Cypher Metaverse Inc. — Interim / Quarterly Report 2021

Aug 26, 2021

CODEBASE VENTURES INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

(Expressed in Canadian Dollars)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

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

Codebase Ventures Inc.

Condensed Consolidated Interim Statements of Financial Position (Expressed in Canadian Dollars) (Unaudited)

Note 2021	2020
ASSETS Current Cash $ 3,836,717 Receivables 6,487 Prepaid expenses 556,275 Deposit 8 1,640,000 Loan receivable 6 20,600	$ 894,548 28,000 43,494 - 20,600
6,060,079 Non-Current Investment in associate – Capital Blocktech Inc. 4 355,588 Investment in associate – Glanis Pharmaceuticals Inc. 5 990,000 Investment in associate – Instacoin Technologies Ltd. 5 109,937 Long term investments 6 1,807,666	986,642 331,980 990,000 - 816,120
Total Assets $ 9,323,270	$ 3,124,742

LIABILITIES AND EQUITY

Current Accounts payable and accrued liabilities 7 $ 45,386	$ 158,457
Equity Share capital 8 29,538,079 Contributed surplus 8 6,102,446 Accumulated other comprehensive income (9,650) Deficit (26,363,451)	20,085,264 4,019,525 (9,650) (21,139,314)
Total equity attributable to shareholders of the Company 9,267,424 Non-controlling interest 10,460	2,955,825 10,460
Total Equity 9,277,884	2,966,285
Total Liabilities and Equity $ 9,323,270	$ 3,124,742

Nature and continuance of operations (Note 1) Subsequent events (Note 11)

Approved on behalf of the Board of Directors on August 26, 2021 :

“George Tsafalas” - Director “Brian Keane” - Director

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

Codebase Ventures Inc. Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Expressed in Canadian Dollars) (Unaudited)

		For the three	For the three	months ended		For the	six	months ended
				June 30,				June 30,
		2021		2020		2021		2020
Expenses
Advertising and promotion	$	223,173	$	201,687	$	435,716	$	345,629
Foreign exchange		(403)		41,819		(4,311)		9,065
Gain on sale of long-term investment		-		22,149		-		25,136
Interest and other income		531		(28,013)		(21,195)		(73,815)
Loss in associate		-		1,034		-		2,069
Management and consulting		508,030		251,729		1,084,420		534,041
Office and miscellaneous		21,352		60,247		58,532		94,429
Professional fees		93,656		80,529		177,819		116,199
Regulatory and transfer agent		10,816		27,419		27,408		39,826
Research and development		-		-		78,000		-
Travel		68,469		-		68,469		13,101
Stock-based compensation		1,460,500		292,985		4,222,589		292,985
Unrealized loss on investments		(817,417)		199,483		(969,820)		302,420
		1,568,707		1,151,068		5,157,627		1,701,085
Loss in associate accounted for using the equity method (Note 5)		66,510		-		66,510		-
Net loss for the period		1,635,217		1,151,068		5,224,137		1,701,085
Translation adjustment		-		(8,586)		-		4,293
Comprehensive loss for theperiod	$	(1,635,217)	$	(1,159,654)	$	(5,224,137)	$	(1,696,792)
Net loss for the period attributable to:
Shareholders of the Company	$	(1,635,217)	$	(1,151,068)	$	(5,224,137)	$	(1,701,085)
Translation adjustment-shareholders		-		(8,586)		-		4,293
Net loss for theperiod	$	(1,635,217)	$	(1,159,654)	$	(5,224,137)	$	(1,696,792)
Loss per share:
Basic and diluted	$	(0.02)	$	(0.03)	$	(0.05)	$	(0.04)
Weighted average number of common shares outstanding – basic and diluted		108,935,235		40,147,874		104,279,952		39,103,967

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

Codebase Ventures Inc. Condensed Consolidated Interim Statements of Cash Flows (Expressed in Canadian Dollars) (Unaudited)

Six months ended June 30, 2021 June 30, 2020	Six months ended June 30, 2021 June 30, 2020
Operating Activities Net loss for the period $ (5,224,137) Adjusted for: Loss from investment in associate 66,510 Accrued interest income (21,195) Shares issued for interest - Stock-based compensation 4,222,589 Loss on long-term investments - Unrealized foreign exchange gain - Unrealized (gain) loss on long-term investments (969,820) Changes in non-cash working capital: Receivables (2,095) Prepaid expenses (512,781) Deposit (640,000) Accounts payable and accrued liabilities (113,603)	$ (1,701,085) 2,069 (42,975) (5,940) 292,985 25,136 73,764 302,420 5,250 (84,342) - (51,858)
Cash flows from operating activities (3,194,532)	(1,184,576)
Investing Activities Acquisition of long-term investment (176,447) Disposition of long-term investment - Loan advanced -	(154,830) 365,634 (683,575)
Cash flows from investing activities (176,447)	(472,771)
Financing Activities Proceeds from private placements, net of share issuance costs 606,998 Proceeds from warrants exercised 3,333,149 Proceeds from stock options exercised 2,373,000	1,607,364 - -
Cash flows from financing activities 6,313,147	1,607,364
Change in cash $ 2,942,168 Cash, beginning of period 894,548	$ (49,983) 79,278
Cash, end ofperiod $ 3,836,717	$ 29,295
Non-Cash Transactions Shares issued for equipment $ 1,000,000 Fair value of warrants included in private placements $ 318,546 Fair value of warrants exercised $ 197,272 Fair value of options exercised $ 2,318,603 Fair value of warrants granted as finders’ fee $ 57,661	$ - $ - $ - $ - $ -

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

Codebase Ventures Inc.

Condensed Consolidated Interim Statements of Changes in Equity (Expressed in Canadian Dollars) (Unaudited)

(Expressed in Canadian Dollars) (Unaudited)
							Accumulated
	Number of						Other	Non-
	Common			Contributed		Comprehensive		Controlling	Accumulated
	Shares	**Share Capital **			Surplus		Income	Interest	Deficit		**Total **
Balance at December 31, 2019	31,477,250	$	16,169,720	$	2,955,483	$	(5,510) $	3,910	$ (17,112,525)	$	2,011,078
Shares issued for private placements	8,045,761		1,661,640		-		-	-	-		1,661,640
Finders’ fees – cash	-		(54,276)		-		-	-	-		(54,276)
Shares issued to acquire 49% of Glanis	6,600,000		990,000		-		-	-	-		990,000
Finder’s fees – warrants	-		(23,779)		23,779		-	-	-		-
Share-based compensation	-		-		292,985		-	-	-		292,985
Translation adjustment	-		-		-		4,293	-	-		4,293
Net loss and comprehensive loss	-		-		-		-	-	(1,701,085)		(1,701,085)
Balance at June 30, 2020	46,123,011	$	18,743,305	$	3,272,247	$	(1,217) $	3,910	$ (18,813,610)	$	3,204,635
Balance at December 31, 2020	79,439,727	$	20,085,264 $		4,019,525	$	(9,650) $	10,460	$ (21,139,314)	$	2,966,285
Common shares issued for cash	3,981,825		318,546		318,546		-	-	-		637,092
Common shares issued for warrant exercise	23,026,509		3,530,421		(197,272)		-	-	-		3,333,149
Common shares issued for stock options exercise	9,300,000		4,691,603		(2,318,603)		-	-	-		2,373,000
Finders’ fees – cash	-		(30,094)		-		-	-	-		(30,094)
Finder’s fees – warrants	-		(57,661)		57,661		-	-	-		-
Shares issued for equipment	4,000,000		1,000,000		-		-	-	-		1,000,000
Share-based compensation	-		-		4,222,589		-	-	-		4,222,589
Net loss and comprehensive loss	-		-		-		-	-	(5,224,137)		(5,224,137)
Balance at June 30, 2021	119,748,061	$	29,538,079 $		6,102,446	$	(9,650) $	10,460	$ (26,363,451)	$	9,277,884

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

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

1. NATURE AND CONTINUANCE OF OPERATIONS

Codebase Ventures Inc. (the “Company”) was incorporated in British Columbia on February 19, 2009. The Company’s registered address is 1780-355 Burrard Street, Vancouver, British Columbia, Canada.

Shares of the Company are listed on the Canadian Securities Exchange (“CSE”) under the symbol CODE, and are quoted on the Frankfurt Stock Exchange (“FWB”) under the symbol C5B, and on the OTCQB under the symbol BKLLF. The Company’s principal activities relate to identifying investments in the technology, biotechnology, cannabis, and CBD wellness sectors.

On June 26, 2020, the Company completed a consolidation of its common shares (“share consolidation”) on the basis of one post-consolidation common share for every ten pre-consolidation common shares held (10-to-1). All references contained in these condensed consolidated interim financial statements to issued and outstanding common shares, warrants, options, per share amounts, and exercise prices, have been retrospectively restated to reflect the effect of the share consolidation.

These condensed consolidated interim financial statements are prepared on a going concern basis, which assumes that the Company will continue its operations for at least the next twelve months. The Company has incurred losses since its inception and has an accumulated deficit of $26,363,451 as at June 30, 2021. In addition, the Company has experienced negative cash flows from operations. These factors may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue its operations and to realize assets at their carrying values is dependent upon obtaining additional financing or maintaining continued support from its shareholders and creditors, identifying and acquiring businesses or assets, and generating profitable operations in the future. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic. The potential economic effects within the Company’s environment and in the global markets, possible disruption in supply chains, as a result of measures introduced and being introduced at various levels of government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and physical distancing) could have a material impact on the Company’s future operations. As of the issue date of these condensed consolidated interim financial statements the extent of the impact of this outbreak and related containment measures on the Company’s operations cannot be reliably estimated.

These events and conditions, create a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue its operations and to realize assets at their carrying values is dependent upon obtaining additional financing or maintaining continued support from its shareholders and creditors, identifying and acquiring businesses or assets, and generating profitable operations in the future. These condensed consolidated interim financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

2.

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These consolidated 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 International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”.

The condensed interim consolidated financial statements do not include all of the information required in annual financial statements and are intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that these condensed consolidated interim financial statements be read in conjunction with the annual consolidated financial statements of the Company for the year ended December 31, 2020.

The accounting policies applied in preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s condensed consolidated interim financial statements for the year ended December 31, 2020, other than as described in Note 3.

pg. 7

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of Measurement

These condensed consolidated interim financial statements have been prepared on a historical cost basis except for financial instruments that have been measured at fair value. In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

Basis of Consolidation

These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. The financial statements of the subsidiaries are included in the condensed consolidated interim financial statements from the date that control commences until the date that control ceases. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries as follows:

		Country of	Percentage	Functional
Name of subsidiary	Abbreviation	Incorporation	Ownership	Currency	Principal Activity
360 Blockchain USA Inc.	360 USA	USA	100%	USD	Holding Company
SV CryptoLab Inc.	SV Crypto	USA	80%	USD	Inactive
Blockchain Media Tech LLC	Blockchain Media Tech	USA	100%	USD	Inactive
Token Media Tech LLC	Token Media Tech	USA	100%	USD	Inactive
Code Cannabis Investments Inc.	Code Cannabis	CAN	100%	CAD	HoldingCompany

Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the condensed consolidated interim financial statements. The accounting policies of its subsidiaries are consistent with the policies adopted by the Company.

During the year ended December 31, 2020, Blockchain Media Tech and Token Media Tech were wound up by the Company.

Foreign Currencies

These condensed consolidated interim financial statements are presented in Canadian dollars, which is the functional currency of the Company and Code Cannabis. The functional currency of 360 USA, SV Crypto, Blockchain Media Tech and Token Media Tech is the US dollar.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate in effect at the date of the transaction. Nonmonetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise.

Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income (loss) to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income (loss).

Subsidiaries

The financial results and position of foreign operations whose functional currency is different from the presentation currency are translated as follows:

• Assets and liabilities are translated at period-end rates; and

• Income and expenses are translated at average exchange rates for the period.

pg. 8

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Subsidiaries (continued)

Exchange differences arising on translation of foreign operations in each period are classified in the consolidated statement of comprehensive income (loss) and the cumulative effect as at the period end is reported as accumulated other comprehensive income. Cumulative differences are recognized in profit or loss in the period in which the operation is disposed of.

Financial Instruments

Recognition

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value, and are derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged, cancelled or expired.

A write-off of a financial asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has no reasonable expectations of recovering the contractual cash flows on a financial asset.

Classification and Measurement

The Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified into the following measurement categories:

• i) those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and,

• ii) those to be measured subsequently at amortized cost.

The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

The classification and measurement bases of the Company’s financial instruments are as follows:

Financial Instrument	Classification
Cash	FVTPL
Receivables	Amortized cost
Loan receivable	Amortized cost
Long-term investments	FVTPL
Long-term investments – in convertible debentures	Amortized cost
Accounts payable and accrued liabilities	Amortized cost

After initial recognition at fair value, financial liabilities are classified and measured at either:

• i) amortized cost;

• ii) FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or,

• iii) FVTOCI, when the change in fair value is attributable to changes in the Company’s credit risk.

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

pg. 9

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost or FVTOCI are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at FVTPL are expensed within profit or loss in the period incurred.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. There were no cash equivalents as at June 30, 2021 and December 31, 2020.

Impairment

At the end of each reporting period the carrying amounts of the Company’s non-monetary assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs 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 current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss in the period in which the impairment arises. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Investment in Associates

The Company follows the equity method of accounting for its investments in associates in which it owns less than 50% and over which it exercises significant influence. Under this method, the Company includes in profit or loss its share of the net earnings or losses of the associate less dividends received, if any.

Once management determines that it no longer has significant influence, it recognizes the investment at fair value, with any gain or loss recognized in profit or loss. Following recognition at fair value, the investment is treated as FVTOCI.

Share Capital

Financial instruments issued by the Company are classified as equity only to the extent they do not meet the definition of a financial liability or financial asset. The Company’s common shares, options and warrants are classified as equity instruments. Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds. Common shares issued as consideration for goods or services are measured at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the fair value of the goods or services cannot be estimated reliably, then the Company measures their value, and the corresponding increase in equity, indirectly, by reference to the value of the common shares, based on the market value of the common shares on the date that the common shares are issued.

Equity financing transactions may involve issuance of common shares or units. A unit comprises a certain number of common shares and a certain number of share purchase warrants. Depending on the terms and conditions of each equity financing agreement, the warrants are exercisable into additional common shares prior to expiry at a price stipulated by the agreement. Warrants that are part of units are assigned value based on the residual value method and included in contributed surplus. Warrants that are issued as transaction costs are accounted for as share ‐ based payments.

Share Issue Costs

Professional, consulting, regulatory and other costs directly attributable to financing transactions are recorded as deferred financing costs until the financing transactions are completed, if the completion of the transaction is considered likely; otherwise they are expensed as incurred. Share issue costs are charged to share capital when the related shares are issued. Deferred financing costs related to financing transactions that are not completed are charged to profit or loss.

pg. 10

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Share-based Payment Transactions

The Company offers equity-settled share-based payments to directors, officers, employees and non-employees. Sharebased payments to employees and others providing similar services are measured at the estimated fair value of the instruments issued on the grant date and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are valued at the date the goods or services are received.

The fair value of instruments granted is measured using the Black-Scholes Option Pricing Model, taking into account the terms and conditions under which the instruments are granted. The fair value of the awards is adjusted by an estimate of the number of awards that are expected to vest as a result of non-market conditions. At each consolidated statement of financial position date, the Company revises its estimates of the number of options that are expected to vest based on the non-market conditions including the impact of the revision to original estimates, if any, with corresponding adjustments to equity.

Consideration received on the exercise of stock options and warrants is recorded as share capital and the related contributed surplus is transferred to share capital.

Earnings (Loss) per Share

The Company presents basic and diluted earnings (loss) per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the weighted average number of common shares, stock options, and warrants outstanding at the beginning of or granted during the period, calculated using the treasury stock method. Under this method, the proceeds from the exercise of the options and warrants are assumed to be used to repurchase the Company’s shares. The difference between the number of shares assumed purchased and the number of options and warrants assumed exercised is added to the actual number of shares outstanding to determine diluted shares outstanding for purposes of calculating diluted earnings per share. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive, in which case the diluted loss per share is equivalent to the basic loss per share.

Income Taxes

Income tax expense is comprised of current and deferred tax components. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the related tax is recognized in equity or other comprehensive income.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded using the asset and liability method. Under this method, the Company calculates all temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the period end date. Deferred tax is calculated based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply to the year of realization or settlement based on tax rates and laws enacted or substantively enacted at the period end date.

Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax losses and tax credits can be utilized. The carrying amount of deferred tax assets is reviewed at each consolidated statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

pg. 11

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant Accounting Estimates and Judgements

The preparation of these condensed consolidated interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Significant estimates include:

• the determination of deferred income tax assets and liabilities;

• the valuation and measurement of the long-term investments, including the determination of fair value; and

• the valuation of investments in associates.

Critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in these condensed consolidated interim financial statements include the following:

• the determination of the functional currency of the Company and each subsidiary; and

• the evaluation of the Company’s ability to continue as a going concern.

3. ADOPTED AND UPCOMING ACCOUNTING PRONOUNCEMENTS

There were no new accounting standards or amendments that became effective during the period ended June 30, 2021 which had a material impact on the condensed consolidated interim financial statements.

New accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s condensed consolidated interim financial statements.

4. INVESTMENT IN ASSOCIATE – CAPITAL BLOCKTECH INC.

The following entity, related by common directors of the Company, has been included in the consolidated interim financial statements using the equity method, recognizing that the Company has significant influence, but not control over the entity:

		Proportion of ownership interest held as at	Proportion of ownership interest held as at
		June 30,	December 31,
Legal Name	Place of Incorporation	2021	2020
Capital Blocktech Inc.	Alberta, Canada	30%	30%

During the year ended December 31, 2018, the Company entered into an agreement with Capital Blocktech Inc. (“Capital Blocktech”), a private Canadian blockchain technology company. During the year ended December 31, 2018, the Company advanced $1,000,000 to earn a 30% interest in Capital Blocktech. The Company also has the right to earn an additional 21% interest in Capital Blocktech for an additional $1,000,000 to be paid on or before January 1, 2021.

The right to earn an additional 21% interest in Capital Blocktech was extended to January 1, 2022, subsequent to year end.

pg. 12

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

4. INVESTMENT IN ASSOCIATE – CAPITAL BLOCKTECH INC. (continued)

The tables below provide summarised financial information for the Company’s equity investment in Capital Blocktech. The information disclosed reflects the amounts presented in the financial statements of Capital Blocktech and not the Company’s share of those amounts:

		June 30,		December 31,
Summarized Balance Sheet		2021		2020
Cash	$	5,000	$	5,000
Computer equipment		62,080		62,080
Total	$	67,080	$	67,080
Accounts payable	$	1,320,022	$	1,320,022
Share capital		1,009,337		1,009,337
Deficit		(2,262,279)		(2,262,279)
Total liabilities and equity	$	67,080	$	67,080

Summarized aggregated financial information of the Company’s share in the associate is as follows:

		Six months		Year
		Ended		Ended
		June 30,		December 31,
Equity Accounting Investment Continuity		2021		2020
Balance, beginning of period	$	355,588	$	332,722
Equity pick up–30% of net period		-		(742)
Balance, end ofperiod	$	355,588	$	331,980

5. INVESTMENT IN ASSOCIATE – GLANIS PHARMACEUTICALS INC

The following entity, related by common directors of the Company, has been included in the condensed consolidated interim financial statements using the equity method:

		Proportion of ownership	interest held as at
Legal Name	Place of Incorporation	June 30, 2021	December 30, 2020
Glanis Pharmaceuticals Inc.	British Columbia, Canada	49%	49%

During the year ended December 31, 2020, the Company entered into an agreement with the shareholders of Glanis Pharmaceuticals Inc. (“Glanis”), a private Canadian pharmaceutical company. During the year ended December 31, 2020 the Company issued 6,600,000 common shares with a fair value of $990,000 to acquire a 49% interest in Glanis, and paid $28,000 of expenses toward the ongoing research studies to develop Glanis’ technology. As at June 30, 2021, the $28,000 (December 31, 2020 - $28,000) was paid from Glanis.

The tables below provide summarised financial information for the Company’s equity investment in Glanis. The information disclosed reflects the amounts presented in the financial statements of Glanis and not the Company’s share of those amounts:

		June 30,		December 31,
Summarized Balance Sheet		2021		2020
Cash	$	12,266	$	3,982
Patent		28,000		-
Totalassets	$	40,266	$	3,982
Accounts payable	$	2,150	$	28,000
Share capital		100		100
Deficit		38,016		(24,118)
Total liabilities and equity	$	40,266	$	3,982

pg. 13

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

5. INVESTMENT IN ASSOCIATE – GLANIS PHARMACEUTICALS INC (continued)

Summarized aggregated financial information of the Company’s share in the associate is as follows:

	For the six months	For the six months		For the Year
		ended		ended
		June 30,		December 31,
Equity Accounting Investment Continuity		2021		2020
Balance, beginning of period	$	990,000	$	-
Paid to earn – 49%		-		990,000
Balance, end of period	$	990,000	$	990,000

During the six month period ended June 30, 2021, and for the year ended December 31, 2020, Glanis has not had any significant expenses to equity account for.

INVESTMENT IN ASSOCIATE – INSTACOIN TECHNOLOGIES LTD.

The following entity has been included in the condensed consolidated interim financial statements using the equity method:

		Proportion of ownership	interest held as at
Legal Name	Place of Incorporation	June 30, 2021	December 30, 2020
InstaCoin Technologies Ltd.	United Kingdom	50%	n/a

During the period ended June 30, 2021, the Company entered into an agreement with the shareholders of InstaCoin Technologies Ltd. (“InstaCoin”), a private technology company formed in the United Kingdom. During the period ended June 30, 2021 the Company paid $176,447 (GBP 100,000) to acquire a 50% interest in InstaCoin.

The tables below provide summarised financial information for the Company’s equity investment in InstaCoin. The information disclosed reflects the amounts presented in the financial statements of InstaCoin and not the Company’s share of those amounts:

		June 30,		December 31,
Summarized BalanceSheet		2021		2020
Cash	$	43,427	$	-
Totalassets	$	43,427	$	-
Share Capital		176,447
Deficit		(133,020)		(24,118)
Total liabilities and equity	$	43,427	$	3,982

Summarized aggregated financial information of the Company’s share in the associate is as follows:

	For the six months	For the six months		For the Year
		ended		ended
		June 30,		December 31,
Equity Accounting Investment Continuity		2021		2020
Balance, beginning of period	$	-	$	-
Paid to earn–50%		176,447		-
Equity loss pick up–50% of net period		(66,510)		-
Balance, end ofperiod	$	109,937	$	-

pg. 14

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

6. LONG-TERM INVESTMENTS

A continuity of the Company’s long-term investments is as follows:

World High Life	Aerosax	Total
Balance,December31,2020 $ 646,405	$ 169,715	$ 816,120
Balance, June 30,2021 $1,637,951	$ 169,715	$1,807,666
World High Life	1933 Industries	Nerds on Site	Red Light Holland Corp	Aerosax Total
Balance, December 31, 2019 $ 1,741,712 Purchase of investments - Accrued interest 86,905 Shares issued for debt settlement 678,515 Sale of investment (346,394) Foreign exchange 16,342 Gain (loss) on sale of investment (354,700) Unrealized fair value gain (loss) (1,175,975)	$ 7,000 - - - (4,013) - (5,187) 2,200	$ 24,403 - - - (15,059) - (95,872) 86,528	$ - 50,000 - - (152,802) - 102,802 -	$ - $ 1,773,115 235,045 285,045 - 86,905 - 678,515 - (518,268) - 16,342 - (352,957) (65,330) (1,152,577)
Balance,December31,2020 $ 646,405	$ -	$ -	$ -	$ 169,715 $ 816,120

The Company’s original investment in World High Life Plc consisted of 2,920,000 ordinary shares and 5,000,000 convertible debentures exercisable at £0.10 (CDN$0.17) accruing interest of 10% per annum maturing September and October 2021. The Company also holds 5,000,000 ordinary share purchase warrants exercisable at £0.15 (CDN$0.26) per share for a period of two years (expiry October 2021) and 1,500,000 warrants exercisable at £0.20 (CDN$0.35) per share exercisable for two years (expiry August 2021). During the period ended June 30, 2021, the agreement was amended whereby the convertible debentures were exercised, all outstanding interest receivable and all previously owned shares were converted into a total of 25,733,699 shares and 22,813,699 warrants exercisable at £0.05 until March 14, 2023.

During the year ended December 31, 2020, the Company advanced loans to World High Life Plc totaling $693,175, and accrued interest of $5,940, $678,515 of which was settled during the year through the issuance of shares. At June 30, 2021 and December 31, 2020 $20,600 remained receivable and was repayable by March 1, 2021 (past due). The loans were all unsecured and bore interest of 5% per annum. The loan was settled subsequently.

A continuity of the valuation of the Company’s investment in World High Life Plc is as follows:

		Ordinary	Warrants	Warrants	Warrants	Warrants	Convertible	Convertible	Convertible	Convertible
		Shares		£0.05		£0.05	Debenture			Feature	**Total **
Balance, December 31, 2019	$	567,600	$	53,404	$	261,090	$	498,346	$	361,272	$ 1,741,712
Fair value loss		(485,161)		(52,205)		(260,882)		(17,517)		(360,210)	(1,175,975)
Accrued interest		-		-		-		86,905		-	86,905
Shares issued for debt settlement		678,515		-		-		-		-	678,515
Sale of investment		(346,394)		-		-		-		-	(346,394)
Loss on sale of investment		(354,700)		-		-		-		-	(354,700)
Foreign exchange gain		16,342		-		-		-		-	16,342
Balance, December 31, 2020		76,202		1,199		208		567,734		1,062	646,405
Accrued interest		-		-		-		21,726		-	21,726
Debentures converted		1,080,042		-		-		(614,976)		(7,423)	457,643
Warrant extension		-		281,265		281,976		-		-	563,241
Fair value gain (loss)		276,507		(179,630)		(179,818)		25,516		6,361	(51,064)
Balance, June 30,2021	$	1,432,751	$	102,834	$	102,366	$	-	$	-	$1,637,951

pg. 15

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

6. LONG-TERM INVESTMENTS (continued)

At June 30, 2021, the Company held 25,733,699 (December 31, 2020 – 2,920,000) ordinary common shares of World High Life Plc, which were valued based on prices in a quoted market in accordance with level 1 of the fair value hierarchy. The World High Life Plc warrants and conversion feature were valued using the Black-Scholes Option Pricing Model, in accordance with level 3 of the fair value hierarchy, with the following assumptions:

				Conversion
	Warrants	Warrants	Warrants	Feature
	June 30,	March 3,	December 31,	December 31,
	2021	2021	2020	2020
Exercise price	£0.05	£0.05	£0.15 – 0.20	£0.10
Value date share price	£0.0325	£0.0542	£0.0195	£0.0195
Duration to maturity	1.7 years	2.03 years	0.80 years	0.80 years
Risk-free interest rate	0.50%	0.50%	0.70%	0.70%
Volatility	80%	80%	80%	80%
Dividend rate	Nil	Nil	Nil	Nil

The Company’s investment in Aerosax Research & Technology Limited (“Aerosax”) is an investment in common shares. The investment was initially recognized at the cost of the investment, and was subsequently adjusted to the estimated fair value. Aerosax is a private company, as such the estimated fair value and unrealized loss on investment were based on recent sales of common shares by Aerosax, which were considered to represent market price in accordance with level 3 of the fair value hierarchy. At June 30, 2021, the investment in Aerosax consists of 326 common shares with an original cost of £786 per share (CDN$1,352 per share), fair valued at £300 per share (CDN$521 per share).

7. RELATED PARTY TRANSACTIONS AND BALANCES

The key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company. The Company has identified its directors and senior officers as its key management personnel. Total compensation to key management personnel for the period ended June 30, 2021 and 2020 was as follows:

was as follows:
		June 30,		June,
Related Party Transactions		2021		2020
Consulting fees	$	223,423	$	209,850
Share-based compensation		1,460,500		51,873
Total	$	1,683,923	$	261,723

Details of outstanding balances with related parties including key management personnel are as follows:

		June 30,		December 31,
Related Party Transactions		2021		2020
Accounts payable	$	-	$	7,275

pg. 16

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

8. SHARE CAPITAL AND CONTRIBUTED SURPLUS

Authorized Share Capital

The Company is authorized to issue an unlimited number of common shares without par value.

Issued and Outstanding – Common Shares Fiscal 2021:

• a) The Company issued 3,981,825 units at a price of $0.16 per unit, for gross proceeds of $637,092. Each warrant entitles the holder to purchase one additional common share at $0.22 for a period of two years from the date of closing. The Company valued the warrant portion of the units, using the residual method, at $318,546. The Company paid finders fees of $30,094 and issued 188,110 broker warrants at their fair value of $57,661, which are on the same terms as the warrants forming part of the units.

• b) The Company issued 23,026,509 common shares upon the exercise of warrants at prices of $0.075 and $0.50 for total proceeds $3,333,149, and issued 9,300,000 common shares pursuant to the exercise of stock options at prices of $0.19; $0.23 and $0.30 for total proceeds $2,373,000.

• c) The Company issued 4,000,000 shares with a fair value of $1,000,000 and paid US$500,000 (CDN$640,000) to acquire bit mining infrastructure. On June 30, 2021, the Company was awaiting delivery of the equipment and has recorded the payment as a deposit. As part of the transaction, the vendor will provide hosting and management services at an all-in price of US$0.075 per kilowatt hour for a period of 2 years. If the Company exercises its option to acquire a second tranche, a similar number of mining rigs will cost US$500,000 cash and US $750,000 to be paid by way of shares issued at market price.

Issued and Outstanding – Common Shares Fiscal 2020:

• a) The Company issued 4,019,285 units at a price of $0.21 per unit, for gross proceeds of $844,050. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at $0.50 for a period of two years from the date of closing. The Company valued the warrant portion of the units, using the residual method, at $148,571. The Company paid finders fees of $36,204, share issuance costs of $4,630 and issued 180,400 broker warrants at their fair value of $27,072, which are on the same terms as the warrants forming part of the units.

• b) The Company issued 1,229,476 units at a price of $0.21 per unit, for gross proceeds of $258,190. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at $0.50 for a period of two years. The Company valued the warrant portion of the units, using the residual method, at $12,295. The Company incurred $3,997 of share issuance costs.

• c) The Company issued 750,000 units at a price of $0.20 per unit, for gross proceeds of $150,000. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at $0.50 for a period of two years from the date of closing. The Company paid finder's fees of $5,000.

• d) The Company completed a second closing of the non-brokered private placement. The Company issued 2,047,000 units at a price of $0.20 per unit, for gross proceeds of $409,400. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at $0.50 for a period of two years from the date of closing. The Company paid finder's fees of $13,072, incurred share issuance costs of $725 and issued 65,360 finder’s warrants at their fair value of $9,399, which are on the same terms as the warrants forming part of the units.

• e) The Company issued 6,600,000 common shares to acquire a 49% interest in Glanis Pharmaceutical Inc. with a fair value of $990,000 (Note 7). The Company incurred $2,329 of share issuance costs.

pg. 17

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

8. SHARE CAPITAL AND CONTRIBUTED SURPLUS (continued)

• f) The Company completed a non-brokered private placement. In the first tranche the Company raised proceeds of $135,000 through the sale of 2,250,000 units. In the final tranche the Company settled $93,250 of accounts payable through the issuance of 1,554,167 units resulting in a loss of $15,542. The Company paid finder's fees of $3,500, incurred share issuance costs of $723 and issued a total of 55,833 broker warrants at their fair value of $2,780, which are on the same terms as the warrants forming part of the units. No finder's fees were payable on the final tranche. Each unit consists of one common share in the equity of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share of the Company at a price of $0.075 per share for a period of two years.

• g) The Company issued 412,416 common shares at a fair value of $52,659 ($0.07 per common share) to settle $24,745 in accrued liabilities, resulting in a loss on settlement of debt of $4,124. The Company incurred $3,203 of share issuance costs.

• h) The Company completed a non-brokered private placement. In the first tranche the Company raised proceeds of $687,000 through the sale of 13,740,000 units. In the second and final tranche the Company raised proceeds of $666,965 through the sale of 13,339,300 units. The Company paid finders fees of $18,000, incurred share issuance costs of $2,699 and issued 160,000 broker warrants at their fair value of $23,456 in the first tranche, and paid finders fees of $49,717, incurred share issuance costs of $6,161 and issued 994,344 broker warrants at their fair value of $140,600 on the final tranche, which are on the same terms as the warrants forming part of the units. The Company raised a total of $1,353,965. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share of the Company at a price of $0.075 per share for a period of two years, subject to the option of the Company to accelerate the expiry date in the event that its shares trade at $0.15 or more for 10 consecutive days.

• i) Issued 2,020,833 common shares upon the exercise of warrants at a price of $0.075 for total proceeds $151,562.

Stock Options

The Company grants options under the terms of its rolling stock option plan to executive officers, directors, employees, and consultants, enabling them to acquire up to 10% of the then issued and outstanding shares of the Company. The exercise price of each option equals the market price of the Company’s shares, less allowable discount, as calculated on the date of grant. The options can be granted for a maximum term of 10 years.

On January 12, 2021, the Company granted a total of 4,400,000 options to management, employees and consultants. Each option entitles the holder to subscribe for one common share of the Company for $0.23 for a period of 5 years.

On February 9, 2021, the Company granted 6,050,000 stock options to management, employees and consultants. Each option entitles the holder to subscribe for one common share of the Company for $0.30 for a period of 5 years.

On February 16, 2021, the Company granted 200,000 stock options to management, employees and consultants. Each option entitles the holder to subscribe for one common share of the Company for $0.30 for a period of 5 years.

On April 12, 2021, the Company granted 7,500,000 stock options to management, employees and consultants. Each option entitles the holder to subscribe for one common share of the Company for $0.265 for a period of 5 years.

On April 9, 2020, the Company granted a total of 1,735,000 options to management, employees and consultants. The options were fully vested upon issuance. Each option entitles the holder to subscribe for one common share of the Company for $0.50 for a period of 5 years.

On November 30, 2020, the Company granted a total of 1,500,000 options to management, employees and consultants. The options were fully vested upon issuance. Each option entitles the holder to subscribe for one common share of the Company for $0.19 for a period of 5 years.

pg. 18

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

8. SHARE CAPITAL AND CONTRIBUTED SURPLUS (continued)

A summary of change in stock options as follows:

	Number of	Average
	Options	Price
Balance at December 31, 2019	1,900,000	$ 0.90
Cancelled	(2,480,000)	0.77
Issued	3,235,000	0.36
Balance at December 31, 2020	2,655,000	0.36
Cancelled/forfeited	(1,155,000)	0.58
Exercised	(9,300,000)	0.26
Issued	18,150,000	0.27
Balance at June 30, 2021	10,350,000	$ 0.27

The following table summarizes stock options outstanding at June 30, 2021:

		Number of	Weighted	Weighted
	Number of	Exercisable	Average Exercise	Average
Expiry Date	Options	Options	Price	Remaining Years
January 6, 2026	800,000	800,000	$0.23	4.52
February 8, 2026	1,850,000	1,850,000	$0.30	4.61
February 16, 2026	200,000	200,000	$0.30	4.64
April 12, 2026	7,500,000	7,500,000	$0.27	4.79
	10,350,000	10,350,000	$0.27

During the period ended June 30, 2021, the Company recorded share-based compensation of $4,222,589 (December 31, 2020 - $699,719) with respect to options granted. The weighted average fair value of these options was $0.27 (December 31, 2020 - $0.22) and was estimated using the Black-Scholes option pricing model. The weighted average assumptions used in calculating the fair value are as follows:

	June 30,	December 31,
	2021	2020
Exercise price	$0.27	$0.35
Spot price	$0.27	$0.22
Risk-free interest rate	0.46%	0.52%
Expected life of options	5	5
Annualized volatility	203%	202.67%
Dividend rate	0%	0%

Warrants

A summary of change in warrants as follows:

	Number of	Average
	Options	Price
Balance at December 31, 2019	16,858,760	$ 0.80
Granted	40,385,164	0.16
Expired	(2,020,833)	0.08
Exercised	(1,425,384)	0.71
Balance at December 31, 2020	53,797,708	0.36
Granted	4,169,935	0.22
Expired	(207,644)	0.50
Exercised	(23,026,509)	0.14
Balance at June 30, 2021	34,733,490	$ 0.49

pg. 19

Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

Codebase Ventures Inc.

8. SHARE CAPITAL AND CONTRIBUTED SURPLUS (continued)

The following table summarizes warrants outstanding at June 30, 2021:

		Weighted Average	Weighted Average
Expiry Date	Number of Warrants	Exercise Price	Remaining Years
September 20, 2021	3,095,329	$0.50	0.22
September 20, 2021	285,714	$0.50	0.22
September 20, 2021	120,646	$0.50	0.22
October 16, 2021	2,315,100	$1.00	0.30
January 3, 2022	2,382,490	$0.50	0.51
January 28, 2022	1,287,700	$0.50	0.58
January 28, 2022	180,400	$0.50	0.58
February 12, 2022	2,073,667	$0.50	0.62
February 24, 2022	1,229,476	$0.50	0.65
February 28, 2022	4,099,950	$1.50	0.67
April 15, 2022	750,000	$0.50	0.79
May 2, 2022	906,667	$0.50	0.84
May 4, 2022	959,500	$0.50	0.84
May 4, 2022	51,412	$0.50	0.84
July 15, 2022	23,750	$0.075	1.04
December 4, 2022	1,740,000	$0.075	1.43
December 4, 2022	80,000	$0.075	1.43
December 21, 2022	8,807,300	$0.075	1.48
December 21, 2022	174,454	$0.075	1.48
February 3, 2023	3,981,825	$0.22	1.60
February 3, 2023	188,110	$0.22	1.60
	34,733,490	$0.49

During the period ended June 30, 2021, the Company recorded share issue costs of $57,661 (December 31, 2020 - $203,307) with respect to broker warrants granted as finders’ fees. The weighted average fair value of these broker warrants was $0.21 (December 31, 2020 - $0.14) and was estimated using the Black-Scholes option pricing model. The weighted average assumptions used in calculating the fair value are as follows:

	June 30,	December 31,
	2021	2020
Exercise price	$0.22	$0.08
Spot price	$0.31	$0.16
Risk-free interest rate	0.23%	0.27%
Expected life	2	2
Annualized volatility	221%	105%
Dividend rate	0%	0%

9. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

Fair values

The Company’s financial instruments consist of cash, receivables, loan receivable, long-term investments, and accounts payable and accrued liabilities. Cash and long-term investments are carried at fair value, except for long-term investments in convertible debentures which are carried at amortized cost. The fair values of receivables, loan receivable, and accounts payable and accrued liabilities approximate their carrying amounts due to their current nature. The carrying value of long-term investments in convertible debentures approximate their fair values due to the inclusion of a market rate of interest.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy based on the degree to which the inputs used to determine the fair value are observable. The three levels of the fair value hierarchy are:

pg. 20

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

9. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (continued)

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

• Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company’s financial assets measured at fair value on a recurring basis were calculated as follows:

June 30, 2021		Balance		Level 1	Level 2	Level 2		Level 3
Cash	$	3,838,717	$	3,836,717	$	-	$	-
Long-term investments*		1,807,666		1,807,666		-		-
December 31, 2020		Balance		Level 1	Level 2			Level 3
Cash	$	894,548	$	894,548	$	-	$	-
Long-term investments*		248,386		76,202		-		172,184

*Excludes long-term investments in convertible debentures of $Nil (December 31, 2020 - $567,734), which are measured at amortized cost.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk associated with cash is minimal as the Company deposits the majority of its cash with a large Canadian financial institution. The Company’s credit risk associated with its receivables, loan receivable, and long-term investment in convertible debentures is monitored by management. The Company’s maximum exposure to credit risk is the carrying value of the cash, receivables, loan receivable, and long-term investment in convertible debentures.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity risk is to ensure it has a planning and budgeting process in place to determine the funds required to support its ongoing operations and capital expenditures. The Company ensures that sufficient funds are raised from private placements to meet its working capital requirements, after taking into account existing cash and expected exercise of share purchase warrants and options. Management believes that it will be successful in raising the necessary funds however, given the current market conditions, management believes that the raising of the required funds will take longer than is normal and will be at prices that may be less than desirable. There are no assurances that additional funds will be available on terms acceptable to the Company or at all. All of the Company’s financial liabilities have maturities of one year or less as at June 30, 2021 and June 30, 2020.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, commodity prices, equity prices, and foreign currency fluctuations.

a) Interest Rate Risk

Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on the Company’s financial instruments. The Company’s long-term investment in convertible debentures is at a fixed rate of interest, as is its loan receivable. The Company is not exposed to significant interest rate risk with respect to these financial instruments as a change in the prevailing interest rates would not impact the future cash flows associated with the fixed rates of interest, nor would they be expected to impact the fair value of future cash flows unless and until such time as these financial instruments matured and were renewed or extended, instead of being collected.

pg. 21

Codebase Ventures Inc. Notes to the Condensed Consolidated Interim Financial Statements June 30, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited – Prepared by Management)

9. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (continued)

b) Price Risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market. The Company is exposed to price risk associated with its long-term investments in marketable securities and warrants, classified in levels 1 and 3 of the fair value hierarchy, respectively. A 10% change in market prices of the common shares underlying the long-term investments in marketable securities and warrants would result in a gain or loss of approximately $164,000.

c) Currency Risk

Currency risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates. At June 30, 2021 the Company held an insignificant balance of US dollar assets. A 10% change in the foreign exchange rate would not impact profit or loss by a material amount. The Company’s investment in World High Life Plc is denominated in Pounds Sterling. A 10% change in the Pound Sterling versus the Canadian dollar would result in a gain or loss of approximately $164,000.

10. CAPITAL MANAGEMENT

The Company’s objectives for managing capital (defined as all components of equity) are to safeguard its ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders. The Company manages capital by issuing new common shares, options, and warrants, and may in the future issue new debt. There are no externally imposed capital requirements. There has been no change to the Company’s capital management approach during the period ended June 30, 2021.

11. SUBSEQUENT EVENT

Subsequent to June 30, 2021, the Company received $15,000 for the exercise of 200,000 warrants.

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