Abound Energy — Interim / Quarterly Report 2021

Aug 30, 2021

Zinc8 Energy Solutions Inc.

Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

Zinc8 Energy Solutions Inc.

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed interim financial statements of the Company and all information contained in the report have been prepared by and are the responsibility of the Company’s management.

The Audit Committee of the Board of Directors has reviewed the condensed interim financial statements and related financial reporting matters.

The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of condensed interim financial statements by an entity’s auditor.

Zinc8 Energy Solutions Inc. Condensed Interim Statements of Financial Position (Unaudited - expressed in Canadian Dollars)

Zinc8 Energy Solutions Inc. Condensed Interim Statements of Financial Position (Unaudited - expressed in Canadian Dollars)
		June 30,	December 31,
	Note	2021	2020
		$	$
Assets
Current Assets
Cash		14,737,261	1,576,581
Prepaid and deposits		163,976	97,824
Amounts receivable		83,556	46,485
		14,984,793	1,720,890
Non-Current Assets
Equipment	5	1,277,712	510,589
Intangible assets	4	4,950,134	4,950,134
		6,227,846	5,460,723
Total Assets		21,212,639	7,181,613
Liabilities
Current Liabilities
Accounts payable and accrued liabilities		1,365,249	1,253,641
Loans payable	12	-	60,000
Lease liability– short term		127,699	78,785
		1,492,948	1,392,426
Lease liability– longterm	8	69,260	61,000
Total Liabilities		1,562,208	1,453,426
Shareholders’ Equity (deficiency)
Share capital	6	37,849,660	21,437,511
Subscriptions received		-	15,500
Contributed surplus	6	6,589,464	2,098,703
Deficit		(24,788,693)	(17,823,527)
		19,650,431	5,728,187
Total Liabilities and Shareholders’ Equity		21,212,639	7,181,613
Nature of operations (Note 1)
Contingencies (Note 10)
Subsequent events (Note 15)
Approved and authorized by the Board on August 30, 2021

“Ron MacDonald” Director “Charn Deol” Director Ron MacDonald Charn Deol

The accompanying notes are an integral part of these condensed interim financial statements

Zinc8 Energy Solutions Inc.

Condensed Interim Statements of Loss and Comprehensive Loss For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

		Three	months ended	Six	months ended
			June 30,		June 30
	Note	2021	2020	2021	2020
		$	$	$	$
Revenue
Grant Revenue		290,000	-	290,000	1,109,706
Expenses
Amortization	5	55,351	11,371	102,925	21,340
General and administrative		97,535	47,871	166,402	140,698
Interest		24,233	317	51,054	63,426
Filing and listing fees		14,772	24,854	97,813	58,460
Management fees	7	176,255	116,000	313,413	212,000
Marketing		74,075	221,915	332,185	470,930
Payroll	7	67,677	47,042	134,618	106,571
Professional fees		73,563	88,621	116,819	111,132
Research and development		1,284,082	1,271,327	2,368,875	1,797,053
Rent		25,962	61,287	57,513	114,594
Share-based compensation	6	3,719,100	-	3,727,644	963,547
Travel		986	4,628	4,973	24,313
		5,613,591	1,895,233	7,474,234	4,084,064
Loss before other items		(5,323,591)	(1,895,233)	(7,184,234)	(2,974,358)
Other Items:
Severance	7	-	(420,881)	-	(420,881)
Disposal of asset		-	-	9,000	-
Gain on debt settlement		169,301	-	169,301	3,736,152
Interest income		40,767	-	40,767	-
		210,068	(420,881)	219,068	3,315,271
Net and Comprehensive
income/(loss) for theperiod		(5,113,523)	(2,316,114)	(6,965,166)	340,913
Basic and diluted loss per
share		(0.04)	(0.03)	(0.05)	0.00
Weighted average shares
outstanding		149,820,779	77,811,259	138,878,750	70,632,474

The accompanying notes are an integral part of these condensed interim financial statements

Zinc8 Energy Solutions Inc.

Condensed Interim Statements of Changes in Equity For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

	Common	Share	Contributed	Subscriptions received
	shares	Capital	Surplus	in advance	Deficit	Total
	#	$	$	$	$	$
Balance, December 31, 2019	47,123,529	13,885,838	975,902	21,000	(15,779,705)	(896,965)
Shares issued pursuant to:
Private Placement	27,879,513	3,066,746	-	-	-	3,066,746
Share Issue costs	-	(186,893)	-	-	-	(186,893)
Brokers warrants	-	(128,469)	128,469	-	-	-
Settlement	800,000	244,000	176,881	-	-	420,881
Warrants exercised	2,832,658	389,920	-	-	-	389,920
Share-based compensation	-	-	963,547	-	-	963,547
Net income for theperiod	-	-	-	-	340,913	340,913
Balance, June 30, 2020	78,635,700	17,271,142	2,244,799	21,000	(15,438,792)	4,098,149
Shares issued pursuant to:
Private Placement	8,750,000	1,400,000	-	-	-	1,400,000
Subscriptions received in advance	-	-	-	(5,500)	-	(5,500)
Share Issue costs	-	(36,160)	-	-	-	(36,160)
Brokers warrants	-	(46,581)	46,581	-	-	-
Options exercised	442,263	181,942	(89,066)	-	-	92,876
Warrants exercised	17,394,604	2,667,168	(118,420)	-	-	2,548,748
Share-based compensation	-	-	14,809	-	-	14,809
Net loss for theperiod	-	-	-	-	(2,384,735)	(2,384,735)
Balance, December 31, 2020	105,222,567	21,437,511	2,098,703	15,500	(17,823,527)	5,728,187
Shares issued pursuant to:
Private Placement	28,750,000	14,635,406	889,594	-	-	15,525,000
Share Issue costs	-	(1,014,230)	-	-	-	(1,014,230)
Debt settlement	116,279	60,465	-	-	-	60,465
Warrants exercised	15,417,565	2,545,819	(35,402)	(15,500)	-	2,494,917
Options exercised	428,199	184,689	(91,075)	-	-	93,614
Share-based compensation	-	-	3,727,644	-	-	3,727,644
Net loss for theperiod	-	-	-	-	(6,965,166)	(6,965,166)
Balance, June 30, 2021	149,934,610	37,849,660	6,589,464	-	(24,788,693)	19,650,431

The accompanying notes are an integral part of these condensed interim financial statements

Zinc8 Energy Solutions Inc. Condensed Interim Statements of Cash Flows For the Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

	2021	2020
	$	$
Cash provided by (used in):
Operating activities
Net income (loss) for the period	(6,965,166)	340,913
Items not affecting cash:
Amortization	102,925	21,340
Accrued interest	-	61,464
Gain on debt settlement	(169,301)	(3,736,152)
Severance	-	420,881
Share-based compensation	3,727,644	963,547
Changes in non-cash working capital items:
Prepaid expense	(66,152)	219,144
Amounts receivable	(37,071)	25,678
Accounts payable and accrued liabilities	341,374	(40,504)
Net cash used in operating activities	(3,065,747)	(1,723,689)
Investing activity
Purchase of equipment	(777,756)	(58,595)
Net cash from investing activity	(777,756)	(58,595)
Financing activities
Proceeds from Private placement	15,525,000	3,045,746
Share issue costs	(1,014,230)	(186,893)
Warrant exercises	2,494,917	389,920
Option exercise	93,614	-
Lease payments	(35,118)	(316)
Advances payable	-	(173,671)
Loan repayment	(60,000)	(260,000)
Net cash from financing activities	17,004,183	2,814,786
Change in cash for the period	13,160,680	1,032,502
Cash, beginning of period	1,576,581	86,499
Cash, end ofperiod	14,737,261	1,119,001
Supplemental information	$	$
Interest paid	51,054		-
Taxespaid	-		-

The accompanying notes are an integral part of these condensed interim financial statements

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS

Zinc8 Energy Solutions Inc. (Formerly, MGX Renewables Inc.) (“Zinc8” or the “Company”) was incorporated on December 8, 2011 in Canada under the legislation of the Province of British Columbia. Zinc8’s head office is located at Unit 1 – 8765 Ash Street, Vancouver, BC, V6P 6T3, Canada. Zinc8 is a developmentstage company and in the process of developing zinc-air batteries. The Company’s shares trade on the Canadian Stock Exchange (“CSE”).

Since March 2020, several measures have been implemented in Canada and the rest of the world in response to the increased impact from novel coronavirus (“COVID-19”). The Company continues to operate and move its business activity forward at this time. While the impact of Covid-19 is expected to be temporary, the current circumstances are dynamic and the impacts of Covid-19 on business operations cannot be reasonable estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in 2021.

2. SIGNIFICANT ACCOUNTING POLICIES

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with IFRS as issued by the IASB.

The Company uses the same accounting policies and methods of computation as in the annual financial statements for the year ended December 31, 2020.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the year. The Company’s critical accounting estimates and judgements are disclosed in the audited financial statements for the year ended December 31, 2020 and 2019.

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

4. INTANGIBLE ASSETS

Intangible assets consist of intellectual property comprising the zinc-air regenerative fuel cell systems and zinc fuel cells (the “Zinc Technology”) purchased from a third party on January 1, 2016. The development of the Zinc Technology was in process and no amortization has been recorded as at June 30, 2021.

5. EQUIPMENT

	Lab		Right of	Leasehold
	Equipment	Equipment	use asset	improvements	Software	Total
	$	$	$	$	$	$
Cost:
Balance, December
31, 2020	392,440	35,043	165,093	31,878	46,235	670,689
Additions	542,649	69,604	92,293	162,731	2,771	870,048
Balance, June 30,
2021	935,089	104,647	257,386	194,609	49,006	1,540,737
Accumulated
Amortization:
Balance, December
31, 2020	80,587	6,099	41,950	7,927	23,537	160,100
Amortization	32,960	11,038	38,853	13,015	7,059	102,925
Balance, June 30,
2021	113,547	17,137	80,803	20,942	30,596	263,025
Net Book Value:
December 31, 2020	311,853	28,944	123,143	23,951	22,698	510,589
June 30, 2021	821,542	87,510	176,583	173,667	18,410	1,277,712

6. SHARE CAPITAL

a) Authorized

Unlimited number of common shares without par value. Unlimited number of preferred shares without par value.

On February 24, 2021, the Company closed a private placement offering of 28,750,000 common shares at a price of $0.54 per share for gross proceeds of $15,525,000. The Company incurred cash issue costs of $1,014,230 and issue 1,725,000 compensation warrants with each compensation warrant exercisable at a price of $0.54 per warrant until February 24, 2023. The Company fair valued the warrants at $889,594 using the Black-Scholes option pricing model based on the following assumptions: risk free rate – 0.23%; expected dividend - nil; expected life – 2 years; expected volatility – 138%.

On June 7, 2021, the Company issued 116,279 common shares as part of a debt settlement agreement, the shares were fair valued at $60,465. (Note 11).

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

b) Options

The Company has adopted a Stock Option Plan, which is a rolling stock option plan under which options may be granted equal in number to 10% of the issued and outstanding capital of the company at the time of grant of the stock option. No single participant may be granted options to purchase a number of Company shares equaling more than 5% of the issued shares of the Company in any 12-month period. The Board may determine the term of the options, but the term shall in no event be greater than five years from the date of issuance. Terms of vesting of the options, eligibility of directors, officers, employees, management company employees and consultants to receive options and the number of options issued to each participant shall be determined at the discretion of the Board of Directors.

During the six months ended June 30, 2021, the Company granted 7,275,000 options, exercisable at $0.62 per option, to directors, consultants and employees of the Company. The options expire on April 5, 2026 and vested immediately. The Company fair valued the options at $3,710,462 using the Black-Scholes option pricing model using the following assumptions: risk free rate – 0.92%; volatility – 112%, expected forfeiture – nil; expected dividends – nil; expected life – 5 years.

The balance of options outstanding as at June 30, 2021 and December 31, 2020 and the changes for the periods then ended is as follows:

	Number of	Weighted Average	Weighted Average
	Options	Exercise Price	Life Remaining
	#	$	(years)
Balance, December 31, 2020	6,621,323	0.26	3.85
Granted	7,275,000	0.62	-
Exercised	(428,199)	0.22	-
Forfeited	(641,674)	0.27
Balance, June 30, 2021	12,826,450	0.46	4.16
Unvested	(16,667)	0.20	2.08
Exercisable, June 30, 2021	12,809,783	0.46	4.16

As at June 30, 2021 and December 31, 2020, the following options were outstanding:

	Exercise Price
Expiry Date	$	Vested	Unvested	Total
September 12, 2024	0.21	2,932,543	-	2,932,543
February 18, 2025	0.32	2,418,907	-	2,418,907
July 28, 2023	0.20	183,333	16,667	200,000
April 5, 2026	0.62	7,275,000	-	7,275,000
		12,826,450	16,667	12,809,783

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

c) Warrants

The balance of warrants outstanding as at June 30, 2021 and December 31, 2020 and the changes for the periods then ended is as follows:

	Number of	Weighted Average	Weighted Average
	Warrants	Exercise Price	Life Remaining
	#	$	(years)
Balance, December 31, 2020	26,904,417	0.21	1.27
Exercised	(15,417,565)	0.16	-
Issued	1,725,000	0.54	-
Balance, June 30, 2021	13,211,852	0.31	1.04

As at June 30, 2021 the following share purchase warrants were outstanding and exercisable:

	Number	Exercise Price
Expiry Date	Outstanding	$
September 11, 2021	2,258,332	0.12
February 10, 2022	308,332	0.155
May 5, 2022	800,000	0.50
September 4, 2022	8,120,188	0.30
February 24, 2023	1,725,000	0.54
	13,211,852

7. RELATED PARTY TRANSACTIONS

Key management includes the CFO, CEO, VP of Engineering and the Board of Directors. Compensation paid to key management during the three and six months ended June 30, 2021 and 2020 was as follows:

	Three months ended	Three months ended	Six	months ended
		June 30,		June 30
	2021	2020	2021	2020
	$	$	$	$
Management fees	148,500	116,000	277,000	212,000
Payroll expense	97,500	33,000	152,500	66,000
Share-based compensation	2,268,099	-	2,268,099	491,031
	2,514,099	149,000	2,697,599	769,031

As at June 30, 2021, the Company had pre-payment of $nil (2020 - $22,600) and had $nil included in accounts payable and accrued liabilities (2020 - $100,000) owing to a company controlled by the CEO of the Company.

A company related by common directors charged marketing fees of $50,000 (2020 - $136,450) and rent of $6,000 (2020 - $7,000) during the six months ended June 30, 2021. The Company had a deposit of $nil (2020 - $50,000) and owed $nil included in accounts payable and accrued liabilities (2020 - $52,500) to the same company as at June 30, 2021.

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

As at June 30, 2021, the Company had $nil (2020 - $26,000) owing to other related parties included in accounts payable and accrued liabilities.

All related party transactions are in the normal course of operations and have been measured at the agreed to amounts, which is the amount of consideration established and agreed to by the related parties.

On June 30, 2018, the Company entered into a promissory note agreement with MGX Minerals Inc. (“MGX”), a former parent company prior to a spin-out, (the “Promissory Note”). The Promissory Note bore interest at 12%, was unsecured and due on December 31, 2020. Additional loans received from MGX subsequent to the Promissory Note had the same terms as the Promissory Note.

	$
Balance, December 31, 2019	5,174,688
Interest	61,464
Gain on debt settlement	(3,736,152)
Repayment	(1,500,000)
Balance, December 31, 2020	-

On March 6, 2020, the Company settled the amount of $5,236,152 owing on the Promissory Note to MGX for $1,500,000. The full cash payments of $1,500,000 were made to MGX and the Company recorded a gain on debt settlement of $3,736,152 during the year-ended December 31, 2020.

8. LEASE LIABILITIES

During the year ended December 31, 2020, the Company entered into leases for an office space and certain pieces of office equipment. The office lease was entered into on June 1, 2020 and has a two-year term with monthly lease payments of $12,441. The Company also entered into leases for an office copier and office chairs with the lease terms commencing on April 1, 2020, and July 1, 2020, respectively. The copier has a 60 month term with monthly payment of $107 while the office chair lease has a 24 month term with monthly payment of $1,142.

During the six months ended June 30, 2021, the Company entered into additional leases for office equipment, the leases range from 24 to 60 months with monthly payments between $138 and 1,332 per month.

The Company recognized its right-of-use assets and lease liabilities for these leases based on the present value of future minimum lease payments. The present value of minimum lease payments for the copier and office chairs were calculated using the interest rate implicit in the leases and the present value of minimum lease payments lease payments for office lease was calculated using the incremental borrowing rate of 8%.

The Company’s future minimum lease payments as at June 30, 2021 and December 31, 2020 are as follows:

	June 30,	December 31,
	2021	2020
	$	$
Less than 1 year	180,913	164,284
1 to 5 years	82,232	73,554
5+ Years	-	-
Total minimum lease payments	263,145	237,868
Less: imputed interest	(66,186)	(98,083)

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

Total lease obligation	196,959	139,785
Current portion of lease obligations	127,699	(78,785)
Non-current portion of lease obligations	69,260	61,000
Lease obligations		$
At January 1, 2020		-
Additions		165,093
Payments		(25,308)
At December 31, 2020		139,785
Additions		92,292
Payments		(35,118)
At June 30, 2021		196,959

9. FINANCIAL INSTRUMENTS

• (a) Fair values

The Company has classified fair value measurements of its financial instruments using a fair value hierarchy that reflects the significance of inputs used in making the measurements as follows:

Level 1: Valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar assets or liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates; and Level 3: Valuations based on significant inputs that are not derived from observable market data, such as discounted cash flow methodologies based on internal cash flow forecasts.

As at June 30, 2021, the fair values of cash, amounts receivable, accounts payable and accrued liabilities, and loans payable approximate their carrying value due to the short-term maturity of these instruments. Lease liabilities are measured at amortized costs using effective interest rate. Cash is carried at level 1 fair value measurement.

• (b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations out of cash. The ability to do this relies on the Company raising equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. As at June 30, 2021, the Company had working capital of $13,491,845.

• (c) Credit Risk

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

The Company’s cash is largely held in large Canadian financial institutions. The Company does not have any asset-backed commercial paper. The Company’s receivables consist of GST receivable due from the Federal Government of Canada. The Company maintains cash deposits with Schedule A financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk.

• (d) Interest rate risk

Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.

• (e) Foreign currency exchange rate risk

The Company’s functional and reporting currency is the Canadian dollar and major purchases are transacted in Canadian dollars. As a result, the Company’s exposure to foreign currency risk is minimal.

10. CAPITAL MANAGEMENT

The Company's objective when managing capital is to maintain adequate cash resources to support planned activities which include administrative costs and general expenditures. In the management of capital, the Company includes cash, loan payable, lease liabilities, and the components of shareholders’ equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. Historically, funding for the Company's plan is primarily managed through the issuance of additional common shares, through its commercial activities and through obtaining financing. There are no assurances that funds will be made available to the Company when required.

In order to carry out the planned development and pay for administrative costs, the Company will spend its existing working capital and expects to raise additional amounts as needed. The Company will continue to assess new business and seek to acquire an interest in additional business if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

The Company invests all capital that is surplus to its immediate operational needs in short-term, liquid and highly rated financial instruments, such as cash, and all are held in major Canadian financial institutions. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company's approach to capital management during the period ended June 30, 2021. The Company is not subject to externally imposed capital requirements.

11. CONTINGENCIES

On September 5, 2019, Market One Media Group Inc. (“Market One”) filed a claim against the Company for unpaid invoices of $208,950 relating to a media advertising and promotion services agreement. The Company’s position is that it has not received any of the services discussed in the contract. Market One has been attempting to schedule a summary trial hearing but has not been able to obtain a date yet. No settlement has been made and the eventual outcome is not determinable. On June 7, 2021, the Company entered into a debt settlement agreement with Market One whereby the Company made a cash payment of $30,000 and issued 116,279 common shares of the Company to settle the outstanding debt of $208,950. The shares were fair valued at $60,465 and the Company recorded a gain on debt settlement of $118,485.

On January 10, 2020, Dig Media filed a claim against the Company for unpaid invoices of $60,900 plus interest of $20,367 relating to media and promotion services. It is the Company’s position that it has not received any of the services. The arbitration proceeding is on hold to allow the parties to settle this matter. If not successful, the case will be referred to a mediator/arbitrator. No settlement has been made and the eventual outcome is not determinable. During the six months ended June 30, 2021, the Company settled

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

the amounts outstanding with Dig Media for cash consideration of $30,450 and recorded a gain on debt settlement of $50,817.

On February 25, 2021, Miller Thomson LLP filed a claim against the Company for unpaid invoices relating to legal services in the amount of $69,718 plus interest of $9,984 for a total claim of $79,702. No settlement has been made and the eventual outcome is not determinable. The full amount of $69,718 and interest of $9,983 has been recorded as accounts payable and accrued liabilities at June 30, 2021.

On March 25, 2021, Michael Reimann, a former director of the Company, filed a claim against the Company for breach of contract and seeking payment of $25,969. No settlement has been made and the eventual outcome is not determinable. The full amount of $25,969 has been recorded as accounts payable and accrued liabilities at June 30, 2021.

12. LOANS PAYABLE

During the six months ended June 30, 2021, the Company repaid $60,000 in loans payable and as at June 30, 2021, the Company had $nil (2020 - $60,000) in loans payable.

13. A COOPERATION AGREEMENT

The Company entered into a Cooperation agreement (the “Agreement”) dated December 24, 2019 with The Power Authority of the State of New York (the “Authority”) for the installation of a 100kW/1MWh ZincAir Battery Energy Storage System in New York State.

Under the Agreement with the Authority, the Authority agreed to collaborate with the Company and contribute to a research and development project through its participation in aspects of design and fabrication of a zinc air energy storage system, then demonstration of the system and the Company agreed to collaborate with the Authority to pursue the research and development project.

The Authority agreed to contribute the following monetary contributions to the Company for the research and development of the Product:

• First Contribution - $835,000 USD (CAD$ 1,109,632 received in 2020), to be paid within 30 days following the Effective Date of this Agreement.

• Second Contribution - $0 USD, to be paid after 6 months following the Effective Date of this Agreement, after receipt and approval of the first interim fiscal report for the first 6-month period, but not before actual qualified expenses and the Company’s project expenses have equaled or exceeded the minimum required expenditures.

Minimum Required Qualified Expenses: $355,000 USD Minimum Required the Company’s Project Expenses:

• Third Contribution - $0 USD, to be paid after 12 months following the Effective Date of this Agreement, after receipt and approval of the second interim fiscal report for the second 6-month period, but not before actual qualified expenses and the Company’s project expenses have equaled or exceeded the minimum required expenditures.

Minimum Required Qualified Expenses: $835,000 USD Minimum Required the Company’s Project Expenses: 80% of $2,950,000 USD

Zinc8 Energy Solutions Inc. Notes to the Condensed Interim Financial Statements For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited - expressed in Canadian Dollars)

• Fourth Contribution - $160,000 USD, to be paid after 18 months following the Effective Date of this Agreement, after receipt and approval of the third interim fiscal report for the third 6-month period, but not before actual qualified expenses and the Company’s project expenses have equaled or exceeded the minimum required expenditures.

Minimum Required Qualified Expenses: $995,000 USD Minimum Required the Company’s Project Expenses: 80% of $4,100,000 USD

• Fifth Contribution - $380,000 USD, to be paid after 24 months following the Effective Date of this Agreement, after receipt and approval of the fourth interim fiscal report for the fourth 6-month period, but not before actual qualified expenses and the Company’s project expenses have been equaled or exceeded the minimum required expenditures, whichever is later.

Minimum Required Qualified Expenses: $1,375,000 USD Minimum Required the Company’s Project Expenses: 80% of $5,400,000 USD

• Sixth Contribution $20,000 USD, to be paid after 30 months following the Effective Date of this Agreement, after receipt and approval of the fifth interim fiscal report for the fifth 6-month period, or after actual qualified expenses and the Company’s project expenditures have been equaled or exceeded the required expenditure, whichever is later.

Minimum Required Qualified Expenses: $1,395,000 USD Minimum Required the Company’s Project Expenses: 80% of $6,450,000 USD

• Final Contribution – After receipt and approval of the final fiscal report, a final contribution of $155,000 will be paid for actual qualified expenses and the Company’s project expenditures have equaled or exceeded the required expenditures.

Minimum Required Qualified Expenses: $1,550,000 USD Minimum Required the Company’s Project Expenses: 80% of $6,450,000 USD

The term of this Agreement (the “Term”) shall begin on the Effective Date and shall be valid for an initial period of 10 years as of the Effective Date, with automatic renewals of one (1) year periods each unless either Party provides written notification to the other. The Authority, within its sole discretion and for any reason, may terminate this Agreement at any time upon 30 days’ notice to the Company. Upon such termination, the Parties will conduct a final payment schedule, which will include any and all final payments due to each side.

14. SUBSEQUENT EVENTS

Subsequent to June 30, 2021:

1) 50,000 warrants were exercised for gross proceeds of $15,000.