loss for the year		-		-		-		-		-		(8,412,398)		(2,299,541)	(10,711,939)
Cumulative translation on foreign operations		-		-		-		(134,341)		-		-		-		(134,341)
Issued in private placement		1,673,359		-		-		-		438,868		-		-		2,112,227
Exercise of warrants		1,936,739		-		-		-		(1,261,739)		-		-		675,000
Stock based compensation		-		-		635,485		-		-		-		-		635,485
Balance, December 31, 2019	$	10,533,138	$	1,132,000	$	1,101,026	$	(15,305)	$	438,868	$	(12,239,466)	$	(2,615,158)	$	(1,664,897)
Net loss for the year		-		-		-		-		-		(9,381,293)		(1,169,945)	(10,551,238)
Cumulative translation on foreign operations		-		-		-		(10,071)		-		(10,071)		-		(20,142)
Change in non-controlling interest		-		-		-		-		-		(2,064,849)		2,064,849		-
Shares issued in private placement		5,187,216		-		-		-		-		-		-		5,187,216
Shares issued on amalgamation		11,026,227		-		-		-		-		-		-		11,026,227
Shares issued on conversion of preferred shares		1,132,000		(1,132,000)		-		-		-		-		-		-
Shares issued on conversion of debenture		5,630,560		-		-		-		-		-		-		5,630,560
Shares issued for consulting services		1,241,485		-		-		-		-		-		-		1,241,485
Exercise of warrants		1,834,868		-		-		-		(438,868)		-		-		1,396,000
Exercise of options		209,588		-		(79,138)		-		-		-		-		130,450
Stock based compensation		-		-		1,421,173		-		-		-		-		1,421,173
Balance,December 31,2020	$	36,795,082	$	-	$	2,443,061	$	(25,376)	$	-	$	(23,695,679)	$	(1,720,254)	$	13,796,834

The accompanying notes are an integral part of these consolidated financial statements

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

1. Nature of operations

Abaxx Technologies Inc. ("Abaxx" or the "Company"), (formerly New Millennium Iron Corp.) is a company incorporated under the Alberta Business Corporations Act. Its corporate headquarters is located at 18 King Street East, Suite 902, Toronto, Ontario, M5C 1C4 and its registered office is located at 855- 2nd Street S.W., Suite 3500, Bankers Hall East Tower, Calgary, Alberta, T2P 4J8.The common shares of the Company are listed on the Aequitas NEO Exchange under the trading symbol “ABXX”.

Abaxx is a technology company engaged in development and deployment of trust enabling internet protocols.

On September 18, 2020, New Millennium Iron Corp. (“the Issuer”) and Abaxx entered into a definitive agreement pursuant to which the Issuer will acquire indirectly all of the issued and outstanding Abaxx shares in exchange for Issuer shares. In connection with the Reverse Takeover (“RTO”) transaction, an aggregate of the Issuer shares was issued in exchange for Abaxx common shares and Abaxx warrants. The RTO transaction was executed in accordance with a plan of arrangement. Upon closing, Abaxx became a wholly owned subsidiary of the Issuer named “Abaxx Technologies Holdco Inc.” See note 3 for additional details of the RTO.

COVID-19

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank evolve and vaccination programs are underway. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods. There are travel restrictions and health and safety concerns in areas that the Company operate including the United States of America, Barbados, Singapore, and Canada. Employees and contractors continue to work remotely and leverage virtual technology to conduct operations. The Company is closely monitoring the business environment and to implement measures to keep disruptions minimal to business operations.

The Board of Directors approved the consolidated financial statements on March 30, 2021.

2. Significant accounting policies

The significant accounting policies of the Company are set out below. These policies have been consistently applied to each of the years presented, unless otherwise indicated

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with and using accounting policies in full compliance with the International Financial Reporting Standards ("IFRS") and International Accounting Standards (“IAS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), effective for the Company’s reporting for the periods ended December 31, 2020 and 2019. The accounting policies set out

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

below have been applied consistently to the years presented in these consolidated financial statements unless otherwise noted below.

(b) Basis of presentation

These consolidated financial statements have been prepared on a historical cost basis other than the Company's financial instruments which are measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

The functional currency of the Company is the Canadian dollar which is also the presentation currency of the consolidated financial statements. The functional currency of the Company's subsidiaries is the United States dollar.

(c) Basis of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary companies after eliminating intercompany balances and transactions. Subsidiaries are entities over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than 50% of the voting rights. At December 31, 2020 and 2019 (except as noted below), the Company's subsidiaries and consolidation basis are as follows:

Name Functional currency Place of incorporation	Ownership December 31
	2020 2019
Abaxx Singapore PTE. LTD. ("Abaxx Singapore")(2) USD Singapore Abaxx Clearing PTE. LTD. ("Abaxx Clearing")(1)(2) USD Singapore Abaxx Exchange PTE. LTD. ("Abaxx Exchange")(1)(2) USD Singapore Abaxx Technologies Corp. ("Abaxx Barbados") USD Barbados Abaxx Technologies Holdco Inc. CAD Canada LabMag Services Inc..(3) CAD Canada LabMag GP Inc..(3) CAD Canada LabMag Limited Partnership.(3) CAD Canada	81% 57.98% 81% 57.98% 81% 57.98% 100% 100% 100% - 100% - 100% - 100% -

(1) Abaxx Clearing and Abaxx Exchange are wholly-owned subsidiaries of Abaxx Singapore. As a result, the interest held by the Company in Abaxx Clearing and Abaxx Exchange is held through Abaxx Singapore. These entities were incorporated in January 2019, as such were first consolidated for the year ended December 31, 2019.

(2) The interest in these entities is held through the Company's wholly-owned subsidiary Abaxx Barbados.

(3) These are fully owned subsidiaries of Abaxx and were not actively engaged in business activities.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(d) Financial instruments

Below is a summary showing the classification and measurement bases of the Company's financial instruments:

Classification
Cash and cash equivalents	FVTPL
Marketable securities	FVTPL
Subscription receivables	Amortized cost
Funds held in Trust	FVTPL
Investment at fair value	FVTPL
Other receivables	Amortized cost
Convertible note receivable	FVTPL
Accounts payable and accrued liabilities	Amortized cost
Amounts due to shareholder	Amortized cost
Derivative liability	FVTPL
Convertible debentures	Amortized cost

Financial assets

Financial assets are classified as either financial assets at fair value through profit and loss (“FVTPL”), amortized cost, or fair valve through other comprehensive income (“FVTOCI”). The Company determines the classification of its financial assets at initial recognition.

Amortized cost - assets that are held for collection of contractual cash flows where those cash flows are solely payments of principal and interest are measured at amortized cost. Interest revenue is calculated using the effective interest method and gains or losses arising from impairment, foreign exchange and derecognition are recognized in profit or loss. Financial asset measured at amortized cost are subscription receivables and other receivables.
Fair value through other comprehensive income - assets that are held for collection of contractual cash flows and for selling the financial assets, and for which the contractual cash flows are solely payments of principal and interest, are measured at fair value through other comprehensive income. Interest income calculated using the effective interest method and gains or losses arising from impairment and foreign exchange are recognized in profit or loss. All other changes in the carrying amount of the financial assets are recognized in other comprehensive income. Upon derecognition, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. The Company does not hold any financial assets measured at fair value through other comprehensive income.
Mandatorily at fair value through profit or loss - assets that do not meet the criteria to be measured at amortized cost, or fair value through other comprehensive income, are measured at fair value through profit or loss. All interest income and changes in the financial assets’ carrying amount are recognized in profit or loss. Financial assets mandatorily measured at fair value through profit or loss are comprised of cash and cash equivalents, marketable securities, and funds held in trust.
Designated at fair value through profit or loss – On initial recognition, the Company may irrevocably designate a financial asset to be measured at fair value through profit or loss in order to eliminate or significantly reduce an accounting mismatch that would otherwise arise from measuring assets or liabilities, or recognizing the gains and losses on them, on different bases. All interest income and changes in the financial assets’ carrying amount are recognized in profit or loss. The Company does not hold any financial assets designated to be measured at fair value through profit or loss.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Expected credit loss impairment model

IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial application.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due.

The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Business model assessment

The Company assesses the objective of its business model for holding a financial asset at a level of aggregation which best reflects the way the business is managed, and information is provided to management. Information considered in this assessment includes stated policies and objectives.

Contractual cash flow assessment

The cash flows of financial assets are assessed as to whether they are solely payments of principal and interest on the basis of their contractual terms. For this purpose, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money, the credit risk associated with the principal amount outstanding, and other basic lending risks and costs. In performing this assessment, the Company considers factors that would alter the timing and amount of cash flows such as prepayment and extension features, terms that might limit the Company’s claim to cash flows, and any features that modify consideration for the time value of money.

Derecognition of financial assets

The Company derecognizes a financial asset when its contractual rights to the cash flows from the financial asset expire.

Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or at amortized cost. The Company determines the classification of its financial liabilities at initial recognition.

i. Amortized cost

Financial liabilities are classified as measured at amortized cost unless they fall into one of the following categories: financial liabilities at FVTPL, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, financial guarantee contracts, commitments to provide a loan at a below-market interest rate, or contingent consideration recognized by an acquirer in a business combination.

The Company’s accounts payable and accrued liabilities amount due to shareholder, and convertible debentures do not fall into any of the exemptions and are therefore classified as measured at amortized cost.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

ii. Financial liabilities recorded FVTPL

Financial liabilities are classified as FVTPL if they fall into one of the five exemptions detailed above. The Company's derivative liability is measured at FVTPL.

Recognition and initial measurement

The Company recognizes a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures financial liabilities at their fair value plus transaction costs that are directly attributable to their issuance, with the exception of financial liabilities subsequently measured at fair value through profit or loss for which transaction costs are immediately recorded in profit or loss. Where an instrument contains both a liability and equity component, these components are recognized separately based on the substance of the instrument, with the liability component measured initially at fair value and the equity component assigned the residual amount.

Classification and subsequent measurement

Subsequent to initial recognition, all financial liabilities are measured at amortized cost using the effective interest rate method or fair value. Interest, gains and losses relating to a financial liability are recognized in profit or loss.

Transaction costs

Transaction costs associated with financial instruments, carried at FVTPL, are expensed as incurred, while transaction costs associated with all other financial instruments are included in the initial carrying amount of the asset or the liability.

Subsequent measurement

Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in profit or loss. Instruments classified as amortized cost are measured at amortized cost using the effective interest rate method. Instruments classified as FVTOCI are measured at fair value with unrealized gains and losses recognized in other comprehensive income.

Derecognition

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred, or liabilities assumed, is recognized in profit or loss.

(e) Determination of functional currency

The functional currency is the currency of the primary economic environment in which the Company operates. The determination of functional currency was performed by the Company on an entity by entity basis, and is based on various judgmental factors such as the influence on labour, material and other costs of goods or services received by the Company’s subsidiaries, management determined that the functional currency for the parent is the Canadian dollar and the functional currency for the Company's subsidiaries in United States dollar.

(f) Foreign currency translation

Monetary assets and liabilities denominated in currencies other than functional currencies are translated into functional currencies at the rate of exchange in effect at the consolidated statement of financial position date. Non-monetary assets and liabilities are translated at the historical rates. Expenses are translated at the transaction date exchange rate. Foreign currency gains and losses resulting from translation are reflected in net comprehensive loss for the period.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

The assets and liabilities of entities with a functional currency that differs from the presentation currency are translated to the presentation currency as follows:

Assets and liabilities are translated at the closing rate on the consolidated statement of the financial position date;
Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case, income and expenses are translated at the rate on the dates of the transactions) for the year or period presented;
Equity transactions are translated using the exchange rate at the date of the transaction; and
All resulting exchange differences are recognized as a separate component of equity as reserve for foreign currency translation.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are recognized in other comprehensive income in the foreign currency translation reserve.

(g) Cash and cash equivalents

Cash and cash equivalents consist of cash deposited in banks and highly liquid short-term interest bearing investments, that includes mutual funds in money market funds.

(h) Marketable securities

Marketable securities comprise of bonds and shares of other publicly trading companies and are recorded at fair value as of the date of the statement of financial position. The fair value adjustment is recorded in net loss.

(i) Income taxes

The Company’s income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income.

Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized and the liability is settled. The effect of a change in the enacted or substantively enacted tax rates is recognized in net earnings and comprehensive income or in equity depending on the item to which the adjustment relates.

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(j) Loss per share

Basic loss per share is computed by dividing the loss for the year available to common shareholders by the weighted average number of shares outstanding during the year. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options, conversion of debentures and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the year. Options, conversion of debentures and warrants are anti-dilutive and, therefore, have not been taken into account in the per share calculations.

(k) Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The Company had no material provisions at December 31, 2020 and 2019.

(l) Share-based payment transactions

The Company operates equity settled share-based remuneration plans for its eligible directors, officers, employees and consultants. The fair value of equity-settled share options granted to employees is recognized as an expense over the vesting period with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company.

The fair value is measured at the grant date and is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option-pricing model, taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior period if share options ultimately exercised are different to that estimated on vesting.

The fair value of share-based payments to non-employees are based on the fair value of the goods or services received. If the Company cannot estimate reliably the fair value of the goods or services received, the Company measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted at the date the Company receives the goods or services.

(m) Convertible debenture

Convertible debentures are financial instruments which are accounted for separately dependent on the nature of their components: a financial liability and an equity instrument. The identification of such components embedded within a convertible debenture requires significant judgment given that it is based on the interpretation of the substance of the contractual arrangement. Where the conversion option has a fixed conversion rate, the financial liability, which represents the obligation to pay coupon interest on the convertible debentures in the future, is initially measured at its fair value and subsequently measured at amortized cost. The residual amount is accounted for as an equity instrument at issuance. Where the conversion option has a variable conversion rate, the conversion option is recognized as a derivative liability

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

measured at fair value through profit and loss. The residual amount is recognized as a financial liability and subsequently measured at amortized cost.

The convertible debenture is considered to contain an embedded derivative relating to the conversion feature. The conversion feature was measured at fair value upon initial recognition using the Black-Scholes valuation model and was separated from the debt component of the debenture. The debt component of the debenture was measured at residual value upon initial recognition. Subsequent to initial recognition, the embedded derivative component is re-measured at fair value at each reporting date while the debt component is accreted to the face value of the debenture using the effective interest rate through periodic charges to finance expense over the term of the debenture.

(n) Share capital

Common shares and preferred shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded in reserves over the vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12, Income Taxes.

(o) Equity units

Proceeds received on the issuance of units, comprised of common shares and warrants are allocated to warrants based on fair value estimate and common shares based on the residual method.

(p) Investment in associate

The Company holds equity investments in an associate. An associate is an entity over which the Company has significant influence and is neither a controlled subsidiary nor a jointly controlled entity. The Company has significant influence when it has the power to participate in the financial and operating policy decisions of the associate but does not have control or joint control over those policies.

The Company accounts for equity investments using the equity method. Under the equity method, the Company’s investment in an associate is initially recognized at cost and is subsequently increased or decreased to recognize the Company’s share of earnings or losses of the associate, and for impairment losses after the initial recognition date. The Company’s share of an associate’s losses that are in excess of its investment in the associate are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company’s share of earnings or losses of associates are recognized through net income or loss during the year. Cash distribution received from an associate are accounted for as a reduction in the carrying amount of the Company’s investment in the associate.

At the end of each reporting period, the Company assesses whether there is any objective evidence that an investment in an associate is impaired. Objective evidence includes observable data indicating that there is a measurable decrease in the estimated future cash flows of the associate’s operations. When there is objective evidence that an investment in an associate is impaired, the carrying amount of such investment is compared to its recoverable amount, being the greater of its fair value less costs of disposal and value in use (i.e., present value of its future cash flows). If the recoverable amount of an investment in an associate is less than its carrying amount, then an impairment loss is recognized in that period. When an impairment loss reverses in a subsequent period, the carrying amount of the investment in an associate is increased to the revised estimate of the recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

not been previously recognized. A reversal of an impairment loss is recognized through net income or loss in the period in which the reversal occurs.

(q) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the Company has the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement and whether the Company has the right to direct the use of the asset.

At inception or on modification of a contract that contains a lease component, the Company will allocate the consideration in the contract to each lease component relative to each component’s stand-alone value.

When the Company is a lessee, it will recognize a right-of-use asset and a lease liability at the commencement date of a lease. The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the date the leased asset is available for use to the end of the lease term or useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the net present value of the lease payments discounted by either the interest rate implicit in the lease or if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of:

fixed payments, including in-substance fixed payments; and
the exercise price under a purchase option that the Company is reasonably certain to exercise.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in our estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option. Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are charged directly to the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

(r) Significant accounting judgments and estimates

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions, and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: Expected credit loss

Management determines the expected credit loss by evaluating individual receivable balances and considering a member’s financial condition and current economic conditions. Other receivables are written off when deemed uncollectible. Recoveries of other receivables previously written off are recorded as income when received. All other receivables and promissory note receivable are expected to be collected within one year of the consolidated statement of financial position date.

Share-based payments

Management is required to make certain estimates when determining the fair value of stock options awards, and the number of awards that are expected to vest. These estimates affect the amount recognized as share-based compensation in the statement of loss and comprehensive loss, based on estimates of forfeiture and expected lives of the underlying stock options.

Warrants

Management is required to make certain estimates on all inputs in the Black-Scholes option-pricing model, when determining the fair value of warrants included in unit financings.

Income taxes and recovery of deferred tax assets

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

Fair value of financial instruments

The individual fair values attributed to the different components of a financing transaction, and/or derivative financial instruments, are determined using valuation techniques. The Company uses judgment to select the methods used to make certain assumptions and in performing the fair value calculations in order to determine (a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market.

Going concern assumption

Going concern presentation of the financial statements which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due. The Company can obtain sufficient financing to cover planned operations throughout the next twelve-month period and fund the working capital.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Consolidation

Judgment is applied in assessing whether the Company exercises control and has significant influence over the entities in which the Company directly or indirectly owns an interest. The Company has control when it has the power over the subsidiary, has exposure to rights or variable returns and has the ability to use its power to affect the returns. Significant influence is defined as the power to participate in the financial and operational decisions of the subsidiaries. Where the Company is determined to have control, these entities are consolidated. Additionally, judgment is applied in determining the effective date on which control was obtained.

Investment in associate

The values relating to investment in associate involve significant estimates and assumptions, including future cash flows and discount rates. It is tested for impairment annually or more frequently if the circumstances or assumptions change significantly.

(s) Fair value hierarchy

The following summarizes the methods and assumptions used in estimating the fair value of the Company's financial instruments where measurement is required. Fair value amounts represent point-in-time estimates and may not reflect fair value in the future. The measurements are subjective in nature, involve uncertainties and are a matter of judgment. The methods and assumptions used to develop fair value measurements, for those financial instruments where fair value is recognized in the consolidated statement of financial position, have been prioritized into three levels as per the fair value hierarchy.

Level one includes quoted prices (unadjusted) in active markets for identical assets or liabilities. Level two includes inputs that are observable other than quoted prices included in level one. Level three includes inputs that are not based on observable market data. Financial instruments measured at fair value include; cash and cash equivalents which are measured as level one, and investments in associates which are measured at level three.

(t) Accounting standards adopted during the period

Definition of a Business (Amendments to IFRS 3)

The IASB has issued Definition of a Business (Amendments to IFRS 3) to clarify the definition of a business for the purpose of determining whether a transaction should be accounted for as an asset acquisition or a business combination.

The amendments:

clarify the minimum attributes that the acquired assets and activities must have to be considered a business
remove the assessment of whether market participants can acquire the business and replace missing inputs or processes to enable them to continue to produce outputs
narrow the definition of a business and the definition of outputs
add an optional concentration test that allows a simplified assessment of whether an acquired set of activities and assets is not a business

At January 1, 2020, the Company adopted this amendment and there was no material impact on the Company's consolidated financial statements.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(u) Accounting standards not yet adopted

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

The IASB has published Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) which clarifies the guidance on whether a liability should be classified as either current or non-current. The amendments:

clarify that the classification of liabilities as current or non-current should only be based on rights that are in place "at the end of the reporting period"
clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability
make clear that settlement includes transfers to the counterparty of cash, equity instruments, other assets or services that result in extinguishment of the liability.

This amendment is effective for annual periods beginning on or after January 1, 2022. There is currently a proposal in place to extend effective date for annual periods beginning on or after January 1, 2023. Earlier application is permitted. The extent of the impact of adoption of this amendment has not yet been determined.

3. Reverse Takeover

On September 18, 2020, New Millennium Iron Corp. (“New Millennium”) and Abaxx entered into a definitive agreement. Pursuant to the definitive agreement, New Millennium indirectly acquired all of the issued and outstanding Abaxx Common Shares through a reverse take-over transaction. New Millennium would rename itself to Abaxx on December 14, 2020 pursuant to the reverse take-over.

The amalgamation was considered a reverse takeover as the legal acquiree’s former shareholders control the consolidated entity after completion of the amalgamation. Consequently, the legal acquiree is the accounting acquirer and the historical financial results presented in these consolidated financial statements are those of Abaxx.

At the time of the amalgamation, New Millennium’s assets consisted primarily of cash and cash equivalents, marketable securities, receivables and accounts payable and it did not have any processes capable of generating outputs; therefore, New Millennium did not meet the definition of a business. Accordingly, as New Millennium did not qualify as a business in accordance with IFRS 3 Business Combinations, the amalgamation did not constitute a business combination; however, by analogy it has been accounted for as a reverse takeover. Therefore, Abaxx, the legal subsidiary, has been treated as the accounting parent company, and New Millennium, the legal parent, has been treated as the accounting subsidiary.

Upon completion of the amalgamation 133,651,238 New Millennium common shares were consolidated into 11,137,596 common shares of the Company on the basis of one post-consolidated share for every twelve pre-consolidation shares. The fair value of these shares of $11,026,227, was based on an estimated fair value of $0.99 per share as at the transaction date as per the trading price of New Millennium September 18, 2020.

In connection with the amalgamation, the Company issued 438,927 common shares as finder’s fees to a third-party. The fair value of these shares of $434,055 was estimated at $0.99 per share based on a recent private placement, adjusted for any conversion ratios. In addition, the Company paid $508,369 legal fees in relation with the RTO transaction which constitute a part of the consideration issued.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

As the acquisition was not considered a business combination, the excess of consideration paid over the net assets acquired together with any transaction costs incurred for the amalgamation is expensed as a transaction in accordance with IFRS 2 Share-Based Payments.

Consideration
Shares	$11,026,227
Legal fees	508,369
Transaction costs-common shares	434,055
Total consideration paid	$11,968,651
Net assets acquired
Cash and cash equivalents	$7,683,226
Prepaid and other current	23,375
Marketable securities	3,040,552
Other receivables	436,050
Land	7,001
Amounts payable and other liabilities	(358,759)
Net assets acquired	$10,831,446
Total transaction expense	$1,137,205

4. Marketable securities

The Company held marketable securities at two large Canadian financial institutions and the balances at December 31, 2020 are as follows:

	December 31, 2020	December 31, 2019
GIC investments	37,913	-
Fixed income investments	3,051,818	-
Total marketable securities	3,089,731	-

The maturity date of GIC and fixed income investments is March 18, 2021 and November 26, 2026 respectively, the GIC and fixed income investments bear interest of 0.5% and 8.5% respectively. During the year ended December 31, 2020, the Company recognized interest income of $27,930 in its consolidated statements of operations and comprehensive loss (December 31, 2019- nil).

5. Funds held in trust

The funds held in trust consists of funds raised from a private placement and are held in trust by the Company's external legal counsel. Funds held in trust are not restricted and can be used for working capital purposes. Subsequent to year end, these funds were transferred to the Company’s bank account.

6. Non-Controlling Interest

Abaxx Singapore

On November 19, 2018, Abaxx Singapore was incorporated and organized under the laws of Singapore with the Company maintaining 57.98% interest in Abaxx Singapore at the time of incorporation. On December 14, 2020, the Company increased its ownership to 81% by exercising its convertible debenture.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Abaxx Clearing

On January 9, 2019, Abaxx Clearing was incorporated and organized under the laws of Singapore. Abaxx Clearing is a wholly-owned subsidiary of Abaxx Singapore.

Abaxx Exchange

On January 9, 2019, Abaxx Exchange was incorporated and organized under the laws of Singapore. Abaxx Exchange is a wholly-owned subsidiary of Abaxx Singapore.

The schedule below presents the changes in non-controlling interest:

December 31, 2018	$ (315,617)
Net loss for the year	(2,299,541)
December 31, 2019	(2,615,158)
Net loss for the year	(1,619,945)
Change in non-controlling interest (Note 2 (c))	2,064,849
December 31, 2020	(1,720,254)

During 2020, Abaxx Singapore issued additional shares to the Company which resulted in an increase of ownership percentage to 81% (December 31, 2019- 57.98%), refer to Note 2(c). The increase in the ownership percentage resulted in a decrease of $2,064,849 in non-controlling interest and a corresponding increase in Deficit.

The net loss of Abaxx Singapore, Abaxx Clearing and Abaxx Exchange for the year ended December 31, 2020 was $1,594,262, $646,979, and $677,308, respectively.

7. Capital risk management

The Company manages its capital with the following objectives:

to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and
to maximize shareholder return through enhancing the share value.

The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by Management and the Board of Directors on an ongoing basis.

The Company considers its capital to be equity, comprising share capital, contributed surplus, reserves, non-controlling interest, cumulative transaction adjustments, and deficit which at December 31, 2020 totaled $15,517,088 (2019 $950,261).

The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

8. Financial risk factors

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements for invested assets are categorized into levels within a fair value hierarchy based on the nature of valuation inputs (Level 1, 2 or 3).

The fair value of other financial assets and financial liabilities is considered to be the carrying value when they are of short duration or when the instrument’s interest rate approximates current observable market rates.

The fair value of cash and cash equivalents, marketable securities, and funds in trust approximates their carrying amounts due to the relatively short period to maturity.

Where other financial assets and financial liabilities are of longer duration, then fair value is determined using the discounted cash flow method using discount rates based on adjusted observable market rates.

The table below summarizes the assets and liabilities that are included at their fair values in the Company’s consolidated statement of financial position as at December 31, 2020 and December 31, 2019. These assets and liabilities have been categorized into hierarchical levels, according to the significance and reliability of the inputs used in determining fair value measurements. The fair value hierarchy has the following levels:

Level 1 – quoted prices represent unadjusted quoted prices for identical instruments exchanged in active markets.
Level 2 – significant other observable inputs includes directly or indirectly observable inputs, other than quoted prices for identical instruments exchanged in active markets.
Level 3 – significant unobservable inputs include inputs that are not based on observable market data.

The following table illustrates the classification of the Company's financial instruments within the fair value hierarchy as at December 31, 2020 and 2019.

December 31,2020	Level 1	Level 2	Level 2	Level 3	Total
Cash and cash equivalents	$ 8,861,671	$	-	$ -	$ 8,861,671
Marketable securities	3,089,731		-	-	3,089,731
Funds held in Trust	1,326,450		-	-	1,326,450
Investment at fair value	-		-	2,084,853	2,084,853
Convertible note receivable	-		-	800,976	800,976
	$ 13,277,852	$	-	$ 2,885,829	$ 16,163,681
December 31, 2019	Level 1	Level 2		Level 3	Total
Cash and cash equivalents	$ 1,707,372	$	-	$ -	$ 1,707,372
Investment at fair value	-		-	1,000,000	1,000,000
Convertible note receivable	-		-	152,919	152,919
Convertible debenture - derivative
liability	-		-	(2,939,705)	(2,939,705)
	$ 1,707,372	$	-	$ (1,786,786)	$ (79,414)

During the year ended December 31, 2020, the movement in level 3 financial instruments included additions of $1,651,150, disposals of $3,465,034 on conversion of convertible debt, and gain on fair value adjustments of $2,858,731. Refer to Note 12 for the information on convertible debenture.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

During the year ended December 31, 2019, the movement in level 3 financial instruments included additions of $2,632,000, no disposals and gain on fair value adjustments of $415,551.

Significant inputs

The measurement basis for the Investment at fair value was the projected revenue and revenue multiplier as at December 31, 2020. A 10% fluctuation in the projected revenue would result in a $85,966 gain or loss on fair value adjustment in the consolidated financial statements. A 10% fluctuation in the revenue multiplier would result in a $85,795 gain or loss on fair value adjustment in the consolidated financial statements.

The measurement basis for the Convertible note receivable was the expected share price and the probability of a fund raise. A 10% fluctuation in the expected share price would result in a $111,818 gain or loss on fair value adjustment in the consolidated financial statements. A 10% fluctuation in the probability of a fund raise would result in a $34,328 gain or loss on the fair value adjustment in the consolidated financial statements. Derivative liability refer to note 12.

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations.

The Company's credit risk is attributable to cash and cash equivalents, subscription receivable, marketable securities, funds held in trust, convertible note receivable, and other receivables. Cash and cash equivalents are on deposit with Canadian and Singaporean chartered banks, from which management believes the risk of loss is remote. Other receivables are due from the Ministry of Revenue from which management believes the risk of loss to be remote. Convertible note receivable is due from an arm's length third party from which management believes the risk of loss to be remote. The Company’s maximum exposure to credit risk as at December 31, 2020 and 2019 is the carrying value of cash and cash equivalents, marketable securities, subscription receivable, funds held in trust, convertible note receivable, and other receivables.

Interest rate risk

The Company has cash and cash equivalents bearing fixed interest rates and no variable interest-bearing debt. The Company's has convertible debentures and amounts due from shareholder bearing fixed interest rate and no variable interest-bearing component. The Company’s current policy is to invest excess cash in investment-grade short term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks.

Liquidity risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2020, the Company had current assets of $14,923,545 to settle current liabilities of $3,211,564. The ability of the Company to continue as a going concern is dependent on its ability to secure additional equity or other financing. All of the Company’s financial liabilities have contractual maturities of less than 90 days and are subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market forces such as interest rates and foreign exchange rates.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Foreign currency risk

The Company's functional and reporting currency is the Canadian dollar. Major purchases and investments are transacted in United States dollar. The Company is exposed to foreign currency risk with respect to the cash balance of $1,438,020 (2019 - $1,612,374) which is denominated in United States dollars.

Sensitivity analysis

Based on management's knowledge and experience of the financial markets, the Company believes the following movements are reasonably possible over a 12-month period:

i) The Company has no variable interest-bearing debt at December 31, 2020 and 2019.

ii) The Company has cash and accounts payable denominated in United States dollars. Sensitivity to a plus or minus 5 percentage point change in exchange rate would lead to a $16,450 (2019 - $80,619) gain (loss) in the reported comprehensive loss.

9. Investment in associate

Operem Inc

During the year ended December 31, 2018, the Company purchased 2,500,000 shares of Operem's Series A-1 Preferred Stock, representing 100% of the outstanding Preferred A-1 Stock, for total consideration of USD $2,530,000 ($3,204,498).

The Series A-1 Preferred Stock of Operem hold the following rights:

voting rights, pari passu, with the common stock;
priority over common stock in the event of liquidation by Operem with respect to a 1x liquidation preference;
automatic conversion into common stock of Operem on the earlier of (i) an initial public offering of Operem, or other similar going-public events, (ii) a sale of over 50.1% of Operem's securities, or (iii) on December 31, 2020.

Operem, a Washington based company, is a private US company that provides electronic intellectual property document encryption and sharing through a streamlined licensing process. This process is achieved with the use of artificial intelligence and blockchain technology.

The Company held 2,500,000 of the outstanding voting shares of Operem which represented a 32.05% ownership interest as of December 31, 2019. During the year ended December 31, 2020 Operem reduced the total number of outstanding voting shares resulting in the increase of ownership in Operem by the Company to 45.05% as of December 31, 2020.

The Company reports the investment in Operem under the equity method and has recorded the Company's share of the losses of Operem in the consolidated statements of loss and comprehensive loss.

During the year ended December 31, 2020, Operem did not conduct any active business activities and did not have funds available to proceed with further development of its intellectual property. The Company considered these facts and circumstances indicate that the investment in Operem is impaired and recorded $2,748,934 impairment loss in its consolidated statements of operations and comprehensive loss.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

The continuity of investment in associate is as follows:

	Investment in
	associate
Balance, December 31, 2018	2,973,298
Loss pick-up from associate during the year	(218,444)
Effect of foreign exchange on investment	(121,144)
Balance, December 31, 2019	2,633,710
Loss pick-up from associate during the year	(7,145)
Effect of foreign exchange on investment	122,369
Impairment of investment in associate	(2,748,934)
Balance,December 31,2020	-

The table below discloses selected financial information of Operem on a 100% basis. The Company's ownership in Operem is 45.05% (2019 32.05%).

	December 31,	December 31,
	2020	2019
Loss and comprehensive loss for the year ended (reported in USD)	18,411	822,328
Total assets (reported in USD)	1,602	2,734
Total liabilities (reported in USD)	195,808	110,586

10. Investment at fair value

Pasig and Hudson

During the year ended December 31, 2018, the Company purchased 2,699,410 Common Stock of Pasig and Hudson Private Limited ("P&H"), representing 18% of the outstanding Common Stock, for total consideration of USD $600,000 in cash and 1,250,000 of common shares of the Company at a fair value of $500,000. In addition, P&H would contribute 50% of the work capacity of 2 senior executives for 12 months ending April 2019. The fair value of the work capacity is estimated at USD $410,000. As a result, at the time of recognition the fair value of the investment was $863,185.

Pasig and Hudson, a Singapore company, is a private company that consulting, advisory, and development services in blockchain and other non-traditional banking solutions.

The Company reports the interest in P&H at fair value with changes in fair value recorded through the Company's consolidated statement of operations and comprehensive loss. During the year ended December 31, 2020, the Company reported a gain of $1,084,852 (2019 $136,815) in the consolidated statement of operations and comprehensive loss as a result of a change in the fair value of the investment in P&H.

The following schedule presents the changes in the investment in fair value:

December 31, 2018	$863,185
Gain on investment at fair value	136,815
December 31, 2019	1,000,000
Gain on investment at fair value	1,084,853
December 31, 2020	$2,084,853

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

11. Convertible note receivable

In September 2018, the Company issued an unsecured convertible debenture to an arm-length party, Smart Crowd Holding Limited ("SCHL") in the amount of USD $140,000 (CAD $181,888).

The facility matures on the earlier of i) the liquidity event ii) or the optional conversion date of December 31, 2020.

The liquidity event is defined as any of the following events:

i) SCHL entered into a binding agreement with an arm's length third party to acquire beneficial ownership of 50% or more of the voting shares of SCHL;

ii) SCHL entered into a binding agreement to dispose of assets comprising more than half the value of the assets;

iii) SCHL resolves to amalgamate with any other company, in a transaction that is in substance the same as those described above; and

vi) SCHL enters into a listing agreement with a recognized stock exchange. The loan is measured at fair value through profit or loss. The fair value adjustment recognized in the year ended December 31, 2020 was $648,057 (2019 loss of $28,969) resulting in the balance of $800,976 as at December 31, 2020 (December 31, 2019- $152,919). The loan has not been repaid as of December 31, 2020.

12. Convertible debenture

In December 2019, the Company issued a 2-year, 8% unsecured convertible promissory note to a shareholder of the Company in the amount of USD $2,000,000 ($2,632,000) ("Debenture 1"). The expiry date of the convertible debenture is December 23, 2021.

During the year ended December 31, 2020, the Company converted shareholder loan into a 2-year, 8% unsecured convertible promissory note in the amount of USD $1,000,000 ($1,298,800) ("Debenture 2"). The expiry date of the convertible debenture is January 3, 2022.

During the year ended December 31, 2020, the Company issued a 2-year, 8% unsecured convertible promissory note to a shareholder of the Company in the amount of USD $250,000 ($352,350) ("Debenture 3"). The expiry date of the convertible debenture is May 15, 2022.

The Company is not entitled to prepay the principal sum outstanding without the prior written consent of the holders of the debentures. The holders of the debentures may elect to receive the interest accrued and payable for any quarter. Should the holder elect payment of interest only in cash, the interest rate of such quarter requested in cash payment will be reduced to 5%.

The note holders have the right, at their sole and absolute discretion, at any time up to and including the Maturity Date to convert all of the principal sum outstanding under this Debenture, including any accrued and unpaid or uncapitalized interest, into fully paid and non-assessable Common Shares at the Conversion Price which is the lower of: (i) CAD$0.55 per Common Share; (ii) a twenty percent (20%) discount to the share price of any subsequent equity financing of the Corporation; and (iii) a twenty percent (20%) discount to the share price of any concurrent equity financing undertaken in connection with any Going Public Transaction, or where there is no such concurrent financing, a twenty percent (20%) discount to the deemed share price at which the outstanding Common Shares are acquired by the legal acquiror in such Going Public Transaction.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

The conversion option created an embedded derivative which meets the definition of a financial liability as it violates “fixed for fixed” criteria and it is being denominated in a currency other than the Company's functional currency.

Accordingly, it must be bifurcated and recorded at fair value on initial recognition and at the end of each reporting period. The host contract is a financial liability that is stated at amortized cost using the effective interest method.

The Company estimated the fair value of Debenture 1 as $2,632,000 on issuance date and $2,113,116 and $2,939,705 as at December 14, 2020 (“conversion date”) and December 31, 2019 respectively. The loan is accreted using an effective interest rate of 46% is estimated at $1,402,311 as at conversion date (December 31, 2019 nil). The fair value of the derivative liability as at December 31, 2019 and a conversion date was estimated using binomial valuation model based on the following assumptions: share price- $0.99, strike price- $0.68, stock price volatility- $150% (conversion date- 124%), expected life- 2 years (conversion date- 1.02).

The Company estimated the fair value of Debenture 2 as $1,298,800 on issuance date and $1,062,595 as at conversion date. The loan is accreted using an effective interest rate of 46% is estimated at $678,537 as at conversion date. The fair value of the derivative liability as at issuance date and a conversion date was estimated using binomial valuation model based on the following assumptions: share price- $0.99, strike price- $0.68, stock price volatility- $150% (conversion date- 124%), expected life- 2 years (conversion date- 1.05).

The Company estimated the fair value of Debenture 3 as $352,350 on issuance date and $289,322 as at conversion date. The loan is accreted using an effective interest rate of 46% is estimated at $103,046 as at conversion date. The fair value of the derivative liability as at issuance date and a conversion date was estimated using binomial valuation model based on the following assumptions: share price- $0.99, strike price- $0.68, stock price volatility- $150% (conversion date- 124%), expected life- 2 years (conversion date- 1.42).

During the year ended December 31, 2020, the Company recorded a fair value adjustment (gain) to the derivative liability of ($988,696) (December 31, 2019- loss $307,705) and a foreign exchange gain of $137,125 (December 31, 2019 nil).

During the year ended December 31, 2020 the Company recorded in its consolidated statements of loss and comprehensive loss, interest and accretion expenses related to the loans of $338,750 and $1,957,789 respectively (December 31, 2019 nil).

During December 2020, the holders elected to convert the outstanding debenture and accrued interest into 6,727,666 common shares of the Company, upon closing of December 14, 2020 "Going Public Transaction". The conversion resulted in a loan carrying amount of $2,183,894 and a derivative liability fair value of $3,465,034 credited to a share capital.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

The schedule below presents a continuity of the convertible debenture:

Loan principal Accrued interest Accretion	Loan carrying amount Derivative
January 1, 2019 - - - Additions 2,632,000 - - Fair value adjustment - - -	- - - 2,632,000 - 307,705
December 31, 2019 2,632,000 - -	- 2,939,705
Additions 1,651,150 338,750 1,957,789 Fair value adjustment - - - Foreign exchange adjustment - - -	2,183,895 1,651,150 - (988,696) - (137,125)
4,283,150 338,750 1,957,789 Exercise December 14, 2020 (4,283,150) (338,750) (1,957,789)	2,183,895 3,465,034 (2,183,895) (3,465,034)
December 31, 2020 - - -	- -

13. Share capital

In December 2020, on the completion of RTO transaction as detailed in Note 1, one Abaxx’s common share was exchanged for 0.809 common share of the resulting issuer. All prior share capital information has been presented based on this ratio.

Common shares issued are as follows:

	Number of
	common shares	Amount
Balance, December 31, 2018	31,358,995	6,923,040
Private placement (i)	1,708,792	2,112,227
Value of warrants issued	-	(438,868)
Exercise of warrants (ii)	3,640,500	600,000
Value of warrants exercised	-	1,336,739
Balance, December 31, 2019	36,708,287	10,533,138
Shares issued in private placement (iii)	5,245,572	5,187,216
Shares issued on amalgamation (iv)	11,137,596	11,026,227
Shares issued on conversion of preferred shares (v)	2,289,470	1,132,000
Shares issued on conversion of debenture (vi)	6,727,666	5,630,560
Shares issued for consulting services (vii)	1,255,453	1,241,485
Exercise of warrants (viii)	637,379	1,834,866
Exercise of options (ix)	161,800	209,588
Balance, December 31, 2020	64,163,223	36,795,082

Common Shares

(a) Authorized

Unlimited number of common shares without par value.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(b) Issued

Shares issued during the year ended December 31, 2020 and 2019, were as follows:

(i) In April 2019, the Company issued 1,708,792 units, at a price of $1.24, per unit for net proceeds of $2,112,227. Each unit consisted of one common share and one-half share purchase warrant. The warrants have an expiry date of December 31, 2020 and an exercise price of CAD $2.47. The fair value of the warrants was estimated to be $438,868 using the Black-Scholes option pricing model with the following weighted average assumptions: share price - CAD $0.99, exercise price - $2.47, dividend yield - 0%, expected volatility (based on comparative companies) - 150%, risk-free interest rate - 2.53%, and an expected life of 20 months.

(ii) In January 2019, a shareholder exercised 404,500 warrants for 404,500 shares of the Company at $0.19 per share. As a result, the fair value of the warrants of $140,193 was re-allocated to share capital. In March 2019, a shareholder exercised 3,236,000 warrants for 3,236,000 shares of the Company at $0.19 per share. As a result, the fair value of the warrants of $1,121,546 was re-allocated to share capital.

(iii) In July 2020, Abaxx completed the private placement financing of 5,245,572 Abaxx common shares at a price of $0.99 per share for net proceeds of $5,187,216.

(iv) On December 14, 2020, Abaxx successfully completed its reverse take-over transaction with New Millennium and 11,137,596 Abaxx common shares were issued upon the automatic conversion of 133,651,238 New Millennium common shares at a price of $0.99 per share, refer to Note 3.

(v) On December 14, 2020, 2,289,470 Abaxx preferred shares were converted to 2,289,470 Abaxx common shares without any proceeds.

(vi) On December 14, 2020, 6,727,666 Abaxx common shares were issued upon the conversion of debentures, refer to Note 12.

(vii) On December 14, 2020, 1,255,453 Abaxx common shares (including 438,927 shares issued on RTO, refer to Note 3) were issued to consultants of the Company for services rendered. The shares were estimated at $0.99 per share based on the recent private placement.

(viii) During the year ended December 31, 2020, 564,682 warrants exercised to common shares at an exercise price of $2.47 per share. During the year ended December 31, 2020, 358,112 warrants were converted to 72,697 common shares at a conversion ratio of 0.203 per share.

(ix) During the year ended December 31, 2020, 161,800 stock options were exercised into common shares of the Company, with proceeds of $130,450 received. The fair value of the options was estimated to be $79,138 using the Black Scholes option pricing model.

Preferred Shares

(a) Authorized

Unlimited number of preferred shares without par value.

(b) Issued

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

In March 2019, the Company issued 2,289,470 preferred shares at a price of $0.49 for aggregate proceeds of $1,132,000. The preference shares are non-voting and automatically convert on a share-for-share basis into common shares at such time that an initial public offering or similar going public event occurs.

These preference shares were converted to common shares of the Company on December 14, 2020 going public date.

14. Stock options

In February 2019, the Company issued 311,465 stock options to employees and directors of the Company exercisable at $0.49 until February 1, 2024. The fair value of the options was estimated to be $116,018 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) - 150%; risk-free interest rate - 2.54%; and an expected life - 5 years. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

In February 2019, the Company issued 129,440 stock options to employees and directors of the Company exercisable at $1.24 until February 1, 2024. The fair value of the options was estimated to be $45,468 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) - 150%; risk-free interest rate - 2.54%; and an expected life - 5 years. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

In April 2020, the Company issued 528,547 stock options to employees and directors of the Company exercisable at $0.68 until April 1, 2025. The fair value of the options was estimated to be $484,263 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) - 150%; risk-free interest rate - 1.86%; and an expected life - 5 years, forfeiture rate- 0%. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

In April 2020, the Company issued 53,933 stock options to employees and directors of the Company exercisable at $1.24 until April 1, 2025. The fair value of the options was estimated to be $48,016 using the Black Scholes option pricing model with the following weighted average assumptions share price $0.99, dividend yield 0%; expected volatility (based on comparative companies) 150%; risk free interest rate 1.85%; and an expected life 5 years, forfeiture rate- 0%. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

In June 2020, the Company issued 125,395 stock options to employees and directors of the Company exercisable at $0.99 until June 1, 2025. The fair value of the options was estimated to be $112,935 using the Black Scholes option pricing model with the following weighted average assumptions share price $0.99, dividend yield 0%; expected volatility (based on comparative companies) 150%; risk free interest rate 1.84%; and an expected life 5 years, forfeiture rate- 0%. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

In November 2020, the Company issued 202,250 stock options to a consultant of the Company exercisable at $0.99 until December 14, 2023. The fair value of the options was estimated to be $174,726 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) – 116.24%; risk-free interest rate – 0.25%; and an expected life - 7 years. The options fully vest on issuance date.

In December 2020, the Company issued 2,404,350 stock options to employees and directors of the Company exercisable at $0.99 until December 14, 2023. The fair value of the options was estimated to be $1,629,437 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) – 116.24%; risk-free interest rate – 0.25%; and an expected life - 3 years. The options vest 1/3 on issuance, 1/3 12 months from issuance date, and 1/3 24 months from issuance date.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

In December 2020, the Company issued 143,400 stock options to consultants of the Company exercisable at $0.99 until December 14, 2023. The fair value of the options was estimated to be $97,183 using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.99, dividend yield - 0%; expected volatility (based on comparative companies) – 116.24%; risk-free interest rate – 0.25%; and an expected life - 3 years. The options vest 1/2 on issuance, 1/2 12 months from issuance date.

During the year ended December 31, 2019 and December 31, 2020 the Company issued

	Number of stock	Weighted average
	options	exercise price
Balance, December 31, 2018	2,312,122	$0.85
Issued	440,905	0.72
Cancelled	(480,456)	0.87
Balance, December 31, 2019	2,272,571	$0.83
Issued	3,457,875	0.95
Exercised	(161,800)	0.81
Forfeited	(151,910)	0.87
Balance, December 31, 2020	5,416,736	$0.90

The following table reflects the stock options issued and outstanding as of December 31, 2020:

		Weighted average
Expiry date	Exercise price ($CAD)	remaining contractual life	Number of options outstanding	Number of options exercisable
		(years)
01-Oct-23	$ 0.49	2.75	789,855	789,856
01-Oct-23	$ 1.24	2.75	768,551	768,549
01-Feb-24	$ 0.49	3.09	311,465	232,155
01-Feb-24	$ 1.24	3.09	129,440	94,420
01-Apr-25	$ 0.68	3.25	528,547	176,183
01-Apr-25	$ 1.24	4.25	53,933	17,978
01-Jun-25	$ 0.99	4.42	125,395	41,798
14-Dec-23	$ 1.00	2.95	2,507,300	945,205
01-Nov-27	$1.00	2.95	202,250	202,250
			5,416,736	3,268,394

During the year ended December 31, 2020, the Company's subsidiary, Abaxx Singapore, issued nil (2019: 765,000) share purchase options at various exercise prices and expiry dates to shareholders, officers and consultants of Abaxx Singapore. The Company has determined the value of these options using the Black-Scholes option pricing model to be of nominal value and have not recorded a share-based expense in the consolidated statement of loss.

In the event that all outstanding share purchase options are exercised in Abaxx Singapore, the Company will maintain controlling interest.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

15. Warrants

During the year ended December 31, 2019 and December 31, 2020 the Company warrants as follows:

	Number of	Grant date	Grant date
	warrants	fair value
Balance, December 31, 2018	3,236,000	$	1,042,892
Issued (i)	854,395		438,868
Exercised	(3,236,000)		(1,042,892)
Balance, December 31, 2019	854,395	$	438,868
Issued	-		-
Exercised (ii)	(564,682)		(290,054)
Converted (iii)	(289,713)		(148,814)
Balance, December 31, 2020	-	$	-

(i) In April 2019, the Company issued 637,379 warrants in connection with a private placement expiring December 31, 2020. The fair value of the warrants was estimated to be $340,916 using the Black-Scholes option pricing model with the following weighted average assumptions: share price - CAD $0.99, exercise price - CAD $2.47, dividend yield - 0%, expected volatility - 150%, risk-free interest rate - 2.46%, and an expected life of 20 months.

(ii) During the year ended December 31, 2020, the 697,999 pre-listing warrants (564,682 Abaxx warrants) were exercised into common shares of the Company at a conversion factor of 0.809 resulting in 564,686 shares.

(iii) During the year ended December 31, 2020, the 358,113 pre-listing warrants (289,713 Abaxx warrants) were exercised into common shares of the Company at a conversion factor of 0.203 resulting in 72,696 shares.

16. Loss per share

For the year ended December 31, 2020, basic and diluted loss per share has been calculated based on the loss attributable to common shareholders of $9,381,294 (December 31, 2019 - $8,412,398) and the weighted average number of common shares outstanding of 39,607,037 (December 31, 2019 – 35,422,734). Diluted loss per share did not include the effect of stock options, share purchase warrants and convertible debentures as they are anti-dilutive.

	December 31, December 31, 2020 2019 For the year ended
Basic earnings per common share Net loss attributable to common shareholders Weighted average number of common shares outstanding Basic earnings per common share Diluted earnings per common share Net loss attributable to common shareholders Weighted average number of common shares outstanding Adjustments to average shares due to share-based options and others Weighted average number of diluted common shares outstanding Diluted earningsper common share	(9,381,293) $ (8,412,398) $ 39,607,037 35,422,734 (0.24) $ (0.24) $ (9,381,293) $ (8,412,398) $ 39,607,037 35,422,734 - -
	39,607,037 35,422,734
	(0.24) $ (0.24) $

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

17. Related party transactions

The Company considers key management to be officers and directors. During the year ended December 31, 2020, $164,201 (2019 - $283,965) of fees were paid to key management and companies controlled by or related to key management.

In addition, during the year, the Chief Financial Officer ("CFO") of the Company was a senior employee of Marrelli Support Services Inc. ("Marrelli"), a firm providing accounting services. Fees paid to Marrelli for accounting and CFO services amounted to $98,736 (2019 - $37,976).

During the year ended December 31, 2019 a shareholder advanced $1,970,485 to the Company. The advances bear interest at 8% per annum. The amounts were unsecured and due on demand.

During the year ended December 31, 2020, the Company paid $467,122 professional fees to Peterson McVicar LLP a law firm where one of the Company’s directors is a partner..

During the year ended December 31, 2020, $1,298,800 of advance from shareholder was converted to convertible debt and subsequently converted to common shares on December 14, 2020. Refer to note 12. The company repaid $756,149 (Including accrued interest of $84,464) of the remaining advance from shareholder. The loan accrued $22,292 interest during the year ended December 31, 2020. As of December 31, 2020, the remaining advance from shareholder was $nil.

During the year ended December 31, 2019, the Company issued Debenture with the CEO of the Company. On December 14, 2020, the principal balance and accrued interest of USD $2,156,055 ($2,750,479) balance of Debenture was converted into shares of the Company.

The Company also converted USD $1,000,000 ($1,298,800) in previously outstanding shareholder advances into Debenture. Further on December 14, 2020, the principal balance and accrued interest of USD $1,075,616 ($1,372,163) balance of Debenture was converted into shares of the Company.

See note 9 for transactions with the Company's investment in associate.

The Company paid or accrued nil (2019 - $1,223,822) in consulting and development services from P&H in the normal course of business. See note 10.

Included in accounts payable and accrued liabilities is $122,362 (2019 - $18,547) owed to key management and companies controlled by or related to key management.

Key management and directors received $23,950 in share-based compensation during the year ended December 31, 2020 (2019 $200,156).

The company issued 181,688 common shares to key management and directors of $179,666 for professional services during the year ended December 31, 2020. The shares were estimated at $0.99 per share based on a recent private placement.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

18. Income taxes

(a) Provision for income taxes

The following table reconciles the expected income tax provision at the statutory tax rate of 26.50% to the amounts recognized in the consolidated statement of loss for the year ended December 31, 2020 and December 31, 2019:

	December 31, 2020	December 31, 2019
Net loss before income taxes	$(10,551,238)	$(10,711,939)
Expected tax recovery at statutory rates increase (decrease)
resulting from
Expected income tax recovery	(2,796,078)	(2,838,664)
Effect of foreign tax rates	235,491	527,978
Share based payments	376,611	168,404
Accretion	518,814	-
Listing expenses	166,791	-
Fair value adjustment	(491,615)	67,252
Other	(40,692)	62,211
Impairment	364,234	-
Tax benefit not recognized	1,666,444	2,012,819
Total income tax expense recovery	-	-

(b) Deferred tax balances

The tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 are as follows:

	December 31, 2020	December 31, 2019
Deferred tax assets
Investments	-	4,558
Deferred tax liabilities
Convertible debentures	-	(4,558)
Net deferred tax liability	-	-

Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred tax assets have not been recognized in respect of the following deductible temporary differences.

	December 31, 2020	December 31, 2019
Intangible assets	1,040,390	166,117
Investments	1,363,742	425,497
Share issuance costs	122,089	163,531
Non-capital losses carried forward - Canada	8,140,903	4,744,591
Non-capital losses carried forward - Foreign	9,055,580	6,576,733
Net deferred tax liability	$19,722,704	$12,076,469

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

i. Share issue and financing costs will be fully amortized in 2023. The remaining deductible temporary differences may be carried forward indefinitely.

ii. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.

(d) Non-capital losses

The Company's Canadian non-capital income tax losses, the benefit of which has not been recognized on the consolidated financial statements, expire as follows:

Canada	Years	Tax loss
	2038 2039 2040	1,036,505 3,708,086 3,396,311

19. Commitments

Royalty Payments

During the year ended December 31, 2019, the Company entered into a Royalty Agreement (“Royalty”) with its subsidiary Abaxx Singapore. The Royalty payment contains the following terms:

Abaxx Singapore will accrue and pay a royalty equal to 2% of gross revenue to the Company, payable quarterly as of April 1, 2019 continuing in perpetuity until the obligation is relinquished by the Company.
The amounts payable become due to the Company after Abaxx Singapore generates positive earnings before income tax and depreciation of USD$25,000,000 in a calendar year.
There is no interest accrued on royalty payments accrued and not yet paid.

As of December 31, 2020, Abaxx Singapore has not achieved any revenue and as such no amounts have been accrued in the consolidated financial statements.

In addition, the Royalty permits the Company to purchase an increase in the royalty payments by 1% for USD$10,000,000 by February 1, 2024.

As of December 31, 2020, the Company has not made any payments to Abaxx Singapore to increase the royalty earnings percentage.

Transfer of Intellectual Property and License Agreement

The Company has developed proprietary digital technology and intellectual property for application to exchange trading and clearing for commodities and financial products including liquid natural gas as well as other tradable commodities and applications. (“Exchange Technology”).

During the year ended December 31, 2019 the Company entered into a Master Licensing Agreement (“MLA”) with its majority owned affiliate Abaxx Singapore. As a result of this agreement, the Company has assigned exclusive title rights of use as well as the sub-license rights to the Exchange Technology by way of a master license agreement.

The Company maintains ownership of the intellectual property licensing in the MLA.

Abaxx Singapore has agreed to pay the Company earnings if in the future it sub-licenses the Exchange Technology, in which case as a result of the MLA royalty fees would be as follows:

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

An amount equal to 20% of revenues on the first USD$2,000,000
An amount equal to 10% of revenues on the next USD$3,000,000
An amount equal to 5% of revenue on any excess revenue

Payments from Abaxx Singapore under these agreements are due monthly to the Company. As of December 31, 2020, no amounts have been accrued by Abaxx Singapore and no amounts have been recorded as receivable by the Company under either a royalty agreement or the MLA.

The Company has not recorded the benefits under either of these agreements as an asset due to the intellectual property being still under development, no revenues have been generated and commercial viability of the Exchange Technology has not yet been determined.

As of the year ended December 31, 2020, this agreement does not have any impact on the consolidated financial statements of the Company.

Contingency

In the ordinary course of business, the Company and its subsidiaries may become involved in various legal and regulatory actions. The Company establishes legal provisions when it becomes probable that the Company will incur a loss and the amount can be reliably estimated. The Company also estimates the aggregate range of reasonably possible losses (RPL) in its legal and regulatory actions (that is, those which are neither probable nor remote), in excess of provisions.

As at December 31, 2020, the Company is being sued by a former consultant in the amount of $1.5 million. The Company believes that the consultant was appropriately compensated and is contesting this claim.

The RPL is from zero to approximately $1.5 million plus legal costs. The Company's provisions and RPL represent the Company's best estimates and are based upon currently available information for the current action for which an estimate can be made, but there are several factors that could cause the Company's provision and/or RPL to be significantly different from its actual or RPL. For example, the Company’s estimate involves significant judgment due to the stage of the proceeding, the yet-unresolved issues in the proceeding, and the attendant uncertainty of the various potential outcomes of the proceeding.

In management’s opinion, based on its current knowledge and after consultation with counsel, the ultimate disposition of this action, will not have a material adverse effect on the consolidated financial condition or the consolidated cash flows of the Company. However, because of the factors listed above, as well as other uncertainties inherent in litigation, there is a possibility that the ultimate resolution of the legal action may be material to the Company’s consolidated results of operations for any reporting period.

20. Segmented information

The Company operates in a single segment, being the development and deployment of trust enabling Internet protocols. As at December 31, 2020 and 2019, the Company’s core assets, intellectual property, and development work, is conducted in Singapore.

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

21. Subsequent events

On February 11, 2021, the Company and AirCarbon Pte. Ltd (“AirCarbon” or “ACX””) a producer of the SmarterMarkets™ Podcast, signed a Letter of Intent (“LOI”) to develop and license software services and explore commodity futures market related services as AirCarbon advances standardized contracts for carbon offset markets.

Under the terms of the LOI, Abaxx has a right to subscribe for new shares in AirCarbon’s. If investments are made, Abaxx has the right to acquire an equity voting stake of up to 10% in AirCarbon. Abaxx has made the first investment of USD $500,000 through its wholly owned subsidiary Abaxx Technologies Corp. The proposed investment represents an initial step to key relationships to deploy Abaxx's technology in carbon markets. The total Abaxx investment would yield a strategic stake in this Singapore-based OTC market initiative for standardizing and trading global voluntary carbon credits, as well as potential integration into the Abaxx Exchange which will enable the development of Environmental, Social and Governance (ESG)-related commodity pricing differentials in Abaxx markets. Pursuant to the completion of both tranches of the investment, Abaxx will further negotiate (i) an LOI for ACX to purchase software licenses from Abaxx Technologies, (ii) exclusive partnership on futures clearing when the ACX platform advances beyond the current spot market setup to a regulated futures market anticipated in the next 12 to 18 months. This investment emphasizes Abaxx’s commitment to its home base in Singapore. Since inception, Abaxx has worked closely with and supported the efforts of Enterprise Singapore in establishing the country as the leading financial center of Asia, and the home for critical energy transition marketplaces and financial technology innovation.

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Abaxx Technologies Inc. — Annual Report 2021

45336_rns_2021-03-31_ba15d3c3-3c89-4bae-91a9-3ecf6afa0ee1.pdf

ABAXX TECHNOLOGIES INC. (Formerly New Millennium Iron Corp.)

Opinion

Basis for Opinion

Other Information

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Financial Position (Expressed in Canadian Dollars)

Approved on behalf of the Board:

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Operations and Comprehensive Loss (Expressed in Canadian Dollars)

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Cash Flows (Expressed in Canadian Dollars)

Abaxx Technologies Inc. (Formerly New Millennium Iron Corp.) Consolidated Statements of Changes in Equity (Expressed in Canadian Dollars)

1. Nature of operations

COVID-19

2. Significant accounting policies

(a) Statement of compliance

(b) Basis of presentation

(c) Basis of consolidation

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(d) Financial instruments

Financial assets

Expected credit loss impairment model

Business model assessment

Contractual cash flow assessment

Derecognition of financial assets

Financial liabilities

i. Amortized cost

ii. Financial liabilities recorded FVTPL

Recognition and initial measurement

Classification and subsequent measurement

Transaction costs

Subsequent measurement

Derecognition

(e) Determination of functional currency

(f) Foreign currency translation

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(g) Cash and cash equivalents

(h) Marketable securities

(i) Income taxes

(j) Loss per share

(k) Provisions

(l) Share-based payment transactions

(m) Convertible debenture

(n) Share capital

(o) Equity units

(p) Investment in associate

(q) Leases

(r) Significant accounting judgments and estimates

Share-based payments

Warrants

Income taxes and recovery of deferred tax assets

Fair value of financial instruments

Going concern assumption

Consolidation

Investment in associate

(s) Fair value hierarchy

(t) Accounting standards adopted during the period

Definition of a Business (Amendments to IFRS 3)

The amendments:

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

(u) Accounting standards not yet adopted

3. Reverse Takeover

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

4. Marketable securities

5. Funds held in trust

6. Non-Controlling Interest

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Abaxx Exchange

7. Capital risk management

Abaxx Technologies Inc. Notes to Consolidated Financial Statements For the year ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

8. Financial risk factors

Fair value

Significant inputs

Credit risk

Interest rate risk

Liquidity risk

Market risk

Foreign currency risk

Abaxx Technologies Inc. Annual Report 2021