Biocure Technology Inc. — Annual Report 2020

Apr 30, 2021

BIOCURE TECHNOLOGY INC CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

==> picture [261 x 54] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Biocure Technology Inc.

Opinion

We have audited the consolidated financial statements of Biocure Technology Inc. (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

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

Basis for Opinion

We conducted our audit 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 Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the 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.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which indicates that the Company has an accumulated deficit of $25,071,293 as at December 31, 2020 and, as of that date, the Company's current liabilities exceeded its total assets by $3,805,369. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

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

In connection with our audit of the 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 financial statements or our knowledge obtained in the audit, 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, 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 Financial Statements

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

In preparing the 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 Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 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 financial statements, including the disclosures, and whether the 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 audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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 Steven Reichert.

==> picture [38 x 20] intentionally omitted <==

DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, BC

April 29, 2021

==> picture [93 x 57] intentionally omitted <==

Biocure Technology Inc.

Consolidated Statements of Financial Position As at December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Biocure Technology Inc. Consolidated Statements of Financial Position As at December 31, 2020 and 2019 (Expressed in Canadian Dollars)	Biocure Technology Inc. Consolidated Statements of Financial Position As at December 31, 2020 and 2019 (Expressed in Canadian Dollars)
Note 2020 2019
ASSETS Current Cash Receivables 4 Prepaid expenses 5 Inventory 6 Non-current Equipment 7 ROU Asset 9 Intangible asset Deposits 5 Investments in KWULP and KWUC 3 Land deposit 8 TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 10 Loans payable 12 Lease liability 13 Severance liabilities 14 Non-current Loan payable 15 Lease liability 13 Convertible Debenture 16 Shareholders’ equity Share capital 17 Accumulated other comprehensive loss Reserve for stock options and warrants 17,18 Deficit Total parent shareholders’ equity Non-controlling interests 19 Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 46,679 $ 132,439 70,893 88,623 13,709 1,768 4,493 11,541
	135,774 234,371
	68,784 107,424 17,304 - 1,460 1,633 48,161 42,580 1,968,334 1,967,354 2,310,603 2,221,734
	$ 4,550,420 $ 4,575,096
	$ 2,576,171 $ 1,108,497 1,053,077 870,770 14,389 - 297,506 233,095
	3,941,143 2,212,362
	1,586,922 1,498,500 3,993 - 1,332,729 1,281,470
	6,864,787 4,992,332 17,452,020 16,984,641 (654,328) (526,630) 6,269,735 6,159,079 (25,071,293) (22,907,714)
	(2,003,866) (290,624) (310,501) (126,612)
	(2,314,367) (417,236)
	$ 4,550,420 $ 4,575,096

Nature of operations and going concern (Note 1) Commitments (Notes 8 and 14) Subsequent events (Note 24)

Approved on behalf of the Board on April 29, 2021:

“Sang Mok Lee” “Collin Kim” Director Director

The accompanying notes are an integral part of these Consolidated Financial Statements.

Biocure Technology Inc.

Consolidated Statements of Comprehensive Loss For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Biocure Technology Inc. Consolidated Statements of Comprehensive Loss For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)
Note	2020 2019
EXPENSES Accretion Amortization Consulting Director and management fees 11 Filing fees General and administrative Interest 12,13,15,16 Loss on inventory disposal Motor vehicle expenses Payroll 10 Professional fees Rent Research and development Share-based compensation 11,18 Supplies Travel and entertainment Utilities OTHER ITEMS Finance costs Foreign exchange gain (loss) Gain on settlement of debt Gain (loss) on valuation of marketable securities Income from government assistance 15 Interest income Recovery of uncollectable loan NET LOSS FOR THE YEAR Loss attributable to the shareholders of the Company Loss attributable to non-controlling interest OTHER COMPREHENSIVE INCOME (items that may be reclassified to profit or loss) Foreign currency translation Attributable to the shareholders of the Company Attributable to non-controlling interest 18 COMPREHENSIVE LOSS Attributable to the shareholders of the Company Attributable to non-controlling interest 18 BASIC AND DILUTED LOSS PER SHARE (attributable to the owners of the parent) WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED	$ 883 $ - 54,899 44,815 384,700 357,313 72,853 61,258 31,127 38,793 82,299 171,635 239,240 129,275 6,742 - 17,559 18,379 480,018 407,243 123,216 164,670 50,928 77,674 1,555,334 1,415,918 109,253 1,577,987 16,598 16,265 108,245 238,749 4,057 5,111
	(3,337,951) (4,725,085)
	- (7,653) 9,786 (57,358) 120,000 - 881 (1,970) 31,662 - 2,891 1,158 94,353 -
	259,573 (65,823)
	$ (3,078,378) $ (4,790,908)
	(2,945,580) (4,740,046) (132,797) (50,862)
	(3,078,378) (4,790,908)
	(135,388) 136,124
	(127,698) 130,434 (7,690) 5,690
	(135,388) 136,124
	$ (3,213,766) $ (4,654,784)
	(3,073,279) (4,609,612) (140,487) (45,172)
	(3,213,766) (4,654,784)
	$(0.03) $(0.05) 98,146,465 96,937,001

The accompanying notes are an integral part of these Consolidated Financial Statements.

Biocure Technology Inc.

Consolidated Statements of Changes in Shareholders’ Equity For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

					Accumulated	Accumulated
	Number of		Reserve For			Other			Non-
	Common	Share	Stock Options		Comprehensive			controlling
	Shares	Capital	and Warrants			Loss	Deficit		interest		Total
December 31, 2018	96,937,001	$ 16,984,641	$	4,581,092	$	(657,064)	$ (20,007,358)	$	-	$ 901,311
Issuance of shares in subsidiary	-	-		-		-	1,839,690		(81,440)		1,758,250
Share-based compensation (Note 18)	-	-		1,577,987		-	-		-		1,577,987
Net loss	-	-		-		-	(4,740,046)		(50,862)		(4,790,908)
Other comprehensive income	-	-		-		130,434	-		5,690		136,124
December 31, 2019	96,937,001	$ 16,984,641	$	6,159,079	$	(526,630)	$ (22,907,714)	$ (126,612)		$ (417,236)
Issuance of shares in subsidiary	-	-		-		-	782,002		(43,402)		738,600
Private Placement (net)	1,786,725	245,379		1,403		-	-		-		246,782
Issuance of shares for debt	1,190,907	222,000		-		-	-		-		222,000
Share-based compensation (Note 18)	-	-		109,253		-	-		-		109,253
Net loss	-	-		-		-	(2,945,581)		(132,797)		(3,078,378)
Other comprehensive loss	-	-		-		(127,698)	-		(7,690)		(135,388)
December 31, 2020	99,914,633	$ 17,452,020	$	6,269,735	$	(654,328)	$ (25,071,293)	$ (310,501)		$	(2,314,367)

The accompanying notes are an integral part of these Consolidated Financial Statements.

Biocure Technology Inc.

Consolidated Statements of Cash Flows For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

OPERATING ACTIVITIES Net loss for the year Non-cash items: Accretion expense Amortization Gain on settlement of debt Gain (loss) on valuation of marketable securities Interest Income from government assistance Recovery of loan receivable Share-based compensation Changes in non-cash working capital items: Receivables Prepaid expenses and deposits Inventory Accounts payable and accrued liabilities Net cash used in operating activities INVESTING ACTIVITIES Purchase of property, plant and equipment Payment of deposit for land purchase Recovery of loan receivable Net cash generated (used) in investing activities FINANCING ACTIVITIES Proceeds from private placement (net of issuance costs) Proceeds from subsidiary shares issued Proceeds from borrowings Proceeds from CEBA loan Repayment of borrowings Lease payments Convertible debentures Net cash provided by financing activities EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH NET CHANGE IN CASH CASH, BEGINNING OF THE YEAR CASH, END OF THE YEAR	$ (3,078,378) $ (4,790,908) 883 - 54,899 44,815 (120,000) - (881) 1,970 46,782 94,373 (31,662) - (94,353) - 109,253 1,577,987 20,348 (57,892) (15,690) 3,553 7,296 7,580 1,791,301 437,163
	(1,310,202) (2,681,359)
	(2,861) - - (1,049,625) 94,353 -
	91,492 (1,049,625)
	246,782 - 738,600 1,758,250 341,578 770,625 60,000 - (241,031) (59,389) (11,970) - - 1,222,760
	1,133,959 3,692,246
	(1,009) 62,561 (85,760) 23,823 132,439 108,616
	$ 46,679 $ 132,439

The accompanying notes are an integral part of these Consolidated Financial Statements.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

Biocure Technology Inc. (the “Company”) was incorporated under the Business Corporation Act (British Columbia) on August 24, 2007. The Company is engaged in a mineral exploration property project through a limited partnership. The Company is also engaged in developing and commercializing several biopharmaceutical technologies relating to uses of recombinant and ranibizumab. The Company’s head office is located at Suite 300, 1055 West Hastings Street, Vancouver, BC, Canada and is trading on the Canadian Securities Exchange under the symbol CURE. On June 18, 2019, the Company began trading on OTCQB under the symbol BICTF.

These Consolidated Financial Statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at December 31, 2020, the Company has a working capital deficiency of $3,805,369. The continuing operations of the Company are dependent upon its ability to raise additional capital during the next twelve months and beyond to support current operations and planned development. As at December 31, 2020, the Company has not earned significant revenue and has an accumulated deficit of $25,071,293. The Company has material financial uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern. The Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Since March 2020, 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 interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the Company’s financial results.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

Statement of compliance

These Consolidated Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of Financial Reporting Interpretations Committee (“IFRIC”).

Basis of measurement

The Company’s Consolidated Financial Statements have been prepared on the historical cost basis except for the revaluation of certain financial assets and financial liabilities to fair value.

Functional and presentation currency

The Consolidated Financial Statements of the Company are presented in Canadian dollars.

The individual financial statements of each entity of the Company are presented in the currency of the primary economic environment in which the entity operates. The functional currency of the Company is the Canadian dollar. The functional currency of the subsidiary is South Korea Won.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The Consolidated Financial Statements incorporate the financial statements of the Company and its subsidiary listed in the following table:

in the following table:
	Country of
Name of Subsidiary	Incorporation	Ownership	Principle Activities
Biocurepharm Corporation (“BP Korea”)	Korea	94.32%	Biopharmaceutical

All intercompany transactions, balances, income and expense are eliminated upon consolidation.

Subsidiaries are those entities which the Company controls by having the power to govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are deconsolidated from the date that control ceases.

Significant estimates and assumptions

The preparation of Consolidated Financial Statements in accordance with IFRS requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in future accounting periods include the recoverability of investments in KWULP and KWUC, useful lives of equipment, recoverability of receivables, fair value measurement and the timing of future cash flows of financial instruments, and the measurement of deferred tax assets and liabilities.

The preparation of Consolidated Financial Statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s accounting policies in these Consolidated Financial Statements were:

• Evaluating whether or not costs incurred by the Company in developing its pharmaceutical products meet the criteria for capitalization to intangible assets. Management determined that as at December 31, 2020, it was not yet able to demonstrate with sufficient certainty that future economic benefits will flow to the Company. Accordingly, all research and development costs incurred to date have been expensed.

Other significant judgments in applying the Company’s accounting policies relate to the assessment of the Company’s ability to continue as a going concern (Note 1), the classification of its financial instruments and the classification of leases as either operating or finance type leases.

Intangible assets

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred. During the year ended December 31, 2020 $391,203 (KRW 344,131,543) (2019 $441,071 (KRW 387,499,998)) relating to direct labor costs were included in Research and development in the consolidated statement of comprehensive loss.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use and borrowing costs on qualifying assets. Other development expenditures are recognized in profit or loss as incurred.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangible assets (continued)

Capitalized development expenditures are measured at cost less accumulated amortization and accumulated impairment losses. As of December 31, 2020, the Company has not capitalized any development expenditures. Patent costs

Patents for technologies that are no longer in the research phase are recorded at cost. Patent costs include legal fees to obtain patent and patent application fees. When the technology is still in the research phase, those costs are expensed as incurred.

Equipment

Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.

Amortization is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The amortization rates applicable to each category of equipment are as follows:

Class of equipment Rate Computer equipment 3 years Furniture and fixtures 5 years Office equipment 5 years Testing equipment 5 years

Impairment of assets

The carrying amount of the Company’s assets is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

Severance liability

Severance liability expense is recognized as the employee provides service to the Company and is recorded with either the severance liability or the Company’s cash contributions to the pension fund.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventory

Inventories consisting of finished goods and raw materials are measured at the lower of cost and net realizable value. The cost of inventories is based on a weighted average cost formula, and includes expenditures incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition.

Government grant

Loans received from government grants are recognized initially at fair value, with the difference between the fair value of the loan based on prevailing market interest rates and the amount received recorded as a government grant gain in the consolidated statements of loss and comprehensive loss.

Financial instruments

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss).

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of net (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of net (loss) income in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income (loss).

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of net income (loss), as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

Impairment of financial assets at amortized cost (continued)

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of net income (loss). However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, 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 the consolidated statements of net (loss) income.

Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and stock options are recognized as a deduction from equity, net of any tax effects.

Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of loss and comprehensive loss, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In this case the income tax is also recognized in other comprehensive loss or directly in equity, respectively.

Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred tax is recognized on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that future taxable income will be available to allow all or part of the temporary differences to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted and are expected to apply by the end of the reporting period.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Loss per share

Basic loss per share is computed using the weighted average number of common shares outstanding during the year. The treasury stock method is used for the calculation of diluted loss per share, whereby all “in the money” stock options and share purchase warrants are assumed to have been exercised at the beginning of the year and the proceeds from their exercise are assumed to have been used to purchase common shares at the average market price during the year. When a loss is incurred during the year, basic and diluted loss per share are the same as the exercise of stock options and share purchase warrants is considered to be anti-dilutive. As at December 31, 2020, the Company had no potentially dilutive shares outstanding.

Share-based payments

The grant date fair value of share-based payment awards granted to employees is recognized as stock-based compensation expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and nonmarket vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Where equity instruments are granted to parties other than employees, they are recorded by reference to the fair value of the services received. If the fair value of the services received cannot be reliably estimated, the Company measures the services received by reference to the fair value of the equity instruments granted, measured at the date the counterparty renders service.

All equity-settled share-based payments are reflected in share-based payment reserve, unless exercised. Upon exercise, shares are issued from treasury and the amount reflected in share-based payment reserve is credited to share capital, adjusted for any consideration paid.

Valuation of equity units issued in private placements

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The fair value of common shares issued in private placements was determined to be the more easily measurable component and are valued at their fair value, as determined by the closing quoted bid price on the announcement date. The balance, if any, is allocated to attached warrants. Any fair value attributed to warrants is recorded to reserves.

Foreign currency translation

Translation of foreign currency transactions

Transactions in foreign currencies are translated using the exchange rate prevailing at the date of the transaction. At each reporting date, foreign currency denominated monetary assets and liabilities are translated at year-end exchange rates. Exchange differences arising from the transactions are recorded in profit or loss for the period, except for exchange differences relating to borrowings hedging net investments denominated in the consolidated subsidiaries’ currency. These differences are recognized in other comprehensive income as currency translation differences until the disposal of the net investment. Exchange differences arising from operating transactions are recorded in operating profit for the period; exchange differences related to financing transactions are recognized as finance costs or income, or in other comprehensive income.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency translation (continued)

Translation of foreign operations

The assets and liabilities of a foreign operation, including goodwill and fair value adjustments arising from the acquisition, are translated in Canadian dollars at year-end exchange rates. Income and expenses, and cash flows of a foreign operation are translated in Canadian dollars using average exchange rates. Differences resulting from translating foreign operations are reported as translation differences in equity. When a foreign operation is disposed of, the translation differences previously recognized in equity are reclassified to profit or loss.

Leases

At the 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 recognizes a right-of-use asset and a lease liability at the lease commencement date. The right- of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle or remove the underlying asset.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using 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 comprise the following:

• Fixed payments, including in-substance fixed payments;

• Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date;

• Amounts expected to be payable under a residual value guarantee; and

• The exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an option renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the statement of comprehensive loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company has elected to not recognize right-of-use assets and lease liabilities for short-term lease of assets that have a lease term of 12 months or less and leases of low-value assets, such as IT equipment. The Company recognizes the lease payments associated with the leases as an expense on a straight-line basis over the lease term.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

3. INVESTMENTS IN KWULP AND KWUC

The Company has a 10% interest in Korea Waterbury Uranium Limited Partnership (“KWULP”), a limited partnership registered under the Limited Partnerships Act (British Columbia), and a 10% interest in the Korea Waterbury Uranium Corporation (“KWUC”), KWULP’s general partner.

In January 2008, KWULP entered into an earn-in agreement with Fission Energy Corp. ("Fission") whereby Fission granted an option to KWULP to acquire up to a 50% interest in certain mineral claims in Saskatchewan, known as the Waterbury Lake Property, by incurring aggregate exploration costs of $14,000,000 by January 30, 2011 (incurred) and subscribing for 1,000,000 common shares of Fission at a price of $1.00 per share (subscribed to on March 14, 2008).

In August 2010, KWULP and Fission Energy Corp. entered into a definitive Limited Partnership Agreement (“WLULP”) to further the joint exploration and development of the Waterbury Lake Uranium Property located in Saskatchewan's Athabasca Basin (the “Waterbury Project”). Each party is responsible for expenditures in accordance with its interest in the partnership and any profits will be distributed to the parties on the same basis.

On April 11, 2011, Fission, a limited partner of KWULP, exercised the Back-In Option available under the WLULP Limited Partnership Agreement. KWULP received $6,000,000 for the Back-in Option from Fission, accordingly of which the Company received $600,000. As a result of the exercise of this option, Fission’s interest in WLULP was increased by 10% and KWULP’s interest was reduced by 10%. KWULP then held a 40% interest and Fission then held 60% in WLULP.

On January 16, 2013, a Binding Letter of Intent was announced whereby Denison Mines Corp. (“Denison”), by way of an arrangement, would acquire certain assets of Fission, including Fission’s 60% interest in the WLULP. The arrangement received final approval of the British Columbia Supreme Court and TSX Venture Exchange on April 25, 2013.

During the years ended December 31, 2015 and 2020, KWULP decided not to participate in funding for the Waterbury Project and as Denison incurs expenditures its interest will increase and KWULP’s will decrease. As at December 31, 2020, KWULP’s interest has declined to 33.09%.

The Company’s investment in KWULP is classified as a fair value through other comprehensive loss (“FVTOCI”) financial asset. Because the investment is an unquoted investment in a private entity and the primary asset is an exploration stage resource property, the fair value is highly subjective. Management has reviewed for indicators of impairment and concluded that no such indicators exist as at December 31, 2020.

4. RECEIVABLES

The Company’s receivables are wholly comprised of refundable value-added tax. As of December 31, 2020, the Company had $70,893 (2019 - $88,623) in receivables.

5. PREPAID EXPENSES AND DEPOSITS

	December 31, 2020	December 31, 2019
Current:
Prepaid expenses	$ 13,709	$ 1,768
Non-current:
Deposits	48,161	42,580
Total	$ 61,870	$ 44,348

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

6. INVENTORY

The Company’s inventory is comprised of finished products (biosimilar) and raw materials (microneedle). As of December 31, 2020, the Company had $4,493 (2019 - $11,541) in inventory.

7. EQUIPMENT

	Furniture and	Office	Computer
	Fixtures	Equipment	Equipment	Testing Equipment	Total
Cost:
At December 31, 2018	$ 54,439	$ 8,248	$ 10,796	$ 637,057	$ 710,540
Additions	-	-	-	-	-
Effect of foreign exchange	(4,206)	(667)	(839)	(50,045)	(55,857)
At December 31, 2019	$ 50,133	$ 7,581	$ 9,957	$ 587,012	$ 654,683
Additions	2,399	-	-	462	2,861
Effect of foreign exchange	2,005	303	398	23,480	26,186
At December 31, 2020	$ 54,537	$ 7,884	$ 10,355	$ 610,954	$ 683,730
Amortization:
At December 31, 2018	$ 33,876	$ 8,248	$ 10,370	$ 493,227	$ 545,721
Charge for the year	4,818	-	426	39,339	44,583
Effect of foreignexchange	(2,669)	(667)	(839)	(38,870)	(43,045)
At December 31, 2019	$ 36,025	$ 7,581	$ 9,957	$ 493,696	$ 547,259
Charge for the year	5,292	-	-	39,288	44,580
Effect of foreign exchange	1,525	303	398	20,881	23,107
AtDecember31,2020	$42,842	$ 7,884	$10,355	$ 553,865	$ 614,946
Net book value:
At December 31, 2019	$ 14,108	$-	$-	$ 93,316	$ 107,424
At December 31,2020	$11,695	$-	$-	$57,089	$68,784

8. LAND DEPOSIT

During the year ended December 31, 2017, the Company entered into an agreement with Korea Land & Housing Corp. (“KLHC”) to acquire land for the purpose of constructing a research and development facility. The title of the land transfers to the Company upon completion of the scheduled payments.

The payment schedule is as follows:

Date	KRW	$
December 12, 2017 (paid)	281,395,000	344,427
June 12, 2018 (paid)	422,555,000	517,207
December 12, 2018 (paid)	422,000,000	516,528
June 12, 2019 (paid)	422,000,000	516,528
December 12, 2019 (paid)	422,000,000	516,528
June 12, 2020	427,908,000	500,652
December 12,2020	429,405,230	502,404
	2,827,263,230	3,414,274

The title of the land transfers to the Company upon completion of the scheduled payments. The Company is currently in arrears for the remaining payments that are required to complete the purchase. As of December 31, 2020 KRW 843,975,890 in principal payments and KRW 17,430,880 of interest payments are outstanding.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

8. LAND DEPOSIT (continued)

If the Company defaults and does not proceed with the purchase, the initial payment of $344,427 (KRW 281,395,000) shall be forfeited. As at December 31, 2020, the Company has made total payment of KRW 1,969,950,000 ($2,411,218), including $100,615 in foreign currency adjustment.

9. RIGHT-OF-USE ASSETS

During the year ended December 31, 2020, the Company entered into a vehicle lease agreement. The lease liability was measured at the present value of the estimated remaining lease payments and discounted using the Company’s incremental borrowing rate as of January 1, 2020, which is 17%.

The changes of the Company’s right-of-use assets for the year ended December 31, 2020 are as follows:

	December 31, 2020
Balance, beginning	$ -
Additions	27,687
Depreciation for the year	(10,383)
Balance, ending	$ 17,304

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	December 31, 2020	December 31, 2019
Accounts payable	$ 2,372,003	$ 1,048,025
Accrued liabilities	179,785	41,470
Payroll liabilities	24,383	19,002
	$2,576,171	$1,108,497

11. RELATED PARTIES

Key management compensation

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company's Board of Directors and the Chief Executive Officer (“CEO”). The remuneration of directors and key management personnel for the years ended December 31 were as follows:

	2020	2019
Management and directors’ fees	$ 314,987	$ 324,067
Share-based compensation	64,431	752,447
Total	$ 379,418	$ 1,076,514

Loan payable to related parties

As of December 31, 2020, the Company has a loan of $47,000 (December 31, 2019 - $47,000) payable to a significant shareholder which is non-interest bearing, unsecured, and due on demand. As of December 31, 2020, the Company has a loan of $348,957 (KRW 298,252,645) (December 31, 2019 - $337,812 (KRW 300,052,470)) payable to the CEO of the Company which bears interest at 4.6% per annum, is unsecured, and due on demand (Note 12).

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

11. RELATED PARTIES (continued)

Share transactions

During the year ended December 31, 2020, the Company issued 136,364 shares to settle debt in the amount of $30,000 with two directors of the Company.

Directors and key management personnel also participated in the Company’s private placement during the year. They invested a total of $20,000 and received a combined 142,860 Units at $0.14 per Unit. Each Unit is comprised of one common share and one share purchase warrant of the Company. Each share purchase warrant entitles the holder to purchase additional common share of the Company at $0.21 per common share until October 14, 2022.

12. LOANS PAYABLE

The following table summarizes the principal and interest amount in loans payable:

The following table summarizes the principal and interest amount in loans	payable:
	December 31,	December 31,
	2020	2019
Loans payable, unsecured:
Non-interest bearing, unsecured and due on demand (Note 11)	$ 47,000	$ 47,000
Interest at 2.0% per annum, unsecured and due on demand	140,724	-
Interest at 4.6% per annum, unsecured and due on demand (Note 11)	348,957	337,812
Interest at 5% per annum, unsecured and due on demand	266,087	242,707
Interest at 10% per annum, unsecured and due on demand	250,309	218,501
Total	$ 1,053,077	$ 870,770

During the year ended December 31, 2020, the Company recorded interest expense of $48,238 (2019 - $50,142).

13. LEASE LIABILITY

During the year ended December 31, 2020, the Company entered into a two year vehicle lease agreement, and recognized a right-of-use asset (Note 9) with a corresponding lease liability.

The changes in the Company’s lease liability for the year ended December 31, 2020 are as follows:

	December 31, 2020
Balance, beginning	$ -
Additions	27,687
Lease payments	(12,320)
Finance charge	3,015
Balance, December 31	$ 18,382
Less: current portion	(14,389)
Balance, ending	$ 3,993

The lease payments associated with leases containing a ROU asset were $1,330 (KRW 1,170,000) per month starting in April 2020. During the year ended December 31, 2019, lease payments were associated with short term leases with monthly payments of $3,627 (KRW 3,187,000) up to October 31, 2019 and $6,046 (KRW 5,311,800) thereafter. The Company recorded depreciation of $10,383 and finance charges of $3,015 for the year ended December 31, 2020, and lease expenses on short term leases of $7,674 for the year ended December 31, 2019.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

14. SEVERANCE LIABILITIES

Under Korean law, the Company is required to either pay employees a severance amount at termination or contribute to a pension scheme. During the year ended December 31, 2016, the Company applied to begin making contributions to a pension scheme. The severance liability is the amount that remains payable by the Company to its employees at the time of termination and is based on a specified percentage of wages paid to date for past services.

As of December 31, 2020, the Company has a carrying balance of severance liabilities of $297,506 (2019 - $233,095). During the year ended December 31, 2020, the Company recognized $64,411 (2019 - $59,261) in severance expenses.

15. LONG-TERM LOAN PAYABLE

LONG-TERM LOAN PAYABLE
	December 31,	December 31,
	2020	2019
Balance, beginning	$ 1,498,500	$ 815,184
Additions	29,222	749,250
Effect of foreign exchange	59,200	(65,934)
Balance, ending	$ 1,586,922	$ 1,498,500

During the year ended December 31, 2020, the Company entered into a Canada Emergency Business Account “CEBA” loan with the Government of Canada. The loan is an interest free loan of $60,000 from the Government of Canada. If the Government of Canada is repaid by December 31, 2022, 33% being $20,000 will be forgiven. If the Company is not able to repay, the loan will convert into a regular loan with a three-year term at 5% per annum. The loan was recorded at a fair value of $29,222 using an effective rate of 17%, considering the grant, the interest- free loan and the forgivable portion. The residual value of $31,662 is recorded as income from government assistance in other income. During the year ended December 31, 2020, the Company recorded accretion expense of $883 (2019 - $Nil).

During the year ended December 31, 2018, the Company assumed a loan payable to the Industrial Bank of Korea (“IBK”) to fund the land purchase agreement with KLHC (Note 8).

The loan terms are as follows:

• Interest rate of 3.3% per year;

• Loan amount shall consist of 5 instalments of $403,920 (KRW 330,000,000) and the sixth instalment of $410,040 (KRW 335,000,000) starting on June 12, 2019 where the balance shall be covered by the Company;

• The Company shall pay interest only for the first 3 years and principal plus interest for the following 5 years; and

• If the Company defaults and does not proceed with the land purchase, IBK shall be paid by KLHC.

During the year ended December 31, 2020, the Company recorded and paid interest expense of $49,969 (2019 - $32,795).

16. CONVERTIBLE DEBENTURE

During the year ended December 31, 2019, the Company issued $1,222,760 (KRW 1,100,000,000) in convertible debentures. The convertible debenture bears a three per cent interest rate, has a term of ten years, and is convertible into common shares of the Company’s subsidiary BP Korea at $12.25 (KRW 11,000) per share three years after the issuance of the convertible debenture. If any common shares of the company are issued or sold for a price less than $12.25 (KRW 11,000) per common share the conversion price will be adjusted downward to the price of such issuance. The adjustment to the conversion price is considered a derivative as it changes in relation to the share price of the Company and does not meet the fixed for fixed criteria. The Company has elected to measure the instrument at FVTPL. On inception, the fair value of the instrument was determined to be the transaction amount.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

16. CONVERTIBLE DEBENTURE (continued)

Management assessed the fair value of the debt at December 31, 2020, and did not make any adjustments to the fair value, based on the market conditions, interest rates and operations of BP Korea.

The proceeds from the issuance were allocated as follows:

		Debenture
Balance at December 31, 2018	$	-
Proceeds		1,222,760
Interest		36,835
Effect of FX		21,875
Balance at December 31, 2019	$ 1,281,470
Interest		37,514
Effect of FX		13,745
Balance at December 31, 2020	$ 1,332,729

17. SHARE CAPITAL

Common Shares

Authorized:

Unlimited number of common shares without par value.

Issued:

During the year ended December 31, 2020, the Company issued 1,786,725 Units at a price of $0.14 per Unit for gross proceeds of $250,142 in a non-brokered private placement. Each Unit is comprised of one common share and one share purchase warrant of the Company, where each whole share purchase warrant entitles the holder to purchase one additional common share of the Company at $0.21 per common share until October 14, 2022. The Company also paid $3,360 and issued 24,000 share purchase warrants as finder’s fees. Each share purchase warrant of the finder’s fee entitles the holder to purchase one common share of the Company at $0.21 per common share until October 14, 2021.

During the year ended December 31, 2020, the Company issued 1,000,000 common shares to settle debt in the amount of $300,000 owed pursuant to a consulting agreement. The fair value of the shares was $0.18 on the date of issuance, and therefore, the Company recognized a gain on debt settlement of $120,000.

During the year ended December 31, 2020, the Company issued 190,907 shares at a fair value of $0.22 per share to settle accounts payable of $42,000.

During the year ended December 31, 2019, the Company did not issue any new shares.

Warrants

During the year ended December 31, 2020, the Company granted 1,786,725 share purchase warrants as part of a private placement and recorded $nil value based on the residual method. The Company also issued 24,000 share purchase warrants as part of the finders’ fees relating to the same private placement with a value of $1,403 using the black-scholes model.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

17. SHARE CAPITAL (continued)

Warrants (continued)

The following table summarizes the information about share purchase warrants as at December 31, 2020:

		Exercise	Weighted average remaining
Expiry date	Warrants outstanding	Price	contractual life, inyears
October 14, 2021	24,000	$ 0.21	0.79
October 14,2022	1,786,725	0.21	1.79
	1,810,725	$0.21	1.78

18. SHARE-BASED COMPENSATION

Stock options

The Company has established a stock option plan under which common share purchase options may be granted to directors, officers, employees and consultants. The maximum number of shares available for options issuable under the stock option plan is 10% of the Company’s common shares outstanding. Options granted have an exercise price of the Company’s prior day closing price quoted on the Exchange for the common shares of the Company.

A summary of stock options activities are as follows:

	December	31, 2020		December	31, 2019
	Number of Weighted		average	Number of	Weighted	average
	options	exercise	price	options	exercise	price
Balance, beginning	6,300,000	$	0.41	4,650,000	$	0.71
Granted	-		-	5,700,000		0.38
Cancelled	-		-	(3,415,000)		0.71
Forfeited	(600,000)		0.69	(635,000)		0.77
Balance, ending	5,700,000	$	0.38	6,300,000	$	0.41

On April 11, 2019, the Company granted to the directors, employees, officers, and consultants 5,700,000 options with an exercise price of $0.38 per share for a period of three years. 4,366,200 of the granted options vested immediately, subject to a four-month hold period in accordance with the policies of the Canadian Securities Exchange, with the remainder of the options vesting on April 11, 2020. The fair value of stock options was $1,675,326 estimated using the Black-Scholes option pricing model with the following assumptions: an expected life of three years; risk-free interest rate of 1.60%; a forfeiture rate of 0%; dividend yield of 0%; and volatility of 138.00%.

During the year ended December 31, 2019, the Company cancelled 3,040,000 options with an exercise price of $0.71 per share expiring on April 11, 2020, 125,000 options with an exercise price of $1.02 expiring on March 1, 2020 and 250,000 options with an exercise price of $0.75 expiring on August 31, 2020.

For the year ended December 31, 2020, the Company recognized stock-based compensation expense of $109,253 (2019 - $1,577,987) relating to the stock options that vested during the year.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

18. SHARE-BASED COMPENSATION (continued)

The following summarizes information about stock options outstanding and exercisable at December 31, 2020:

	Options	Options	Exercise	Weighted average remaining
Expiry date	outstanding	exercisable	Price	contractual life, inyears
April 11, 2021	600,000	600,000	0.38	0.28
April 11,2022	5,100,000	5,100,000	0.38	1.28
	5,700,000	5,700,000	$0.38	1.17

19. NON-CONTROLLING INTERESTS

At December 31, 2020, the Company owned 94.32% interest in it’s Korean subsidiary BiocurePharm. The remaining 5.68% of BP Korea shares were issued in non-brokered private placements throughout 2019 and 2020 to third-party investors. Prior to these private placements, the Company owned a 100% interest in BP Korea.

Set out below is summarized financial information for the subsidiary before any inter-company eliminations:

Summarized balance sheet	BiocurePharm Incorp. December 31, 2020 December 31, 2019
Current assets Current liabilities Current net assets Non-current assets Non-current liabilities Non-current net assets Net assets Accumulated NCI	$ 72,095 $ 169,826 3,984,659 2,252,987
	(3,912,564) (2,083,161) 2,449,119 2,375,198 3,572,264 3,457,812
	(1,123,145) (1,082,614) $ (5,035,709) $ (3,165,775) $ (310,501) $ (126,612)

Summarized statement of comprehensive income	BiocurePharm Incorp. December 31, 2020 December 31, 2019
Operating expenses Other income (expenses) Net loss for the year Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive Loss allocated to NCI	$ (2,581,082) $ (2,507,160) 107,939 (58,170)
	(2,473,143) (2,565,331) (135,388) 136,124
	$ (2,608,531) $ (4,429,207) $ (140,487) $ (45,172)

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

20. FINANCIAL INSTRUMENTS AND RISKS

Classification of financial instruments

Financial assets included in the statement of financial position are as follows:

		December 31,		December 31,
		2020		2019
Fair value through other comprehensive income (loss)
Investments	$	1,968,334	$	1,967,354
	$	1,968,334	$	1,967,354

Financial liabilities included in the statement of financial position are as follows:

	December 31,	December 31,
	2020	2019
Fair value through profit or loss:
Convertible debenture	1,332,729	1,281,470
Financial liabilities at amortized cost:
Accounts payable	$ 2,576,171	$ 1,108,497
Loans payable	2,639,999	2,369,270
Lease liability	18,382	-
	$6,567,281	$4,759,237

Fair value

The Company has applied a three-level hierarchy to reflect the significance of the inputs used in making fair value measurements. The three levels of fair value hierarchy are:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for assets or liabilities, neither directly or indirectly; and

• Level 3 – Inputs for assets or liabilities that are not based on observable market data.

The Company’s financial instruments consist of cash, receivables, loan receivable, accounts payable and accrued liabilities, loans payable, severance liability at amortized cost and convertible debentures at FVTPL. The fair value of these financial instruments, other than cash and convertible debentures, approximates their carrying values due to the short-term nature of these instruments. Cash is measured at fair value using level 1 inputs.

Financial liabilities measured at fair value consisted of convertible debentures, which are measured using level 2 inputs.

The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate and liquidity risk.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

20. FINANCIAL INSTRUMENTS AND RISKS (continued)

a) Credit risk

Credit risk is risk of financial loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s cash is held in large Korean financial institutions and is not exposed to significant credit risk.

If the Company defaults or does not proceed with the land purchase (Note 8), $1,975,609 (KRW 1,688,555,000) would be refundable to the Company. As the land purchase agreement is with a corporation owned by the Korean government, the Company is not exposed to significant credit risk in the case that these amounts become payable to the Company.

b) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to limited interest rate risk.

c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise the required capital through future equity or debt issuances. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the directors are actively involved in the review, planning, and approval of significant expenditures and commitments.

d) Foreign currency risk

The Company’s functional currency is the South Korean Won and major transactions are in South Korean Wons. As of December 31, 2020, the Company had $396,839 (December 31, 2019 - $404,764) in financial liabilities denominated in Canadian Dollars. The remaining values in financial assets and financial liabilities are denominated in South Korean Wons. Management believes that the foreign exchange risk related to currency conversion is minimal and therefore does not hedge its foreign exchange risk.

21. CAPITAL MANAGEMENT

The capital managed by the Company includes the components of shareholders’ equity as described in the consolidated statements of shareholders’ equity. The Company is not subject to externally imposed capital requirements.

The Company’s objectives of capital management are to create long-term value and economic returns for its shareholders. It does this by seeking to maximize its resources to fund the growth and development of its business, and to support the working capital required to maintain its ability to continue as a going concern. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its assets by seeking to limit shareholder dilution and optimize its cost of capital while maintaining an acceptable level of risk. In order to maintain or adjust its capital structure, the Company considers all sources of financing reasonably available to it, including but not limited to the issuance of new capital, the issuance of new debt and the sale of assets in whole or in part.

Biocure Technology Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

22. INCOME TAXES

The income tax provisions differ from the expected amounts calculated by applying Korean corporate income tax rates to the Company’s loss before income taxes. The components of these differences are as follows:

	2020	2019
Net loss	$ (3,078,378)	$ (4,790,908)
Statutory tax rate	27%	27%
Expected income tax recovery	(831,000)	(1,294,000)
Non-deductible expenditures	79,000	477,000
Foreign exchange	(141,000)	226,000
Change in unrecognised deferred assets	864,000	554,000
Other	29,000	37,000
Actual income tax recovery	$ -	$ -

The Company’s tax-effected deferred income tax assets and liabilities are estimated as follows:

	December 31, 2020	December 31, 2019
Deferred income tax assets
Non-capital losses carried forward	$ 4,470,000	$ 3,596,000
Property equipment	(10,000)	-
Unrecognized deferred tax assets	(4,460,000)	(3,596,000)
Net deferred income tax assets	$ -	$ -

As at December 31, 2020, the Company has income tax loss carry forwards of approximately $17,694,000 to reduce future taxable income which expire between 2021 and 2040.

23. OTHER LIABILITIES AND CONTINGENCIES

On March 6, 2019 BiocurePharma Inc (BPK) received a notice that a lawsuit was filed with the court of Suwon District. Sehyun Pharma Co. (“SP”) filed a compensation claim. On Jan. 23, 2017 SP and BPK signed an agreement for a take-over SP however later in the process terminated for business reasons. The plaintiffs are seeking damages of KRW 500,000,000 ($585,000) for the termination of the contract. The Company is of the view that the allegations contained in the claim are without merit and intends to vigorously defend its position.

Subsequent to the year end the lawsuit filed with the court of Suwon District. Sehyun Pharma Co. (“SP”) against the company was dismissed.

24. SUBSEQUENT EVENTS

On January 31, 2021, the Company received a notice of area settlement from the Korean government adjusting the amounts that are outstanding and due from KRW 857,313,230 ($1,003,056) to KRW 843,975,890 ($987,453). The Company also owes arrears interest on the currently overdue payments of KRW 17,430,880 ($20,394).

In March 2021, the Company granted to the directors, employees, officers, and consultants 6,020,000 options with an exercise price of $0.30 per share for a period of three years. The options are subject to a four-month hold period in accordance with the policies of the Canadian Securities Exchange.