Elcora Advanced Materials Corp. — Audit Report / Information 2021

Jul 24, 2021

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ELCORA ADVANCED MATERIALS CORP.

Consolidated Financial Statements

For the year ended March 31, 2021 and 2020

(Expressed in Canadian Dollars)

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Elcora Advanced Materials Corp.:

Opinion

We have audited the consolidated financial statements of Elcora Advanced Materials Corp. (the “Company”), which comprise the consolidated statements of financial position as at March 31, 2021 and 2020, and the consolidated statements of loss and 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 March 31, 2021 and 2020, 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 2 in the financial statements which describes matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about 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 will 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 on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the 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 Barry Hartley.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, Canada July 23, 2021

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ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)

	March 31, 2021 March 31, 2020 $ $
Assets Current assets Cash Accounts receivable_(note 8) Prepaid expenses(note 9)_	290,427 33,192 15,774 2,413 5,159 808
Total current assets	311,360 36,413
Non-current assets Right of use lease (note 10) Property and equipment_(note 12)_	9,999 28,653 165,587 284,885
Total non-current assets	175,586 313,538
Total assets	486,946 349,951
Liabilities and shareholders’ deficit Current liabilities Accounts payable and accrued liabilities_(note 11) Current portion of loan payable(note 15) Lease liability(note 10) Promissory notes(note 16)_	1,413,517 1,352,351 33,738 101,202 10,232 21,061 388,251 33,765
Total current liabilities Long-term liabilities Loans payable_(note 15) Government loan (_note 17)	1,845,738 1,508,379 749,323 665,539 23,610 -
Total liabilities	2,618,671 2,173,918
Shareholders’ equity Share capital_(note 18) Share based payment reserve(note 18)_ Deficit	16,657,789 16,029,909 3,872,789 3,927,516 (22,662,303) (21,781,392)
Total shareholders’ equity	(2,131,725) (1,823,967)
Total liabilities and shareholders’ equity	486,946 349,951

-See Accompanying Notes-

Going concern (note 2) Subsequent event (note 21)

Approved on behalf of the Board of Directors on July 23, 2021

	“Troy Grant” “Denis Choquette”
	Director Director

ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)

	Year ended,	Year ended,
	March 31, 2021 March 31, 2020
		$ $
Expenses	(60,793) 213,210 47,556 50,451 41,448 36,400 149,215 166,931 400,000 516,745 18,802 28,274 221,153 - 103,259 105,560 2,338 10,433 (15,746) (155)
Research and development expense (recovery), net of government grants and assistance_(note 15)_
Professional fees
General and administrative expenses (note 14)
Depreciation_(notes 10 and 12)_
Management and consulting fees_(note 14)_
Transfer, filing and listing fees
Share based compensation (notes 14 and 18)
Accretion of interest_(notes 15 and 17)_
Interest expense_(note 16)_
Gain on foreign exchange
	(907,232) (1,127,849) - 1,776 7,920 - 18,401 - - (12,119)
Other items
Realized and unrealized gain on marketable securities
Gain on lease modification (note 10)
Government grant (note 17)
Impairment of marketable securities
Comprehensive loss for the year	(880,911) (1,138,192)
Loss per share- Basic and diluted loss per share	(0.01) (0.01)
Weighted average number of outstanding common shares – Basic and diluted	87,106,327 86,493,313

-See Accompanying Notes-

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ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)

OR THE YEARS ENDED MARCH 31, 2021 EXPRESSED IN CANADIAN DOLLARS)	AND 2020
			Share based		Total
	Share Capital (#)	Share Capital $	payment reserve $	Deficit $	shareholders' equity $
Balance – March 31, 2019	86,493,313	16,029,909	3,927,516	(20,643,200)	(685,775)
Net loss and comprehensive loss for the year	-	-	-	(1,138,192)	(1,138,192)
Balance – March 31, 2020	86,493,313	16,029,909	3,927,516	(21,781,392)	(1,823,967)
Options exercised (note 18)	3,950,000	627,880	(275,880)	-	352,000
Stock based compensation (note 18)	-	-	221,153	-	221,153
Net loss and comprehensive loss for the year	-	-	-	(880,911)	(880,911)
Balance- March 31, 2021	90,443,313	16,657,789	3,872,789	(22,662,303)	(2,131,725)

-See Accompanying Notes-

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ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)

ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)	ELCORA ADVANCED MATERIALS CORP. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS)
March 31, 2021 March 31, 2020 $ $
$
Cash flows from operating activities
Net loss for the year (880,911)	(1,138,192)
Adjustments for items not involving cash:
Share based compensation 221,153	-
Depreciation expense 149,215	166,931
Government grant (18,401)	-
Government assistance (84,928)	(63,530)
Accrued interest 2,313	-
Accretion of interest 103,259	105,560
Impairment of marketable securities -	12,119
Realized and unrealized gain on marketable securities -	(1,776)
Unrealized gain on foreign exchange (15,746)	(155)
Interest on right-of-use asset 1,558	3,652
Gain on lease modification (7,920)	-
Changes in non-cash working capital items:
Accounts receivable (13,361)	9,066
Prepaid expenses (4,351)	10,462
Accounts payable and accrued liabilities 368,912	391,781
Net cash used in operating activities (179,208)	(504,082)
Investing activities
Acquisition of equipment -	(9,882)
Net cash used in investing activities -	(9,882)
Financing activities
Proceeds from options exercised 60,000	-
CEBA loan 40,000	-
Repayment of lease liability (15,730)	(49,449)
Proceeds from promissory notes 352,173	17,244
Net cash from (used in) financing activities 436,443	(32,205)
Net change in cash 257,235	(546,169)
Cash, beginning 33,192	579,361
Cash ending 290,427	33,192
Supplement cash flow information
Shares issued in exchange for settlement of accounts payable 567,880	-

-See Accompanying Notes-

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

1. Nature of business

Elcora Advanced Materials Corp. (the “Company” or “Elcora”) was incorporated pursuant to the Canada Business Corporations Act on June 6, 2011 and its common shares are listed on the TSX Venture Exchange under the trading symbol ERA. The Company is also listed on the Frankfort Stock exchange under the symbol ELM and on the OTC Pink Sheets under the trading symbol ECORF. The Company’s registered office is at 789 West Pender Street, Suite 810, Vancouver, British Columbia, V6C 1H2, Canada and its head office is located at 111 Ahmadi Crescent, Bedford, Nova Scotia, B4A 4E5, Canada.

Elcora has been structured as a vertically integrated graphite and graphene company that mines, processes, refines graphite and produces both graphene and graphene applications. Elcora is advancing its vertical integration business model in graphite and graphene production. The core business is advanced material research and production.

2. Going concern

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes continuity of operations and realization of assets and settlement of liabilities and commitments in the normal course of business as they become due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that lend significant doubt upon the entity’s ability to continue as a going concern, as described in the following paragraph.

The Company is in the research and development (“R&D”) stage and is subject to the risks and challenges similar to other companies in a comparable stage of R&D. These risks include, but are not limited to, dependence on key individuals, successful research and development programs and the ability to secure adequate financing to meet the minimum capital required to successfully complete the project and continue as a going concern. For the year ended March 31, 2021, the Company incurred losses of $880,911 (2020 - $1,138,182) and as at March 31, 2021 had an accumulated deficit of $22,662,303 (2020 - $21,781,392). The Company has negative cash flows from operations and at March 31, 2021 and had a working capital deficiency of $1,534,378 (2020 – $1,471,966).

The ability of the Company to continue as a going concern is dependent upon raising additional financing through equity and non-dilutive funding and partnerships. There can be no assurance that the Company will have sufficient capital to fund its ongoing operations, develop or commercialize any products without future financings. These material uncertainties cast significant doubt as to the Company’s ability to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The Company is currently pursuing financing alternatives that may include equity, debt, and non-dilutive financing alternatives including co-development through potential collaborations, strategic partnerships or other transactions with third parties, and merger and acquisition opportunities. There can be no assurance that additional financing will be available on acceptable terms or at all. If the Company is unable to obtain additional financing when required, the Company may have to substantially reduce or eliminate planned expenditures or the Company may be unable to continue operations.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and has adversely affected global workforces, financial markets, and the general economy. It is not possible for the Company to determine the duration or magnitude of the adverse results of COVID-19 nor its effects on the Company’s business or operations. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in 2021.

These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and the consolidated statements of financial position classifications that would be necessary were the going concern assumption be inappropriate. These adjustments could be material.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

3. Basis of preparation

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) as set out in the Chartered Professional Accountants of Canada Handbook – Accounting – Part I. The accounting policies were consistently applied to all years presented.

The consolidated financial statements were approved by the Board of Directors for issue on July 23, 2021.

Basis of measurement

These consolidated financial statements have been prepared on an accrual basis and under the historical-cost convention except for the revaluation of certain financial assets and financial liabilities to fair value.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its 100% owned subsidiary, Graphene Corp. 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. All inter-company transactions and balances have been eliminated in the consolidated financial statements

4. Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements are as follows:

a) Foreign currency translation

Items included in the consolidated financial statements of each entity included in these consolidated financial statements are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars. All other entities have a Canadian dollar functional currency. Assets and liabilities of each foreign entity are translated into Canadian dollars at the exchange rate in effect on the consolidated statements of financial position date. Revenue and expenses are translated at the average rate in effect during the year. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in other comprehensive loss on the consolidated statements of comprehensive loss, which is a component of accumulated other comprehensive income included in shareholders’ equity.

Foreign currency transactions denominated in a currency other than an entity’s functional currency are remeasured into the functional currency with any resulting gains and losses included in the consolidated statements of comprehensive loss, except for gains and losses arising on intercompany foreign currency transactions that are of a long-term investment nature.

b) Financial instruments

The following is the Company’s accounting policy for financial instruments under IFRS 9:

(i) 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.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

4. Summary of significant accounting policies (continued)

b) Financial Instrument (continued )

(i) Classification (continued)

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 if the Company has opted to measure them at FVTPL.

The following table shows the classification under IFRS 9:

Financial assets/liabilities	Classification
Cash	Amortized cost
Accounts receivable	Amortized cost
Accounts payable	Amortized cost
Loan payable	Amortized cost
Promissory notes	Amortized cost
Government loan	Amortized cost

(ii) Measurement

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 statements of loss. 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 statements of loss in the period in which they arise.

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive loss (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

(iii) 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 recognizes in the statements of loss and comprehensive 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.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

4. Summary of significant accounting policies (continued)

b) Financial instruments (continued)

(iv) Derecognition

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.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

Gains and losses on derecognition are generally recognized in profit or loss.

c) Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units; otherwise, they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

The recoverable amount of an asset 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statements of loss and comprehensive loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the consolidated statements of loss and comprehensive loss.

d) Property and equipment

Property and equipment are carried at cost, less accumulated depreciation and impairment allowances. Depreciation is provided from the date assets are ready to be put into service at rates which will amortize the carrying cost less residual value of the property and equipment over their estimated useful lives on a straight-line basis. Estimated useful lives and residual values are reviewed at least annually. The estimated useful lives are as follows:

Lab equipment	5 years
Leasehold improvements	Term of the lease
Drilling equipment	7 years
Right of use asset	Term of the lease

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

4. Summary of significant accounting policies (continued)

e) Leases

During the year ended March 31, 2020, the Company adopted all of the requirements of IFRS 16 “Leases” which replaced IAS 17 “Leases” and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting is not substantially changed. The Company adopted IFRS 16 effective April 1, 2019. The standard was applied using the modified retrospective method, which does not require restatement of prior period financial information, as it recognizes the cumulative effect, if any, as an adjustment to opening retained earnings and applies the standard prospectively.

f) Share-based payments

The Company records stock-based compensation expense for stock options granted to directors, officers and consultants using the fair value method. Option terms and vesting conditions are at the discretion of the Board of Directors. The fair value of of stock options granted is determined using the Black-Scholes Option Pricing Model. In instances where stock options are committed to individuals before they are granted, the Company recognizes the expense based on estimated fair value. Upon granting of such options, the initial estimate is revised based on the fair value of stock options determined on the grant date. Stock-based compensation expense is calculated for each installment over the vesting period based on the number of stock options expected to vest. Stock-based compensation expense is recorded in the consolidated statements of comprehensive loss with a corresponding increase to share based payment reserve. Forfeiture estimates are based on historic information and reviewed at each reporting date, with any impact being recognized immediately in the consolidated statements of loss and comprehensive loss. When stock options are exercised the consideration received and the amount previously recognized in share-based payment reserve is recorded as an increase to share capital.

g) Income tax

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

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the date of the consolidated statements of financial position and will apply when the deferred tax asset or liability is expected to be settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. Deferred income tax assets and liabilities are presented as non-current.

h) Warrants

The Company makes certain estimates and assumptions when calculating the estimated fair value of warrants issued for financing purposes. When warrants are issued independently, their fair value is determined using the Black Scholes Option Pricing Model. The significant assumptions used herein include the estimate of expected volatility, expected life, expected dividend rate and expected risk-free rate of return. The warrants issued as part of the private placement units are valued using the residual method. When warrants are exercised the consideration received and, if any, the amount previously recognized in contributed surplus is recorded as an increase to share capital.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

4. Summary of significant accounting policies (continued)

i) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.

j) Loss per share

The Company presents basic and diluted loss per share date for its ordinary shares. Basic loss per share is calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of shares outstanding adjusted for the effects of all dilutive potential common shares. All stock options and warrants are currently anti-dilutive. As a result, basic and diluted loss per share are the same.

k) Segmented information

The Company's operations consist of graphene related research and development activities through the Company's subsidiary Graphene Corp.

l) Joint arrangements

The Company applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor.

Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the post-acquisition profits or losses and movements in the consolidated statements of comprehensive loss. When the Company’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any long-term interests that, in substance, form part of the Company’s net investment in the joint venture), the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

Unrealized gains on transactions between the Company and its joint venture are eliminated to the extent of the Company’s interest in the joint venture. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint venture have been changed where necessary to ensure consistency with the policies adopted by the Company.

m) Research and development

All research costs are expensed in the period incurred. Development costs are expensed in the period incurred, unless they meet the criteria for capitalization, in which case they are capitalized and then amortized over their useful life. Development costs are written off when there is no longer an expectation of future benefits.

n) Government grants and assistance

Government grants and assistance are recognized where there is reasonable assurance that the grant or assistance will be received and all attached conditions will be complied with. When the grant or assistance relates to an expense item, it is recognized as income over the period necessary to match the grant or assistance on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it reduces the carrying amount of the asset. The grant is then recognized as income over the useful life of a depreciable asset by way of a reduced depreciation charge. When government assistance is received which relates to expenses of future periods, the amount is deferred and amortized to income as the related expenditures are incurred.

The Company also has an interest-free repayable funding obligation from the Government of Canada. The benefit of the government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

4. Summary of significant accounting policies (continued)

New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after April 1, 2021, and have not been applied in preparing these consolidated financial statements. None of the new standard are expected to be applicable or to have a significant effect on the consolidated financial statements of the Company.

5. Critical Accounting Estimates and Judgments

The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates the Company has made in the preparation of these financial statements.

Estimate of recoverability for non-financial assets

At the end of each reporting period, the Company assesses each of its mineral resource properties and its joint venture, of which the principal asset is a mineral resource property, to determine whether any indication of impairment exists. Judgment is required in determining whether indicators of impairment exist, including factors such as, the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and results of exploration and evaluation activities on the exploration and evaluation assets.

Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. The impairment analysis requires the use of estimates and assumptions, such as long-term commodity prices, discount rates, future capital requirements, exploration potential and operating performance.

Fair value of mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. If the Company does not have sufficient information about a particular mineral resource property to meaningfully estimate future cash flows, the fair value is estimated by management through the use of comparison to similar market assets and industry benchmarks. Actual results may differ materially from these estimates.

Government assistance

Elcora received an interest-free repayable loan from the Atlantic Canada Opportunities Agency (“ACOA”), a government agency and Canada Emergency Business Account (“CEBA”) COVID-19 Economic Response Plan, by the Government of Canada. The benefit of both loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates. The fair value of the components, being the loan and the government grant, must be calculated initially in order to allocate the proceeds to the components. The valuation is complex, as there is no active trading market for these items and is based on unobservable inputs.

14

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

6. Financial instruments and fair values

Financial assets included in the statement of financial position are classified as follows:	Financial assets included in the statement of financial position are classified as follows:
	March 31,	March 31,
	2021	2020
	$	$
Fair value through profit and loss:
Cash	290,427	33,192
	290,427	33,192
Financial liabilities included in the statement of financial position are classified as follows:
	March 31,	March 31,
	2021	2020
	$	$
Other financial liabilities at amortized cost:
Accounts payable	300,629	414,267
Promissory notes	388,251	33,765
Loans payable	783,061	766,741
Government loan	23,610	-
	1,495,551	1,214,773

The Company uses the following hierarchy in attempting to maximize the use of observable inputs and minimize the use of unobservable inputs, primarily using market prices in active markets.

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing on an ongoing basis. Investments in marketable securities are valued based on quoted market prices in active markets. In addition, cash is measured using level 1 inputs.

Level 2 – Observable inputs other than level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable that can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair values of the loans payable and government loan have been valued at initial recognition using level 3 inputs; specifically, the discount rate. For proceeding periods, the loan will be measured at amortized cost.

(a) Market risk

i) Foreign exchange risk

Foreign exchange risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company does not have significant monetary assets or liabilities denominated in foreign currencies and as such is not exposed to significant foreign exchange risk.

ii) 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’s accounts payable, government loan and loans payable are non-interest bearing and have contractual maturities of 30 days or less, except as otherwise noted. The loan advanced from the CFO is at a fixed interest rate. The Company’s promissory notes payable bear interest at a fixed rate. As such, the Company is not exposed to interest rate risk.

15

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

6. Financial instruments and fair values (continued)

• (a) Market risk (continued)

iii) Price risk

The Company is not exposed to any direct price risk other than that associated with commodities and how fluctuations impact companies in the mineral exploration and mining industries as the Company has no significant revenues.

• (b) Credit risk

Credit risk is the risk that a customer or third party to a financial instrument fails to meet its commercial obligations. The carrying amount of financial assets represents the maximum credit exposure. The Company manages credit risk by holding the majority of its cash with banks in Canada, where management believes the risk of loss to be low .

• (c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages liquidity risk by maintaining sufficient cash balances to meet liabilities when due. As at March 31, 2021, the Company had cash of $290,427 (2020 - $33,192) to settle current liabilities of $1,845,738 (2020 - $1,508,379). The Company will require further financing to fund operations.

Currently, the Company does not have sufficient working capital to cover its operating overheads and other commitments for the next twelve months. The timeline and estimated capital required to advance the project to the next stage are under review. The Company will need to raise additional financing. Although the Company has been successful in raising funds to date, there is no assurance that future equity capital or debt will be available to the Company in the amounts or at the times desired or on terms that are acceptable to the Company, if at all. Liquidity risk is assessed as high.

7. Capital management

The Company attempts to manage its capital structure and makes adjustments to it, based on the funds available to the Company. The Company considers capital to be total shareholder’s deficiency, which at March 31, 2021 totaled $2,131,725 (2020 - $1,823,967). The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of business. The Company is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the year.

8. Accounts receivable

	March 31,	March 31,
	2021	2020
	$	$
Sales tax recoverable	1,142	2,413
Other receivables	14,632	-
	15,774	2,413

9. Prepaid expenses

	March 31,	March 31,
	2021	2020
	$	$
Current	5,159	808

Prepaid expenses include funds paid in advance for third party suppliers and rent deposit.

16

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

10. Right of use asset and lease liability

The Company through its subsidiary, Graphene Corp., entered into a three-year operating lease for premises used for its graphene research. The lease commenced September 1, 2017 and expired August 31, 2020. During the year ended March 31, 2021, the Company received a rent deferral letter from the lessor in relation to the rent relief program due to COVID-19. Upon rent payments being resumed on August 31, 2020, the lessor has amended the terms of the lease. Upon amendment, the term re-commences starting September 1, 2020 and expires on August 31, 2021. Due to the amendment, under IFRS 16 Leases , the amended lease will be treated as a lease modification and all according calculations will follow under IFRS 16 Leases – lease modification.

Set out below are the carrying amounts of right of use assets and lease liabilities recognized and the movements during the year:

	Right of use asset	Lease liability
	$	$
As at April 1, 2019	66,857	(66,857)
Interest additions	-	(3,653)
Depreciation	(38,204)	-
Payments	-	49,449
As at March 31, 2020	28,653	(21,061)
Adjustment due to change in deferred program	(12,734)	20,654
Additions due to modification	23,997	(23,997)
Interest additions	-	(1,558)
Depreciation	(29,917)	-
Payments	-	15,730
As at March 31, 2021	9,999	(10,232)

The total revised minimum lease payments including operating costs are $4,790 per month. The Company is committed to lease payments as follows:

			$
Year endingMarch	31,	2022	23,949

The lease payments are discounted using a discount rate of 8% which is the Company’s incremental borrowing rate.

11. Accounts payable and accrued liabilities

	March 31,	March 31,
	2021	2020
	$	$
Accounts payable (note 14)	300,629	414,267
Accrued liabilities (note 14)	1,112,888	938,084
	1,413,517	1,352,351

17

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

12. Property and equipment

Lab Equipment $ Leasehold Improvements $	Drilling equipment $ Total $ 162,197 284,885 (33,106) (119,298) 129,091 165,587 231,731 690,567 (102,640) (524,980) 129,091 165,587 195,304 403,730 - 9,882 (33,107) (128,727) 162,197 284,885 231,731 690,567 (69,534) (405,682) 162,197 284,885
Year ended March 31, 2021 Opening net book value 116,854 5,834 Depreciation for the year (80,358) (5,834)
Closing net book value 36,496 -
At March 31, 2021 Cost 401,797 57,039 Accumulated depreciation (365,301) (57,039)
Closing net book value 36,496 -
Year ended March 31, 2020 Opening net book value 188,332 20,094 Additions (note 15) 9,882 - Depreciation for the year (81,360) (14,260)
Closing net book value 116,854 5,834
At March 31, 2020 Cost 401,797 57,039 Accumulated depreciation (284,943) (51,205)
Closing net book value 116,854 5,834

Additions to property and equipment are net of government assistance benefits related to the ACOA loan (note 15). The total amount of government assistance allocated to property and equipment totaled $Nil for the year ended March 31, 2021 (2020 - $10,023) (note 15).

13. Investment in Joint Venture

Sakura Joint Venture

On September 30, 2014, Elcora completed the purchase of 40% of the issued and outstanding shares of Sakura. The remaining 60% of Sakura is owned by J.D.K. Wickramaratne, through his wholly owned company KWA Holdings (PVT) Ltd. (“KWA”).

The Sakura Graphite Mine is located on Sakura's leased plots totaling 70 acres in Sri Lanka (the "Mine"). Elcora will earn 30% of the net income from the entire operation for managing the processing of the graphite, for the life of the Mine. In order to maintain its 40% interest in Sakura, Elcora will provide the capital expenditures required to return the Mine to commercial production, to a maximum of US$12 million. As at March 31, 2021, approximately US$3 million has been funded and the Company does not expect that it will contribute the maximum amount of US$12 million.

Based on the terms of the joint venture, management has determined there is joint control. Accordingly, the investment is accounted for using the equity method in these consolidated financial statements.

At both March 31, 2021 and 2020, the operations of Sakura could not support the carrying value of the investment and advances. As at March 31, 2019, the investment and advances had been fully impaired. There have been no further activities in Sakura nor transactions between Sakura and the Company during the years ended March 31, 2021 or 2020.

18

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

13. Investment in Joint Venture (continued)

Pathaha Agro (Private) Limited

On February 9, 2018, the Company entered into a Sale and Purchase Agreement with a Sri Lankan individual (“Seller”) to purchase Pathaha Agro (Private) Limited (“Pathaha”), a private company incorporated in Sri Lanka, for total consideration of USD $990,000. In 2018, the Company paid a deposit of $120,267 (USD $90,000) which was written off in fiscal 2019. The remaining consideration was to be paid on completion, subject to the following conditions being satisfied:

• a) Pathaha shall have been granted certain exploration licenses from the Geological Surveys and Mines Bureau of Sri Lanka;

• b) Pathaha shall have been granted one Artisan Mining License from the Geological Surveys and Mines Bureau of Sri Lanka;

• c) Pathaha shall have the right to possess the land with respect to which the Artisan Mining License applies; and

• d) The Board of Investment of Sri Lanka shall have approved the purchase of Pathaha by the Company.

During the year ended March 31, 2020, the agreement was cancelled.

14. Related party transactions

Key management includes directors, executive officers and officers which constitutes the management team. The Company paid or accrued compensation in the form of consulting fees to companies controlled by directors, executive officers and officers and share based compensation directly to directors, executive officers and officers as follows:

	March 31, 2021 $ March 31, 2020 $
Rent and administrative fees to a company jointly controlled by the CFO Consulting fees to the CEO and CFO Share-based compensation to a company controlled by the CFO	18,000 12,000 400,000 400,000 89,578 -
Total	507,578 412,000

As at March 31, 2021, total amounts payable to directors and companies owned thereby and recorded in accounts payable and accrued liabilities were $864,022 (2020 - $905,757) (Note 11). All balances are unsecured, noninterest bearing, have no fixed repayment terms, and are due on demand.

In addition, the Company has promissory notes payable to certain related parties totaling $388,251 including principal and accrued interest (Note 16).

15. Loans payable

	March 31,	March 31,
	2021	2020
	$	$
ACOA interest-free loan with a maximum contribution of $495,750,
(“Loan 1”) repayable in 61 equal monthly payments of $5,100
commencing July 1, 2017. As at March 31, 2021, the total amount drawn
down on the loan is $141,449 (2020 - $141,449)	114,559	110,303
ACOA interest-free loan with a maximum contribution of $1,306,150,
(“Loan 2”) repayable in 108 equal monthly payments of $11,767
commencing October 1, 2020 and a final payment of $6,466. As at March
31, 2021, the total amount drawn down on the loan is $1,265,536 (2020 -
$1,265,536)	668,502	656,438
	783,061	766,741
Less: Currentportion	(33,738)	(101,202)
	749,323	665,539

19

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

15. Loans payable (continued)

Based on management’s analysis as at March 31, 2021, the fair value of the loans was $783,061 (2020 - $766,741). The Company estimated the fair value of this liability based on the net present value of expected repayments, using a discount rate of 15% (2020 – 15%).

The minimum annual principal repayments of long-term debt over the next five years from March 31, 2021 are as follows:

Year ending	$
March 31, 2022	151,803
March 31, 2023	202,204
March 31, 2024	175,554
March 31, 2025	141,204
March 31, 2026	141,204
	812,169

	March 31,	March 31,
	2021	2020
	$	$
Balance – Beginning of the year	766,741	741,232
Advanced, net of $Nil (2020 – $772,229) allocated to government assistance	-	44,679
Fair value adjustment resulting from amended terms	(84,928)	-
Fair value adjustment resulting from extinguishment	-	(63,530)
Repayment	-	(61,200)
Accreted interest	101,248	105,560
Balance – End of the year	783,061	766,741
Less: Current portion	(33,738)	(101,202)
Non-current portion	749,323	665,539

During the year ended March 31, 2021, $84,928 (2020 - $0) relating to the change in fair value of the debt upon amendment was recorded as an offset to research and development expenses. During the year ended March 31, 2021, $0 (2020 - $35,299) of the government assistance benefit was recorded as a reduction in related research and development expenses.

16. Promissory notes

During the year ended March 31, 2021, the Company’s CEO advanced $18,400 (2020 - $33,765) to the Company in the form of a promissory note. The promissory note is non-interest bearing, due on demand and unsecured. At March 31, 2021, $52,165 (2020 - $33,765) is outstanding (note 14).

During the year ended March 31, 2021, a director of the Company advanced USD$3,000 ($3,773) (2020 - $Nil) to the Company in the form of a promissory note. The promissory note is non-interest bearing, due on demand and unsecured. At March 31, 2021, $3,773 is outstanding (note 14).

During the year ended March 31, 2021, the Company’s CFO loaned $330,000 (2020 - $Nil) to the Company. The loan bears 8% interest per year, compounded on a monthly basis. At March 31, 2021, $332,313 is outstanding including accrued interest of $2,313.

20

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

17. Government Loan

During the year ended March 31, 2021, the Company received $40,000 funds from the Government of Canada in respect to the Canada Emergency Business Account (CEBA) COVID-19 Economic Response Plan. The loan bears interest at a rate of 0% per annum during the initial term of the loan, expiring December 31, 2022. No principal repayments are required during this initial term. If the Company has paid 75% of the loan amount prior to December 31, 2022, the lender will forgive the remaining balance of the loan at this time.

If a balance is outstanding at January 1, 2023, interest will commence at a rate of 5% per annum, payable on a monthly basis. Any balance remaining on the loan will be repayable in full on December 31, 2025. The loan is unsecured.

Pursuant to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance , the benefit of a government loan at below-market rate is treated as a government grant and measured in accordance with IFRS 9 Financial Instruments : the benefit of below-market rate shall be measured as the difference between the initial carrying value of the loan (being the present value of a similar loan at market rates) and the proceeds received.

The Company has estimated the initial carrying value of the CEBA Loan at $21,599, using a discount rate of 15%, which was the estimated rate for similar loan without the interest-free component. The difference of $18,401 will be accreted to the loan liability over the term of the CEBA Loan and offset to other income on the statements of loss and comprehensive loss. During the year ended March 31, 2021 the Company recorded $2,011 in accretion and recognized $18,401 as income from government grants.

	Government loan
Balance – March 30, 2020	$ -
Addition	21,599
Accretion	2,011
Balance– March 31, 2021	$ 23,610

17. Share capital and reserves

Authorized capital stock

Unlimited common shares without nominal or par value

Shares issued for the year ended March 31, 2021 and 2020

During the year ended March 31, 2021, the Company issued 3,950,000 common shares pursuant to the stock option exercises.

There were no shares issued during the year ended March 31, 2020.

Warrants

	Number of	Weighted average
	warrants	exercise price
	#	$
Balance – March 31, 2019	20,683,476	0.24
Expired	(17,558,476)	0.29
Balance – March 31, 2020	3,125,000	0.36
Expired	(3,125,000)	0.36
Balance– March 31, 2021	-	-

During the year ended March 31, 2021, 3,125,000 warrants expired unexercised with a weighted average price of $0.36.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

18. Share capital and reserves (continued)

During the year ended March 31, 2020, 17,558,476 warrants expired unexercised with a weighted average price of $0.29.

Stock options

The Board of Directors of the Company has adopted an incentive stock option plan (the “Option Plan”). Under the Option Plan, the Board of Directors of the Company may, from time to time, at its discretion, and in accordance with the exchange requirements and applicable securities legislation, grant to directors, officers, employees and consultants of the Company, non-transferable options to purchase common shares, exercisable for a period of up to 10 years from the date of grant. The number of common shares reserved for issuance under the Option Plan will not exceed 10% of the issued and outstanding common shares of the Company. The number of common shares reserved for issuance to any one individual Director or Officer may not exceed 5% of the issued and outstanding common shares and the aggregate number of common shares reserved for issuance to all technical consultants will not exceed 2% of the issued and outstanding common shares. Vesting terms are determined by the Board of Directors at the time of grant.

The following table summarizes the changes in the outstanding stock options for the year ended March 31, 2021:

	Number of	Weighted average
	options	exercise price
	#	$
Balance – Exercisable at March 31, 2019 and 2020	8,620,000	0.12
Expired	(3,620,000)	0.16
Issued	3,200,000	0.09
Exercised	(3,950,000)	0.09
Balance– Exercisable at March 31, 2021	4,250,000	0.09

On January 22, 2021, the Company granted 1,700,000 stock options which is 100% vested immediately with an exercise price of $0.11 per share expiring on January 22, 2026. The fair value of the stock options was estimated to be $131,575 using the Black-Scholes Option Pricing model with the following assumptions: term – 5 years; sexpected volatility - 136%; risk-free rate - 0.36%; and expected dividends - zero.

On January 29, 2021, the Company granted 1,500,000 stock options which is 100% vested immediately with an exercise price of $0.07 per share expiring on January 26, 2026. The fair value of the stock options was estimated to be $89,578 using the Black-Scholes Option Pricing Model with the following assumptions: term – 4 years; expected volatility - 145%; risk-free rate - 0.34%; and expected dividends - zero.

The range of exercise prices of stock options outstanding and exercisable as at March 31, 2021 are as follows:

	Outstanding options	Outstanding options		Exercisable options	Exercisable options
	Number of	Weighted	Weighted	Number of	Weighted
	options	average	average	options	average
	outstanding	remaining	exercise price	exercisable	exercise price
Exercise prices	#	term(years)	$	#	$
$0.01 - $0.10	425,000	0.11	0.01	425,000	0.01
$0.01 - $0.10	2,950,000	1.98	0.06	2,950,000	0.06
$0.11-$0.20	875,000	0.31	0.03	875,000	0.03
	4,250,000	2.40	0.10	4,250,000	0.10

Share based payment reserve

The share-based payment reserve records items recognized as stock-based compensation expense and other sharebased payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital.

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ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

19. Income taxes

a) Losses

The Company has capital losses of $390,000 which are carried forward to reduce future taxable capital gains. The Company has non-capital tax losses, which include certain deductions for share issue costs of approximately $9,485,000 available for carry-forward to reduce future years’ taxable income. These non-capital tax losses expire between 2031 and 2041.

b) Effective income tax rate

At March 31, 2021 and 2020, the Company’s effective income tax rate differs from the amount that would be computed from applying the federal and provincial statutory rate of 29% and 31% respectively to the pre-tax net loss for the year. The reasons for the difference are as follows:

	March 31,	March 31,
	2021	2020
	$	$
Loss before income taxes	880,911	1,138,192
Income tax recovery based on statutory rates	255,464	352,840
Non-deductible items	(113,372)	-
Unrealized gains	-	(32,724)
Other	(6,628)	(53,488)
Change in tax rate	(391,054)	-
Unrecorded tax benefit of losses	255,590	(266,628)
Recovery of income taxes	-	-

c) Deferred tax assets and liabilities

The following reflects the deferred tax assets and liabilities at March 31, 2021 and March 31, 2020:

	March 31,	March 31,
	2021	2020
	$	$
Deferred tax assets
Non-capital losses	2,740,000	2,800,000
Capital losses	56,000	59,000
Deductible share issuance costs	-	8,000
Tax value in excess of accounting value of marketable
securities	134,000	143,000
Tax value in excess of accounting value of exploration and
evaluation assets	45,000	48,000
Tax value in excess of accounting value of joint venture	2,663,000	2,847,000
Tax value in excess of accounting property and equipment	165,000	155,000
ROU asset	-	(2,000)
Portion of deferred tax assets unrecognized	(5,803,000)	(6,058,000)
Deferred tax asset	-	-

23

ELCORA ADVANCED MATERIALS CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2021 AND 2020 (EXPRESSED IN CANADIAN DOLLARS UNLESS OTHERWISE INDICATED)

20. Segmented information

The Company's operations comprised of two reportable segments; the development of graphite mineral properties through the joint venture in Sakura and graphene related research and development activities through the Company's subsidiary Graphene Corp. The net loss and comprehensive loss and non-current assets identifiable with these segments are as follows:

Loss and comprehensive loss for the year ended March 31,	2021	2020
	$	$
Graphene Corp. (Canada)	155,798	579,771
Corporate (Canada)	725,113	558,421
	880,911	1,138,192
Non-current assets as at March 31,	2021	2020
	$	$
Graphene Corp. (Canada)	175,586	313,538
	175,586	313,538

21. Subsequent event

Subsequent to the year ended March 31, 2021, the Company entered into a second lease extension agreement to extend the current lease for one more year to August 31, 2022, effective September 1, 2021 (Note 10).

24