Lithos Group — Audit Report / Information 2020

Oct 17, 2020

ALCHEMIST MINING INC.

Financial Statements

Years Ended April 30, 2020 and 2019

(Expressed in Canadian Dollars)

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INDEPENDENT AUDITORS’ REPORT

To the Shareholders of:

Alchemist Mining Inc.

Opinion

We have audited the financial statements of Alchemist Mining Inc. (the “Company”), which comprise the statement of financial position as at April 30, 2020, and the statements of loss and comprehensive loss, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

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 indicates that the Company incurred a net loss of $435,360 during the year ended April 30, 2020. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Comparative Information

The financial statements of the Company for the year ended April 30, 2019 were audited by another auditor who expressed an unmodified opinion on those statements on April 6, 2020.

Other Information

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

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

In connection with our audit of the financial statements, our responsibility is to read the other information 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, 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.

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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.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 Robert G. Charlton, CPA, CA.

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CHARTERED PROFESSIONAL ACCOUNTANTS

1735-555 Burrard Street Vancouver, BC V7X 1M9

October 16, 2020

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ALCHEMIST MINING INC. Statements of Financial Position As at April 30, 2020 and 2019 (Expressed in Canadian Dollars)

		2020		2019
Assets
Current
Cash	$	19,708	$	5,913
Amounts receivable		30,512		23,170
Prepaid expenses		-		3,781
		50,220		32,864
Equipment(note 6)		465		759
Deposit(note 8)		599,695		599,695
Total Assets	$	650,380	$	633,318
Liabilities
Current
Accounts payable and accrued liabilities (note 10)	$	486,959	$	141,979
Loan payable (note 11)		55,000		-
Shareholder loans (note 10)		24,380		-
Total Liabilities		566,339		141,979
Shareholders’ equity
Share Capital(note 9)		3,908,821		3,908,821
Subscriptions(note 9)		98,062		70,000
Reserves		146,260		266,888
Deficit		(4,069,102)		(3,754,370)
		84,041		491,339
Total liabilities and shareholders’ equity	$	650,380	$	633,318

Nature of operations (note 1) Going concern (note 2) Subsequent events (note 15)

Approved on behalf of the Board:

“Paul Mann”

..................................................................... Director

Paul Mann

“Awet Kidane”

..................................................................... Director

Awet Kidane

The accompanying notes are an integral part of these financial statements

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ALCHEMIST MINING INC. Statements of Loss and Comprehensive Loss Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars)

		2020		2019
Expenses
Accounting, legal and audit (note 10)	$	70,187	$	70,293
Depreciation (note 6)		294		595
Consulting fees (note 10)		341,000		310,481
Filing fees and shareholder information		20,730		23,918
Interest expense (note 11)		5,081		-
Management fees (note 10)		-		91,500
Office and general		4,062		4,160
Rent (expense recovery)		(2,156)		49,735
Travel and accommodation		14,626		48,095
		453,824		598,777
Other items
Write-off of accounts payable		(32,902)		-
Write-off of advances		14,438		-
Impairment of exploration and evaluation assets (note 7)		-		391,500
Loss and Comprehensive Loss for the Year	$	(435,360)	$	(990,277)
Basic and Diluted Loss Per Share	$	(0.01)	$	(0.02)
Weighted Average Number of Common Shares
Outstanding – Basic and Diluted		58,911,900		45,198,623

The accompanying notes are an integral part of these financial statements

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ALCHEMIST MINING INC. Statements of Changes in Shareholders’ Equity (Expressed in Canadian Dollars)

Number of Shares Share Capital	Reserves Share-based Payments Warrants Subscriptions Deficit Total
Balance, April 30, 2018 38,918,100 $ 2,915,348 Exercise of warrants 94,000 7,050 Expiry of options and warrants - - Private placements 18,118,000 905,900 Shares issued for debt 1,781,800 89,999 Share subscriptions received - - Share issuance costs - (9,476) Loss for the year - -	$ 381,181 $ 11,049 $ - $ (2,891,761) $ 415,817 - - - - 7,050 (123,408) (4,260) - 127,668 - - - - - 905,900 - - - - 89,999 - - 70,000 - 70,000 - 2,326 - - (7,150) - - - (990,277) (990,277)
Balance, April 30, 2019 58,911,900 $ 3,908,821	$ 257,773 $ 9,115 $ 70,000 $ (3,754,370) $ 491,339
Exercise of warrants - - Expiry/cancellation of options and warrants - - Share subscriptions received - - Loss for the year - -	- - 6,062 - 6,062 (111,513) (9,115) - 120,628 - - - 22,000 - 22,000 - - - (435,360) (435,360)
Balance, April 30, 2020 58,911,900 $ 3,908,821	$ 146,260 $ - $ 98,062 $ (4,069,102) $ 84,041

The accompanying notes are an integral part of these financial statements

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ALCHEMIST MINING INC. Statements of Cash Flows Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars)

		2020		2019
Operating Activities
Loss for the year	$	(435,360)	$	(990,277)
Items not involving cash
Depreciation		294		595
Write-off of accounts payable		(32,902)		-
Write-off of advances		14,438		-
Impairment of exploration and evaluation assets		-		391,500
		(453,530)		(598,182)
Changes in non-cash working capital items
Amounts receivable		(7,342)		6,195
Prepaid expenses		3,781		(3,781)
Accounts payable and accrued liabilities		368,444		156,185
Cash Used in Operating Activities		(88,647)		(439,583)
Investing Activities
Deposit		-		(599,695)
Cash Used in Investing Activities		-		(599,695)
Financing Activities
Loan received		50,000		-
Shareholder loans		24,380		-
Proceeds from exercise of warrants		6,062		7,050
Share subscriptions received		22,000		70,000
Issuance of common shares, net of share issue costs		-		898,750
Cash Provided by Financing Activities		102,442		975,800
Increase (Decrease) in Cash		13,795		(63,478)
Cash, Beginning of Year		5,913		69,391
Cash, End of Year	$	19,708	$	5,913
Supplemental Disclosures with Respect to Cash Flows
Taxes paid	$	-	$	-
Interest paid	$	-	$	-
Shares issued for debt settlement	$	-	$	89,999

The accompanying notes are an integral part of these financial statements

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

1. NATURE OF OPERATIONS

Alchemist Mining Inc. (the “Company”) was incorporated as NY85 Capital Inc. under the Business Corporations Act on October 22, 2010 in the province of British Columbia. On October 1, 2012, the shareholders of the Company approved the name change from NY85 Capital Inc. to Alchemist Mining Inc. at the Annual General and Special Meeting of the Company. On August 20, 2014, the Company de-listed from the TSX-V and commenced trading on the Canadian Securities Exchange ("CSE"). The common shares of the Company are listed for trading on the CSE under the symbol AMS. The Company has been operating in a single business segment focusing on mineral exploration in Canada. The Company is transitioning to a technology developer and provider initially targeting the Cannabis sector and is waiting for approval of their change in business by the CSE.

2. GOING CONCERN

These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

Several adverse conditions may cast significant doubt on the validity of this assumption. For the year ended April 30, 2020 the Company incurred a net loss of $435,360 (2019 - $990,277), and as at April 30, 2020, has an accumulated deficit of $4,069,102 (2019 - $3,754,370). At April 30, 2020, the Company has a working capital deficiency of $516,119 (2019 - $109,115). The Company has limited resources, no sources of operating cash flows and no assurances that sufficient funding will be available to continue operations for an extended period of time. The Company is in the development stage, and accordingly, has not yet commenced revenue-producing operations.

The application of the going concern concept is dependent upon the Company’s ability to satisfy its liabilities as they become due and to obtain the necessary financing to complete the development of its technologies and the attainment of profitable operations. Management is actively engaged in seeking to raise the necessary capital to meet its funding requirements. There can be no assurance that management’s plan will be successful. If the going concern assumption were not appropriate for these financial statements then adjustments may be necessary in the carrying values of assets and liabilities, the reported expenses and the statement of financial position classifications used. Such adjustments could be material.

On March 11, 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, was declared by the World Health Organization as a global pandemic. This has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing, have caused material disruption to business globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.

3. BASIS OF PRESENTATION

Approval of the financial statements

The financial statements of the Company for the year ended April 30, 2020 were reviewed by the Audit Committee and approved and authorized for issue on October 16, 2020 by the Board of Directors of the Company.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

3. BASIS OF PRESENTATION (Continued)

Statement of compliance

The 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”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

Effective May 1, 2019, the Company adopted IFRS 16 Leases (“IFRS 16”). The adoption of this standard did not have a material measurement or disclosure impact on the Company’s financial statements.

Basis of preparation

The financial statements are presented in Canadian dollars, which is also the Company’s functional currency. The financial statements of the Company have been prepared on a historical cost basis, except for certain financial assets and financial liabilities measured at fair value.

4. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting judgments, estimates and assumptions

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses.

Significant accounting judgments

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements are discussed below:

The carrying value of the exploration and evaluation assets and the recoverability of the carrying value

The application of the Company’s accounting policy for exploration and evaluation expenditures requires judgment in determining whether it is likely that future economic benefits will flow to the Company.

If, after exploration and evaluation expenditures are capitalized, information becomes available suggesting that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount the Company carries out an impairment test at the cash-generating unit (“CGU”) or group of CGUs level in the year the new information becomes available. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit, including geologic and metallurgic information, economics assessment/studies, accessible facilities, existing permits and ability to continue development.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Significant accounting judgments (continued)

The carrying value of the deposit for the Green Rush asset and the recoverability of the carrying value

The application of the Company’s accounting policy for the deposit for the Green Rush asset requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions may change if new information becomes available. If, after payments are capitalized, information becomes available suggesting that the recovery of the payments are unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available. Management review estimates at least annually and are updated if expectations change as a result of technical obsolescence or legal and other limits to use.

Going concern

The assessment of the Company’s ability to continue as a going concern and to raise sufficient funds to pay for its ongoing operating expenditures, meet its liabilities for the ensuing year, and to fund planned and contractual technology development programs, involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances .

Significant accounting estimates and assumptions

Information about estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are provided below. Actual results may be substantially different.

Deferred income tax

The Company recognizes a deferred tax asset to extent recovery is probable. Assessing the recoverability of deferred tax assets requires management to make significant estimates of future taxable profit against which deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized. In addition, changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods.

Share-based payments

Estimating the fair value of granted stock options requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected rate of forfeitures, volatility and dividend yield, and making assumptions about them.

Equipment

Recognition and measurement

On initial recognition, equipment is valued at cost, being the purchase price and directly attributable costs of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing items.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Equipment (continued)

Equipment is subsequently measured at cost less accumulated amortization, less any accumulated impairment losses.

Amortization

The amortization rates applicable to each category of equipment are as follows:

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Class of equipment Amortization rate
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Computer equipment 55% declining-balance Furniture and fixtures 20% declining-balance

One-half the normal amortization is taken in the year of acquisition.

Exploration and evaluation assets

Exploration and evaluation expenditures

Exploration and evaluation activities involve the search for minerals, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation costs incurred prior to obtaining licenses are expensed in the period in which they are incurred. Once a license to explore an area has been secured, expenditures on exploration and evaluation activities are capitalized, and classified. Such expenditures include, but are not limited to, exploration license expenditures, leasehold property acquisition costs, evaluation costs, including drilling costs directly attributable to a property, and directly attributable administrative costs. From time to time the Company may acquire or dispose of a mineral property pursuant to the terms of an option agreement. As the options are exercisable entirely at the discretion of the optionee, the amounts payable or receivable are not recorded. Option payments are recorded as property costs or recoveries when the payments are made or received.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets are tested for impairment and transferred to “mines under construction”. No amortization is taken during the exploration and evaluation phase.

Decommissioning liabilities

An obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation, development or ongoing production.

Decommissioning and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net present value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs are charged against operations through depreciation of the asset and unwinding of the discount on the provision.

Depreciation is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost of the related asset. The costs for the restoration of site damage, which arises during production, are provided at their net present values and charged against operations as extraction progresses.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Exploration and evaluation assets (continued)

Changes in the measurement of a liability, which arises during production, are charged against operating profit. The discount rate used to measure the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. To date, the Company does not have any decommissioning liabilities.

Impairment of non-financial assets

The carrying amount of the Company’s non-financial assets are reviewed at each reporting date to determine if there is any indication of impairment. 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 (“CGU”) to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

Where an impairment loss subsequently reverses for its long-lived assets, the carrying amount of the asset or CGU 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 CGU in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Financial instruments

The Company’s financial instruments are accounted for as follows:

	IAS 39	IFRS 9
Financial Asset
Cash	Fair value through profit and	FVTPL
	loss (“FVTPL”)
Financial Liabilities
Accounts payable and	Amortized cost	Amortized cost
accrued liabilities
Loans payable	Amortized cost	Amortized cost
Shareholder loans	Amortized cost	Amortized cost

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (continued)

Financial assets

• (i) Recognition and measurement of financial assets

The Company recognizes a financial asset when it becomes a party to the contractual provisions of the instrument.

• (ii) Classification of financial assets

The Company classifies financial assets at initial recognition as financial assets: measured at amortized cost, measured at fair value through other comprehensive income or measured at fair value through profit or loss.

Financial assets measured at amortized cost

A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost:

• The Company’s business model for the such financial assets, is to hold the assets in order to collect contractual cash flows.

• The contractual terms of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the amount outstanding.

A financial asset measured at amortized cost is initially recognized at fair value plus transaction costs directly attributable to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined using the effective interest method, net of impairment loss, if necessary.

Financial assets measured at fair value through other comprehensive income (“FVTOCI”)

Elected investments in equity instruments measured at fair value through other comprehensive income is recognized initially at fair value plus transaction costs directly attributable to the asset. After initial recognition, the asset is measured at fair value with changes in fair value included as “financial asset at fair value through other comprehensive income” in other comprehensive income.

Financial assets measured at fair value through profit or loss (“FVTPL”)

A financial asset measured at fair value through profit or loss is recognized initially at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial asset is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises.

• (iii) Derecognition of financial assets

The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and losses on derecognition are generally recognized in the consolidated statement of loss and comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive loss.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial instruments (continued)

Financial Liabilities

Financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. A financial liability is derecognized when it is extinguished, discharged, cancelled or when it expires. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities subsequently measured at amortized cost. All interest-related charges are reported in profit or loss within interest expense, if applicable. The Company’s financial liabilities include accounts payable and accrued liabilities and classified as financial liabilities subsequently measured at amortized cost.

Income taxes

Income tax expense consisting of current and deferred tax expense is recognized in the statements of loss and comprehensive loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates substantively enacted at year-end, adjusted for amendments to tax payable with regard to previous years.

Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. 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.

Share-based payments

The Company grants stock options to acquire common shares of the Company to directors, officers, employees and consultants. The fair value of share-based payments to employees is measured at grant date using the Black-Scholes option pricing model, and is recognized over the vesting period. Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services are received based on the fair value of the goods or services received. If it is determined that the fair value of goods and services received cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments issued using the Black-Scholes option pricing model.

Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest, except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-based payments (continued)

For both employees and non-employees, the fair value of share-based payments is recognized as either an expense or capitalized with a corresponding increase in share-based payment reserves. The amount recognized as expense is adjusted to reflect the number of share options that actually vest. Consideration received on the exercise of stock options is recorded in share capital and the related share-based payment reserves is transferred to share capital.

Loss per share

Basic loss per share is calculated by dividing the net loss for the year by the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding used in the calculation of diluted loss per share assumes that the deemed proceeds received from the exercise of share options, share purchase warrants and their equivalents would be used to repurchase common shares of the Company at the average market price during the year.

Existing share options and share purchase warrants have not been included in the computation of diluted loss per share as to do so would be anti-dilutive. Accordingly, basic and diluted loss per share is the same.

Shares held in escrow, other than where their release is subject to the passage of time, are not included in the calculation of the weighted average number of common shares outstanding.

Share capital

Proceeds from the exercise of stock options and warrants are recorded as share capital in the amount for which the option or warrant enabled the holder to purchase a share in the Company. Share capital issued for non-monetary consideration is valued at the closing market price at the date of issuance. The proceeds from the issuance of units are allocated between common shares and warrants based on the residual value method. Under this method, the proceeds are allocated first to share capital based on the fair value of the common shares at the time the units are priced and any residual value is allocated to the warrants reserve. Consideration received for the exercise of options or warrants is recorded in share capital and the related residual value is transferred to share capital. For those options and warrants that expire, the recorded value is transferred to deficit.

New accounting standards recently adopted

IFRS 16 Leases

This new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. The new standard introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease.

15

ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

New accounting standards recently adopted (continued)

The main features of the new standard are as follows:

• An entity identifies as a lease a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

• A lessee recognizes an asset representing the right to use the leased asset, and a liability for its obligation to make lease payments. Exceptions are permitted for short-term leases and leases of low-value assets.

• A lease asset is initially measured at cost, and is then depreciated similarly to property, plant and equipment. A lease liability is initially measured at the present value of the unpaid lease payments.

• A lessee presents interest expense on a lease liability separately from depreciation of a lease asset in the statement of profit or loss and other comprehensive income .

• A lessor continues to classify its leases as operating leases or finance leases, and to account for them accordingly.

• A lessor provides enhanced disclosures about its risk exposure, particularly exposure to residual-value risk.

The new standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

Applicable to the Company’s annual period beginning May 1, 2019. The adoption of this standard did not have a material measurement or disclosure impact on the Company’s financial statements.

5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial instruments are agreements between two parties that result in promises to pay or receive cash or equity instruments. The carrying values of these instruments approximate their fair values due to their short term to maturity.

Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

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

The Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash and accounts payable and accrued liabilities. Their carrying values approximate the fair values due to short-term maturity of these instruments.

The Company has exposure to the following risks from its use of financial instruments:

• Credit risk;

• Liquidity risk; and

• Market risk.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company manages credit risk, in respect of cash, by placing cash at major Canadian financial institutions. The Company has minimal credit risk.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquid funds to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The contractual financial liabilities of the Company as of April 30, 2020 equal $566,339 (2019 - $141,979). All of the liabilities presented as accounts payable are due within 90 days of April 30, 2020. The Company is seeking additional sources of capital through financing.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on capital.

As at April 30, 2020, the Company is not exposed to significant market risk.

6. EQUIPMENT

		Computer		Furniture and
		Equipment		Fixtures		Total
Cost
Balance,April 30,2018,2019 and 2020	$	5,453	$	2,032	$	7,485
Amortization
Balance, April 30, 2018	$	4,526	$	1,605	$	6,131
Amortization		509		86		595
Balance, April 30, 2019		5,035		1,691		6,726
Amortization		230		64		294
Balance,April 30,2020	$	5,265	$	1,755	$	7,020
Net Book Value
April 30,2019	$	418	$	341	$	759
April 30,2020	$	188	$	277	$	465

17

ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

7. EXPLORATION AND EVALUATION ASSETS

		Aubaine		Windfall		Total
Balance, April 30, 2018	$	341,000	$	50,500	$	391,500
Impairment		(341,000)		(50,500)		(391,500)
Balance,April 30,2019 and 2020	$	-	$	-	$	-

Windfall Lake Property

On March 2, 2017, the Company entered into an option agreement to acquire a 100% interest in the Windfall Lake Property (“Windfall”) located in Quebec. In consideration, the Company paid $2,500 in cash and issued 800,000 common shares of the Company (issued and valued at $48,000).

During the year ended April 30, 2019, the Company did not meet the financial commitments and, the Company has terminated the option agreement on the property.

Management recorded an impairment loss of $50,500 in accordance with level 3 of the fair value hierarchy for the year ended April 30, 2019.

Aubaine Property

On March 3, 2017, as amended May 17, 2017, the Company entered into an option agreement to acquire a 100% interest in the Aubaine Property (“Aubaine”) located in Quebec. In consideration, the Company must make payments and issue common shares as follows:

• $10,000 in cash (paid) and 2,000,000 common shares (issued and valued at $160,000) of the Company upon signing of the agreement;

• $15,000 in cash on or before May 27, 2017 (paid);

• $15,000 on or before June 27, 2017 (paid);

• $25,000 in cash on or before March 3, 2018 (paid);

• $25,000 in cash on or before September 3, 2018; and

• $100,000 in cash on or before March 3, 2019.

The Company must also incur $500,000 in exploration expenditures on or before March 3, 2020. The vendor will retain a 3% NSR on Aubaine, of which the Company can buy back 1% on or before March 3, 2023 for $1,000,000. In March 2017, the Company also issued 200,000 finders shares valued at $16,000.

During the year ended April 30, 2019, the Company didn’t meet the financial commitments and, the Company has terminated the option agreement on the property.

Management recorded an impairment loss of $341,000 in accordance with level 3 of the fair value hierarchy for the year ended April 30, 2019.

Environmental

The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

7. EXPLORATION AND EVALUATION ASSETS (Continued)

Environmental (continued)

Environmental legislation is becoming increasingly stringent and the expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions.

If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated.

8. DEPOSIT

On March 19, 2019, the Company entered into an asset purchase agreement (“Agreement”) with Green Rush Consulting LLC (“Green Rush”) whereby Green Rush has granted the Company the right to purchase 100% of Green Rush’s right, title, and interest in and certain intellectual property rights relating to Green Rush’s Oddysee Software Platform, a software-as-a-service platform focused on the automation for city and state cannabis license applications.

In accordance with the Agreement, the Company is required to make a series of payments totaling US$3,750,000 (“Purchase Price”) and issue 20,000,000 common shares of the Company (“Consideration Shares”) to Green Rush.

As at April 30, 2020, the Company has paid $599,695 (US$453,895) (2019 - $599,695). This amount has been recorded as a prepaid acquisition cost. The reminder of the purchase price of US$3,296,105 will be issued as a secured promissory note.

The Company shall pay the reminder of the Purchase price, issue the common shares and promissory note once the closing date is agreed upon between the Company and Green Rush. Currently, management and Green Rush are in discussions regarding when the Agreement will close. The Agreement is also pending CSE approval. There is no guarantee that the deposit will be refundable if the asset purchase agreement does not close.

9. SHARE CAPITAL

Authorized

Unlimited number of common shares without par value.

Issued

For the year ended April 30, 2020:

During the year ended April 30, 2020, the Company received $6,062 from the exercise of 107,500 warrants at prices between of $0.055-$0.075 per share. These shares have not yet been issued and are included as subscriptions.

The Company received $22,000 during the year ended April 30, 2020 in share subscriptions towards a private placement which has not closed as at April 30, 2020. The private placement consists of units at a price of $0.25 per unit. Each unit is to be comprised of 4 common shares and 4 transferable common share purchase warrants. Each warrant will be exercisable for on additional common share at a price of $0.15 for a period of two year from the date of closing.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

9. SHARE CAPITAL (Continued)

Issued (continued)

For the year ended April 30, 2019:

On November 13, 2018 the Company settled indebtedness of $9,999 to a third party by the issuance of 181,800 common shares at a fair value of $0.055 per common share.

On December 14, 2018, the Company closed the first tranche of a non-brokered private placement and raised $689,000 through the issuance of 13,780,000 units at a price of $0.05 per unit. Each unit consists of one common share and one share purchase warrant. Each whole warrant is exercisable by the holder to acquire an additional common share of the Company for a period of one year from issuance at an exercise price of $0.075 per share. The Company paid finders fees of $7,150 and issued 143,000 agent warrants valued at $2,326 with the same terms as the warrants in the private placement.

On February 2, 2019 the Company settled indebtedness of $80,000 to a Company controlled by a director through the issuance of 1,600,000 common shares at a fair value of $0.05 per common share.

On March 14, 2019, the Company closed the second tranche of a non-brokered private placement and raised $216,900 through the issuance of 4,338,000 units at a price of $0.05 per unit. Each unit consists of one common share and one share purchase warrant. Each whole warrant is exercisable by the holder to acquire an additional common share of the Company for a period of one year from issuance at an exercise price of $0.075 per share.

During the year ended April 30, 2019, 94,000 shares were issued for warrants exercised at a value of $7,050.

The Company received $70,000 during the year ended April 30, 2019 towards a private placement which has not closed as at April 30, 2020. The private placement consists of units at a price of $0.25 per unit. Each unit is to be comprised of 4 common shares and 4 transferable common share purchase warrants. Each warrant will be exercisable for on additional common share at a price of $0.15 for a period of two year from the date of closing.

Share options

The Company has adopted a share option plan pursuant to which the Board of Directors of the Company may, from time to time, in its discretion, and in accordance with the CSE requirements, grant to directors, officers, employees and consultants of the Company non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares at the time of grant and exercisable for a period of up to ten years from the date of grant. The number of common shares reserved for issuance to any individual director or officer will not exceed 5% of the issued and outstanding common shares and the number of common shares reserved for issuance to all consultants will not exceed 2% of the issued and outstanding common shares. Options may be exercised within 90 days following cessation of the optionee’s position with the Company, provided that if the cessation of office, directorship, employment or consulting arrangement was by reason of death, the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option.

20

ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

9. SHARE CAPITAL (Continued)

Share options (continued)

The changes in share options during the years ended April 30, 2020 and 2019 are summarized as follows:

		2020		2019
		Weighted		Weighted
	Number of	Average	Number of	Average
	Options	Exercise Price	Options	Exercise Price
Outstanding and exercisable,
beginning of year	2,520,000	$ 0.15	3,890,000	$ 0.15
Expired	(950,000)	0.06	-	-
Cancelled	(450,000)	0.22	(1,370,000)	0.16
Outstanding,end ofyear	1,120,000	$0.21	2,520,000	$0.15

The following table summarizes information about share options outstanding at April 30, 2020:

	Weighted Average
	Remaining Contractual		Options	Options
ExpiryDate	Lifein Years	ExercisePrice	Outstanding	Exercisable
January 5, 2021	0.68	$ 0.24	775,000	775,000
March 26, 2021	0.90	$ 0.13	345,000	345,000
	0.75	$0.21	1,120,000	1,120,000

During the year ended April 30, 2020, the Company granted Nil (2019 – Nil) stock options. The Company recognized share-based payments expense of $Nil (2019 - $Nil) for options granted and vested during the period. During the year ended April 30, 2020, the Company reclassified $111,513 (2019 - $123,408) from share-based payments reserve to deficit on the expiry or cancellation of the options.

Warrants

The changes in warrants during the years ended April 30, 2020 and 2019 are summarized as follows:

		2020		2019
		Weighted		Weighted
	Number of	Average	Number of	Average
	Warrants	Exercise Price	Warrants	Exercise Price
Outstanding, beginning of year	25,174,500	$ 0.075	8,662,500	$ 0.075
Issued	-	-	18,261,000	0.075
Exercised	(107,500)	0.056	(94,000)	0.075
Expired	(25,067,000)	0.070	(1,655,000)	0.100
Outstanding, end of year	-	$ -	25,174,500	$ 0.075

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

9. SHARE CAPITAL (Continued)

Warrants (continued)

On August 9, 2019, the Company repriced 6,751,000 warrants that issued on September 7, 2018 and expiring September 7, 2019 from an exercise price of $0.075 to an exercise price of $0.055. There were no changes to the values of the warrants arising from the repricing.

There are Nil warrants outstanding as at April 30, 2020 (2019 – 25,174,500). For the agent warrants issued as part of the non-brokered private placements, the Company applied the fair value method using the Black-Scholes option pricing model in accounting for its finders’ warrants granted with the following weighted average assumptions:

	Year Ended	Year Ended
	April30, 2020	April30, 2019
Expected life (years)	-	1.00
Risk-free interest rate	-	1.88%
Volatility	-	100%
Dividend yield	-	0.00%
Grant date fair value	-	$0.06

10. RELATED PARTY TRANSACTIONS

Key management personnel compensation for years ended April 30, 2020 and 2019 is as follows:

		2020		2019
Short-term compensation	$	241,500	$	284,356

Of the $241,500 recorded as short-term compensation for the year ended April 30, 2020 (2019 - $284,356), $7,500 (2019 - $8,000) was recorded as accounting and legal, $Nil (2019 - $91,500) was recorded as management fees and $234,000 (2019 - $184,856) was recorded as consulting fees.

On February 5, 2019, the Company issued 1,600,000 common shares as settlement of $80,000 in accounts payable with officers of the Company. The fair value of the common shares issued according to the trading price was $80,000.

At April 30, 2020, $218,125 (2019 - $29,381) of unpaid management and consulting fees was included in accounts payable and accrued liabilities.

At April 30, 2020, included in Shareholder loans is $5,962 (2019 - $Nil) was due to a related party.

11. LOAN PAYABLE

As at April 30, 2020, the Company had a total loan payable of $55,000 (2019 - $NIL) from one arms-length individual. The principal on the loan is $50,000 with interest of $5,000 that represents a fixed interest of 10% regardless of term. The loan unsecured and is repayable upon the Company receiving any monies from any source whatsoever.

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ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

12. INCOME TAXES

Income tax expense differs from the amount that would be computed by applying the Canadian statutory income tax rate of 27% (2019 - 27%) to income before income taxes.

A reconciliation of income taxes at statutory rates with reported taxes is as follows:

		2020		2019
Net loss for the year	$	(435,360)	$	(990,277)
Statutory income tax rate		27%		27%
Income tax benefit computed at statutory tax rate		(117,547)		(267,375)
Items not deductible for income tax purposes		81		-
Change in timing differences		-		2,481
Unrecognized benefit of deferred income tax assets		117,466		264,894
Income tax benefit	$	-	$	-

Significant unrecognized tax benefits and unused tax losses for which no deferred tax asset is recognized as of April 30 are as follows:

		2020		2019
Non-capital losses carried forward	$	3,016,564	$	2,532,144
Excess of tax value over carrying value of equipment		9,119		9,074
Excess of tax value over carrying value of exploration
and evaluation assets		465,302		681,304
Share issue costs		7,540		15,011
Unrecognized deductible temporarydifferences	$	3,498,525	$	3,237,533

The Company has non-capital losses of $3,017,000 available for carry-forward to reduce future years' income for income tax purposes. These losses expire as follows:

2031	$	9,000
2032		157,000
2033		376,000
2034		248,000
2035		311,000
2036		252,000
2037		253,000
2038		372,000
2039		601,000
2040		438,000
	$	3,017,000

23

ALCHEMIST MINING INC. Notes to the Financial Statements Years Ended April 30, 2020 and 2019 (Expressed in Canadian Dollars, unless otherwise stated)

13. SEGMENTED INFORMATION

The Company operates in a single reportable operating segment, development of technology, and all of its operations and assets are in Canada.

14. CAPITAL MANAGEMENT

The Company considers its capital to be comprised of shareholders’ equity.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. Although the Company has been successful at raising funds in the past through the issuance of share capital, it is uncertain whether it will continue this method of financing due to the current difficult market conditions.

In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions.

Management reviews the capital structure on a regular basis to ensure that the above objectives are met. There have been no changes to the Company’s approach to capital management during the year ended April 30, 2020. The Company is not subject to external restrictions on its capital.

15. SUBSEQUENT EVENT

Subsequent to the year ended April 30, 2020:

• i) The Company was cease traded during fiscal 2020 and resumed trading on the CSE on August 7, 2020.

• ii) The Company was cease traded by the CSE on October 8, 2020 due to the late filing of its financial statements.

• iii) The Company received an unsecured loan from a third party of $11,000. The loan is payable on demand and bears interest at a fixed amount of $1,100.

• iv) On August 31, 2020, the Company entered into a Letter of Intent (“LOI”) where Alchemist would purchase and acquire essentially all of the assets (excluding cash and cash equivalents) of All Nations Cannabis Corporation, a BC corporation. The assets include but are not limited to its name, real estate land holdings, cultivation facility and business agreements. The purchase price will be $20,000,000 payable in the common shares of Alchemist at a fixed value of $0.045 per share.

There will be a concurrent private placement undertaken in the amount of C$3,000,000 at a price of $0.035 per share. On September 15, 2020, the first tranche of 14,285,715 common shares for gross proceeds of $500,000 was closed.

24