Nexe Innovations Inc.

WHATCOM CAPITAL CORP.

FILING STATEMENT

QUALIFYING TRANSACTION INVOLVING THE ACQUISITION BY WHATCOM CAPITAL CORP. OF NEXE INNOVATIONS INC.

Dated as at November 30, 2020

Neither the TSX Venture Exchange Inc. (the “ Exchange ”) nor any securities regulatory authority has in any way passed upon the merits of the Qualifying Transaction described in this filing statement.

GLOSSARY OF TERMS .................................................................................................................................... 4 CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS ...................................... 10 MARKET AND INDUSTRY DATA ................................................................................................................ 11 SUMMARY OF FILING STATEMENT ......................................................................................................... 12 GENERAL ....................................................................................................................................................... 12 THE QUALIFYING TRANSACTION ........................................................................................................... 12 THE RESULTING ISSUER ............................................................................................................................ 13 INTERESTS OF INSIDERS, PROMOTERS OR CONTROL PERSONS ..................................................... 14 ARM’S LENGTH QUALIFYING TRANSACTION ..................................................................................... 15 AVAILABLE FUNDS AND PRINCIPAL PURPOSES ................................................................................. 15 SELECTED PRO FORMA FINANCIAL INFORMATION .......................................................................... 16 MARKET FOR SECURITIES ........................................................................................................................ 16 EXCHANGE APPROVAL ............................................................................................................................. 17 CONFLICTS OF INTERESTS........................................................................................................................ 17 SPONSORSHIP ............................................................................................................................................... 17 EXPERTS ........................................................................................................................................................ 17 SUMMARY OF RISK FACTORS .................................................................................................................. 17 PART I - RISK FACTORS ............................................................................................................................... 18 PART II - INFORMATION CONCERNING THE ISSUER......................................................................... 30 CORPORATE STRUCTURE ......................................................................................................................... 30 Name and Incorporation .............................................................................................................................. 30 GENERAL DEVELOPMENT OF THE BUSINESS ...................................................................................... 30 History ......................................................................................................................................................... 30 PROPOSED FINANCINGS ............................................................................................................................ 30 SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................................................................ 31 Management’s Discussion and Analysis...................................................................................................... 32 DESCRIPTION OF THE SECURITIES ......................................................................................................... 32 Issuer Shares ................................................................................................................................................ 32 STOCK OPTION PLAN ................................................................................................................................. 33 PRIOR SALES ................................................................................................................................................ 33 Issuer Shares ................................................................................................................................................ 33 Incentive Stock Options ............................................................................................................................... 34 IPO Agent’s Warrants .................................................................................................................................. 34 STOCK EXCHANGE PRICE ......................................................................................................................... 34 ARM’S LENGTH TRANSACTION ............................................................................................................... 34 LEGAL PROCEEDINGS ................................................................................................................................ 34 AUDITOR, TRANSFER AGENT AND REGISTRAR .................................................................................. 34 Auditor ......................................................................................................................................................... 34 Transfer Agent and Registrar ....................................................................................................................... 35 MATERIAL CONTRACTS ............................................................................................................................ 35 PART III - INFORMATION CONCERNING NEXE .................................................................................... 36 CORPORATE STRUCTURE ......................................................................................................................... 36 Name and Incorporation .............................................................................................................................. 36 INTERCORPORATE RELATIONSHIPS ...................................................................................................... 36 GENERAL DEVELOPMENT OF THE BUSINESS ...................................................................................... 36 Overview ..................................................................................................................................................... 36 NARRATIVE DESCRIPTION OF THE BUSINESS ..................................................................................... 37 Principal Business ........................................................................................................................................ 37 Principal Products or Services ..................................................................................................................... 39

Operations .................................................................................................................................................... 40 Market .......................................................................................................................................................... 41 Marketing Plans and Strategies .................................................................................................................... 42 Competitive Conditions ............................................................................................................................... 43 Future Developments ................................................................................................................................... 43 Proprietary Protection .................................................................................................................................. 44 Lending ........................................................................................................................................................ 44 SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................................................................ 44 Information from Incorporation ................................................................................................................... 44 Management’s Discussion and Analysis...................................................................................................... 45 DESCRIPTION OF THE SECURITIES ......................................................................................................... 45 NEXE Share Capital .................................................................................................................................... 45 PRIOR SALES ................................................................................................................................................ 47 EXECUTIVE COMPENSATION ................................................................................................................... 48 Compensation Discussion and Analysis ...................................................................................................... 48 Summary Compensation Table .................................................................................................................... 50 Management Contracts ................................................................................................................................ 50 Termination of Employment and Change of Control Benefits .................................................................... 51 Director Compensation ................................................................................................................................ 51 Securities Authorized for Issuance under Equity Compensation Plans ........................................................... 51 NON-ARM’S LENGTH PARTY TRANSACTIONS ..................................................................................... 52 LEGAL PROCEEDINGS ................................................................................................................................ 52 MATERIAL CONTRACTS ............................................................................................................................ 52 PART IV- INFORMATION CONCERNING THE RESULTING ISSUER ................................................ 53 CORPORATE STRUCTURE ......................................................................................................................... 53 NARRATIVE DESCRIPTION OF THE BUSINESS ..................................................................................... 54 Stated Business Objectives .......................................................................................................................... 54 Milestones .................................................................................................................................................... 54 DESCRIPTION OF SECURITIES .................................................................................................................. 55 Resulting Issuer Shares ................................................................................................................................ 55 PRO FORMA CONSOLIDATED CAPITALIZATION ................................................................................. 55 FULLY-DILUTED SHARE CAPITAL .......................................................................................................... 56 AVAILABLE FUNDS AND PRINCIPAL PURPOSES ................................................................................. 57 Available Funds ........................................................................................................................................... 57 Dividends ..................................................................................................................................................... 58 Principal Purposes of Funds ........................................................................................................................ 58 PRINCIPAL SECURITYHOLDERS .............................................................................................................. 59 DIRECTORS AND EXECUTIVE OFFICERS ............................................................................................... 59 PROMOTERS ................................................................................................................................................. 62 CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES ................................................................ 62 PENALTIES OR SANCTIONS ...................................................................................................................... 63 PERSONAL BANKRUPTCIES ...................................................................................................................... 63 CONFLICTS OF INTEREST .......................................................................................................................... 63 OTHER REPORTING ISSUER EXPERIENCE ............................................................................................. 63 EXECUTIVE COMPENSATION ................................................................................................................... 64 Compensation Discussion and Analysis ...................................................................................................... 64 Option-Based Awards .................................................................................................................................. 64 Pension Plan Benefits .................................................................................................................................. 64 Termination of Employment, Change in Responsibilities and Employment Contracts ............................... 64 DIRECTORS COMPENSATION ................................................................................................................... 65 Summary Compensation for Directors ........................................................................................................ 65

Pension Plan Benefits for Directors ............................................................................................................. 65 INDEBTEDNESS OF DIRECTORS AND OFFICERS ................................................................................. 65 INVESTOR RELATIONS ARRANGEMENTS ............................................................................................. 65 OPTIONS TO PURCHASE SECURITIES ..................................................................................................... 65 Stock Option Plan ........................................................................................................................................ 65

ESCROWED SECURITIES ............................................................................................................................ 67 CPC Escrow Shares ..................................................................................................................................... 67 Value Escrow Shares ................................................................................................................................... 68 AUDITOR, TRANSFER AGENT AND REGISTRAR .................................................................................. 69 Auditor ......................................................................................................................................................... 69 Transfer Agent and Registrar ....................................................................................................................... 69 GENERAL MATTERS ..................................................................................................................................... 70 Agent Relationship .......................................................................................................................................... 70 EXPERTS ........................................................................................................................................................ 70 Opinions ....................................................................................................................................................... 70 Interests of Experts ...................................................................................................................................... 70 Expertised Reports ....................................................................................................................................... 70 OTHER MATERIAL FACTS ......................................................................................................................... 70 BOARD APPROVAL ..................................................................................................................................... 70 CERTIFICATE OF THE ISSUER ................................................................................................................... 71 CERTIFICATE OF NEXE ............................................................................................................................... 72 ACKNOWLEDGEMENT – PERSONAL INFORMATION ......................................................................... 73 SCHEDULE “A” ................................................................................................................................................ 74 SCHEDULE “B” ................................................................................................................................................ 75 SCHEDULE “C” ................................................................................................................................................ 76 SCHEDULE “D” ................................................................................................................................................ 77 SCHEDULE “E” ................................................................................................................................................ 78

LIST OF SCHEDULES

SCHEDULE A Unaudited interim financial statements of the Issuer as at and for the nine-month period ended July 31, 2020 and audited financial statements of the Issuer for the period from incorporation on September 19, 2019 to October 31, 2019

SCHEDULE B Management’s Discussion and Analysis of the Issuer for the nine months ended July 31, 2020 and for the period from incorporation on September 19, 2019 to October 31, 2019

SCHEDULE C Unaudited interim financial statements of NEXE for the period ended August 31, 2020 and audited financial statements of NEXE for the years ended May 31, 2018, 2019 and 2020

SCHEDULE D Management’s Discussion and Analysis of NEXE for the interim period ended August 31, 2020 and financial years ended May 31, 2018, 2019 and 2020

SCHEDULE E Pro forma consolidated statement of financial position of the Resulting Issuer

GLOSSARY OF TERMS

The following is a glossary of certain defined terms used throughout this Filing Statement. This is not an exhaustive list of defined terms used in this Filing Statement and additional terms are defined throughout. Terms and abbreviations used in the financial statements and the Management’s Discussion and Analysis of the Issuer are defined separately and the terms and abbreviations defined below are not used therein, except where otherwise indicated. Words importing the singular, where the context requires, include the plural and vice versa, and words importing any gender include all genders.

“ $ ” means Canadian dollars.

“ Affiliate ” shall have the meaning ascribed to such term in National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators.

“ Agent ” means Canaccord as Lead Agent in connection with the Concurrent Private Placement pursuant to the terms of the Private Placement Agency Agreement.

“ Amalco ” means the corporation resulting from the Amalgamation.

“ Amalgamation ” means an amalgamation of Subco and NEXE pursuant to the BCA, on the terms and subject to the conditions set out in the Definitive Agreement, subject to any amendments or variations thereto made in accordance with the provisions of the Definitive Agreement.

“ Associate ” shall have the meaning ascribed to such term in the Securities Act (British Columbia).

“ Auditor ” means the Issuer’s auditor, Shim & Associates LLP, Chartered Professional Accountants.

“ BCA ” means the Business Corporations Act (British Columbia).

“ Board ” means the board of directors of the Issuer and the board of directors of the Resulting Issuer, as applicable.

“ Broker’s Commission ” means the cash commission of up to 8% of the total proceeds of the Concurrent Private Placement payable when the Escrow Release Conditions are satisfied.

“ Business Day ” means a day other than a Saturday, Sunday or a day on which chartered banks in Vancouver, British Columbia are closed.

“ Canaccord ” means Canaccord Genuity Corp., at 2200 – 609 Granville Street, Vancouver, B.C., V7Y 1H2.

“ CEO ” means Chief Executive Officer.

“ CFO ” means Chief Financial Officer.

“ COO ” means Chief Operating Officer.

“ Closing ” means the closing of the Transaction.

“ Completion of the Transaction ” means the date the Final Exchange Bulletin is issued by the Exchange in respect of the Transaction.

“ Consolidation ” means the consolidation of the Issuer Shares on the basis of one new Issuer Share for each two and one-half (2.5) existing Issuer Shares.

“ Concurrent Private Placement ” means the concurrent brokered private placement financing of 11,437,500 Subscription Receipts at a price of $0.80 per Subscription Receipt, for gross proceeds of $9,150,000.

“ Control Person ” means any person or company that holds or is one of a combination of persons or companies that holds a sufficient number of any of the securities of an issuer so as to affect materially the control of that issuer, or that holds more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holder of those securities does not materially affect the control of the Issuer.

“ CPC ” means a corporation:

(a) that has been incorporated or organized in a jurisdiction in Canada;
(b) that has filed and obtained a receipt for a preliminary CPC prospectus from one or more of the securities regulatory authorities in compliance with the CPC Policy; and
(c) in regard to which the completion of the Qualifying Transaction has not yet occurred.

“ CPC Escrow Agreement ” means the Exchange Form 2F CPC Escrow Agreement dated November 13, 2019, as amended, among the Issuer, the Transfer Agent and certain Shareholders of the Issuer, pursuant to which the CPC Escrow Shares are currently held in escrow.

“ CPC Escrow Shares ” means the Issuer Shares held in escrow pursuant to the CPC Escrow Agreement.

“ CPC Policy ” means Exchange Policy 2.4 - Capital Pool Companies in the Exchange Corporate Finance Manual.

“ Definitive Agreement ” means the amalgamation agreement dated August 11, 2020, as amended October 23, 2020, among the Issuer, Subco and NEXE, which is available on the Issuer’s SEDAR profile at www.sedar.com.

“ Escrow Agent ” means TSX Trust Company.

“ Escrow Release Conditions ” means collectively, the satisfaction of:

(a) all conditions precedent to the completion of the Transaction, other than the release of the escrowed funds to the Resulting Issuer pursuant to the Subscription Receipt Agreement shall have been satisfied to the satisfaction of, or waived by, the Agent including, without limitation: (a) any necessary government and regulatory approvals; (b) any required shareholder approvals of each of NEXE and the Issuer; (c) the conditional approval of the Exchange of the Transaction and the listing of the Resulting Issuer Shares to be issued to the subscribers of the Subscription Receipts upon completion of the Transaction and any Resulting Issuer Warrant Shares issued upon exercise of the Resulting Issuer Warrants;
(b) the Agent having received an officers’ certificate from each of NEXE’s and the Issuer’s officers that each party has irrevocably instructed its counsel that upon release of the Escrowed Funds to NEXE, to issue the securities underlying the Subscription Receipts and to complete the Transaction and issue the securities of the Resulting Issuer; and
(c) an irrevocable joint notice from NEXE and the Issuer, and acknowledged by the Agent, is delivered to the Escrow Agent stating that all conditions precedent to the completion of the Transaction have been satisfied or waived, other than the release of the Escrowed Funds to NEXE pursuant to the Subscription Receipt Agreement.

“ Escrow Release Deadline ” means 5:00 p.m. (Vancouver time) on December 15, 2020, or such later date as the Issuer, NEXE, and the Agent of the Concurrent Private Placement may agree in writing.

“ Escrowed Funds ” means the gross proceeds of the Concurrent Private Placement less the Agent’s expenses of the Offering, to be deposited in escrow with the Escrow Agent on the closing date of the Concurrent Private Placement in accordance with the terms of the Subscription Receipt Agreement.

“ Exchange ” means the TSX Venture Exchange Inc.

“ Filing Statement ” means this filing statement dated as of November 30, 2020 together with all Schedules hereto.

“ Final Exchange Bulletin ” means the Exchange bulletin which is issued following closing of the Qualifying Transaction and the submission of all required documentation that evidences the final Exchange acceptance of the Qualifying Transaction.

“ Insider ” if used in relation to an Issuer, means:

(a) a director or senior officer of the Issuer;
(b) a director or senior officer of the company that is an Insider or subsidiary of the Issuer;
(c) a Person that beneficially owns or controls, directly or indirectly, voting shares carrying more than 10% of the voting rights attached to all outstanding voting shares of the Issuer; or
(d) the Issuer itself if it holds any of its own securities.

“ IPO ” means the initial public offering of the Issuer as completed on June 2, 2020.

“ IPO Agency Agreement ” means the amended and restated agency agreement dated April 29, 2020 amending and restating the agency agreement dated January 17, 2020 between the Issuer and the IPO Agent.

“ IPO Agent ” means Industrial Alliance Securities Inc. at its office in Toronto, Ontario, the agent which assisted the Issuer with respect to the sale of Issuer Shares in the IPO pursuant to the terms of the IPO Agency Agreement. “ IPO Agent’s Warrant ” means the non-transferable agent’s warrant entitling the IPO Agent to acquire 375,000 Issuer Shares at an exercise price of $0.10 per Issuer Share, expiring June 2, 2022.

“ Issuer ” means Whatcom Capital Corp., a reporting issuer in the Provinces of British Columbia, Alberta, Saskatchewan and Ontario, incorporated under the BCA.

“ Issuer Stock Option Plan ” means the stock option plan of the Issuer adopted November 12, 2019.

“ Issuer Shares ” means the Class A common shares in the capital of the Issuer.

“ Issuer Preferred Shares ” means the Class B preferred shares in the capital of the Issuer.

“ Issuer Options ” means the 400,000 outstanding stock options (pre-Consolidation) of the Issuer exercisable at $0.10 until June 2, 2025.

“ Lead Agent ” means Canaccord Genuity, as lead agent in connection with the Concurrent Private Placement, pursuant to the terms of the Private Placement Agency Agreement.

“ Member ” has the meaning given to it in Exchange Policy 1.1 - Interpretation .

“ Named Executive Officer ” or “ NEO ” means each of the following individuals:

(a) the CEO;
(b) the CFO;
(c) each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000, as determined in accordance with subsection 1.3(6) of Form 51-102F6 Statement of Executive Compensation , for that financial year; and
(d) each individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the company, nor acting in a similar capacity, at the end of that financial year.

“ NEXE ” means Nexe Innovations Inc., a private company incorporated under the BCA.

“ NEXE Class A Preferred Shares ” means the Class A preferred shares of NEXE of which there are currently three series issued and outstanding: the Series 1 Shares, Series A Shares and Series A Preferred Shares.

“ NEXE Financing Warrant ” means a warrant to purchase one additional Series A Preferred Share at a price of $1.10 per Series A Preferred Share for a period of two years from the date of issue.

“ NEXE Finder Warrants” means a warrant to purchase one additional Series A Preferred Share at a price of $0.65 per Series A Preferred Share for a period of two years from the date of issue.

“ NEXE Options ” means the outstanding options to acquire NEXE Shares.

“NEXE Performance Warrants” means a warrant to purchase one additional NEXE Share at a price of $0.35 per NEXE Share subject to certain performance vesting milestones.

“ NEXE Shares ” means the common shares in the capital of NEXE.

“ NEXE Units ” means the NEXE units to be sold by way of the NEXE Unit Financing, each NEXE Unit consisting of one NEXE Share and one NEXE Unit Warrant.

“NEXE Unit Financing” means a non-brokered private placement of NEXE Units at a price of $0.80 per NEXE Unit for gross proceeds of up to $4,500,000. Each NEXE Unit will consist of one NEXE Share and one-half of one share purchase warrant, with each whole share purchase warrant (“ NEXE Unit Financing Warrant ”) entitling the holder to purchase one additional NEXE Share at a price of $1.00 per NEXE Share for a period of twelve months from the date of issue. “NEXE Warrants” means NEXE Financing Warrants, NEXE Unit Financing Warrants, NEXE Finder Warrants, NEXE Performance Warrants currently issued and outstanding.

“ Non Arm’s Length Party ” means in relation to a company, a promoter, officer, director, other Insider or Control Person of that company (including the Issuer) and any Associates or Affiliates of any of such Persons. In relation to an individual, means any Associate of the individual or any company of which the individual is a promoter, officer, director, Insider or Control Person.

“ Non Arm’s Length Qualifying Transaction ” means a proposed Qualifying Transaction where the same party or parties or their respective Associates or Affiliates are Control Persons in both the CPC and in relation to the Significant Assets which are to be the subject of the proposed Qualifying Transaction.

“ Person ” means a company or individual.

“ Private Placement Agency Agreement ” means the agency agreement dated September 30, 2020 among the Issuer, NEXE and the Agent in respect of the Concurrent Private Placement.

“ Qualifying Transaction ” means a transaction where a CPC acquires Significant Assets other than cash, by way of purchase, amalgamation, merger or arrangement with another company or by other means and which in this Filing Statement refers to the “Transaction” as defined below.

“ Resulting Issuer ” means the Issuer, that was formerly a CPC, that exists upon issuance of the Final Exchange Bulletin.

“ Resulting Issuer Shares ” means post-Consolidation Class A common shares in the capital of the Resulting Issuer.

“ Resulting Issuer Stock Option Plan ” means the fixed stock option plan of the Issuer to be adopted on closing of the Transaction. See “ Part IV – Information Concerning the Resulting Issuer – Stock Option Plan .”.

“ Resulting Issuer Warrants ” means the share purchase warrants in the capital of the Resulting Issuer which are convertible into Resulting Issuer Warrant Shares.

“ Resulting Issuer Warrant Shares ” means the Resulting Issuer Shares issuable upon exercise of the Resulting Issuer Warrants in according with their respective terms.

“ Shareholder ” means a holder of Issuer Shares, Resulting Issuer Shares, or NEXE as applicable.

“ Significant Assets ” means one or more assets or businesses which, when purchased, optioned or otherwise acquired by the CPC, together with any other concurrent transactions, would result in the CPC meeting the initial listing requirements of the Exchange.

“SQFL Certification” means Safe Food Quality Level 2 certified food manufacturing facility.

“ Stock Option ” means an option to acquire Issuer Shares or Resulting Issuer Shares, as applicable, pursuant to the Stock Option Plan.

“ Stock Option Plan ” means the incentive stock option plan of the Issuer or the Resulting Issuer, as applicable.

“ Subco ” means 1260350 B.C. Ltd., a wholly-owned subsidiary of the Issuer.

“ Subscription Receipt Agent ” means TSX Trust.

“ Subscription Receipt Agreement ” means the September 30, 2020 subscription receipt agreement entered into with the Subscription Receipt Agent on closing of the Concurrent Private Placement and which governs the Subscription Receipts.

“ Subscription Receipts ” means the subscription receipts issued by NEXE pursuant to the Concurrent Private Placement, with each such subscription receipt convertible, for no additional consideration, into a NEXE Share and one-half of one NEXE Warrant (a “ Financing Warrant ”), with each whole Financing Warrant exercisable into a NEXE Share at an exercise price of $1.00 for a period of one year following the date that the Escrow Release conditions are satisfied.

“ Transaction ” means the acquisition by the Issuer of all of the issued and outstanding securities of NEXE pursuant to the Definitive Agreement, which is intended to constitute the Issuer’s Qualifying Transaction in accordance with the CPC Policy.

“ Transfer Agent ” means the Issuer’s transfer agent and registrar, TSX Trust Company.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Filing Statement contains forward-looking statements. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Issuer, NEXE or the Resulting Issuer to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements in this Filing Statement include, but are not limited to, statements with respect to:

the anticipated closing and effective date of the Transaction;
the available funds of the Resulting Issuer upon completion of the Concurrent Private Placement and Completion of the Transaction, and the anticipated use of those funds by the Resulting Issuer;
the Resulting Issuer’s anticipated directors, officers and insiders;
any of the Resulting Issuer’s potential acquisitions;
any of the Resulting Issuer’s potential transactions;
the Resulting Issuer’s expectations about the timing of achieving milestones and the related costs;
expectations about the Resulting Issuer’s services and products;
the commercial development of the NEXE POD and other soluable format capsules;
the effectiveness of the NEXE’s products and ability to develop products for other single service coffee brewing systems;
the ability of NEXE to devise a marketing and pricing strategy for the NEXE POD;
NEXE achieving brand awareness with respect to the NEXE POD.

The forward-looking statements contained in this Filing Statement reflect the current views of the Issuer and NEXE and are based on certain assumptions, including assumptions regarding:

the ability of the Issuer and NEXE to satisfy all conditions precedent and obtain all regulatory approvals for the Transaction, including by the dates indicated;
that there will be no regulation or law that will prevent NEXE from operating its business;
the ability of NEXE to achieve its goals on time and on budget;
the anticipated costs to complete the Transaction; and
that NEXE (and therefore the Resulting Issuer) will be able to execute its business strategy successfully such that the future growth, results of operations, operating costs, performance and business prospects and opportunities of NEXE, and therefore the Resulting Issuer, will be as anticipated.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this Filing Statement. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the ability of the Issuer to obtain necessary financing; the ability to attract and retain key personnel; the ability to successful commercialize the NEXE POD for coffee; NEXE will enter into purchase orders to sell the NEXE POD; the ability of NEXE to carry out large scale production of the NEXE POD and such production does not affect the quality of the product; ability to adequately protect proprietary information and technology from competitors; the satisfaction of the conditions under the Definitive Agreement; satisfaction of the requirements of the Exchange with respect to the Transaction; the economy generally; competition; and anticipated and unanticipated costs. Such statements could also be materially affected by regulatory changes, competition, stock market volatility and the ability to access sufficient capital from internal or external sources.

Completion of the Transaction and Exchange approval; closing of the Concurrent Private Placement; development and technology uncertainty; additional financing requirements and access to capital; no assurance of success; government regulations; rapid technological change; competition; lack of demand; reliance on key personnel; risks associated with acquisitions; security threats; equipment failures; volatility of share price, absence of dividends and fluctuation of operating results; no assurance of active trading market; conflict of interest; limited operating history; dilution to shareholders; value of securities; protection of intellectual property rights; litigation; use of proceeds; reporting issuer status; and global economic and financial deterioration.

Actual results, performance or achievement could differ materially from those expressed herein. While the Issuer and NEXE anticipate that subsequent events and developments may cause its views to change, the Issuer specifically disclaims any obligation to update these forward-looking statements, except as otherwise required by applicable securities laws. These forward-looking statements should not be relied upon as representing the Issuer’s views as of any date subsequent to the date of this Filing Statement. Although the Issuer and NEXE have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Recent Developments

In December 2019, a novel strain of coronavirus, which causes COVID-19, surfaced in Wuhan, China and has reached multiple other regions and countries, including Surrey, British Columbia, Canada, where NEXE’s primary office and facility are located. The coronavirus pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. The extent to which the coronavirus impacts the Resulting Issuer’s market for its products and its operations or those of its third-party partners, including manufacturing operations and other elements of the business, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. These measures have recently been alleviated in part, but NEXE may be required to implement them again and other measures depending on the circumstances moving forward. The Resulting Issuer cannot presently predict the scope and severity of the planned and potential shutdowns or disruptions of businesses and government and regulatory agencies, such as the British Columbia Securities Commission and the Exchange, among others.

The factors identified above are not intended to represent a complete list of the factors that could affect the Issuer, NEXE, or the Resulting Issuer. Additional factors are noted in this Filing Statement under “Part I - Risk Factors”.

MARKET AND INDUSTRY DATA

The market and industry data contained in this Filing Statement are based upon information from independent industry and other publications and the management of NEXE’s knowledge of, and experience in, the industry in which NEXE operates. No source of market and industry data has provided any form of consultation, advice or counsel regarding any aspect of, or is in any way whatsoever associated with, the Transaction. Market and industry data are subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data at any particular point in time, the voluntary nature of the data gathering process or other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy and completeness of this data are not guaranteed. Neither the Issuer nor NEXE has independently verified any of the data from third party sources referred to in this Filing Statement or ascertained the underlying assumptions relied upon by such sources.

SUMMARY OF FILING STATEMENT

The following is a summary of information relating to the Issuer, NEXE and the Resulting Issuer (assuming Completion of the Transaction) and should be read together with the more detailed information and financial data and statements contained elsewhere in this Filing Statement.

GENERAL

The Issuer was incorporated pursuant to the provisions of the BCA on September 19, 2019 and is a CPC pursuant to the Exchange CPC Policy. The Issuer is a reporting issuer in the provinces of British Columbia, Alberta, Saskatchewan and Ontario. The full corporate name of the Issuer is “Whatcom Capital Corp.”. The Issuer Shares are listed for trading on Tier 2 of the Exchange under the trading symbol “WHAT.P”. The Issuer has not carried on any business or operations other than identifying and evaluating business opportunities for the purposes of completing a Qualifying Transaction.

NEXE is a private British Columbia-based company that is currently developing compostable (plant-based) single-serve coffee pods. Following the Completion of the Transaction, the Resulting Issuer will continue the business of NEXE. Incorporated on April 27, 2015, NEXE purchased its facility in Surrey, British Columbia in 2016. Since then, NEXE has gone on to purchase a variety of equipment to roast, produce and package coffee into the Company’s proprietary and fully compostable capsules, known as “NEXE PODs”. Additionally, NEXE has also purchased three-dimensional printers, which have been beneficial to the Company developing hundreds of iterations of the Keurig K-Cup, Nespresso, and soluble capsules. This in-house testing process contributes toward NEXE developing the NEXE POD for commercialization. NEXE is also developing Nespresso-sized pods as well as assessing other fully compostable packaging opportunities. The Resulting Issuer will continue to commercialize the NEXE POD and soluble format capsules and intends to develop the NEXE brand as the standard in fully compostable packaging. Ultimately, NEXE aspires to be a leading partner to major Consumer Packaging Companies (“ CPG ”) to provide compostable solutions for a variety of beverages, including coffee, tea and others.

NEXE believes that the NEXE POD can eradicate the waste created by single-serve pods. NEXE’s goal is to attract and sustain a significant portion of the single-serve pod market, as there is a growing demand for environmentally friendly and sustainable products, brands will continue to shift to environmentally sustainable solutions for pods for Keurig and Nespresso single-serve brewing systems.

NEXE’s technology platform consists of the patented, fully compostable, “NEXE POD” as well as the proprietary equipment involved with the process of making the NEXE POD. Hundreds of municipalities in the European Union, Canada, and the United States are moving in the direction of introducing comprehensive compost systems, making the NEXE POD a viable alternative to the typical plastic coffee capsules out in the marketplace.

See “ Part III - Information Concerning NEXE ”.

THE QUALIFYING TRANSACTION

Pursuant to the Definitive Agreement, the Issuer will acquire all of the issued and outstanding securities of NEXE from NEXE's securityholders. Each holder of NEXE Shares will receive one (1) Resulting Issuer Share for each NEXE Share held, each holder of NEXE Class A Preferred Shares, Series A (“ Series A Shares ”) will receive one (1) Resulting Issuer Share for each Series A Share held, each holder of NEXE Class A Preferred Shares, Series A Preferred (“ Series A Preferred Shares ”) will receive one (1) Resulting Issuer Share for each Series A Preferred Share held, and each holder of NEXE Class A Preferred Shares, Series 1 (“ Series 1 Shares ”) will receive one and one-half (1.5) Resulting Issuer Shares for each Series 1 Share held. All currently outstanding convertible securities of NEXE, including NEXE Warrants and NEXE Options will be exchanged or replaced with convertible securities of the Resulting Issuer based on a 1:1 ratio and on the same economic terms and conditions as previously issued.

The deemed consideration of the Transaction is approximately $34,626,428, represented by issuing 43,283,035 Resulting Issuer Shares to the NEXE Shareholders at a deemed price of $0.80 per Resulting Issuer Share. After the Completion of the Transaction, the NEXE securityholders will become securityholders of the Resulting Issuer. The number of shares to be issued in connection with the Transaction was determined pursuant to arm’s length negotiations between management of each of the Issuer and NEXE.

Prior to or concurrently with the Completion of the Transaction, the Issuer intends to complete the Consolidation. For the purposes of this Filing Statement, the Transaction assumes that the Consolidation will occur prior to the Completion of the Transaction such that the Issuer will have 4,000,000 Issuer Shares issued and outstanding prior to Completion of the Transaction.

NEXE has completed the Concurrent Private Placement on September 30, 2020. Under the Concurrent Private Placement, NEXE and the Issuer engaged the Agent to act as lead agent and sole book runner on a commercially reasonable efforts basis financing of 11,437,500 Subscription Receipts at a price of $0.80 per Subscription Receipt for gross proceeds of $9,150,000.

Each Subscription Receipt will, prior to the effective time of the Transaction, automatically convert into one NEXE Share and one-half of one Financing Warrant, with each whole Financing Warrant exercisable into a NEXE Share at an exercise price of $1.00 for a period of twelve months, for no additional consideration upon the satisfaction of certain escrow release conditions, including the conditional approval of the Exchange for the Transaction and satisfaction or waiver of all of the conditions precedent to the Transaction as set out in the Definitive Agreement. The NEXE Shares and Financing Warrants will be exchanged into Resulting Issuer Shares and Resulting Issuer Warrants pursuant to the Amalgamation.

Under the Concurrent Private Placement, the Agent will receive the Broker’s Commission, being a cash commission of up to 8% of the total proceeds of the Concurrent Private Placement and payable at the date when the Escrow Release Conditions are satisfied and, issued such number of non-transferable common share purchase warrants (each an “ Agent’s Warrant ”) of up to 8% of the Subscription Receipts sold under the Concurrent Private Placement. Each Agent’s Warrant will be exercisable into one NEXE Share at a price of $0.80 for a period of 12 months following the date the Escrow Release Conditions are satisfied. Each Agent’s Warrant will be exchanged into a Resulting Issuer Warrant with the same terms pursuant to the Amalgamation. The Agent will also receive the Corporate Finance Fee consisting of $75,000 in cash and $75,000 in Issuer Shares (“ CF Shares ”) and the payment of its reasonable out-of-pocket expenses, including legal fees, plus disbursements and taxes. The cash portion of Corporate Finance Fee will be paid from the proceeds of the Concurrent Private Placement held by the Escrow Agent on the date the Escrow Release Conditions are satisfied and the CF Shares will be converted into Resulting Issuer Shares upon the closing of the Transaction.

NEXE will also complete the NEXE Unit Financing of up to 5,625,000 NEXE Units at a price of $0.80 per NEXE Unit for gross proceeds of up to $4,500,000 in conjunction with closing the Transaction. Each NEXE Unit will consist of one NEXE Share and one-half of one NEXE Unit Financing Warrant, with each whole NEXE Unit Financing Warrant entitling the holder to purchase one additional NEXE Share at a price of $1.00 per NEXE Share for a period of twelve months from the date of issue.

The proceeds of the Concurrent Private Placement and NEXE Unit Financing will be used for product sales, increase production and working capital over the next twelve months. See “ Part IV - Information Concerning the Resulting Issuer – Available Funds and Principal Purposes ”.

Completion of the Transaction is subject to compliance with the terms and condition set forth in the Definitive Agreement including, but not limited to (i) entering into any other agreements necessary for the Transaction; (ii) receipt of all required approvals, including approval of all the shareholders of NEXE, Exchange approval and all necessary consents of other third parties; (iii) no material adverse change occurring in either the Issuer or NEXE prior to Closing; (iv) upon Completion of the Transaction, the Resulting Issuer meeting the applicable minimum listing requirements as a Technology Issuer (pursuant to Policy 2.1 – Initial Listing Requirements of the Exchange); (v) immediately prior to Closing, each of the parties required by the Exchange shall have entered into an escrow agreement upon the terms and conditions imposed pursuant to the policies of the Exchange; (vi) completion of the Concurrent Private Placement; and (vii) certain other customary conditions for a transaction of this nature.

THE RESULTING ISSUER

Following the Closing, Amalco will be a wholly-owned subsidiary of the Resulting Issuer. The name of the Resulting Issuer will be changed to “Nexe Innovations Inc.” (or such other name as may be acceptable to the Issuer, NEXE and the Exchange). The capital structure of the Resulting Issuer will be altered in the manner contemplated by the Transaction. Upon the issuance of the Final Exchange Bulletin, the Resulting Issuer will become a Tier 2 Technology Issuer on the Exchange. Following the Completion of the Transaction, the Resulting Issuer will continue the business of NEXE. See “ Part IV - Information Concerning the Resulting Issuer – Narrative Description of the Business ”.

INTERESTS OF INSIDERS, PROMOTERS OR CONTROL PERSONS

Except as disclosed herein, no Insider, promoter or Control Person of the Issuer and no Associate or Affiliate of any of those persons, has any interest in the Transaction other than that which arises from the holding of Resulting Issuer Shares.

Upon Completion of the Transaction, all of the Issuer’s directors and senior officers will resign and Darren Footz, Ashvani Guglani, Steve Lockhart, Haytham Hodaly and Graham Gilley will be the directors of the Resulting Issuer. The senior officers of the Resulting Issuer will be: Darren Footz (Chief Executive Officer), Raj Kang (Chief Financial Officer) and Steve Lockhart (Chief Operating Officer).

The following table summarizes the shareholding of each current Insider, promoter or Control Person of the Issuer, before giving effect to the Transaction (including before the Concurrent Private Placement and the Consolidation):

Name of Insider, Promoter or Control Person (including Associates and Affiliates) of the Issuer	Issuer Shares Owned Before the Transaction (including before the Concurrent Private Placement and Consolidation)	Issuer Shares Owned Before the Transaction (including before the Concurrent Private Placement and Consolidation)
	Number	Percentage(1)
Darren Tindale Director, CEO, CFO, Corporate Secretary & Promoter Vancouver, BC	500,000	5%
Jeff Tindale Director Vancouver, BC	500,000	5%
Martin Cronin Director Kelowna, BC	500,000	5%
Greg Clough Director Surrey, BC	500,000	5%

Notes:

(1) Calculated on an undiluted basis with 10,000,000 Issuer Shares being issued and outstanding as of the date of this Filing Statement (pre-Consolidation), not including any Issuer Shares issuable upon exercise of the Issuer Options and Issuer Warrants.

The following table summarizes the proposed shareholding of each person who will be an Insider, promoter or Control Person of the Resulting Issuer, after giving effect to the Transaction and completion of the Concurrent Private Placement:

Name of Insider, Promoter or Control Person (including Associates and Affiliates) of the Resulting Issuer	Resulting Issuer Shares Owned After Giving Effect to the Transaction Following Completion of the Concurrent Private Placement and the Concurrent Unit Financing	Resulting Issuer Shares Owned After Giving Effect to the Transaction Following Completion of the Concurrent Private Placement and the Concurrent Unit Financing
	Number	Percentage(1)
Darren Footz Vancouver, BC Chief Executive Officer and Director	11,092,949	17.21%
Raj Kang Vancouver, BC Chief Financial Officer and Corporate Secretary	-	-
Ashvani Guglani VP Finance and Director	2,100,001	3.26%


Steve Lockhart Vancouver, BC Chief Operating Officer and Director	76,923	0.12%
Haytham Hodaly Director	-	-
Graham Gilley Director	-	-

Notes:

(1) Calculated on an undiluted basis and assuming there are 64,439,286 Resulting Issuer Shares being issued and outstanding upon Closing. See “ Part IV - Information Concerning the Resulting Issuer – Pro Forma Consolidated Capitalization ”.

ARM’S LENGTH QUALIFYING TRANSACTION

The Transaction will be carried out by parties dealing at arm’s length to one another and therefore will not be a Non Arm’s Length Qualifying Transaction.

AVAILABLE FUNDS AND PRINCIPAL PURPOSES

Upon Completion of the Transaction (including the Concurrent Private Placement and NEXE Unit Financing), the Resulting Issuer is expected to have the following funds available to it for the next 12-month period:

Source of Funds:	Estimated Amount (Concurrent Private Placement)	Estimated Amount (Assuming Concurrent Financing and NEXE Unit Financing)
Estimated working capital of Issuer as at October 31, 2020	$621,796	$621,796
Estimated working capital of NEXE as at October 31, 2020	$2,439,900	$2,439,900
Estimated net proceeds(1)from the Concurrent Private Placement	$8,213,932	$8,213,932
Estimated net proceeds from the NEXE Unit Financing	-	$4,500,000(2)
Total Available Funds	$11,275,628	$15,775,628

Notes:

(1) In connection with the Concurrent Private Placement, the Agent will receive the Broker’s Commission of up to 8% of the total proceeds of the Concurrent Private Placement and payable on the date the Escrow Release Conditions are satisfied and, will be issued such number of Agent’s Warrants up to 8% of the Subscription Receipts sold under the Concurrent Private Placement. The Issuer anticipates all costs related to the Transaction and Concurrent Private Placement (including the Broker’s Commission, the cash portion of the Corporate Finance Fee ($75,000), legal fees, fees and expenses of the Concurrent Private Placement, audit fees, transfer agent fees and filing fees (collectively $307,000)) will be $936,000.

(2) Assumes completion of the maximum NEXE Unit Financing.

The Resulting Issuer is expected to use the funds available to it in furtherance of its stated business objectives. Specifically, the Resulting Issuer will use the funds available to it upon Completion of the Transaction as follows:

Principal Uses of Available Funds for the 12 Month Period Ended subsequent to Completion of the Transaction	Estimated Amount(1) (Concurrent Private Placement)	Estimated Amount(1) (Concurrent Private Placement and NEXE Unit Financing)


Operating expenses, including staffing & further expansion of manufacturing	$917,000	$917,000
Purchase of additional equipment to increase production to up to 220 million units	$2,500,000	$5,000,000
Purchase of molding equipment	$2,080,000	$3,120,000
Research and Development	$500,000	$500,000
General and Administrative Expenses, including Legal & Accounting	$275,000	$275,000
Sales, Marketing & Investor Relations	$1,150,000	$1,150,000
Total Uses	$7,422,000	$11,462,000
Unallocated working capital	$3,853,628	$4,313,628

Notes:

(1) Less the Broker’s Commission as set out in the “Source of Funds” table above.

The Resulting Issuer intends to spend the funds available as stated in this Filing Statement. There may be circumstances, however, where for sounds business reasons a reallocation of funds may be necessary. Use of proceeds will be subject to the discretion of management. See “ Part IV - Information Concerning the Resulting Issuer – Available Funds and Principal Purposes ”.

SELECTED PRO FORMA FINANCIAL INFORMATION

The following table contains certain financial information regarding the Resulting Issuer. This table should be read in conjunction with the unaudited pro forma consolidated statement of financial position of the Resulting Issuer included in this Filing Statement as Schedule “E”.

	Issuer (as at July 31, 2020)	NEXE (as at August 31, 2020)	Adjustments (Assuming Concurrent Private Placement and NEXE Unit Financing)(1)	Pro Forma Statement of Financial Position (Assuming Concurrent Private Placement and NEXE Unit Financing)(1)
Total assets	$734,482	$8,378,026	$12,400,302	$21,512,810
Total liabilities	$29,471	$2,428,380	(29,471)	$2,428,380
Total equity	$705,482	$5,949,646	$12,429,773	$19,084,430

MARKET FOR SECURITIES

The Issuer Shares are listed on the Exchange under the trading symbol “WHAT.P”. The Issuer Shares were halted from trading on the Exchange on July 28, 2020. The closing price per Issuer Shares on July 27, 2020, the date immediately preceding the announcement of the Transaction, was $0.16. It is anticipated that the Resulting Issuer Shares will resume trading on the Exchange upon Completion of the Transaction under the symbol “NEXE”.

The NEXE Shares are not listed on any stock exchange.

See “ Part II – Information Concerning the Issuer - Stock Exchange Price ” for more information.

EXCHANGE APPROVAL

The Exchange has conditionally approved the Transaction as the Qualifying Transaction for the Issuer, and the listing of the Resulting Issuer Shares on the Exchange, subject to the Issuer fulfilling all the requirements of the Exchange.

CONFLICTS OF INTERESTS

Conflicts of interest may arise as a result of the proposed directors and officers of the Resulting Issuer also holding positions as directors and officers of other companies. Conflicts of interest may arise which could influence these persons in evaluating possible acquisitions or in generally acting on behalf of the Resulting Issuer, notwithstanding that they will be bound by the provisions of the BCA to act at all times in good faith in the interests of the Resulting Issuer and to disclose such conflicts to the Resulting Issuer if and when they arise. As of the date of this Filing Statement, to the best of its knowledge, the Issuer is not aware of the existence of any conflicts of interest between the Issuer and any of the directors or officers of the Issuer.

SPONSORSHIP

Pursuant to Policy 2.2 – Sponsorship and Sponsorship Requirements of the Exchange, sponsorship is generally required in conjunction with a Qualifying Transaction. The Issuer received an exemption from the sponsorship requirement.

EXPERTS

The following Persons (“ Professional Persons ”) whose profession or business gives authority to a statement made by that Person are named as having prepared or certified part of this Filing Statement or having prepared or certified a report or valuation described or included in this Filing Statement:

(a) the Issuer’s current auditor is Shim & Associates LLP, Chartered Professional Accountants of Vancouver, BC. Shim & Associates LLP conducted the audit and executed the audit report in respect of the financial statements of the Issuer for the period from incorporation on September 19, 2019 to October 31, 2019 and the audited financial statements of Subco from the date of incorporation on August 6, 2020 to August 31, 2020; and
(b) NEXE’s current auditor is MNP LLP of Vancouver, BC. MNP LLP conducted the audits and executed the audit reports in respect of the financial statements of NEXE for the years ended May 31, 2018, 2019 and 2020.

To the knowledge of the management of the Issuer and NEXE, as of the date hereof, Shim & Associates LLP and MNP LLP, or any Associate or Affiliate of Shim & Associates LLP and MNP LLP, do not have any beneficial interest, direct or indirect, in the securities or property of the Issuer, NEXE or the Resulting Issuer or of an Associate or Affiliate of the Issuer, NEXE or the Resulting Issuer, and no Professional Person is expected to be elected, appointed or employed as a director, officer or employee of the Resulting Issuer or of any Associate or Affiliate of the Resulting Issuer.

SUMMARY OF RISK FACTORS

An investment in the Resulting Issuer following Completion of the Transaction involves a substantial degree of risk and should be regarded as highly speculative due to the nature of the proposed business of the Issuer, NEXE and the Resulting Issuer. The risks, uncertainties and other factors, many of which are beyond the control of the Resulting Issuer, that could influence actual results include, but are not limited to: Completion of the Transaction and Exchange approval; closing of the Concurrent Private Placement; development and technology uncertainty; additional financing requirements and access to capital; no assurance of success; government regulations; rapid technological change; competition; lack of demand; reliance on key personnel; risks associated with acquisitions; security threats; equipment failures; volatility of share price, absence of dividends and fluctuation of operating results; no assurance of active trading market; conflict of interest; limited operating history; dilution to shareholders; value of securities; protection of intellectual property rights; litigation; use of proceeds; reporting issuer status; and global economic and financial deterioration.

See “ Part I – Risk Factors ” below for a detailed description of certain risk factors relating to the Transaction and the ownership of the Resulting Issuer Shares, which should be carefully considered before making an investment decision.

PART I - RISK FACTORS

The following are certain factors relating to the business of the Issuer, NEXE and the Resulting Issuer assuming Completion of the Transaction, which factors investors should carefully consider when making an investment decision concerning the Issuer Shares. These risks and uncertainties are not the only ones facing the Resulting Issuer. If any such risks actually occur, the financial condition, liquidity and results of operations of the Resulting Issuer could be materially adversely affected and the ability of the Resulting Issuer to implement its growth plans could be adversely affected. The Resulting Issuer will face a number of challenges in the development of its business.

Prospects for companies in the technology industry generally may be regarded as uncertain given the nature of the industry and, accordingly, investments in technology companies should be regarded as highly speculative. Technology research and development involves a significant degree of risk. An investor should carefully consider the risks and uncertainties described below. The risks and uncertainties described below are not an exhaustive list. Additional risks and uncertainties not presently known to NEXE or that NEXE believes to be immaterial may also adversely affect NEXE’s business. If any one or more of the following risks occur, the Resulting Issuer's business, financial condition and results of operations could be seriously harmed. Further, if the Resulting Issuer fails to meet the expectations of the public market in any given period, the market price of the Resulting Issuer's Shares could decline.

If any such risks actually occur, shareholders could lose all or part of their investment and the financial condition, liquidity and results of operations of the Resulting Issuer could be materially adversely affected and the ability of the Resulting Issuer to implement its growth plans could be adversely affected. Potential investors should consult with their professional advisors to assess an investment in the Resulting Issuer.

Limited operating history.

The Resulting Issuer has limited operating history. NEXE was incorporated on April 27, 2015. The Resulting Issuer will be subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its growth objectives. To the extent that such expenses do not result in revenue gains that are adequate to sustain and expand its business, the Resulting Issuer’s long-term viability may be materially and adversely affected. To date, NEXE has not generated any revenues.

Negative Cash Flow from Operating Activities

NEXE has had negative cash flow from operating activities since inception. Significant capital investment will be required to achieve the Resulting Issuer’s and NEXE’s existing plans. There is no assurance that the Resulting Issuer and NEXE’s business will generate earnings, operate profitably or provide a return on investment in the near future. Accordingly, the Resulting Issuer and NEXE may be required to obtain additional financing in order to meet its future cash commitments.

Further, NEXE has a history of operating losses and may not sustain profitability. The Resulting Issuer and NEXE cannot guarantee investors that it will become profitable, and even if the Resulting Issuer and NEXE achieves profitability, given the competitive and evolving nature of industry in it operates, the Resulting Issuer and NEXE may not be able to sustain or increase profitability and its failure to do so could adversely affect its business, including its ability to raise additional funds.

Going-concern risks.

The financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Resulting Issuer’s future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Resulting Issuer will be successful in completing an equity or debt financing or in achieving profitability.

The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should the Resulting Issuer be unable to continue as a going concern.

Commercialization of the NEXE PODs

Although NEXE is able to manufacture and produce a NEXE POD for the soluble market, NEXE has not commercialized the NEXE PODs for the Keurig and Nespresso markets. In order to commercialize the NEXE PODs for these markets,

NEXE will be required to acquire certain customized automation equipment that permits the commercial production (ie. sufficient number) of these NEXE PODs. Further, certain customers will require NEXE to obtain SQFL Certification prior to delivering any purchase orders to NEXE. If NEXE is unable to acquire this automation equipment or SQFL Certification, it may not be able to properly commercialize the NEXE PODS for the Keurig and Nespresso markets.

Future performance is highly dependent upon the sales of Keurig® and Nespresso® beverage systems.

Continued acceptance and adoption of Keurig® and Nespresso ® beverage systems are significant factors in the Resulting Issuer’s growth plans. Any substantial or sustained decline in the sale of Keurig® and Nespresso ® hot system brewers, failure of consumers to adopt those beverage system, would materially adversely affect the Resulting Issuer’s business.

The research and development of the single-serve beverage pods has required and will continue to require a significant investment and commitment of resources, is subject to numerous risks and uncertainties, and ultimately may not prove successful.

NEXE has invested and expects to continue to invest significantly in the research and development of its NEXE POD technology. Such endeavor involves significant risks and uncertainties, including, insufficient revenues to offset liabilities and expenses associated with developing and launching the single-serve beverage pods, not accurately predicting consumer tastes and the market opportunity for a beverage platform, inability to respond in a timely manner to consumer desires and demands, and unidentified issues not discovered in NEXE due diligence and planning.

The Resulting Issuer cannot be certain that the Keurig® and Nespresso ® hot system brewers will be widely accepted by consumers or that they will be willing to pay a higher price for these products. In addition, the Resulting Issuer may not be able to sufficiently scale or find other ways to reduce the costs of manufacturing the pods. Because the introduction of and investment in a new pod is inherently risky, no assurance can be given that the NEXE PODs will ultimately be successful or that it will not materially adversely affect the Resulting Issuer’s reputation, financial condition, and operating results.

Continued innovation and the successful development and timely launch of new platforms, products and product extensions are critical to the Resulting Issuer’s financial results and achievement of its growth strategy.

The Resulting Issuer may not be successful in developing innovative new products or the new products may not be commercially successful. Additionally, new product introductions are often time sensitive, and thus failure to deliver innovations on schedule could be detrimental to the Resulting Issuer’s ability to successfully launch such new products and retain partners, in addition to potentially harming the Resulting Issuer’s reputation and customer loyalty. The Resulting Issuer’s financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the direction of its key marketplaces and successfully identify, develop, manufacture, market and sell new or improved products in these changing marketplaces. As the Resulting Issuer and its industry evolve, the Resulting Issuer expects to face new challenges with respect to the introduction of innovative products and the changing competitive landscape within the single-serve category and the beverage industry. These challenges can occur at various stages, including design, supply chain and sales cycle.

Future financial results are difficult to predict, and failure to meet market expectations for the Resulting Issuer’s financial performance or its publicly announced guidance may cause the price of its securities to decline.

The Resulting Issuer’s public forecasts regarding the expected performance of the business and future operating results are forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in other public statements, and necessarily reflect current assumptions and judgments that may prove incorrect. As a result, there can be no assurance that the Resulting Issuer’s performance will be consistent with any public forecasts or that any variation from such forecasts will not be material and adverse.

Changes in the beverage environment and retail landscape could impact the Resulting Issuer’s financial results.

The beverage environment is rapidly evolving as a result of, among other things, changes in consumer preferences; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the beverage retail landscape is dynamic and constantly evolving, not only in emerging and developing marketplaces, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed marketplaces, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If the Resulting

Issuer is unable to successfully adapt to the rapidly changing environment its and overall financial results could be negatively affected.

Failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact the Resulting Issuer’s future growth and business.

Any of the Resulting Issuer’s strategic partners may make their own business decisions which may not align with the Resulting Issuer’s interests. If the Resulting Issuer’s is unable to provide an appropriate mix of incentives to its strategic partners through a combination of pricing and marketing and advertising support, or if its strategic partners are not satisfied with its brand innovation and technological or other development efforts, they may take actions, including entering into agreements with competing pod contract manufacturers or vertically integrating to manufacture their own pods. Increasing competition among pod manufacturers and the move to vertical integration may result in price compression, which could have an adverse effect on the Resulting Issuer’s gross margins. The loss of strategic partners could also adversely impact the Resulting Issuer’s future profitability and growth, its ability to attract additional branded or private label parties to do business with the Resulting Issuer or its ability to attract new customers.

In order to grow its business, the Resulting Issuer anticipates that it will continue to depend on its relationships with third parties, such as alliance partners, distributors, equipment supplies, and manufacturers. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. The Resulting Issuer’s competitors may be effective in providing incentives to third parties to favor their products or services, or to prevent or reduce the Resulting Issuer’s products and services. In addition, acquisitions of the Resulting Issuer’s partners by its competitors could result in a decrease in the number of current and potential customers, as its partners may no longer facilitate the adoption of the Resulting Issuer’s products and services by potential customers.

If the Resulting Issuer is unsuccessful in establishing or maintaining its relationships with third parties, its ability to compete in the marketplace or to grow its revenue could be impaired, and its operating results may suffer. Even if the Resulting Issuer is successful, the Resulting Issuer cannot assure investors that these relationships will result in increased customer usage of the Resulting Issuer’s services or increased revenue and/or profitability. Furthermore, if the Resulting Issuer’s partners fail to perform as expected, the Resulting Issuer’s reputation may be harmed, and its business and operating results could be adversely affected.

Product safety and quality concerns could negatively affect the Resulting Issuer’s business.

The Resulting Issuer’s success depends in part on its ability to maintain consumer confidence in the safety and quality of all of its products. Product safety or quality issues, or mislabeling, actual or perceived, or allegations of product contamination or quality or safety issues, even when false or unfounded, could subject the Resulting Issuer to product liability and consumer claims, negative publicity, a loss of consumer confidence and trust, may require the Resulting Issuer from time to time to conduct costly recalls from some or all of the channels in which the affected product was distributed, could damage the goodwill associated with its brands, and may cause consumers to choose other products. Such issues could result in the destruction of product inventory, lost sales due to the unavailability of product for a period of time, and higher than anticipated rates of warranty returns and other returns of goods, all of which could cause the Resulting Issuer’s business to suffer and affect its results of operations.

The Resulting Issuer’s long-term purchase commitments for certain strategic materials critical for the manufacture of pods could impair its ability to be flexible in its business without penalty.

In order to ensure a continuous supply of high-quality materials some of the Resulting Issuer’s inventory purchase obligations may long-term purchase commitments for certain strategic materials critical for the manufacture of pods. The timing of these may not always coincide with the period in which the Resulting Issuer needs the supplies to fulfill customer demand. This could lead to higher and more variable inventory levels and/or higher material costs.

Risk related to technological obsolescence and difficulty in obtaining equipment.

To remain competitive, the Resulting Issuer will continue to invest in equipment at its facilities required for maintaining the Resulting Issuer’s activities. Should competitors introduce new technologies, the Resulting Issuer recognizes its equipment and its underlying technology may become obsolete and require substantial capital to replace such equipment, which could adversely affect an investment in the Resulting Issuer.

Risks related to insurance of the Resulting Issuer’s operations.

The Resulting Issuer will have the same insurance coverage as NEXE including directors’ and officers’ insurance and commercial insurance covering the facility and the equipment within the facility. Nevertheless, given the novelty of development of biodegradable pods and associated businesses, such insurance may become unavailable, uneconomical for the Resulting Issuer, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Resulting Issuer. While the Resulting Issuer believes its insurance coverage will address all material risks to which it is exposed and could be adequate and customary in its current state of operations, such insurance will be subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Resulting Issuer is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Resulting Issuer’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Resulting Issuer were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Resulting Issuer were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.

Risks related to product development and technology change.

The Resulting Issuer’s success could be seriously affected by a competitor’s ability to develop and market technologies that compete with the Resulting Issuer’s technologies. To remain competitive, the Resulting Issuer must continue to enhance and improve the responsiveness, functionality and features of its technology. The single-serve beverage industry are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices that could render the Resulting Issuer’s existing operations and proprietary technology and systems obsolete. There can be no assurance the Resulting Issuer will successfully implement new technologies and systems to meet industry standards and if unable to adapt in a timely matter, the business of the Resulting Issuer could be materially affected.

Risks related slow acceptance of products.

The marketplace may be slow to accept or understand the significance of the Resulting Issuer’s technology due to its unique nature and the competitive landscape. If the Resulting Issuer is unable to promote, market and sell its products and secure relationships with partners and purchasers, the Resulting Issuer’s business and financial condition will be adversely affected, which could adversely affect an investment in the Resulting Issuer.

Resulting Issuer has an evolving business model and thus its services and products could change.

To stay current with the industry, the Resulting Issuer’s business model may need to evolve as well. From time to time, it may modify aspects of the Resulting Issuer’s business model relating to Resulting Issuer’s product mix and service offerings. The Resulting Issuer cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. The Resulting Issuer may not be able to manage growth effectively, which could damage the Resulting Issuer’s reputation, limit the Resulting Issuer’s growth and negatively affect its operating results.

If the Resulting Issuer’s revenue is primarily derived from a limited number of customers, the loss of such customer could have an adverse impact on the Resulting Issuer.

Although the Resulting Issuer intends to seek a broad base of customers, if the Resulting Issuer’s revenue is concentrated in one or a few larger customers, and such customers become dissatisfied with the Resulting Issuer’s products and services, or the Resulting Issuer’s pricing, or ceases to do business with the Resulting Issuer for any other reason, the operating results of the Resulting Issuer would be negatively and substantially impacted.

Interruptions or delays in service from the Resulting Issuer’s facilities could impair the delivery of the Resulting Issuer’s services and harm its business.

pay penalties, cause customers to terminate their contracts and adversely affect the Resulting Issuer’s renewal rate and its ability to attract new customers. The Resulting Issuer’s business will also be harmed if its customers and potential customers believe the Resulting Issuer’s service and product is unreliable. Despite precautions taken such as disaster recovery plans at these facilities, the occurrence of a natural disaster, an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the Resulting Issuer’s services. Even with the disaster recovery arrangements and precautions taken at its facilities, the Resulting Issuer’s services could be interrupted. Further, as the Resulting Issuer continues to grow and scale its business to meet the needs of its customers, additional burdens may be placed on its facilities. These interruptions, stoppages and burdens could adversely affect an investment in the Resulting Issuer.

The Resulting Issuer depends on highly skilled personnel to grow and operate its business, and if the Resulting Issuer is unable to hire, retain and motivate its personnel, the Resulting Issuer may not be able to grow effectively.

The Resulting Issuer’s future success will depend upon its continued ability to identify, hire, develop, motivate and retain highly skilled personnel, including senior management, engineers, designers, product managers, sales representatives, and customer support representatives. The Resulting Issuer’s ability to execute efficiently is dependent upon contributions from its employees, including its senior management team. In addition, there may occasionally be changes in the Resulting Issuer’s senior management team that may be disruptive to its business. If the Resulting Issuer’s senior management team, including any new hires that the Resulting Issuer may make, fails to work together effectively and to execute on its plans and strategies on a timely basis, its business could be harmed.

The Resulting Issuer’s growth strategy also depends on its ability to expand its organization with highly skilled personnel. Identifying, recruiting, training and integrating qualified individuals will require significant time, expense and attention. In addition to hiring new employees, the Resulting Issuer must continue to focus on retaining its best employees. The Resulting Issuer may need to invest significant additional amounts of cash and equity to attract and retain new employees, and the Resulting Issuer may never realize returns on these investments. If the Resulting Issuer is not able to effectively add and retain employees, its ability to achieve its strategic objectives could be adversely impacted, and its business could be harmed.

If the Resulting Issuer is unable to maintain and promote its brand, its business and operating results may be harmed.

The Resulting Issuer believes that maintaining and promoting its brand is critical to expanding its customer base. Maintaining and promoting its brand will depend largely on its ability to continue to provide useful, reliable and innovative services, which the Resulting Issuer may not do successfully. The Resulting Issuer may introduce new features, products, services or terms of service that its customers do not like, which may negatively affect its brand and reputation. Maintaining and enhancing the Resulting Issuer’s brand may require it to make substantial investments, and these investments may not achieve the desired goals. If the Resulting Issuer fails to successfully promote and maintain its brand or if the Resulting Issuer incurs excessive expenses in this effort, its business and operating results could be adversely affected.

Risks associated with acquisitions.

If appropriate opportunities present themselves, the Resulting Issuer intends to acquire businesses, technologies, services or products that the Resulting Issuer believes are strategic. There can be no assurance that the Resulting Issuer will be able to identify, negotiate or finance future acquisitions successfully, or to integrate such acquisitions with its current business. The process of integrating an acquired business, technology, service or product into the Resulting Issuer may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of the Resulting Issuer’ business. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Resulting Issuer’s business, results of operations and financial condition. Any such future acquisitions of other businesses, technologies, services or products might require the Resulting Issuer to obtain additional equity or debt financing, which might not be available on terms favourable to the Resulting Issuer, or at all, and such financing, if available, might be dilutive.

The Resulting Issuer in the future may invest, in new business strategies, acquisitions and/or joint ventures. New ventures are inherently risky and may not be successful. In evaluating such endeavors, the Resulting Issuer is required to make difficult judgments regarding the value of business strategies, opportunities, technologies and other assets, and the risks and

cost of potential liabilities. Furthermore, acquisitions and investments involve certain other risks and uncertainties, including the risks involved with entering new competitive categories or regions, the difficulty in integrating newlyacquired businesses, the challenges in achieving strategic objectives and other benefits expected from acquisitions, investments or joint ventures, the diversion of the Resulting Issuer’s attention and resources from its operations and other initiatives, the potential impairment of acquired assets and liabilities, the performance of underlying products, capabilities or technologies and the potential loss of key employees and customers of the acquired businesses.

The expansion or development of the business, including through acquisitions, increased product offerings or other strategic growth opportunities, may cause disruptions in the Resulting Issuer’s business, which may have an adverse effect on the Resulting Issuer’s business, operations or financial results.

The Resulting Issuer may seek to expand and develop its business, including through acquisitions, increased product offerings, or other strategic growth opportunities. In the ordinary course of business, the Resulting Issuer may review, analyze, and evaluate various potential transactions or other activities in which it may engage. Such transactions or activities could cause disruptions in, increase risk or otherwise negatively impact its business. Among other things, such transactions and activities may:

disrupt the Resulting Issuer’s business relationships with its customers, depending on the nature of or counterparty to such transactions and activities;
direct the time or attention of management away from other business operations;
fail to achieve revenue or margin targets, operational synergies or other benefits contemplated;
increase operational risk or volatility in the Resulting Issuer’s business; and/or
result in current or prospective employees experiencing uncertainty about their future roles with the Resulting Issuer, which might adversely affect the Resulting Issuer’s ability to retain or attract key managers or other employees.

The Resulting Issuer may be vulnerable to security breaches that could adversely affect its operations, business, operations, and reputation.

The Resulting Issuer’s infrastructure may be vulnerable to damage, disruptions, or shutdowns due to unauthorized access, computer viruses, cyber-attacks, and other security breaches. An attack attempt or security breach could potentially result in interruption or cessation of certain of the Resulting Issuer’s services to its customers or the Resulting Issuer’s inability to meet expected levels of service. The Resulting Issuer cannot guarantee that its security measures will not be circumvented, resulting in production interruptions and have a material adverse effect on its business, financial condition, or operational results. The Resulting Issuer may be required to expend significant resources to protect against or recover from such threats. If an actual or perceived breach of its security occurs, the market perception of the effectiveness of its security measures could be harmed, and the Resulting Issuer could lose customers. Further, the perpetrators of cyber-attacks are not restricted to particular groups or persons. These attacks may be committed by the Resulting Issuer’s employees, contractors or external actors operating from any geography. Any such events could result in legal claims or penalties, disruption in operations, misappropriation of sensitive data, damage to the Resulting Issuer’s reputation, negative market perception, or costly response measures, which could adversely affect its business.

Risks related to regulation by governmental authorities.

The activities of the Resulting Issuer may be subject to regulation by governmental authorities wherever its business is conducted. Achievement of the Resulting Issuer’s business objectives are contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals. The Resulting Issuer cannot predict the time required to secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failure to obtain regulatory approvals could have a material adverse effect on the business, results of operations and financial condition of the Resulting Issuer.

The business of the Resulting Issuer is subject to rapid regulatory changes. Failure to keep up with such changes may adversely affect the business of the Resulting Issuer. Failure to follow regulatory requirements will have a detrimental impact on the business. Timing and nature of changes in legislation cannot be predicted and could irreparably harm the business.

Risks related to protection of intellectual property rights.

The future success of the Resulting Issuer’s business is dependent upon the intellectual property rights surrounding the technology, including trade secrets, know-how and continuing technological innovation. Although the Resulting Issuer will seek to protect its proprietary rights through trademark registrations and patent applications, its actions may be inadequate to protect any proprietary rights or to prevent others from claiming violations of their proprietary rights. As of the date of this Filing Statement, NEXE has one (1) U.S. patent, one (1) pending PCT application (PCT/CA2020/050015), six (6) US provisional patent applications and one (1) pending Canadian trademark application for “NEXE INNOVATIONS” There can be no assurance that other companies are not investigating or developing other technologies that are similar to the technology. In addition, effective intellectual property protection may be unenforceable or limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate designation of the Resulting Issuer’s technology. Any of these claims, with or without merit, could subject the Resulting Issuer to costly litigation. If the protection of proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of the Resulting Issuer’s brand and other intangible assets may be diminished. Any of these events could have an adverse effect on the Resulting Issuer’s business and financial results.

If third party patents or patent applications contain claims infringed by the Resulting Issuer’s technology and these claims are valid, the Resulting Issuer may be unable to obtain licenses to these patents at a reasonable cost, if at all, and may also be unable to develop or obtain alternative technology. If such licenses cannot be obtained at a reasonable cost, the business could be significantly impacted. Further, the enforceability of the patents owned by the Resulting Issuer may be challenged and the Resulting Issuer’s patents could be partially or wholly invalidated following challenges by third parties.

If a third party accuses the Resulting Issuer of infringing its intellectual property rights or if a third party commences litigation against the Resulting Issuer for the infringement of patent or other intellectual property rights, the Resulting Issuer may incur significant costs in defending such action, whether or not it ultimately prevails. Typically, patent litigation in the technology industry is expensive. Costs that the Resulting Issuer incurs in defending third party infringement actions would also include diversion of management’s and technical personnel’s time. In addition, parties making claims against the Resulting Issuer may be able to obtain injunctive or other equitable relief that could prevent the Resulting Issuer from further developing discoveries or commercializing its technology. In the event of a successful claim of infringement against the Resulting Issuer, it may be required to pay damages and obtain one or more licenses from the prevailing third party. If it is not able to obtain these licenses at a reasonable cost, if at all, it could encounter delays in product introductions and loss of substantial resources while it attempts to develop alternative technology. Defense of any lawsuit or failure to obtain any of these licenses could prevent the Resulting Issuer or its partners from commercializing available technology and could cause it to incur substantial expenditure.

The Resulting Issuer also relies on its trade secrets, which include information relating to the manufacture, development and administration of its technology. The protective measures that the Resulting Issuer employs may not provide adequate protection for its trade secrets. This could erode the Resulting Issuer’s competitive advantage and materially harm its business. The Resulting Issuer cannot be certain that others will not independently develop the same or similar technologies on their own or gain access to trade secrets or disclose such technology, or that the Resulting Issuer will be able to meaningfully protect its trade secrets and unpatented know-how and keep them secret.

Risks related to competition.

To remain competitive, the Resulting Issuer will require a continued high level of investment in research and development, marketing, sales and client support. The Resulting Issuer may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations of the Resulting Issuer.

operation. The Resulting Issuer’s ability to gain a share of sales in the global marketplace or in various local marketplaces or maintain or enhance its relationships with its partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the food and beverage industry and an increase in the number of competitive pod contract manufacturers.

Many of the Resulting Issuer’s competitors and potential competitors are larger and have greater name recognition, longer operating histories, larger marketing budgets and significantly greater resources than the Resulting Issuer does. With the introduction of new technologies and market entrants, the Resulting Issuer expects competition to continue to intensify in the future. If the Resulting Issuer fails to compete effectively, its business will be harmed. For these reasons, the Resulting Issuer may not be able to compete successfully against its current and future competitors.

Some of the Resulting Issuer’s current and potential competitors have significantly greater resources and better competitive positions in certain markets than the Resulting Issuer does. These factors may allow the Resulting Issuer’s competitors to respond more effectively than the Issuer to new or emerging technologies and changes in market requirements. The Resulting Issuer’s competitors may develop products, features, or services that are similar to the Resulting Issuer or that achieve greater market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. Certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against the Resulting Issuer. As a result, the Resulting Issuer’s competitors may acquire and engage users at the expense of the growth or engagement of its user base, which may negatively affect the Resulting Issuer’s business and financial results.

The Resulting Issuer believes that its ability to compete effectively depends upon many factors both within and beyond the Resulting Issuer’s control, including:

the usefulness, ease of use, performance, and reliability of the Resulting Issuer’s products and services compared to its competitors;
customer service and support efforts;
marketing and selling efforts;
the Resulting Issuer’s financial condition and results of operations;
changes mandated by legislation, regulatory authorities, or litigation, some of which may have a disproportionate effect on the Resulting Issuer;
acquisitions or consolidation within the Resulting Issuer’s industry, which may result in more formidable competitors;
the Resulting Issuer’s ability to attract, retain, and motivate talented employees and consultants;
the Resulting Issuer’s ability to cost-effectively manage and grow its operations; and
the Resulting Issuer’s reputation and brand strength relative to that of its competitors.

For further information on the competitors of NEXE and the Resulting Issuer see “Part II – Information Concerning NEXE – Narrative Description of the Business – Competitive Conditions.”

Risks related to management of growth.

The Resulting Issuer may in the future, experience rapid growth and development in a relatively short period of time by aggressively marketing its products and services. The Resulting Issuer may be subject to growth related risks including capacity constraints and pressure on its internal systems and controls. The ability of the Resulting Issuer to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Resulting Issuer to deal with this growth may have a material adverse effect on the Resulting Issuer’s business, financial condition, results of operations and prospects.

Risks related to conflicts of interest.

Certain of the directors and officers of the Resulting Issuer are also directors and officers of other companies, and conflicts of interest may arise between their duties as officers and directors of the Resulting Issuer and as officers and directors of such other companies. In addition, as applicable, such directors and officers will refrain from voting on any matter in which they have a conflict of interest.

Additional financing requirements and access to capital.

The Resulting Issuer may require additional funds for further research and development, sales and marketing, operations, working capital, and general corporate purposes. The Resulting Issuer may attempt to raise additional funds for these purposes through public or private equity or debt financing, collaborations with other companies, government grants and/or from other sources. There can be no assurance that additional funding or partnership will be available on terms acceptable to the Resulting Issuer. If additional funds are raised through further issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of Resulting Issuer Shares. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Resulting Issuer to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained, the Resulting Issuer may be required to reduce, curtail, or discontinue operations.

Product recalls and/or product liability may adversely impact the Resulting Issuer.

The Resulting Issuer will be subject to regulation by a variety of regulatory authorities. In the event that the Resulting Issuer, does not adhere to product safety requirements or its quality control standards, it might not identify a deficiency before its ships its products to customers. The failure to produce products that adhere to the Resulting Issuer’s quality control standards could damage its reputation and brands and lead to customer litigation against the Resulting Issuer and the Resulting Issuer may be required to remove or recall those products at a substantial cost. The Resulting Issuer may be unable to recover costs related to product recalls.

The Resulting Issuer’s business will be highly dependent on sales of coffee, and if demand for coffee decreases, its business would suffer.

Because the Resulting Issuer is highly dependent on consumer demand for coffee, a shift in consumer preferences away from coffee or its product offerings would harm the business more than if it had more diversified product offerings. If customer demand for coffee decreases, its sales would decrease and the Resulting Issuer would be materially adversely affected.

Future revenues are dependent on demand for coffee. Demand for coffee and demand for single-cup brewing systems is affected by many factors, including:

Changes in consumer tastes and preferences;
Changes in consumer lifestyles;
National, regional and local economic conditions;
Perceptions or concerns about the environmental impact of the products;
Demographic trends; and
Perceived or actual health benefits or risks.

Risks related to volatility of share price, absence of dividends and fluctuation of operating results.

Market prices for the securities of technology companies have historically been highly volatile. Factors such as fluctuation of the Resulting Issuer’s operating results, announcements of technological innovations, patents or new commercial

products by the Resulting Issuer or competitors, and other factors could have a significant effect on the share price or trading volumes for the Resulting Issuer Shares. The Resulting Issuer has not paid dividends to date and the Resulting Issuer does not expect to pay dividends in the foreseeable future.

Risks related to no assurance of active trading market.

There can be no assurances that an active trading market in the Resulting Issuer Shares on the Exchange will be sustained.

Risks related to equity dilution to shareholders.

The issuance of any equity securities could, and the issuance of any additional shares will, cause the Resulting Issuer’s existing shareholders to experience dilution of their ownership interests.

Any additional issuance of shares or a decision to acquire other businesses through the sale of equity securities may dilute investors’ interests, and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. Such issuance may cause a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline in the price of the Resulting Issuer’s Shares.

Risks related to value of securities.

The value of the Resulting Issuer’s Shares may be reduced for a number of reasons, many of which are outside the control of the Resulting Issuer, including:

general economic and political conditions in Canada, the United States and globally;
governmental regulation of the beverage industry including coffee pods;
failure to achieve desired outcomes by the Resulting Issuer;
failure to obtain industry partner and other third-party consents and approvals, when required;
stock market volatility and market conditions;
competition for, among other things, capital, and skilled personnel;
the need to obtain required approvals from regulatory authorities;
revenue and operating results failing to meet expectations in any particular period;
investor perception of the beverage, coffee and single-serve coffee industries;
limited trading volume of the Resulting Issuer’s Shares;
announcements relating to the Resulting Issuer’s business or the businesses of the Resulting Issuer’s competitor’s; and
the Resulting Issuer’s ability or inability to raise additional funds.

Risks related to use of proceeds.

Although the Resulting Issuer has set out its intended use of proceeds in this Filing Statement, these intended uses are estimates only and subject to change. While management does not contemplate any material variation, management does retain broad discretion in the application of such proceeds. The failure by the Resulting Issuer to apply these funds effectively could have a material adverse effect on the Issuer’s business, including the Resulting Issuer’s ability to achieve its stated business objectives.

Risks related to global economic and financial deterioration impeding access to capital or increasing the cost of capital.

Market events and conditions, including disruption in the Canadian, U.S. and international financial markets and other financial systems and the deterioration of Canadian, U.S. and global economic and financial market conditions, could, among other things, impact currency trading and impede access to capital or increase the cost of capital, which would have an adverse effect on the Resulting Issuer’s ability to fund its working capital and other capital requirements. Current and future conditions in the domestic and global economies remain uncertain. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the market area in which the Resulting Issuer will participate.

Risks related to litigation.

The Resulting Issuer and/or its directors and officers may be subject to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its business, the Resulting Issuer may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause the Resulting Issuer to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may have a material adverse effect on the Resulting Issuer’s business, operating results or financial condition.

Risks related to reporting issuer status.

As a reporting issuer, the Resulting Issuer will be subject to reporting requirements under applicable securities law and stock exchange policies. Compliance with these requirements will increase legal and financial compliance costs, make some activities more difficult, time consuming or costly, and increase demand on existing systems and resources. Among other things, the Resulting Issuer will be required to file annual, quarterly and current reports with respect to its business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm the Resulting Issuer’s business and results of operations. The Resulting Issuer may need to hire additional employees to comply with these requirements in the future, which would increase its costs and expenses.

Management of the Resulting Issuer expects that being a reporting issuer will make it more expensive to maintain director and officer liability insurance. This factor could also make it more difficult for the Resulting Issuer to retain qualified directors and executive officers.

Economic environment and global economic risk.

The Resulting Issuer’s operations could be affected by the economic context should the unemployment level, interest rates or inflation reach levels that influence consumer trends and consequently, impact the Resulting Issuer’s sales and profitability.

Any economic slowdown and downturn of global capital markets could make the raising of capital by equity or debt financing more difficult. Access to financing has been negatively impacted by the ongoing global economic risks. These factors may impact the Resulting Issuer’s ability to raise equity or obtain loans and other credit facilities in the future and on terms favourable to the Resulting Issuer. If uncertain market conditions persist, the Resulting Issuer’s ability to raise capital could be jeopardized, which could have an adverse impact on the Resulting Issuer’s operations and the trading price of the Resulting Issuer’s Shares on the stock exchange.

Climate change may have a long-term adverse impact on the Resulting Issuer’s business and results of operations.

such as coffee, which are important sources of ingredients for the Resulting Issuer’s business and products, and could impact the food security of communities around the world. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt the Resulting Issuer’s supply chain or impact demand for its products. As a result, the effects of climate change could have a long-term adverse impact on the business and results of operations.

Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption to the development and distribution of products and adversely impact business.

Public health crises such as pandemics or similar outbreaks could adversely impact the Resulting Issuer’s business. In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes COVID-19 surfaced in Wuhan, China and has reached multiple other regions and countries, including Surrey, British Columbia, Canada where NEXE’s primary office and facility is located. The coronavirus pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. The extent to which the coronavirus impacts the demand for the Resulting Issuer’s products and the Resulting Issuer’s operations or those of third-party partners, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. The continued spread of COVID-19 globally could adversely impact the Resulting Issuer’s product distribution, business relationships and sales, both locally and internationally. COVID-19 may also affect the Resulting Issuer’s management personnel and employees as well as employees of third-parties located in affected geographies that it relies upon.

Completion of the Transaction and Exchange Approval

The Completion of the Transaction is subject to several conditions precedent, certain of which are outside the control of the Issuer and NEXE. In addition, there is no guarantee that the Issuer will be able to satisfy the requirements of the Exchange such that it will issue the Final Exchange Bulletin. There can be no certainty, nor can the Issuer or NEXE provide any assurance, that these conditions will be satisfied, or if satisfied, when they will be satisfied. There can be no certainty that the Transaction will be completed on the terms set out in the Definitive Agreement, as negotiated, or at all. In the event that any of the conditions precedent are not satisfied or waived, or the Issuer does not satisfy the requirements of the Exchange, the Transaction may not be completed.

Currency risk exposures.

The Resulting Issuer may have financial risk exposure to varying degrees relating to the currency risk and volatility of each of the countries where it operates.

PART II - INFORMATION CONCERNING THE ISSUER

The following information is presented on a pre-Transaction basis and is reflective of the current business, financial and share capital position of the Issuer. See “ Part IV ─ Information Concerning the Resulting Issuer ” for pro forma business, financial and share capital information relating to the Resulting Issuer after giving effect to the Transaction.

CORPORATE STRUCTURE

Name and Incorporation

The Issuer was incorporated under the BCA on September 19, 2019, under the name “Whatcom Capital Corp.”, as evidenced by a certificate of incorporation issued on that date pursuant to the provisions of the BCA. The Issuer’s head office and registered and records office is located at 750-1095 West Pender Street, Vancouver, British Columbia, V6E 2M6.

GENERAL DEVELOPMENT OF THE BUSINESS

History

The Issuer is a CPC and to date has not carried on any operations. The sole business of the Issuer since its incorporation has been to identify and evaluate opportunities for the acquisition of an interest in assets or businesses and, once identified and evaluated, to negotiate an acquisition or participation, subject to any approvals as required under applicable corporate and securities laws and subject to acceptance by the Exchange, so as to complete a Qualifying Transaction. Until the Completion of a Qualifying Transaction, the Issuer will not have a business, business operations or any material assets other than cash.

On April 29, 2020, the Issuer filed an amended and restated prospectus dated April 29, 2020 in Alberta, British Columbia, Saskatchewan and Ontario to qualify for public sale and distribution under the IPO, 3,750,000 Issuer Shares at $0.10 per share for gross proceeds of $375,000 (the “ Prospectus ”). The IPO closed on June 2, 2020. Pursuant to the Prospectus, in addition to the IPO, the Issuer entered into subscription agreements prior to the closing of the IPO pursuant to which subscribers agreed to purchase, on a private placement basis, an aggregate of 3,750,000 Issuer Shares at a price of $0.10 per Issuer Share for gross proceeds of $375,000 (the “ IPO Private Placement ”). The IPO Private Placement closed immediately prior to the closing of the IPO and the Issuer Shares issued thereunder were qualified by the Prospectus. Immediately prior to the closing of the IPO, Pursuant to the IPO Agency Agreement, the Issuer paid a cash commission of $37,500 (10% of the gross proceeds of the IPO) to the IPO Agent and granted to the IPO Agent non-transferable common share purchase warrants to purchase up to 375,000 common shares exercisable for a period of 24 months from the date of listing of the Issuer Shares on the Exchange at a price of $0.10 per Issuer Share. The Issuer also paid the IPO Agent a corporate finance fee of $15,000 plus applicable taxes.

The Issuer entered into the letter of intent on July 28, 2020 with NEXE (the “ Letter of Intent ”) and subsequently entered into the Definitive Agreement with respect to the Transaction on August 11, 2020. Pursuant to the Definitive Agreement, the Issuer will acquire 100% of the issued and outstanding securities of NEXE from NEXE’s securityholders. Each holder of NEXE Shares will receive one (1) Resulting Issuer Share for each NEXE Share held, each holder of Series A Shares will receive one (1) Resulting Issuer Share for each Series A Share held, each holder of Series A Preferred Shares will receive one (1) Resulting Issuer Share for each Series A Preferred Share held, and each holder of Series 1 Shares will receive one and one-half (1.5) Resulting Issuer Shares for each Series 1 Share held, for an average deemed price of $0.80 per share, for aggregate deemed consideration of approximately $34,626,428. All outstanding convertible securities of NEXE, including NEXE Warrants and NEXE Options will be exchanged for convertible securities of the Resulting Issuer based on a 1:1 ratio and on the same economic terms and conditions as previously issued. The number of common shares to be issued in connection with the Transaction was determined pursuant to arm’s length negotiations between management of each of the Issuer and NEXE.

On July 28, 2020, trading in the Issuer Shares was halted on the Exchange, pending the announcement of the Letter of Intent.

PROPOSED FINANCINGS

Prior to or concurrently with the completion of the Transaction, NEXE intends to complete the Concurrent Private Placement.

Upon completion of the Transaction, it is intended that the Issuer will be known as “Nexe Innovations Inc.” Proceeds from the closing of the Concurrent Private Placement, less the Agent’s expenses, are held in escrow by the Subscription Receipt Agent , defined herein as the Escrowed Funds. Pursuant to the terms of the Subscription Receipt Agreement, each Subscription Receipt shall entitle the holder thereof to receive, upon satisfaction of the Escrow Release Conditions on or before the Escrow Release Deadline, including all conditions precedent to the Transaction being satisfied, and without payment of additional consideration therefor, one NEXE Share and one Financing Warrant. Should the Escrow Release Conditions not be satisfied by the Escrow Release Deadline, the Subscription Receipts will be cancelled and all proceeds held in escrow from the sale of Subscription Receipts will be returned to subscribers. NEXE has agreed that in such event, it will pay each holder of a Subscription Receipt the amount of any shortfall of the Escrowed Funds to ensure that each holder of a Subscription Receipt will be entitled to receive the repayment of the full subscription price paid

The Agent is acting as agent to the Issuer and NEXE to sell the Subscription Receipts on a commercially reasonable efforts basis in connection with the Concurrent Private Placement, and will receive the corporate Finance Fee of $75,000 in cash and $75,000 in CF Shares and the payment of its reasonable out-of-pocket expenses, including legal fees, plus disbursements and taxes. The cash portion of the Corporate Finance Fee will be paid from the proceeds of the Concurrent Private Placement held by the Escrow Agent on the date the Escrow Release Conditions are satisfied. Prior to the completion of the Transaction, CF Shares will be converted into Resulting Issuer Shares.

In connection with the Concurrent Private Placement, the Agent will also receive cash commission of up to 8% of the total proceeds of the Concurrent Private Placement from subscriptions and payable on the date the Escrow Release Conditions are satisfied and, issued such number of Agent’s Warrants of up to 8% of the Subscription Receipts sold under the Concurrent Private Placement. Each Agent’s Warrant will be exercisable into one NEXE Share at a price of $0.80 for a period of 12 months following the date the Escrow Release Conditions are satisfied. Pursuant to the Amalgamation, the Agent’s Warrants will be exchanged to Resulting Issuer Warrants with the same terms.

The proceeds from the Concurrent Private Placement will be used to finance the continued development of the business of the Resulting Issuer and for working capital purposes. See “ Part IV - Information Concerning the Resulting Issuer – Available Funds and Principal Purposes ”.

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MANAGEMENT’S DISCUSSION AND ANALYSIS

The following table sets out a summary of the selected financial information of the Issuer for the periods indicated and should be considered in conjunction with the more complete information contained in the Issuer’s audited financial statements and interim financial statements for the periods indicated below, all attached as Schedule “A”. Copies of the financial statements are also available on the Issuer’s SEDAR profile at www.sedar.com. Unless otherwise indicated, all currency amounts are stated in Canadian dollars.

Statement of Loss Data	Nine Months Ended July 31, 2020(2) ($)	Incorporation on September 19, 2019 to October 31, 2019(1) ($)
Total expenses	117,726	6,542
Net Loss	117,726	6,542
Amount Deferred in connection with the Transaction	Nil	Nil
Balance Sheet Data	Nine Months Ended July 31, 2020(2) ($)	Incorporation on September 19, 2019 to October 31, 2019(1) ($)
Total Assets	734,482	124,383
Total Liabilities	29,471	5,925
Shareholders’ Equity	705,011	118,458

Notes :

(1) Audited.

(2) Unaudited.

As of the date of this Filing Statement, the Issuer had cash and cash equivalents (on an unaudited basis) of approximately $640,603 (which does not include the anticipated Concurrent Private Placement). The Issuer estimates that its additional cash expenditures in closing the Transaction and the Concurrent Private Placement, including legal fees, filing fees and audit fees, will be approximately $307,000 not including the Broker’s Commission or the cash portion of the Corporate Finance Fee. The Issuer expects that if the Transaction is not completed, it may have to raise additional financing to pursue another Qualifying Transaction.

Management’s Discussion and Analysis

A copy of the Management’s Discussion and Analysis (“ MD&A ”) of the Issuer for period from incorporation on September 19, 2019 to October 31, 2019 and for the nine months ended July 31, 2020, are included in Schedule “B” to this Filing Statement. The MD&As should be read in conjunction with the Issuer’s financial statements for the same periods, together with the notes thereto, which are attached to this Filing Statement as Schedule “A”. Copies of the MD&As are also available on the Issuer’s SEDAR profile at www.sedar.com.

DESCRIPTION OF THE SECURITIES

The authorized capital of the Issuer consists of an unlimited number of Issuer Shares without par value and an unlimited number of Issuer Preferred Shares without par value.

Issuer Shares

As at the date of this Filing Statement, 10,000,000 Issuer Shares are issued and outstanding as fully paid and non-assessable (pre-Consolidation).

The Shareholders are entitled to one vote at all meetings of Shareholders of the Issuer, to receive dividends if, as and when declared by the directors and, to participate rateably in any distribution of property or assets upon the liquidation, windingup or other dissolution of the Issuer, except for any distribution of any part of the assets of the Company to holders of Issuer Preferred Shares, in which case Shareholders would be entitled to assets if any remain available after distribution to the holders of Issuer Preferred Shares. The Issuer Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of Issuer Shares to contribute additional capital and no restrictions on the issuance of additional securities by the Issuer. There are no restrictions on the repurchase or redemption of Issuer Shares by the Issuer except to the extent that any such repurchase or redemption would render the Issuer insolvent.

Issuer Preferred Shares

The Issuer Preferred Shares may be issued from time to time in one or more series and will have, among others, the following special rights and restrictions:

The holders of Issuer Preferred Shares as a class shall, in preference to the holders of the Issuer Shares, be entitled to receive dividends.
The holders of the Issuer Preferred Shares of any series shall also be entitled to such other preference, not inconsistent with these provisions, over the holders of the Issuer Shares.
Unless subordinated in priority by the special rights and restrictions attached to any series of Preferred Shares, holders of Issuer Preferred Shares as a class will be entitled on distribution of the assets of the Issuer on liquidation, dissolution or winding-up of the Issuer, whether voluntary or involuntary, or on any other distribution of assets the Issuer prior to any distribution to the holders of Issuer Shares.
No Issuer Preferred Shares may be issued if the Issuer is in arrears in the payment of dividends on any outstanding series of Issuer Preferred Shares without the approval of the holders of the Issuer Preferred Shares by resolution passed by the majority of holders of Issuer Preferred Shares.

The board of directors of the Issuer may also, by resolution, determine the maximum number of shares of any series of Issuer Preferred Shares, alter the Articles to create an identifying name by which the shares of any of the Issuer Preferred Shares may be identified and alter the Articles and authorize the alteration of the notice of articles to attach special rights

or restrictions to Preferred Shares or to alter such special rights or restrictions, as follows, including without limitation: (a) the rate, amount or method of calculation of dividends, (b) whether such dividends are cumulative, partly cumulative or noncumulative, (c) the dates, manner and currency of payments of dividends and the date from which they accrue or become payable, (d) if redeemable or purchasable (whether at the option of the Issuer or holder of the Preferred Shares or otherwise), the redemption or purchase prices and currencies thereof and terms and conditions of redemption or purchase, with or without provision for sinking or similar funds, (e) the voting rights, if any and (f) any conversion, exchange or reclassification rights.

The Issuer, as of the date hereof, has not issued any Issuer Preferred Shares and has no intention to issue Issuer Preferred Shares.

STOCK OPTION PLAN

Issuer Stock Option Plan

The Issuer’s Stock Option Plan was approved and adopted by the board on November 12, 2019.

Under the Issuer’s Stock Option Plan, the stock options (each an “ Option ”) are non-assignable and may be granted for a term not exceeding 5 years from the date of grant. Options may be granted to directors, executive officers, employees, persons performing Investor Relations Activities (as defined in the Issuer Stock Option Plan), consultants and management company employees, provided that while the Issuer is a CPC, Eligible Person means a director, officer or consultant, and subject to the rules and regulations of applicable regulatory authorities and the Exchange.

The exercise price of Options granted under the Issuer Stock Option Plan may not be lower than the market price of the Issuer Shares at the time the Option is granted, as calculated based upon the prior trading day closing price of the Issuer Shares on the Exchange.

The Issuer Stock Option Plan reserves a “rolling” maximum of 10% of the issued and outstanding Issuer Shares (determined at the time of the Option grant) for issuance upon the exercise of Options granted pursuant to the Issuer Stock Option Plan. The Issuer Stock Option Plan provides that: no more than 5% of the issued and outstanding Issuer Shares will be granted to any individual in any 12-month period; no more than 2% of the issued and outstanding Issuer Shares will be granted to any one consultant in any 12-month period; and no more than an aggregate of 2% of the issued Issuer Shares will be granted to an employee and consultants conducting investor relations activities in any 12-month period.

Options may be exercised before the greater of: 12 months after the completion of a Qualifying Transaction; and 90 days following cessation of the optionee’s position with the Issuer, provided that if the cessation of office, employment, directorship, 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. Any Issuer Shares acquired pursuant to the exercise of options under the Issuer Stock Option Plan prior to completion of a Qualifying Transaction must be deposited in escrow and will be subject to escrow until the Final Exchange Bulletin is issued.

As at the date of this Filing Statement, there are 400,000 Issuer Options outstanding (pre-Consolidation). Any Issuer Shares acquired pursuant to the exercise of options under the Issuer Stock Option Plan prior to the Completion of the Transaction must be deposited in escrow and will be subject to escrow until the Final Exchange Bulletin is issued. See “ Part IV – Information Concerning the Resulting Issuer – Escrowed Securities ”.

PRIOR SALES

Issuer Shares

Since the date of incorporation of the Issuer, 10,000,000 Issuer Shares have been issued as follows (pre-Consolidation and prior to the Completion of the Transaction and Concurrent Private Placement):

Date	Price	Number of Issuer Shares	Consideration Received
September 19, 2019	$0.05	2,000,000(1)	Cash
September 30, 2019	$0.05	500,000(2)	Cash
June 2, 2020	$0.10	3,750,000(3)	Cash

Date	Price	Number of Issuer Shares	Consideration Received
June 2, 2020	$0.10	3,750,000(4)	Cash
Total:		10,000,000(5)

Notes:

(1) Issuer Shares that were issued pursuant to a private placement.

(2) Issuer Shares that were issued pursuant to a private placement.

(3) Issuer Shares that were issued pursuant to the IPO.

(4) Issuer Shares that were issued pursuant to the IPO Private Placement.

(5) As of the date of this Filing Statement, the Issuer has 10,000,000 common shares issued and outstanding.

Incentive Stock Options

On June 2, 2020, the Issuer granted 400,000 Issuer Options with an exercise price of $0.10 and an exercise term of five years.

IPO Agent’s Warrants

In consideration of the services provided by the IPO Agent in connection with the IPO, the Issuer granted the IPO Agent’s Warrants to the IPO Agent to acquire 375,000 Issuer Shares at an exercise price of $0.10 per share until 24 months from the date of listing of the Issuer Shares on the Exchange. As of the date of this Filing Statement, none of the IPO Agent’s Warrants have been exercised.

STOCK EXCHANGE PRICE

The Issuer Shares were listed and posted for trading on the Exchange on May 29, 2020 and commenced trading on the Exchange on June 4, 2020. The following table sets out trading information for the Issuer Shares for the periods indicated:

Period	High ($)	Low ($)	Volume
July 2020(1)	0.16	0.15	27,782
June 2020(2)	0.15	0.10	40,382

Notes:

(1) On July 28, 2020, the Issuer Shares were halted from trading upon the Issuer’s announcement of the Transaction.

(2) The Issuer Shares commenced trading on the Exchange on June 4, 2020.

ARM’S LENGTH TRANSACTION

The proposed Transaction is not a Non-Arm’s Length Qualifying Transaction.

LEGAL PROCEEDINGS

To the best of management’s knowledge, there are no material pending legal proceedings to which the Issuer is or is likely to be a party, or of which any of its property is the subject matter.

AUDITOR, TRANSFER AGENT AND REGISTRAR

Auditor

The auditor of the Issuer is Shim & Associates LLP, Chartered Professional Accountants at its office at Suite 970 – 777 Hornby Street, Vancouver, BC V6Z 1S4.

Transfer Agent and Registrar

The registrar and transfer agent of the Issuer Shares is TSX Trust at 2700 – 650 West Georgia Street, Vancouver, B.C., V6B 4N9.

MATERIAL CONTRACTS

The Issuer has not entered into any contracts material to investors in the Issuer Shares since incorporation other than contracts in the ordinary course of business, except:

(a) the Transfer Agent, Registrar and Dividend Disbursing Agent Agreement dated September 23, 2019, between the Issuer and TSX Trust;
(b) the CPC Escrow Agreement dated November 13, 2019 among the Issuer, the TSX Trust and certain Shareholders;
(c) the IPO Agency Agreement dated April 29, 2020 between the Issuer and the IPO Agent;
(d) the Private Placement Agency Agreement dated September 30, 2020 among the Issuer, NEXE, and the Agent; and
(e) the Definitive Agreement.

Copies of these agreements may be inspected without charge during regular business hours at the offices of the Issuer until 30 days after the Closing. Copies of the above listed agreements may also be found on SEDAR at www.sedar.com.

PART III - INFORMATION CONCERNING NEXE

CORPORATE STRUCTURE

Name and Incorporation

NEXE was incorporated under the BCA on April 27, 2015, as “G-KUP Technology Inc.”. On February 26, 2016, NEXE changed its name to “G-Pak Technology Inc.”. On July 24, 2020 it changed its name to “Nexe Innovations Inc.”. NEXE’s head office is located at #109 – 19353 22[nd] Avenue, Surrey, BC V3S 3S6 and the registered and records office is located at Suite 704 - 596 Howe Street, PO Box 35, Vancouver BC V6C 2T5.

NEXE has also amended its articles as follows: (i) on May 1, 2015, NEXE created the Series 1 Shares as a new series under the Class A Preferred Shares, re-classified its previous Class A common shares to the NEXE Shares and eliminated its Class B common shares (ii) on February 1, 2016, NEXE created the Series A Shares as a new series under the Class A Preferred Shares, and (iii) on May 31, 2019, NEXE created the Series A Preferred Shares as a new series under the Class A Preferred Shares.

INTERCORPORATE RELATIONSHIPS

NEXE has three wholly-owned (100%) British Columbia-incorporated subsidiaries: NEXE Technology Corp., GPAK Holdings Inc. and Scepter Industries Ltd. NEXE Technology Corp. is NEXE’s operating subsidiary which is used to administer wages and various supplier and manufacturer payments. GPAK Holdings Ltd. owns the NEXE facility in Surrey, BC. Scepter Industries Ltd. is an inactive subsidiary.

GENERAL DEVELOPMENT OF THE BUSINESS

Overview

NEXE is a private British Columbia based company (formerly known as G-Pak Technology Inc.). NEXE has, since incorporation, engaged in researching and developing environmentally friendly biodegradable single-serve coffee pods.

History

Since incorporation, NEXE has focused its resources on developing the NEXE POD, acquiring the NEXE facility, developing its own customized automation equipment to produce the NEXE PODs, protecting its intellectual property and raising capital to finance its active operations.

In 2015, NEXE was formed and obtained a U.S. patent on the NEXE POD (US Patent No. 8,960,489). NEXE then engaged third parties to carry out a preliminary compostable study with the University of British Columbia. The results indicated that the NEXE POD would fully breakdown (degrade) after twelve (12) weeks.

In 2016, NEXE focused on acquiring the facility that became the NEXE facility in Surrey B.C. The NEXE facility would be used to produce the NEXE PODs once commercialized. To acquire the NEXE facility, NEXE paid $1,326,460 plus GST. NEXE also completed two private placement financings: (i) in early 2016, NEXE issued a total of 2,906,073 Series 1 Shares at $0.2750275 per share for total proceeds of $799,250, and (ii) from mid-2016 to early 2017, NEXE issued a total of 12,906,106 Series A Shares at a price of $0.53236 for total proceeds of $6,870,695. The capital raised in these financings provided sufficient funds to acquire the NEXE facility on a mortgage-free basis and to fund ongoing development of the NEXE POD.

In 2016, NEXE focused on the build out of the NEXE facility and received a financial contribution from the Minister responsible for Western Economic Diversification Canada (the “ WINN Contribution ”). The WINN Contribution provided NEXE with $2,500,000 of funding. The purpose of the WINN Contribution was to provide NEXE with funding to acquire custom manufacturing equipment to commercialize the NEXE Pods. NEXE received approximately $1.4 million of the WINN Contribution in 2017 and approximately $1.1 million of the WINN Contribution in 2018. NEXE is required to repay the WINN Contribution with monthly installments of $41,667 per month ending on December 1, 2023. The Company also entered into a contribution agreement with the National Research Council of Canada, as represented by its Industrial Research Assistance Program (“ IRAP ”) in February2017 (the “ IRAP Contribution ”) whereby IRAP provided $473,800

in funding. The purpose of the IRAP Contribution was for NEXE to design, develop and test a fully automated proof of concept prototype capable of producing compostable single serve coffee pods.

In 2018, NEXE received its first high-speed automation equipment, which it then customized for producing NEXE PODs. With its first customized automation equipment, NEXE was able to test the production of NEXE PODs for the pod market, Nespresso market and soluble market with the objective of commercializing these products. NEXE also began discussions with various coffee producers on using the NEXE POD once commercialized. The result of these discussions was a letter of understanding with Kicking Horse Coffee (the “ Kicking Horse LOU ”) whereby Kicking Horse Coffee confirmed that it was evaluating the use of the NEXE POD.

In 2019, NEXE was focused on completing certain key milestones towards commercialization of the NEXE POD. These milestones included:

Completing NEXE’s coffee transport system, which roasts and grinds coffee in a contained environment.
Completing factory and site acceptance testing for dosing and sealing in the NEXE POD for the Keurig market.
Completion and commercialization of the NEXE POD for the soluble market (ie. hot chocolate, tea, latte, etc.).

NEXE also received the results of its final compost study in July 2020, which states that the NEXE POD is fully compostable after 35 days. In 2019 through mid-2020, NEXE completed a private placement financing of 7,209,456 units (“ Units ”) at a price of $0.65 per Unit for total proceeds of $4,686,145, which closed in various tranches. Each unit consisted of one Series A Preferred Share and one share purchase warrant (a “ NEXE Financing Warrant ”), with each NEXE Financing Warrant entitling the holder to purchase an additional Series A Preferred Share at $1.10 per share for a period of two years. In connection with this offering, NEXE also issued 78,624 finder’s warrants (a “ NEXE Finder’s Warrant ”) to Haywood Securities Inc. and 30,800 NEXE Finder’s Warrants to Canaccord Genuity Corp. on November 5, 2019; 1,200 NEXE Finder’s Warrants to Haywood Securities Inc. on November 27, 2019; 15,574 NEXE Finder’s Warrants to Haywood Securities Inc. and 79,960 NEXE Finder’s Warrants to Canaccord Genuity Corp. on December 18, 2019; 5,600 NEXE Finder’s Warrants to Haywood Securities Inc. on December 20, 2019, 101,433 NEXE Finder’s Warrants to certain brokers of Ironwood Wealth Management on December 20, 2019; and 18,681 NEXE Finder’s Warrants to Haywood Securities Inc. on April 1, 2020. The NEXE Finder’s Warrants are exercisable at $0.65 per Series A Preferred Share for a period of two years from the date of issue.

In 2020, NEXE has focused its resources on scaling up its operations, obtaining a public listing through this Transaction and protecting its intellectual property. To scale up operations, NEXE has paid a deposit for a 10 lane customized automation equipment to be delivered between fourth quarter 2020 and first quarter of 2021. To protect its intellectual property, a third party consultant was engaged to carry out an analysis of the intellectual property of NEXE and to develop a strategy to protect such intellectual property. As of the date of this Filing Statement, a total of seven patent applications have been filed and NEXE anticipates further applications to be filed in the short term. In connection with a settlement agreement regarding a previous business relationship, NEXE issued 125,000 Series A Preferred Shares at a deemed price of $0.65 per share and in connection with debt settlement NEXE issued an aggregate of 501,361 Series A Preferred Shares at deemed prices of $0.53 and $0.65 per share

Significant Acquisition or Dispositions

NEXE has not completed any significant acquisitions or dispositions since its incorporation.

NARRATIVE DESCRIPTION OF THE BUSINESS

Principal Business

Founded in 2015, NEXE produces the proprietary NEXE POD, the first fully compatible single-serve beverage pod that is made of readily renewable materials for the Keurig brewing systems and is 100 percent compostable in an industrial composter. The innovative use of readily renewable materials combined with dynamic design, maintains the taste and integrity of the coffee. The NEXE POD provides a rich, great tasting, fully compostable product that will satisfy the consumer’s desire to brew a single-serve hot beverage in a sustainable and environmentally friendly way and enhances the “circle economy” where there is reuse and composting.

NEXE owns a fully paid for facility in Surrey, British Columbia that is 11,000 square feet. The facility is used both as the corporate headquarters and for research, development and manufacturing.

Figure 1 – NEXE Facility

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the forecast period of 2018-2025[1] . Although some of these pods are recyclable, unfortunately, many of these pods are thrown in the garbage where they ultimately end up in either a landfill or in the ocean resulting in significant environmental damage. NEXE’s fully compostable coffee NEXE POD intends to address this issue.

The NEXE POD is fully compostable in more than 35 days, disposes with kitchen scraps, and is non-toxic. Alternatively, for those pods that are recyclable and made of polypropylene plastic, only one third of recycling programs accept these pods. Furthermore, recycling methods in place do not provide convenience to the consumer and pods must be deconstructed.

NEXE believes that its patented packaging, enables it to not only enter multiple plant-based food and beverage packaging markets (soluble, creamers, ketchup, jam, etc.) but also helps prevent food waste.

The NEXE POD is manufactured from readily renewable resources that are fully compostable, biodegradable and advantageous for the environment. The dynamics inside a single-serve coffee brewer are harsh for compostable materials. There’s water, high temperatures, and high pressures, all of which are the same factors, which biodegrade compostable matter. The NEXE POD does not use glue or a simple heat-sealed process that plastic conventional coffee pods use to bring together the product.

NEXE’s pioneering approach was manufactured using fibrous plant materials available from bamboo, bagasse and other plants, polylactic acid and poly-L-lactide and is patented with the United States Patent and Trademark Office (Patent No. 8,960,489).

NEXE’s technology platform consists of the patented fully compostable NEXE POD as well as the proprietary equipment involved with the process of making the NEXE PODs. The equipment developed by NEXE to manufacture the NEXE POD has been highly customized by NEXE.

With NEXE’s proprietary equipment, NEXE is currently able to manufacture up to 20 million NEXE POD annual capacity in its facility but, the Resulting Issuer intends to increase its scale to a potential 220 million NEXE POD volume within the next few years. This volume will comprise of Nespresso format, K-Cup format, and soluble (hot chocolate, tea, etc.) markets. NEXE has various strategic partnerships with various government organizations, such as the City of Surrey, innovate British Columbia, the University of British Columbia, Western Economic Diversification Canada, the National Research Council Canada, and the Natural Sciences and Engineering Research Council to name a few. In addition to the NEXE governmental ties, NEXE has also won several awards for its technology. =

Furthermore, NEXE is in discussions with various commercial entities which could eventually serve as customers.

The single-serve market is growing at a rapid pace. The urgency to commercialize NEXE comes from a great need for an environmentally sound alternative to waste created by current non-compostable pods. NEXE is committed to the development of a solution and plan to build strategic partnerships with local roasters in the Pacific Northwest, Central Canada and California.

NEXE believes that its product can eradicate the waste created by single-serve pods. NEXE’s long-term goal is to attain a significant portion of the single-serve pod market share by creating a culture where consumers of other brands will feel compelled switch to its environmentally sustainable solution.

Principal Products or Services

NEXE’s principal product is the NEXE POD, which can be used for single serve beverages, such as, the Nespresso format, K-Cup format and soluble (hot chocolate, tea, etc.) markets.

NEXE anticipates that it will primarily focus on the sale of NEXE PODs for single serve coffee in Nespresso format and K-Cup format. The NEXE POD for the Nespresso market and the K-Cup market are near commercialization. To reach commercialization for the Nespresso market and the K-Cup market, NEXE must acquire certain customized automation equipment in order to attach a filter to NEXE PODs in mass quantities. NEXE anticipates this equipment will be acquired between the fourth quarter of 2020 and the first quarter of 2021. Certain coffee producers also require that NEXE’s facility obtain the SQFL Certification, which is anticipated in November 2020.

1 https://www.globenewswire.com/news-release/2020/03/16/2000705/0/en/Global-Coffee-Pod-and-Capsule-Market-isExpected-to-Reach-USD-29-2-Billion-by-2025-Fior-Markets.html.

NEXE plans to also produce and sell the NEXE POD for the soluble market, which is for single serve pre-made beverages (ie. not ground coffee and instead hot chocolate, latte, tea, etc.). As of the date of this Filing Statement, the NEXE POD for soluble markets is commercialized and ready for production upon receipt of purchase orders. The NEXE POD for the soluble market will be used in K-Cup machines.

NEXE intends to earn revenue from the sales of its fully compostable NEXE PODs to its clients as a contract manufacturer or co-packer. Although at the date of this Filing Statement there have not been any sales to date, NEXE is in discussions with several potential customers. Typically, what has been discussed and how NEXE believes it will earn revenue is through the sale of its NEXE PODs to significant coffee companies as well as companies that have a focus on soluble formats, such as tea or hot chocolate on a negotiated volume basis. To date, NEXE has signed the Kicking Horse LOU.

For example, NEXE would do a commercial deal with a well-known coffee company that is interested in having fully compostable coffee pods for single-serve coffee consumption. Having a fully compostable coffee pod for these coffee companies typically fits well into these specific coffee companies’ focus on sustainability, fair trade, and social consciousness.

The coffee and soluble format companies that NEXE has been in discussions with are those that cater to single-serve Keurig K-Cup and Nespresso consumers.

The production concept is as follows: the coffee companies will ship their whole beans to the NEXE facility and NEXE would grind those beans into a powder format. With the proprietary equipment at the NEXE facility, NEXE can take the powder format and pack it into the patented NEXE PODs for mass production. NEXE is able to do the same for tea and hot chocolate, for example, that it can do for coffee.

The NEXE PODs are in white label format but can be specially designed including the associated lid, carton and any packaging, for the purposes of NEXE’s customers. This enables NEXE’s customers to specifically tailor the NEXE PODs for their own marketing and branding schemes with retailers and end-consumers of their coffee.

Currently, NEXE PODs formats include: long filter (K-Cup format), short filter (K-Cup format), Nespresso format and soluble. Long and short filter and soluble format NEXE PODs all fit into the standard home and office single-serve Keurig coffee machine. The Nespresso format NEXE POD fits into the standard Nespresso single-serve coffee machine. Long filter would typically be used by K-Cup format customers which are looking for a stronger and more bold flavored coffee. The short filter K-Cup format customers would consist primarily of the major coffee chains who would resell the rebranded NEXE PODs via major grocery chains to their socially conscious coffee drinkers. Customers would typically consume tea or hot chocolate in single-serve format.

NEXE intends to monetize its white label NEXE PODs by pre-negotiating a price with its coffee customers, which, is also directly correlated to the volume of NEXE PODs necessary as well as any other functionality or additional services that NEXE might perform for its customers, such as with branding and marketing efforts, facilitating logistics, and potentially charging a premium for exclusivity on a particular packaging scheme.

NEXE has the technology platform, the resources, the know-how and the ability to permit its coffee and soluble customers to bundle NEXE PODs for its customers’ end consumers.

Going forward, NEXE plans to strengthen its patent portfolio by making additional patent applications on the processes involved in the production of the NEXE pod and compostable packaging. Further, NEXE sees the potential in doing licensing deals with eventual partners as well as participating in joint ventures when it makes sense with various CPG and Food and Beverage (“ F&B ”) companies.

Operations

NEXE has built and currently owns and maintains its NEXE POD technology platform, as the basis for its service offering. NEXE has spent over five years developing the technology and executives of NEXE have more than twenty years operating in the coffee and retail grocer industries. The technology platform consists of the patented fully compostable NEXE POD as well as the proprietary equipment involved with the process of making the NEXE PODs. Through this process, NEXE is able to:

Provide environmentally conscious customers with fully compostable NEXE PODs;
Provide customers with long filter and short filter K-Cup Keurig compliant NEXE PODs;

Provide customers with Nespresso-format compatible NEXE PODs;
Provide customers with a soluble format NEXE POD for tea and hot chocolate; and
License potential technology to various CPG and F&B companies.

NEXE is currently able to serve up to 20 million NEXE POD annual capacity in its facility but is expecting delivery of additional equipment by the end of 2020 as well as the beginning of 2021 which should expand NEXE POD capacity to approximately 220 million potential annual NEXE PODs. By being able to do so, NEXE should be able to significantly increase revenue by having the opportunity to serve larger volumes per customer and across a broader set up customers.

NEXE is able to produce its soluble NEXE PODs and will be able to begin taking orders in the fall of 2020 (as the Resulting Issuer). Additionally, NEXE is close to being able to fully-commercialize its K-Cup and Nespresso format capsules and believes that with some additional testing it should be able to enter into large quantity contracts utilizing those formats in 2021. To fully-commercialize the K-Cup and Nespresso format capsules, NEXE will need to:

install customized automation equipment, which will be delivered to its facility between fourth quarter 2020 and first quarter 2021;
for certain potential customers, obtain SQFL Certification at its facility, which is scheduled for November 2020; and
receive purchase orders from customers, which it is anticipating in the first quarter 2021.

See “Part IV – Information Concerning the Resulting Issuer – Narrative Description of Business”.

Furthermore, as NEXE continues to develop additional intellectual property, NEXE believes that it will be able to engage in licensing deals with various CPG companies.

NEXE’s sales and business development operations are presently conducted from Surrey, British Columbia. Because NEXE is based on the West Coast of North America, an environment which is a leader in socially conscious decision-making and sustainability, NEXE is a great company to attract potential customers in the region that are looking for fully compostable solutions as part of their mandate. NEXE believes that in addition to coffee and tea, that there could be other industry opportunities that might arise for its patented pod materials.

Attention to NEXE’s NEXE POD have come from “word of mouth” as well as from the media. NEXE’s management has also attended various investment and sustainability conferences, which has also increased the awareness of NEXE. Furthermore, discussions with potential customers has also come from the founding team members’ experience in the coffee industry over numerous years.

NEXE currently has 10 employees, including four executives, a coffee specialist, one administrative employee, two research and development (“ R&D ”) specialists, and two floor and equipment operators.

Market

Consumers are willing to purchase coffee machines to recreate the café style experience at home. As a result, key players in the coffee industry have introduced coffee pods that are compatible with popular machines, such as Nespresso and Keurig. According to reports, more than 25 million Keurig machines were installed into offices and homes across the United States in 2014[1] . Furthermore, consumers are also become more adept at purchasing these pods Direct to Consumer (“ DTC ”) to their home. From the report “Global Coffee Pods and Capsules Market – Growth, Trends, and Forecast (2019-2024),” released in February 2020 – the number of orders placed for coffee capsules grew 53% over the past 12 months and accounted for half of all coffee orders online. Nespresso and K-Cup, by Keurig, are leading the online sales of coffee pods in the United States. Furthermore, industry reports state that coffee capsules growth is between 7-8.5% YoY[2] .

Furthermore, according to the National Geographic, over161 million tons of plastic packaging is produced globally each year. Furthermore, in 2018, National Geographic estimated that “some 18 billion pounds of plastic waste flows into the

1 https://www.globenewswire.com/news-release/2020/03/16/2000705/0/en/Global-Coffee-Pod-and-Capsule-Market-isExpected-to-Reach-USD-29-2-Billion-by-2025-Fior-Markets.html

2 https://www.nationalgeographic.com/news/2018/05/plastics-facts-infographics-ocean-pollution/

oceans every year from coastal regions” and that “40 percent of plastic produced is packaging, used just once and then discarded.”[1]

Of the coffee capsules consumed every year, the majority are comprised of plastic. Although many of these pods can be recycled, many of the recyclable ones are still thrown out on a daily basis. As it is, with the rise of Environmental, Social, and Governance (“ ESG ”) funds and activism, a larger spotlight is being placed on companies that do not adhere to more socially acceptable methods of business and environmental awareness. The NEXE POD aims to gain market share of this huge market as more companies and consumers adopt sustainable and socially conscious mandates.

NEXE is well-situated to take advantage of the rise of the “circular economy,” which promotes a business model of reuse and return of biological materials, through anaerobic digestion, such as composting. Hundreds of municipalities in the EU, Canada, and the US are moving in the direction of introducing compost systems, making the NEXE POD a more likely alternative to the typical plastic coffee capsules out in the marketplace.

The management of NEXE is not aware of any material market controls or regulations that may affect the marketing of its products.

Marketing Plans and Strategies

NEXE’s strategy is to be a leading enabler of environmentally and sustainable packaging. NEXE believes this strategic focus has several benefits, including the ability to offer best-of-breed packaging, various and diversified revenue streams, additional potential licensing and technology development by-products, and is strongly positioned within a growing and more accepted ESG initiatives.

NEXE’s key near term objectives are to commercialize the NEXE POD on a mass scale. The corresponding plan to accelerate growth includes the following major areas of focus:

Commercialize NEXE PODs on a mass scale basis: Although NEXE has been able to demonstrate that it can package coffee-filled NEXE PODs on a small scale, NEXE is aiming to commercialize its NEXE PODs on a mass scale of hundreds of thousands of compostable capsules per month and growing in volume to meet pent-up demand. Increasing commercialization will come from both trial and error and also from the experiences of the NEXE team, which currently has experienced team members from the coffee, engineering, and retail grocery industries. NEXE intends to hire more regional sales team members to meet future demand.
Developing a strong pipeline of products: To expand its products pipeline and to offer more stock keeping units, NEXE continuously meets with CPG and F&B executives to understand their sustainable packaging needs. NEXE believes that by interacting with and understanding the pains of its potential customers, that this should be an ideal way to further commercialize new products and enable NEXE to grow from coffee and tea and into other opportunities.
Increasing its geographic scope: NEXE believes that as it begins to experience success with customers on the West Coast of North America, that this success will help NEXE gain increased traction into other geographies. Many of the potential customers that NEXE is dealing with are either funded by private equity groups and entities based internationally, which should help NEXE grow its customer base.
Developing additional IP: NEXE believes that with its existing proprietary NEXE POD and equipment that NEXE will be able to develop additional intellectual property for additional beverage pods. NEXE has already begun to work with a significant intellectual property consulting group that has performed an initial assessment of its potential patent portfolio. By increasing the number of patents, especially those that are inter-related, NEXE believes its positioning will move into (?) the packaging sector and intends to ensure protection of its proprietary process in making its NEXE PODs.
Increasing ability to do licensing deals: NEXE believes that by doing licensing and joint venture deals, that this will increase its revenue ability and not necessarily take the company’s resources away from its current core-focus of commercializing its NEXE PODs. Licensing deals will come from its internal R&D function and enable it to not only enhance its value within the CPG segment but potentially help it realize additional revenue streams.

1 https://www.natinoalgeogrpahic.com/news/2018/05/plastics-facts-infographics-ocean-pollution/

NEXE intends to generate revenue from sales of its fully compostable pods to its customers who will then sell the NEXE PODs into their distribution channel. Volume orders will dictate pricing and exclusivity. Additionally, NEXE intends to eventually license out its technology and develop a revenue stream from these opportunities as well as potential joint ventures that NEXE might eventually develop with other CPG and private equity companies.

Competitive Conditions

The market for coffee pods is fast growing, fragmented and dynamic. Larger, more established companies in the broader coffee pod space exist along with smaller emerging companies in the coffee pod space.

NEXE’s management believes that its primary competitive advantages stem from ongoing partnerships with existing suppliers, equipment manufacturers, government and university sources, and potential customers. NEXE believes that potential customers want to use NEXE’s NEXE PODs and innovative materials platform simply because they often do not have the time, human resources, technology, or ability to build an in-house solution. Current competitors in the environmental-friendly coffee pods space include Keurig’s recyclable K-Cups, Nespresso, PurPod, SF Bay Coffee, Eco Caps and Halo. Further, Maxwell House has recently announced that it has launched a compostable coffee pod. Unlike the NEXE PODs, the coffee pods of competitors are either recyclable or not fully compostable (ie. a portion of the pod cannot breakdown). Further, certain competitors pods state that their pods are 100% compostable but such pods do not break down within an acceptable timeframe as required by an industrial composter. Pods made of a recyclable material: are hot to the touch, do not decompose and involve a multi-step process to recycle the material in an environmentally friendly manner. Further, compostable pods made by competitors are: hot to the touch, not fully compostable (a portion of the pod does not breakdown), and have poor barriers resulting in leakage of the coffee. While there are several companies that operate in or adjacent to NEXE’s focus market, NEXE believes that current coffee pod competitors can also act as partners to sell a fully compostable coffee pod.

NEXE believes that the following factors provide it with advantages over certain of its competitors:

Competitors are too big: The major coffee companies such as Jacobs Douwe Egberts, JAB Holding Co, Nestle, Lavazza, Kraft Foods, Dunkin Brands, and Starbucks are too focused on their core business of overseeing existing portfolio companies. However, these companies, which are seven of the largest worldwide are acquiring many companies for their technology, regional presence, or niche focus, such as NEXE.
Too time consuming: Most of the smaller artisanal and fair trade coffee suppliers who would be initial customers, are too focused on their own businesses of supplying whole bean and organic coffee to their customers versus being more technology-driven, such as NEXE.
Non-specialized labour force: NEXE’s team consists of materials PhDs, engineers, and operators who have worked in the coffee, retail grocery, and capital markets sectors. The combined work experience and abilities of this team will help NEXE commercialize its current and future product pipeline.
Costs and know-how: NEXE’s specialized NEXE POD and manufacturing equipment has been developed over the last five years as a result of trial and error, venture capital funding and government support and sources. Over CAD$15 million has been invested in NEXE’s technology to date.

Future Developments

Following the completion of the Transaction, NEXE intends to build its organization with a focus on sales. These sales resources will be directed to target a broader set of long-term contracts with customers as well as licensing opportunities with potential partners throughout North America. NEXE has identified the following methods to expand its offering:

Continuing to develop relationships with artisanal and fair trade coffee companies to expand partnerships with like-minded environmentally focused brands. NEXE sees more companies focusing on becoming environmentally sound;
Expanding the NEXE portfolio of products beyond the coffee industry by developing new plant-based products to tailor to other CPG and F&B opportunities; and

Developing additional intellectual property opportunities to enhance licensing deals. As NEXE continues to focus on becoming an innovative materials company, new opportunities will present itself to create new technology to address these new demands.

In addition to its core focus on the West Coast, NEXE believes that its NEXE POD solution is scalable anywhere there is a consumption of coffee and solubles, such as tea. Moreover, NEXE will consider possible strategic acquisitions that may enhance its technology offering and market position.

To support its market strategy, NEXE intends to continue to increase its service delivery capacity within the scalable model it has already established, add selective technology functionality to its innovative materials platform to enhance specific vertical and or client offerings, and continue to refine its corporate infrastructure to ensure effective operation and corporate governance as a public company.

Proprietary Protection

NEXE has designed, engineered and built its own technology platform, including the patented NEXE POD and the underlying equipment used to build it. NEXE relies on a combination of trademarks, trade secrets, copyright laws and contractual restrictions to protect the proprietary aspects of its products and services. These legal protections afford only limited protection. NEXE may selectively pursue patenting of further technology developed in the future.

NEXE filed a trademark under serial no. 2027865 for the NEXE Innovations name. This application is pending examination.

NEXE also owns Patent No. 8,960,489, registered with the USPTO on February 24, 2015, for the NEXE POD. NEXE may file for patents regarding aspects of its pod and equipment technology, services and delivery method at a later date depending on the costs and timing associated with filing. NEXE has currently applied for seven provisional patents [in relation to parts of the NEXE POD, the packaging and a related system] and will be considering applying for more potential patents going forward.

NEXE may make investments to further strengthen its intellectual protection going forward, although no assurances can be given that it will be successful in such endeavors.

NEXE seeks to limit disclosure of its intellectual property by requiring employees, consultants, and partners with access to its proprietary platform and information to execute confidentiality agreements and noncompetition agreements and by restricting access to NEXE’s proprietary information.

Due to rapid technological change, NEXE believes that factors such as expertise and technological and creative skills of its personnel, new services and enhancements to its existing services are more important to establish and maintain an industry and technology advantage than other available legal protections.

Despite NEXE’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of its services or to obtain and use information that both companies regard as proprietary. The laws of many countries do not protect proprietary rights to the same extent as the laws of the United States or Canada. Litigation may be necessary in the future to enforce NEXE’s intellectual property rights or to defend against claims of infringement. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on NEXE’s business, operating results and financial condition. There can be no assurance that NEXE’s means of protecting its proprietary rights will be adequate or that its competitors will not independently develop similar services or products. Any failure by NEXE to adequately protect its intellectual property could have a material adverse effect on its business, operating results and financial condition.

Lending

NEXE does not have an investment policy, nor does it have any lending or investment restrictions. NEXE has not been involved in or filed bankruptcy, voluntary bankruptcy, receivership, or similar proceedings.

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MANAGEMENT’S DISCUSSION AND ANALYSIS

Information from Incorporation

The following table sets forth selected financial information about NEXE for the financial years ended May 31, 2020, 2019 and 2018. Such information is derived from the NEXE’s audited financial statements and should be read in conjunction with such financial statements, which are included in Schedule “C” to this Filing Statement.

Annual Information

Selected Financial Information	Year Ended May 31, 2020	Year Ended May 31, 2019	Year Ended May 31, 2018
Total revenues	-	-	-
Income from Operations	-	-	-
Total assets	$8,642,707	$5,365,292	$6,171,166
Total liabilities	$2,142,416	$1,298,020	$1,197,300
Operating Loss before other Items	$1,905,768	$1,349,191	$1,372,768
Net Loss	$2,187,603	$1,158,327	$1,130,860
Cash Dividends	-	-	-

Management’s Discussion and Analysis

Copies of the MD&As of NEXE for the financial years ended May 31, 2018, 2019 and 2020, are included as Schedule “D” to this Filing Statement. The MD&A should be read in conjunction with the NEXE’s financial statements for the same periods, together with the notes thereto, which are attached to this Filing Statement as Schedule “C”.

See “ Part I –Risk Factors” and “ Narrative Description of the Business–Market”.

DESCRIPTION OF THE SECURITIES

NEXE Share Capital

As of the date of this Filing Statement, NEXE has 18,182,004 NEXE Shares, 2,906,073 Series 1 Shares, 12,906,106 Series A Shares, 7,835,817 Series A Preferred Shares, 10,791,508 NEXE Warrants, and 5,644,020 NEXE Options issued and outstanding. No other securities convertible into or exchangeable for securities of NEXE are outstanding and no other rights to acquire securities of NEXE exist.

All of the NEXE Shares, Series 1 Shares, Series A Shares and Series A Preferred Shares are subject to a shareholders agreement (the “ Shareholders Agreement ”).

The authorized capital of NEXE consists of an unlimited number of voting common shares (referred to herein as NEXE Shares), and an unlimited number of Class A Preferred Shares (with three series of Class A Preferred Shares currently issued and outstanding, with the special rights and restrictions of each described in detail below). Holders of NEXE Shares are entitled to dividends if, as and when declared by the NEXE Board, to receive notice of and to attend all meetings of NEXE Shareholders, to one vote per NEXE Share at such meetings, and subject to the rights, privileges, restrictions and conditions attaching to any other class of shares, to receive the remaining property of NEXE upon dissolution. The NEXE Shares carry no pre-emptive, conversion or exchange rights, no redemption, retraction, repurchase, sinking fund or purchase fund provisions, and there are no provisions requiring the holder of NEXE Shares to contribute additional capital. NEXE is not subject to any restrictions on the issuance of additional securities, and there are no restrictions on the repurchase or redemption of NEXE Shares by NEXE, except to the extent that any such repurchase or redemption would render NEXE insolvent. Pursuant to the terms of a shareholders agreement, if NEXE Shareholders holding 66 2/3% of the NEXE Shares

have decided to sell their shares to a person (an “Offering Party”), the other shareholders will be required to sell their shares to the Offering Party.

The NEXE Class A Preferred Shares may be issued from time to time in one or more series and shall have special rights and restrictions as determined by the board of directors of NEXE with any one or more of the following special rights and restrictions including, the rate, amount or method of calculation of dividends, whether such dividends are cumulative, partly cumulative or noncumulative, the dates, manner and currency of payments of dividends and the date from which they accrue or become payable, if redeemable or purchasable (whether at the option of NEXE or holder or otherwise), the redemption or purchase prices and currencies thereof and terms and conditions of redemption or purchase, with or without provision for sinking or similar funds, the voting rights, if any, and any conversion, exchange or reclassification rights. The holders of NEXE Class A Preferred Shares as a class shall, in preference to the holders of the NEXE Shares, be entitled to receive dividends. The holders of the NEXE Class A Preferred Shares of any series shall also be entitled to such other preference, not inconsistent with these provisions, over the holders of the NEXE Shares.

The Class A Preferred Shares, Series 1 Shares (referred to herein as the Series 1 Shares) are entitled to receive notice of and vote at meetings of the NEXE shareholders. Each Class A Preferred Share, Series 1 is convertible into NEXE Shares at a conversion ratio of 1.5 NEXE Shares for each Series 1 Share (the “Series 1 Conversion Ratio”), at any time by the holder. The holders will automatically convert at the Series 1 Conversion Ratio upon completion of a: Qualified IPO: (a Qualified IPO meaning that the NEXE Shares have been unconditionally approved for listing and trading on the TSX, the TSXV, the NYSE, the London Stock Exchange or are quoted for trading on NASDAQ, immediately prior to completion of an best efforts basis public offering of Nexe Shares from treasury). Upon a dissolution event of NEXE, the holders are entitled to, in preference to the NEXE Shares, the greater of (i) Series 1 conversion price (approximately $0.27 per share, subject to adjustment) multiplied by 1.5, and (ii) the amount which the holder would receive if all of its Series 1 Shares were converted into NEXE Shares at the applicable conversion ratio and all declared and unpaid dividends.

The Class A Preferred Shares, Series A Shares (referred to herein as the Series A Shares) are entitled to receive notice of and vote at meetings of the NEXE shareholders. Each Class A Preferred Share, Series A is entitled to convert into NEXE Shares at a conversion ratio of 1 NEXE Share for each Class A Preferred Share, Series A (the “Series A Conversion Ratio”). The holders will automatically convert at the Series A Conversion Ratio upon completion of a Qualified IPO. Upon a dissolution event of NEXE, the holders are entitled to, in preference to the NEXE Shares, the greater of (i) the Series A conversion price (approximately $0.53 per share, subject to adjustment), and (ii) the amount which the holder would receive if converted into one NEXE Share and all declared and unpaid dividends.

The Class A Preferred Shares, Series A Preferred Shares (referred to herein as the Series A Preferred Shares) are entitled to receive notice of and vote at meetings of the NEXE shareholders. Each Class A Preferred Share, Series A Preferred is entitled to convert into NEXE shares at a conversion ratio of 1 NEXE Share for each Class A Preferred Share, Series A Preferred (the “Series A Preferred Conversion Ratio”). The holders will automatically convert at the Series A Preferred Conversion Ratio upon completion of a Qualified IPO (which is defined in the Articles of NEXE). Upon a dissolution event of NEXE, the holders are entitled to, in preference to the NEXE Shares, the greater of (i) the Series A Preferred Share conversion price (approximately $0.65 per share, subject to adjustment), and (ii) the amount which the holder would receive if all its Series A Preferred Shares were converted into NEXE Shares at applicable conversion ratio and all declared and unpaid dividends.

CONSOLIDATED CAPITALIZATION

The following table sets out NEXE’s consolidated capitalization:

Designation of Security	Amount Authorized	Amount outstanding as at August 31, 2020(2)	Amount outstanding as of a specific date within 30 days of the Filing Statement prior to giving effect to the Transaction as at ●, 2020
NEXE Shares	Unlimited	18,182,004	18,182,004


Class A Preferred Shares, Series 1	Unlimited	2,906,073	2,906,073
Class A Preferred Shares, Series A	Unlimited	12,906,106	12,906,106
Class A Preferred Shares, Series A Preferred	Unlimited	7,835,817	7,835,817
NEXE Warrants	N/A	10,791,508(1)	10,791,508(1)
NEXE Options	10% Stock Option Plan	5,644,020(3)	5,644,020(3)

Notes:

(1) 7,209,456 NEXE Warrants are exercisable at $1.10 per Series A Preferred Share for a period of two years. 332,052 NEXE Warrants are exercisable at $0.65 per NEXE Share for a period of two years. 3,250,000 NEXE Warrants are exercisable at $0.35 per NEXE Share until June 1, 2025.

(2) The deficit of the Resulting Issuer as set forth in the unaudited pro forma consolidated statement of financial position of the Resulting Issuer included in this Filing Statement as Schedule “E” is $9,367,590.

(3) Exercisable at prices between $0.275 to $0.80 per NEXE Share with varying expiry dates.

PRIOR SALES

Within the 12 months before the date of the Filing Statement, securities of NEXE have been issued as follows:

Date	Price	Number of Securities
October 25, 2019	$0.65	1,552,935 Units(2)
November 5, 2019	$0.65	1,367,800 Units(2)
November 5, 2019	N/A	109,424 NEXE Finder Warrants(3)
November 13, 2019	$0.65	88,060 Units(2)
November 13, 2019	$0.65	1,200 NEXE Finder Warrants(3)
November 27, 2019	$0.65	144,923 Units(2)
December 9, 2019	$0.65	780,500 Units(2)
December 13, 2019	$0.65	196,912 Units(2)
December 18, 2019	$0.65	219,000 Units(2)
December 18, 2019	N/A	95,714 NEXE Finder Warrants(3)
December 20, 2019	$0.65	90,000 Units(2)
December 20, 2019	N/A	107,333 NEXE Finder Warrants(3)
December 31, 2019	$0.65	1,623,408 Units(2)
February 10, 2020	$0.65	80,000 Units(2)
April 1, 2020	$0.65	647,669 Units(2)
April 1, 2020	$0.65	18,681 NEXE Finder Warrants(3)
June 3, 2020	$0.65	125,000 Series A Preferred Shares(4)

July 2, 2020	$0.65	251,361 Series A Preferred Shares(5)
July 2, 2020	$0.53	250,000 Series A Preferred Shares(5)
August 4, 2020	$0.65	230,383 Units(2)

Notes:

(1) The NEXE Shares are not posted for trading on any stock exchange.

(2) Each Unit consists of one Series A Preferred Shares and one NEXE Financing Warrant. Each NEXE Financing Warrant entitles the holder to purchase one additional Series A Preferred Share at a price of $1.10 per share for a period of two years from the date of issuance of the NEXE Financing Warrant.

(3) These NEXE Finder Warrants were issued to finders as finder’s warrants in connection with the various tranches of the Unit financing. Each NEXE Finder Warrant entitles the holder to purchase one additional Series A Preferred Share at a price of $0.65 per share for a period of two years.

(4) These Series A Preferred Shares were issued as a part of a settlement agreement regarding a previous business relationship. (5) These Series A Preferred Shares were issued in settlement of debt owed by NEXE.

EXECUTIVE COMPENSATION

For the purposes of this section, the Named Executive Officers are: the chief executive officer; chief financial officer; each of the four most highly compensated executive officers who were serving as executive officers at the end of the most recently completed financial year; and any additional individuals for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer of NEXE at the end of the most recently completed financial year. Based on the above criteria, the only former or current Named Executive Officers for NEXE are:

(a) Darren Footz: Chief Executive Officer;
(b) Raj Kang: Chief Financial Officer and Corporate Secretary;
(c) Steve Lockhart: Chief Operating Officer; and
(d) Ashvani Guglani: Vice President Finance.

Compensation Discussion and Analysis

The significant element of compensation awarded to the Named Executive Officers is a cash salary. NEXE does not presently have a long-term incentive plan for its Named Executive Officers. There is no policy or target regarding allocation between cash and non-cash elements of NEXE’s compensation program. The Board of Directors is solely responsible for determining compensation to be paid to NEXE’s Named Executive Officers. In addition, the Board of Directors reviews annually the total compensation package of each of NEXE’s executives on an individual basis.

In setting compensation rates for Named Executive Officers, NEXE compares the amounts paid to them with the amounts paid to executives in comparable positions at other comparable corporations. NEXE’s compensation payable to the Named Executive Officers is based upon, among other things, the responsibility, skills and experience required to carry out the functions of each position held by each Named Executive Officer and varies with the amount of time spent by each Named Executive Officer in carrying out his or her functions on behalf of NEXE.

In addition, NEXE has set forth certain criteria for increasing the salary and determining bonuses of certain Named Executive Officers. In particular, NEXE will increase base salary payable to certain NEOs, such as Darren Footz and Ashvani Guglani, in the event that certain revenue milestones are obtained, such as, total revenues of $10,000,000 and $20,000,000. Further, NEXE has also developed a criteria whereby certain NEOs, such as Mr. Footz and Mr. Guglani, will receive a performance bonuses upon NEXE reaching certain production milestones and selling a significant number of units, which milestones are 100 million, 250 million, 500 million, 750 million and 1 billion units, as set forth in more detail below :

a. $35,000 in NEXE Shares when NEXE commercializes a compostable soluble coffee pod;
b. $65,000 in NEXE Shares when NEXE lists shares on Canadian stock exchange ;
c. $50,000 in NEXE Shares upon delivery of first 4 land GPOD Automation model K
d. $100,000 in combination of cash or NEXE Shares upon delivery of second 4 lane GPOD Automation model K;
e. $150,000 in combination of cash or NEXE Shares upon successfully launching the Nespresso project;

f. $120,000 in combination of cash and NEXE Shares upon total sales of 100 million units through manufacturing by NEXE and another party through a license agreement;
g. $250,000 in combination of cash or NEXE Shares upon total sales of 250 million units through manufacturing by NEXE and another party through a license agreement;
h. $500,000 in combination of cash or NEXE Shares upon total sales of 500 million units through manufacturing by NEXE and another party through a license agreement;
i. $750,000 in combination of cash or NEXE Shares upon total sales of 750 million units through manufacturing by NEXE and another party through a license agreement; and
j. $1 million in combination of cash or NEXE Shares upon total sales of 1 billion units through manufacturing by NEXE and another party through a license agreement,

(the “ Performance Bonuses ”).

The NEXE Shares are to be issued at the greater of the Market Price (as defined by the rules of the Exchange) and $0.05 per share. All shares issued as Performance Bonuses are subject to acceptance of the TSX Venture Exchange.

The purpose of this compensation plan is to incentivize certain NEOs to significantly grow the business and revenue of NEXE and thereby adding significant value to the shareholders of NEXE.

NEXE has entered into an employment agreement, as amended and restated, with Darren Footz (the “ Footz Agreement ”) whereby Mr. Footz has agreed to serve as Chief Executive Officer of NEXE for a three year term. Under the terms of the Footz Agreement, Mr. Footz receives a salary of $180,000 per annum (the “ Footz Salary ”). The Footz Salary will increase to: (i) $240,000 per annum upon NEXE completing a minimum $5 million financing, (ii) $300,000 per annum upon NEXE obtaining $10,000,000 in total revenue, and (iii) $360,000 per annum upon NEXE obtaining $20,000,000 in total revenue. Mr. Footz may also receive a significant cash or NEXE Share payments upon the Performance Bonuses being satisfied. Further, if NEXE experiences a change of control Mr. Footz may, within 60 days of the triggering event provide 60 days written notice to NEXE and NEXE must pay a severance payment of (a) salary accrued to the date of termination; (2) two years of salary; (3) payment and immediate vesting of all Performance Bonuses; and (4) immediate vesting of all unvested stock options (the “ Severance Payment ”) to Mr. Footz. If NEXE terminates the Footz Agreement without cause, NEXE must pay Mr. Footz the Severance Payment.

NEXE has entered into a management consulting agreement, as amended and restated, (the “ Guglani Agreement ”) with 1060383 B.C. Ltd. (“ 1060383 ”) and Ashvani Guglani whereby Mr. Guglani has agreed to serve as Vice President Finance of NEXE. 1060383 is a company controlled by Mr. Guglani. Under the terms of the Guglani Agreement, 1060383 receives a fee of $15,000 per month (the “ 1060383 Fee ”). The 1060383 Fee will increase to: (i) $20,000 per month upon NEXE completing a minimum $5 million financing, (ii) $25,000 per month upon NEXE obtaining $10,000,000 in total revenue, and (iii) $30,000 per month upon NEXE obtaining $20,000,000 in total revenue. 1060383 may also receive significant cash or NEXE Share payments upon the Performance Bonuses being satisfied. Further, if NEXE experiences a change of control, Mr. Guglani may, within 60 days of the triggering event, provide 60 days written notice to NEXE and NEXE must pay Mr. Guglani the Severance Payment. If NEXE terminates the Guglani Agreement without cause, NEXE must pay Mr. Guglani the Severance Payment.

NEXE entered into an employment agreement with Steve Lockhart (the “ Lockhart Agreement ”) whereby Mr. Lockhart agreed to serve as general manager of NEXE and, in consideration of which, NEXE agreed to pay Mr. Lockhart $132,000 per annum and granted Mr. Lockhart stock options to acquire 200,000 NEXE Shares at $0.65 per NEXE Share until April 1, 2025. Mr. Lockhart may terminate the Lockhart Agreement with four weeks’ notice and NEXE may termination Mr. Lockhart’s employment without cause with (a) two months’ notice or two months’ base salary in lieu thereof; (2) one additional weeks’ notice and (c) a continuation of Mr. Lockhart’s benefit coverage.

NEXE entered into a consulting services agreement with RSK Management Consulting Inc. (“RSK”), a company controlled by Raj Kang, Chief Financial Officer of NEXE, whereby NEXE retained RSK as an independent contractor for Mr. Kang to act as Chief Financial Officer of NEXE and, in consideration of which, NEXE will pay RSK $7,000 per month plus GST (the “ Kang Agreement ”).

NEXE’s Stock Option Plan is intended to emphasize management’s commitment to the growth of NEXE. The grant of stock options, as a key component of the executive compensation package, enables NEXE to attract and retain qualified executives and employees. Stock option grants are based on the total of stock options available under the Stock Option Plan. In granting stock options, the Board of Directors reviews the total of stock options available under the Stock Option Plan and recommends grants to newly retained executive officers at the time of their appointment, and considers

recommending further grants to executive officers from time to time thereafter. The amount and terms of outstanding options held by an executive are taken into account when determining whether and how new option grants should be made to the executive. The exercise periods are to be set at the date of grant. The stock option grants may contain vesting provisions in accordance with NEXE’s Stock Option Plan.

NEXE has not permitted any Name Executive Officer or director to purchase any financial instruments. The Board has not considered the implications of the risks associated with NEXE’s compensation policies and practices.

Summary Compensation Table

The following table is a summary of compensation paid to the Named Executive Officers for the two most recent financial years:

Name and principal position					Non-equity incentive plan compensation	Non-equity incentive plan compensation
					($)
			Share-	Option-			Pension	All other	Total
	Year Ended (1)	Salary ($)	based awards ($)	based			value	compensation	compensation
				awards	Al	Long-	($)	($)	($)
				($)(6)	nnua incentive plans	term incentive plans
Darren Footz CEO(2)	2019 2020	$56,160 $75,400	$nil $nil	$nil $64,250	$nil $nil	$nil $nil	$nil $nil	$84,000 $77,000	$140,160 $216,650
Raj Kang CFO and Corporate Secretary(3)	2019 2020	$nil $nil	$nil $nil	$nil $nil	$nil $nil	$nil $nil	$nil $nil	$nil $35,000	$nil $35,000
Steve Lockhart COO(4)	2019 2020	$nil $33,000	$nil $nil	$nil $56,750	$nil $nil	$nil $nil	$nil $nil	$nil $nil	$nil $89,750
Ashvani Guglani VP Finance(5)	2019 2020	$nil $nil	$nil $nil	$nil $64,250	$nil $nil	$nil $nil	$nil $nil	$50,000 $107,000	$50,000 $171,250

(1) Year ended May 31, 2019 and 2020.
(2) Mr. Footz’s ‘All Other Compensation’ was a consulting fee paid to 11342749 BC Ltd., a company controlled by Mr. Footz. Mr. Footz’s compensation was $140,160 in 2019 (which included salary of $56,150 and a consulting fee paid to a company controlled by him of $84,000). On March 1, 2020, Mr. Footz’s salary increased to $180,000 pursuant to the Footz Agreement. As of March 1, 2020, Mr. Footz will not be charging a consulting fee through his company.
(3) Mr. Kang was appointed CFO on January 1, 2020. ‘All Other Compensation’ was paid to RSK Management Consulting Inc., a company controlled by Mr. Kang.

(4) Mr. Lockhart was appointed COO on March 1, 2020.

(5) Mr. Guglani’s ‘All Other Compensation’ was paid to 1060383 BC Ltd., a company controlled by Mr. Guglani.
(6) The fair value of the option based awards is estimated using Black-Scholes pricing model. The Black Scholes model was used due to the straightforward nature of options and the fact that it is a commonly used model.

Management Contracts

No management functions of NEXE are performed by a Person other than the directors or officers of NEXE.

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth for each Named Executive Officer option based award outstanding as at the financial year ended May 31, 2020.

		Option-Based Awards	Option-Based Awards		Share-based Awards	Share-based Awards	Share-based Awards
Name	Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date	Value of unexerci sed in- the money options ($)	Number of shares or units of shares that have not vested (#)	Market or payout value of share- based awards that have not vested ($)	Market or payout value of vested share-based awards not paid out or distributed ($)
Darren Footz(1) CEO	250,000	$0.53	June 1, 2024	N/A
Steve Lockhart COO	50,000 200,000	$0.65 $0.65	Oct 19, 2024 Apr 1, 2025	N/A N/A
Ashvani Guglani(2) VP Finance	355,859 250,000	$0.28 $0.53	October 2, 2025 June 1, 2024	N/A N/A

Note:

(1) Subsequent to the financial year ended May 31, 2020, NEXE granted Mr. Footz options to purchase 250,000 NEXE Shares at $0.65 per share expiring on June 1, 2025.

(2) Subsequent to the financial year ended May 31, 2020, NEXE granted Mr. Guglani options to purchase 250,000 NEXE Shares at $0.65 per share expiring on June 1, 2025.

Pension Plan Benefits

NEXE does not provide a defined benefit plan or a defined contribution plan for any of its executive officers, nor does it have a deferred compensation plan for any of its executive officers.

Termination of Employment and Change of Control Benefits

Other than as set forth above under “Compensation Discussion and Analysis”, there are no change of control benefits for any Named Executive Officers. Upon Completion of the Transaction, all of the current directors and officers of the Issuer will resign and the board of directors of the Resulting Issuer will consist of five directors, comprised of Darren Footz, Raj Kang, Steve Lockhart, Haytham Hodaly and Graham Gilley. Management of the Resulting Issuer will be comprised of Darren Footz as CEO, Raj Kang as CFO and Corporate Secretary and Steve Lockhart as COO. See “ Part IV – Information Concerning the Resulting Issuer – Directors and Executive Officers ”.

Director Compensation

Other than the Named Executive Officers, NEXE has not paid any other compensation to non-executive directors.

Outstanding Share-Based Awards and Option-Based Awards

Other than the Named Executive Officers, NEXE has not issued any share-based or option-based awards to non-executive directors.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth all compensation plans under which equity securities of NEXE are authorized for issuance as of the end of the financial year ended May 31, 2020.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans
Plan Category
Equity compensation plans approved by securityholders	-	N/A	-

Equity compensation plans not approved by securityholders	4,294,020	$0.55	-
Total	4,294,020	$0.55	-

Note : As of the date of this Filing Statement, there are 5,644,020 NEXE Options issued and outstanding.

NON-ARM’S LENGTH PARTY TRANSACTIONS

Since its incorporation, other than disclosed herein, NEXE has not completed any acquisitions of assets or services or provisions of assets or services from (i) any director, officer, or promoter of NEXE, (ii) an Insider or a securityholder disclosed in this Filing Statement as a principal securityholder of NEXE, either before or after giving effect to the Transaction; or (iii) an Associate or Affiliate of any Person described in (i) or (ii).

LEGAL PROCEEDINGS

To the best of management’s knowledge, there are no material pending legal proceedings to which NEXE is or is likely to be a party, or of which any of its property is the subject matter.

MATERIAL CONTRACTS

NEXE has entered into the following material contracts:

Contribution Agreement between NEXE and Western Economic Diversification Canada.
Kang Agreement between NEXE and RSK Management Consulting Inc
Footz Agreement between NEXE and Darren Footz.
Guglani Agreement between NEXE, 1060383 B.C. Ltd. and Ashvani Guglani.
The Definitive Agreement.
The Private Placement Agency Agreement.

Copies of this agreement may be inspected without charge during regular business hours at the offices of NEXE at #109 – 19353 22[nd] Avenue, Surrey, BC V3S 3S6, at any time during ordinary business hours until the Completion of the Transaction and for a period of 30 days thereafter.

PART IV- INFORMATION CONCERNING THE RESULTING ISSUER

The Transaction will result in all of the issued and outstanding NEXE Shares being acquired by the Resulting Issuer, such that following the Closing, Subco and NEXE will be amalgamated and Amalco shall be a wholly-owned subsidiary of the Resulting Issuer. The following information is presented assuming Completion of the Transaction, and is reflective of the projected business, financial and share capital position of the Resulting Issuer assuming the completion thereof. This section only includes information respecting the Resulting Issuer, on a consolidated basis, after the Transaction that is materially different from information provided earlier in this Filing Statement. See also the pro forma consolidated balance sheet of the Resulting Issuer attached hereto as Schedule “E”.

CORPORATE STRUCTURE

The Resulting Issuer will be organized under the BCA and its corporate name is expected to be changed to “Nexe Innovations Inc.” (or such other name as may be acceptable to the Issuer, NEXE and the Exchange) prior to or following Completion of the Transaction.

The Resulting Issuer’s head office and registered and records office will be located at #109 – 19353 22[nd] Avenue, Surrey, BC V3S 3S6.

Upon Completion of the Transaction, Subco and NEXE will be amalgamated and continue as Amalco, subject to the terms and conditions of the Definitive Agreement. As a result, the Resulting Issuer will directly own all of the issued and outstanding common shares of Amalco. The board of directors of Amalco will be Darren Footz, Ashvani Guglani and Steven Lockhart.

Following the Transaction, the Shareholders of NEXE will become Shareholders of the Resulting Issuer.

The following diagram sets forth the corporate structure of the Resulting Issuer following the Transaction:

==> picture [307 x 248] intentionally omitted <==

----- Start of picture text -----

Nexe Innovations Inc.
(formerly, Whatcom Capital Corp.)
(the “Resulting Issuer”)
100% equity
Amalco
(private B.C. Company)
100% equity 100% equity
NEXE Technology Corp. GPAK Holdings Inc.
(private B.C. Company) (private B.C. Company)
----- End of picture text -----

NEXE Technology Corp. also is the sole shareholder of Scepter Industries Ltd. The Resulting Issuer plans to dissolve Scepter Industries Ltd. following closing of the Transaction.

NARRATIVE DESCRIPTION OF THE BUSINESS

Stated Business Objectives

Upon Completion of the Transaction, the Resulting Issuer will continue NEXE’s current business. The Resulting Issuer intends to use the proceeds of the Transaction (including the Concurrent Private Placement) to:

Commercialize the NEXE POD. The Resulting Issuer plans to complete the commercialization of the NEXE PODs for Keurig and Keurig compatible brewing systems. In order to complete this objective, the Resulting Issuer has ordered new customized automation equipment that will be delivered between the fourth quarter of 2020 and first quarter of 2021.
Increase Production Capacity to 420 Million Units. The Resulting Issuer plans to scale up its production to 420 million units by purchasing additional customized automation equipment. It is anticipated that NEXE will have the capacity to produce up to: (i) 220 million units by the fourth quarter 2021, and (ii) 420 million units by mid-2022.
Ensure Protection of Proprietary Property . The Resulting Issuer will continue with the NEXE strategy of increasing its intellectual property of its products and equipment by filing additional patent applications. Further, the Resulting Issuer plans to ensure all molding for the NEXE PODs are done at its facility instead of out-ofcountry. By keeping molding and other facets of the intellectual process in-country, this better enables NEXE to not only have full control of the intellectual process but also significantly reduces time to development and costs while minimizing time associated with logistics. Each molding machine will cost approximately $520,000 with the first molding machine to be delivered to the Resulting Issuer in the first quarter of 2021.
Secure Purchase Orders for NEXE PODs. As a pre-requisite to receiving significant purchase orders of at least 50 million units of NEXE pods, a number of these coffee producers will require the Resulting Issuer to be certificated under Safe Quality Food (SQFL). The Resulting Issuer anticipates it will achieve SQFL certification in November 2020 and plans to pursue significant purchase orders in the first quarter of 2020. It is anticipated that having the SQFL certification should make it easier for the Resulting Issuer to enter into large purchasing orders.
Additional Production Space. The Resulting Issuer plans to increase its space to produce its NEXE PODs. In order to increase its production space, the Resulting Issuer plans to lease additional space and will need to upgrade the infrastructure contained in space. The Resulting Issuer plans to lease new premises in the first quarter of 2021.

Milestones

Over the next twelve months, the Resulting Issuer’s milestones to accomplish its business objectives are:

Purchase automation equipment to increase production to up to 220 million units annually, with the completion of the Concurrent Private Placement, and up to 420 million units annually, with the completion of the Concurrent Private Placement and assuming completion of the maximum NEXE Unit Financing. In order to increase capacity to 220 million units, the Resulting Issuer anticipates the purchase of such additional automation equipment will be approximately $2,500,000 and will commence in the fourth quarter of 2020. Further, to achieve capacity of 420 million units, the Resulting Issuer anticipates such automatization equipment will cost approximately $5,000,000.
Purchase molding equipment to produce molding in-house and protect intellectual property of the Resulting Issuer. The Resulting anticipates each molding machine will cost approximately $520,000. The Resulting Issuer plans to purchase four molding machines, with the completion of the Concurrent Private Placement, and up to six molding machines, with the completion of the Concurrent Private Placement and assuming completion of the maximum NEXE Unit Financing. The purchase of the molding machines will commence in the first quarter of 2021.
Increase and expand the sales force of the Resulting Issuer. The Resulting Issuer has allocated a budget of $500,000 and anticipates this will be done throughout the twelve months following closing of the Transaction.

Implement marking awareness to increase product awareness of the Resulting Issuer. The Resulting Issuer has allocated a budget of $500,000 and anticipates this will be done throughout the twelve months following closing of the Transaction.
Complete the development of new potential products.
The Resulting Issuer plans to increase add an additional 10,000 square feet of production space to its current facility. The Resulting Issuer has allocated a budget of $500,000 in connection with anticipated lease payments and infrastructure upgrades.

See “ Part III - Information Concerning NEXE – General Development of the Business ” and “ Part III - Information Concerning NEXE – Narrative Description of the Business ”.

DESCRIPTION OF SECURITIES

The authorized capital of the Resulting Issuer will consist of an unlimited number of Resulting Issuer Shares without par value. Following the Completion of the Transaction, there will be approximately 58,814,286 Resulting Issuer Shares, with completion the Concurrent Private Placement, and 64,439,286 Resulting Issuer Shares, assuming completion of the Concurrent Private Placement and the maximum NEXE Unit Financing, will be issued and outstanding, on an undiluted basis. See “ Part IV – Information Concerning the Resulting Issuer – Pro Forma Consolidated Capitalization ”.

Resulting Issuer Shares

The Resulting Issuer Shares will have all of the same attributes and characteristics as the existing Issuer Shares. For a full description of such rights and restrictions, see “ Part II – Information Regarding the Issuer – Description of the Securities – Attributes and Characteristics of Shares ”.

Resulting Issuer Stock Options

It is anticipated that the Resulting Issuer will grant stock options to directors, executive officers and other eligible optionees in the future in accordance with the Resulting Issuer Stock Option Plan and Exchange policies. See “ Part IV – Information Concerning the Resulting Issuer – Stock Option Plan ” for more information. Immediately after the Closing, the Resulting Issuer intends to have 5,644,020 stock options at various exercise prices. The 3,250,000 NEXE Performance Warrants set forth below will form part of the Resulting Issuer Stock Option Plan.

Resulting Issuer Warrants

Assuming completion of the Concurrent Private Placement, it is anticipated that the Resulting Issuer will have: (i) 7,209,456 NEXE Financing Warrants, (ii) 332,052 NEXE Finder’s Warrants, (iii) 3,250,000 NEXE Performance Warrants, (iv) 150,000 IPO Agent’s Warrants, (v) 5,718,750 Financing Warrants, and (vi) 692,585 Agent’s Warrants.

Assuming completion of the Concurrent Private Placement and the maximum NEXE Unit Financing, it is anticipated that the Resulting Issuer will have: (i) 7,209,456 NEXE Financing Warrants, (ii) 332,052 NEXE Finder’s Warrants, (iii) 3,250,000 NEXE Performance Warrants, (iv) 150,000 IPO Agent’s Warrants, (v) 5,718,750 Financing Warrants, (vi) 692,585 Agent’s Warrants; and (vii) 2,812,500 NEXE Unit Warrants.

PRO FORMA CONSOLIDATED CAPITALIZATION

The following table sets out the capitalization of the Resulting Issuer on Completion of the Transaction and the Concurrent Private Placement. This table should be read in conjunction with the unaudited pro forma consolidated statement of financial position of the Resulting Issuer included in this Filing Statement as Schedule “E”.

Designation of Security	Amount authorized or to be authorized	Amount outstanding after giving effect to the Transaction	Amount outstanding as of the date of this Filing Statement after giving effect to the Transaction, the Concurrent Private	Amount outstanding as of the date of this Filing Statement after giving effect to the Transaction, the Concurrent Private

		and the Consolidation	Placement and the Consolidation	Placement, NEXE Unit Financing and the Consolidation
Common Shares	Unlimited	47,283,036(1)(2)	58,814,2862)(3)	64,439,286(2)(3)

Notes:

(1) On an undiluted basis.

(2) Includes the current Issuer Shares of 4,000,000 (post-Consolidation) and the 43,283,035 Resulting Issuer Shares to be issued to the NEXE Shareholders.

(3) Includes 11,437,500 Resulting Issuer Shares pursuant to the Concurrent Private Placement and the 93,750 CF Shares.

(4) Includes 11,437,500 Resulting Issuer Shares pursuant to the Concurrent Private Placement, the 93,750 CF Shares and 5,625,000 NEXE Shares pursuant to the maximum NEXE Unit Financing.

(5) The working capital surplus of the Resulting Issuer as set forth in the unaudited pro forma consolidated statement of financial position of the Resulting Issuer included in this Filing Statement as Schedule “E” is $15,410,166.

See “ Part II – Information Concerning the Issuer – Proposed Financings ” for more information on the Concurrent Private Placement.

FULLY-DILUTED SHARE CAPITAL

The following table sets out the number and percentage of securities of the Resulting Issuer proposed to be outstanding on a fully diluted basis after giving effect to the Transaction (assuming completion of the Concurrent Private Placement and Consolidation) and other matters:

Description of Security	Number of Securities (Assuming Concurrent Private Placement)	Percentage of Total Securities (Assuming Concurrent Private Placement)(2)	Number of Securities (Assuming Concurrent Private Placement and NEXE Unit Financing)(1)	Percentage of Total Securities (Assuming Concurrent Private Placement and NEXE Unit Financing)(1) (3)
Issuer Shares outstanding as at the date of this Filing Statement (post- Consolidation)	4,000,000	4.88%	4,000,000	4.42%
Resulting Issuer Shares issued to Shareholders of NEXE at Closing	43,283,036	52.80%	43,283,036	47.87%
Resulting Issuer Shares issued pursuant to the Concurrent Private Placement(1)	11,437,500	13.95%	11,437,500	12.65%
Resulting Issuer Shares issued pursuant to the NEXE Financing	0	-	5,625,000	6.22%
Resulting Issuer Shares issuable pursuant to the exercise of NEXE Financing Warrants	7,209,456	8.80%	7,209,456	7.97%


Resulting Issuer Shares issuable pursuant to the exercise of Financing Warrants	5,718,750	6.98%	5,718,750	6.33%
Resulting Issuer Shares issuable pursuant to the exercise of NEXE Unit Financing Warrants	-	-	2,812,500	3.11%
Resulting Issuer Shares issuable pursuant to the exercise of IPO Agent Warrants	150,000	0.18%	150,000	0.17%
Resulting Issuer Shares issuable pursuant to the exercise of Agent Warrants	692,585	0.84%	692,585	0.77%
Resulting Issuer Shares issuable pursuant to the exercise of NEXE Finders Warrants	332,052	0.41%	332,052	0.37%
Resulting Issuer Shares issuable pursuant to the exercise of Performance Warrants	3,250,000	3.96%	3,250,000	3.59%
CF Shares	93,750	0.11%	93,750	0.10%
Resulting Issuer Shares reserved for issuance under the Resulting Issuer Stock Option Plan (NEXE Options, Issuer Options,)	5,804,020	7.08%	5,804,020	6.42%
Total (fully diluted)	81,971,149	100%	90,408,649	100%

AVAILABLE FUNDS AND PRINCIPAL PURPOSES

Available Funds

The Issuer had working capital (on an unaudited basis) of approximately $621,796 as at October 31, 2020, being the most recent month end prior to the date of this Filing Statement. Based on this working capital position, and assuming Completion of the Transaction (including the Concurrent Private Placement and NEXE Unit Financing), the Resulting Issuer is expected to have the following funds available to it for the next 12 month period:

Source of Funds:	Estimated Amount (Concurrent Private Placement)	Estimated Amount (Concurrent Private Placement and NEXE Unit Financing)


Estimated working capital of Issuer as at October 31, 2020	$621,796	$621,796
Estimated working capital of NEXE as at October 31, 2020	$2,439,900	$2,439,900
Estimated net proceeds(1)from the Concurrent Private Placement	$8,213,932	$8,213,932
Estimated net proceeds from the NEXE Unit Financing	-	$4,500,000(2)
Total Available Funds	$11,275,628	$15,775,628

Notes:

(1) In connection with the Concurrent Private Placement, the Agent will receive a Broker Commission. The Issuer anticipates all costs related to the Transaction and Concurrent Private Placement (including legal fees, fees and expenses of the Concurrent Private Placement, audit fees, transfer agent fees and filing fees and the cash portion of the Corporate Finance Fee) will be $936,068.

(2) Assumes the completion of the maximum NEXE Unit Financing.

Dividends

There will be no restrictions in the Resulting Issuer’s articles, or elsewhere, other than customary general solvency requirements, which would prevent the Resulting Issuer from paying dividends following Completion of the Transaction. However, neither the Issuer nor NEXE has declared dividends to date and it is expected that the Resulting Issuer will not declare dividends in the near future. The directors of the Resulting Issuer will determine if and when dividends should be declared and paid in the future based upon the Resulting Issuer’s financial position at the relevant time.

Principal Purposes of Funds

Principal Uses of Available Funds for the 12 Month Period Ended subsequent to Completion of the Transaction	Estimated Amount(1) (Concurrent Private Placement)	Estimated Amount(1) (Concurrent Private Placement and NEXE Unit Financing)
Operating expenses, including staffing & further expansion of manufacturing	$917,000	$917,000
Purchase of additional equipment to increase production to up to 220 million units (assuming Concurrent Private Placement) and up to 420 million units (assuming Concurrent Private Placement and NEXE Unit Financing)	$2,500,000	$5,000,000
Purchase of molding equipment at a rate of $520,000 per machine	$2,080,000	$3,120,000
Research and Development	$500,000	$500,000
General and Administrative Expenses, including Legal & Accounting	$275,000	$275,000
Sales, Marketing & Investor Relations	$1,150,000	$1,150,000
Facility Expansion and Infrastructure Upgrade	-	$500,000


Total Uses	$7,422,000	$11,462,000
Unallocated working capital	$3,853,628	$4,313,628

Notes:

(1) Less the Broker Commission as set out in the “Source of Funds” table above.

The Resulting Issuer intends to spend the funds available to it upon Completion of the Transaction to further its stated business objectives as set forth in the table above. There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for the Resulting Issuer to achieve its stated business objectives. See “ Part IV – Information Concerning the Resulting Issuer – Narrative Description of the Business - Stated Business Objectives ” for more information.

PRINCIPAL SECURITYHOLDERS

Except as set forth below, upon Completion of the Transaction, there is no Person who will own of record or beneficially, directly or indirectly, or exercise control or direction over, Resulting Issuer Shares carrying 10% or more of all voting rights attached to the outstanding Resulting Issuer Shares.

Name and Municipality of Residence	Number of Shares(1)	Percent (Concurrent Private Placement)(2) (4)	Percent (Concurrent Private Placement and NEXE Unit Financing)(3) (4)
Darren Footz Surrey, BC	11,092,949	18.86%	17.21%

Notes:

(1) Assuming no Subscription Receipts are purchased by Mr. Footz under the Concurrent Private Placement.

(2) Based on the 58,814,286 Resulting Shares issued and outstanding upon Completion of the Transaction and Concurrent Private Placement and including the 93,750 CF Shares.

(3) Based on the 64,439,286 Resulting Shares issued and outstanding upon Completion of the Transaction, Concurrent Private Placement and completion the maximum NEXE Unit Financing and including the 93,750 CF Shares.

(4) Assuming exercise of all stock options and share purchase warrants, Mr. Footz will hold 11,592,949 Resulting Issuer Shares representing 14.14%, assuming completion of the Concurrent Private Placement, and 12.82%, assuming completion of the Concurrent Private Placement and the maximum NEXE Unit Financing.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets out the name, municipality and province of residence, proposed position with the Resulting Issuer, current principal occupation, period during which served as a director or executive officer, and the number and percentage of Resulting Issuer Shares which will be beneficially owned, directly or indirectly, or over which control or direction is proposed to be exercised, by each of the Resulting Issuer’s directors and executive officers following Completion of the Transaction.

Name, Municipality of Residence and Proposed Position(s) with the Resulting Issuer	Principal Occupation or Employment for Last Five Years	Director Since	Anticipated number and percentage of Resulting Issuer Shares owned, directly or indirectly, or over which control or direction is proposed to be exercised on Completion of the Transaction, the Concurrent Private Placement and the Consolidation(1)
Darren Footz Surrey, BC CEO and Director	Chief Executive Officer of NEXE Innovations Inc.	April 2015	11,092,949 Shares (18.86%(2)and 18.21%(3))
Raj Kang New Westminster, BC	RSK Management Consulting Inc. since September 2005 and	May 2020	Nil

Name, Municipality of Residence and Proposed Position(s) with the Resulting Issuer	Principal Occupation or Employment for Last Five Years	Director Since	Anticipated number and percentage of Resulting Issuer Shares owned, directly or indirectly, or over which control or direction is proposed to be exercised on Completion of the Transaction, the Concurrent Private Placement and the Consolidation(1)
CFO and Corporate Secretary	Chief Financial Officer of various public companies.
Steve Lockhart Delta, BC COO	Director of Operations of NEXE Innovations Inc. since March 2020 and Director of Retail Operations of Choices Markets Ltd. from November 1990 to February 2020.	April 2020	76,923 Shares (0.13%(2)and 0.12%(3))
Ashvani Guglani Vancouver, BC VP Finance and Director	VP Finance of NEXE Innovations Inc. since April 2015 and Director of NEXE Innovations Inc. since July 2015.	April 2015 (VP Finance) July 2015 (Director)	2,100,001 Shares (3.57%(2)and 3.26%(3))
Haytham Hodaly New Westminster, BC Director	Senior Vice President Corporate Development of Wheaton Precious Metals Corp.	Proposed	Nil
Graham Gilley North Vancouver, BC Director	Director of Risk Management of Mulgrave School.	Proposed	Nil
Killian Ruby North Vancouver, BC Director	Chief Executive Officer and President at Malaspina Consultants Inc., and currently CFO of a number of junior public companies listed on TSX Venture Exchange.	Proposed	Nil

Notes:

(1) At the Completion of the Transaction, the Concurrent Private Placement, and the Consolidation the Resulting Issuer will have approximately 58,814,286 Resulting Issuer Shares issued and outstanding on an undiluted basis, assuming completion of the Concurrent Private Placement, and approximately 64,439,286 Resulting Issuer Shares issued and outstanding on an undiluted basis, assuming completion of the Concurrent Private Placement and the maximum NEXE Unit Financing.

(2) Assumes completion of the Concurrent Private Placement.

(3) Assumes completion of the Concurrent Private Placement and the maximum NEXE Unit Financing.

Upon the Completion of the Transaction, the Concurrent Private Placement and the Consolidation, the directors and officers of the Resulting Issuer as a group will beneficially own, directly or indirectly, or exercise control or direction over an aggregate of 13,269,873 Resulting Issuer Shares, representing approximately 22.56%, assuming completion of the Concurrent Private Placement, and 20.59%, assuming completion of the Concurrent Private Placement and the maximum NEXE Unit Financing, of the issued and outstanding Resulting Issuer Shares (on an undiluted basis). Each director’s term of office will expire at the next annual meeting of the Shareholders of the Resulting Issuer unless re-elected at such meeting.

The Resulting Issuer’s audit committee will initially be comprised of Killian Ruby, Haytham Hodaly and Graham Gilley. All members are considered financially literate. There are no other committees of the Board at this time.

Additional biographic information about the proposed directors and officers of the Resulting Issuer is provided below.

Darren Footz – Vancouver, British Columbia, Canada – Chief Executive Officer and Director (Age: 51)

Darren Footz is the founder, CEO, and a director of NEXE and will hold the same positions in the Resulting Issuer. Mr. Footz was the past President of Granville Island Coffee Company Ltd., a coffee company that he built in less than 5 years

from a small artisan roaster to a recognized national coffee brand. He is the innovative mind behind the 100% plant-based and fully compostable NEXE POD.

Mr. Footz will devote 100% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as an officer and director of the Resulting Issuer. It is anticipated that Mr. Footz will enter into a noncompetition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Footz will be an employee of the Resulting Issuer.

Raj Kang – New Westminster, British Columbia, Chief Financial Officer and Corporate Secretary (Age: 47)

Raj Kang is the Chief Financial Officer and Corporate Secretary of NEXE and will hold the same positions in the Resulting Issuer. Mr. Kang is the founder & president of RSK Management Consulting Inc. a private company that provides management services and has over 25 years of accounting and finance experience. He has proficient knowledge of capital markets, raising capital, M&A and corporate regulation of publicly listed companies.

Mr. King will devote 90% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as an officer and director of the Resulting Issuer. It is anticipated that Mr. Kang will enter into a noncompetition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Kang will be an independent contractor of the Resulting Issuer.

Steve Lockhart - Delta, British Columbia, Chief Operating Officer (Age: 45)

Steve Lockhart is the Chief Operating Officer and a director of NEXE and will be Chief Operating Officer in the Resulting Issuer. Mr. Lockhart has over 20 years of experience in management positions with Choices Markets, a $100 million revenue local chain grocer. He played a key role in building the business from start-up to stability and profitability through the opening of 10 large retail stores .

Mr. Lockhart will devote 100% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as an officer of the Resulting Issuer. It is anticipated that Mr. Lockhart will enter into a non-competition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Lockhart will be an employee of the Resulting Issuer.

Ashvani Guglani - Vancouver, British Columbia, Vice President Finance and Director (Age: 40)

Ashvani Guglani is the Vice President Finance and a director of NEXE and will hold the same positions in the Resulting Issuer. Mr. Guglani spent 12 years in capital markets with a national investment bank in Vancouver. As an original founder of NEXE, he plays an integral role in helping NEXE in all capacities across financing (public, private and government), operations, and marketing. Mr. Guglani has a BBA from BCIT.

Mr. Guglani will devote 90% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as an officer and director of the Resulting Issuer. It is anticipated that Mr. Guglani will enter into a noncompetition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Guglani will be an independent contractor of the Resulting Issuer.

Haythem Hodaly – Port Coquitlam, British Columbia, Director (Age: 50)

Haythem Hodaly is a proposed director of the Resulting Issuer on closing of the Transaction. Mr. Hodaly is currently the Senior Vice President, Corporate Development of Wheaton Precious Metals and brings with him more than 23 years of experience in analyzing mining opportunities.Prior to joining Wheaton Precious Metals, Mr. Hodaly had spent more than 16 years in the North American securities industry, most recently as Director and Mining Analyst, Global Mining Research, at RBC Capital Markets. Prior to this, Mr. Hodaly held the position of Co-Director of Research and Senior Mining Analyst at Salman Partners Inc., in addition to holding the titles of Vice President and director of the firm. Mr. Hodaly is an engineer with a Bachelor of Applied Science in Mining and Mineral Processing Engineering and a Master of Engineering, specializing in Mineral Economics, both obtained from the University of British Columbia. Mr. Hodaly is also a Director of GoldSource Mines Inc., a position he has held since 2017.

Mr. Hodaly will devote 25% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as a director of the Resulting Issuer. It is anticipated that Mr. Hodaly will enter into a non-competition or

non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Hodaly will be an independent contractor of the Resulting Issuer.

Graham Gilley – North Vancouver, British Columbia, Director (Age: 56)

Graham Gilley is a proposed director of the Resulting Issuer on closing of the Transaction. Mr. Gilley is currently a Director of Enterprise Risk Management and Data Protection at Mulgrave School - The International School of Vancouver. For the past 15 years, he has been responsible for the leadership, innovation, governance, and management of the school’s operational, financial, and strategic risks. By developing tools, practices, and policies that analyze and report enterprise risks, he has been able to create and implement an enterprise risk management framework in compliance with applicable regulations and strategic priorities. Previously, Graham was Executive Director of Ideation & Development with Cloud9 Secure Digital Services, where he drove the creation of applications to help power mobile online banking in the Canadian market.

Mr. Gilley holds degrees from Trent University and the University of Calgary.

Mr. Gilley will devote 20% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as a director of the Resulting Issuer. It is anticipated that Mr. Gilley will enter into a non-competition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Gilley will be an independent contractor of the Resulting Issuer.

Killian Ruby – North Vancouver, British Columbia, Director (Age: 44)

Mr. Ruby is the president and chief executive officer of Malaspina Consultants Inc. in Vancouver, and focuses on clients in the resource and junior public sector. Mr. Ruby advises clients on matters related to financial management and public company reporting, and is particularly adept at handling complex issues and multiple stakeholders with a collaborative, team-based approach. Prior to joining Malaspina, Mr. Ruby was an assurance partner at Wolrige Mahon LLP (now Baker Tilly Canada) working predominantly with resource and other junior public companies, and formerly was a senior manager with KPMG LLP working on a range of public companies and reporting issuers.

Mr. Ruby received his chartered accountant designations from Canada and Ireland in 2010 and 2002, respectively.

Mr. Ruby will devote 20% of his time to the business of the Resulting Issuer in order to complete his duties and responsibilities as a director of the Resulting Issuer. It is anticipated that Mr. Ruby will enter into a non-competition or non-disclosure agreement with the Resulting Issuer. It is expected that Mr. Ruby will be an independent contractor of the Resulting Issuer.

PROMOTERS

To the knowledge of the board of directors of NEXE and the board of directors of the Issuer, there will be no promoter of the Resulting Issuer and, to the knowledge of the board of directors of NEXE, there has been no promoter of NEXE since NEXE’s incorporation to the date of this Filing Statement.

CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES

Except as disclosed below, as at the date of this Filing Statement and within the ten years before the date of this Filing Statement, no director, officer or promoter of the Resulting Issuer or a securityholder anticipated to hold a sufficient number of securities of the Resulting Issuer to affect materially the control of the Resulting Issuer is or has been a director, officer or promoter of any person or company (including the Resulting Issuer), that while that person was acting in that capacity:

(a) was the subject of a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or
(b) became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

PENALTIES OR SANCTIONS

No proposed director, officer or promoter of the Resulting Issuer, or a securityholder anticipated to hold sufficient securities of the Resulting Issuer to affect materially the control of the Resulting Issuer, has:

(a) been the subject of any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b) been subject to any other penalties or sanctions imposed by a court or regulatory body, including a selfregulatory body that would be likely to be considered important to a reasonable securityholder making a decision about the Transaction.

PERSONAL BANKRUPTCIES

Except as set forth below, no proposed director, officer or promoter of the Resulting Issuer, or a securityholder anticipated to hold sufficient securities of the Resulting Issuer to affect materially the control of the Resulting Issuer, or a personal holding company of such persons, has, within the past ten years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement, or compromise with creditors or had a receiver, receiver manager, or trustee appointed to hold the assets of that individual.

Mr. Footz filed a consumer proposal on January 27, 2011 and such consumer proposal was fully performed by May 17, 2011.

CONFLICTS OF INTEREST

Conflicts of interest may arise as a result of the directors and officers of the Resulting Issuer holding positions as directors or officers of other companies. Some of the directors and officers have been and will continue to be engaged in the identification and evaluation of assets and businesses, with a view to potential acquisition of interests in businesses and companies on their own behalf and on behalf of other companies, and situations may arise where the directors and officers will be in direct competition with the Resulting Issuer. Conflicts, if any, will be subject to the procedures and remedies under the BCA or other applicable corporate legislation.

OTHER REPORTING ISSUER EXPERIENCE

The following table sets out the proposed directors, officers and promoters of the Resulting Issuer that are, or have been within the last five years, directors, officers or promoters of other reporting issuers:

Name	Name of Reporting Issuer	Stock Exchange	Position	From	To
Raj Kang	Viridis Holdings Corp.	TSXV	Chief Financial Officer	October 2018	Present
	Kootenay Silver Inc.	TSXV	Chief Financial Officer and Corporate Secretary	October 2007	Present
Haytham Hodaly	Wheaton Precious Metals Corp.	TSX & NYSE	Senior VP, Corporate Development	January 2012	Present
	Goldsource Mines Inc.	TSXV	Director	March 2017	Present

	Killian Ruby	Gold Springs Resources Corp.	TSX	CFO	August 2018	Present
		Callinex Mines Inc.	TSXV	CFO	February 2019	Present
		Equity Metals Corporation	TSXV	CFO Director	May 2019 July 2019	Present Present

EXECUTIVE COMPENSATION

Upon Completion of the Transaction, the Resulting Issuer will have four executive officers being Darren Footz (Chief Executive Officer), Raj Kang (Chief Financial Officer and Corporate Secretary), Steve Lockhart (Chief Operating Officer) and Ashvani Guglani (Vice President Finance) who will continue to be paid the annual salaries or consulting fees set forth above pursuant to the Footz Agreement, the Guglani Agreement, the Lockhart Agreement and the Kang Agreement.

Compensation Discussion and Analysis

When determining compensation policies and individual compensation levels for the Resulting Issuer’s executive officers, a variety of factors, will be considered including: the overall financial and operating performance of the Resulting Issuer, each executive officer’s individual performance and contribution towards meeting corporate objectives; each executive officer’s level of responsibility and length of service; and industry comparables.

The Resulting Issuer’s compensation philosophy for its executive officers will follow three underlying principles: to provide compensation packages that encourage and motivate performance; to be competitive with other companies in the industry in which it operates, which are of similar size and scope of operations, so as to attract and retain talented executives; and to align the interests of its executive officers with the long-term interests of the Resulting Issuer and its Shareholders through equity related programs.

Compensation for the NEOs of the Resulting Issuer and other key employees will be determined in connection with or following the Closing and will be in line with similar development-stage companies.

Option-Based Awards

The Resulting Issuer intends to grant option-based awards, being awards under an equity incentive plan of options, including share options, share appreciation rights, and similar instruments that have option-like features by granting stock options to its directors, officers and employees. Resulting Issuer Options are expected to be granted under the Resulting Issuer Stock Option Plan. Subject to the Completion of the Transaction, Resulting Issuer Options will be granted to certain executive officers, directors and consultants of the Resulting Issuer in accordance with the Definitive Agreement.

Please see “See “ Part II – Information Concerning the Issuer – Stock Option Plan ” for a discussion of the Resulting Issuer Option Plan, which is the same as the Issuer Option Plan.

Pension Plan Benefits

The Resulting Issuer does not plan to have a pension plan, defined benefit plan, defined contribution plan or deferred compensation plan that provides for payments or benefits to the NEOs at, following, or in connection with retirement.

Termination of Employment, Change in Responsibilities and Employment Contracts

The Resulting Issuer may enter into employment or consulting agreements with any NEOs or key employees in connection with the Closing or in the 12 months following Completion of the Transaction, which agreements may include terms with respect to: (a) the resignation, retirement or other termination of employment of the Named Executive Officer or key employee; (b) a change in control of the Resulting Issuer; or (c) a change in the Named Executive Officer’s responsibilities following a change in control of the Resulting Issuer.

DIRECTORS COMPENSATION

Summary Compensation for Directors

The Resulting Issuer expects to grant option-based awards to its directors upon Completion of the Transaction. In addition, the Resulting Issuer may decide to grant option-based awards to its directors during the 12 month period following Completion of the Transaction. Details of such grants will be announced by the Resulting Issuer in the event such a determination is made.

It is not anticipated that any directors of the Resulting Issuer who are not NEOs, will receive, in the 12 months following Completion of the Transaction, compensation pursuant to:

(a) any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments;
(b) any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as director; or
(c) any arrangement for the compensation of directors for services as consultants or experts.

The Resulting Issuer expects to compensate directors primarily through the grant of Stock Options and reimbursement of expenses incurred by such persons acting as directors of the Resulting Issuer.

Pension Plan Benefits for Directors

The Resulting Issuer does not plan to have a pension plan, defined benefit plan, defined contribution plan or deferred compensation plan that provides for payments or benefits to the directors, other than NEOs, at, following, or in connection with retirement.

INDEBTEDNESS OF DIRECTORS AND OFFICERS

No director or officer of the Issuer or NEXE, nor any proposed director or officer of the Resulting Issuer, is or has been indebted to the Issuer or NEXE at any time other than disclosed herein.

INVESTOR RELATIONS ARRANGEMENTS

Upon completion of the Transaction, NEXE plans to engage Hybrid Financial Ltd. (“Hybrid Financial”) to provide investor relations and digital marketing services to the Resulting Issuer:

The Resulting Issuer will engage Hybrid Financial to provide investor relations services for total consideration of CDN $90,000. Hybrid Financial will provide services primarily related to communications with numerous registered brokers. The term of this engagement is for six months.

OPTIONS TO PURCHASE SECURITIES

Stock Option Plan

The Resulting Issuer will adopt a fixed stock option plan (the “Resulting Issuer Stock Option Plan”) whereby a total of 11,762,857 Resulting Issuer Shares, assuming completion of the Concurrent Private Placement, and up to 12,887,857 Resulting Issuer Shares of the Resulting Issuer, assuming completion of the Concurrent Private Placement and NEXE Unit Financing, may be reserved for issuance pursuant to the exercise of options or NEXE Performance Warrants. The Resulting Issuer Stock Option Plan will be subject to shareholder approval.

The Resulting Issuer Stock Option Plan is being established to provide incentive to directors, officers, employees, management company employees and consultants who provide services to the Resulting Issuer. The intention of management in proposing the Resulting Issuer Stock Option Plan is to increase the proprietary interest of such persons in the Resulting Issuer and thereby aid the Resulting Issuer in attracting, retaining and encouraging the continued involvement of such persons with the Resulting Issuer.

Options and NEXE Performance Warrants may be granted under the Resulting Issuer Stock Option Plan to such service providers of the Resulting Issuer and its affiliates, if any, as the Board of Directors may from time to time designate. The exercise price of option grants will be determined by the Board of Directors, but cannot be lower than the price permitted by the TSX Venture Exchange. The Resulting Issuer Stock Option Plan provides that the number of common shares that may be reserved for issuance to any one individual upon exercise of all stock options or NEXE Performance Warrants held by such individual may not exceed 5% of the issued Resulting Issuer Shares, if the individual is a director or officer, or 2% of the issued Resulting Issuer Shares, if the individual is a consultant or engaged in providing investor relations services, on a yearly basis. Options granted to persons providing investor relations services will vest quarterly over a 12 month period.

Subject to earlier termination, all options granted under the Stock Option Plan will expire not later than the date that is ten years from the date that such options are granted. In the event that an optionee ceases to be a director, officer, employee or consultant, the option will terminate within ninety days. In the event of the death of an optionee, the options will only be exercisable within 12 months of such death. Options granted under the Stock Option Plan are not transferable or assignable other than by will or other testamentary instrument or pursuant to the laws of succession.

Under the policies of the Exchange, if the grant of options under the proposed Resulting Issuer Stock Option Plan to insiders of the Resulting Issuer, together with all of the Resulting Issuer’s outstanding stock options, could result at any time in:

(a) the grant to insiders of the Resulting Issuer, within a 12 month period, of a number of options and NEXE Performance Warrants exceeding 10% of the issued Resulting Issuer Shares; or
(b) the issuance to any one optionee, within a 12 month period, of a number of shares exceeding 5% of the issued Resulting Issuer Shares,

the Resulting Issuer must obtain disinterested shareholder approval. The policies of the Exchange and the terms of the Resulting Issuer Stock Option Plan also provide that disinterested shareholder approval will be required for any agreement to decrease the exercise price of options previously granted to insiders of the Resulting Issuer. The term disinterested shareholder approval means approval by a majority of the votes cast at the Meeting other than votes attaching to shares of the Resulting Issuer beneficially owned by insiders of the Company to whom options may be granted under the proposed Stock Option Plan.

Stock Option Grants and NEXE Performance Warrants

The following table provides information as to options to purchase Resulting Issuer Shares that, as of the date of this Filing Statement, are expected to be outstanding immediately following the Completion of the Transaction. At Closing, the Resulting Issuer expects to have 5,804,020 stock options issued and outstanding, which includes the 5,644,020 NEXE Options and 160,000 Issuer Options (post-Consolidation), and 3,250,000 NEXE Performance Warrants.

Upon Completion of the Transaction and the Consolidation, there would be up to 11,762,857 Resulting Issuer Shares, assuming completion of the Concurrent Private Placement, and up to 12,887,857 Resulting Issuer Shares, assuming completion of the Concurrent Private Placement and NEXE Unit Financing, reserved for issuance under the Resulting Issuer’s Stock Option Plan with 5,804,020 Resulting Issuer Stock Options and 3,250,000 NEXE Performance Warrants granted.

The following table sets forth the number of Resulting Issuer Options and NEXE Performance Warrants that are expected to be granted and outstanding upon Completion of the Transaction (post-Consolidation):

		Number of
		Common Shares
	Number of	Reserved Under	Exercise
	Common Shares	NEXE	Price Per
	Reserved Under	Performance	Common
Group	Option	Warrants	Share	Expiry Date
Officers as Group

		Number of
		Common Shares
	Number of	Reserved Under	Exercise
	Common Shares	NEXE	Price Per
	Reserved Under	Performance	Common
Group	Option	Warrants	Share	Expiry Date
Darren Footz, CEO	250,000	-	$0.53	June 1, 2024
	250,000	-	$0.65	June 1, 2025
Steve Lockhart, COO	50,000	-	$0.65	October 19, 2024
	200,000	-	$0.65	April 1, 2025
	-	100,000	$0.35	June 1, 2025
Ashvani Guglani, VP	355,859	-	$0.28	October 2, 2015
Finance	250,000	-	$0.535	June 1, 2024
	250,000	-	$0.65	June 1, 2025
Total	1,605,859	100,000
Directors as Group
Haytham Hodaly	200,000	-	$0.80	Five Years from the Listing Date
Graham Gilley	200,000	-	$0.80	Five Years from the Listing Date
Killian Ruby	200,000	-	$0.80	Five Years from the Listing Date
Total	600,000	-
Employees as Group	232,929	-	$0.28 to	Up to June 1, 2025
			$0.65
Consultants as Group	3,365,232		$0.28 to	Up to June 1, 2025
			$0.65
	-	3,150,000	$0.35	June 1, 2025

ESCROWED SECURITIES

CPC Escrow Shares

The following table sets out, as at the date of this Filing Statement, the number and percentage of CPC Escrow Shares held in escrow under the CPC Escrow Agreement prior to giving effect to the Transaction, and the number and percentage of Reporting Issuer Shares that will be held in escrow after giving effect to the Transaction, but before giving effect to the initial release of the CPC Escrow Shares under the CPC Escrow Agreement.

Name and Municipality of Residence of Securityholder	Designation of class	Prior to giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	Prior to giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, NEXE Unit Financing and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, NEXE Unit Financing and the Consolidation


		Number of securities held in escrow	Percentage	Number of securities to be held in		Number	Percentage of class(3)
						of
						securities to be held in escrow
			of class(1)	escrow	Percentage of
					class(2)
Darren Tindale Vancouver, BC	Issuer Shares	500,000	20%	200,000	0.34%	200,000	0.31%

Name and Municipality of Residence of Securityholder	Designation of class	Prior to giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	Prior to giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, NEXE Unit Financing and the Consolidation	After giving effect to the Transaction, the Concurrent Private Placement, NEXE Unit Financing and the Consolidation
		Number of securities held in escrow	Percentage of class(1)	Number of securities to be held in escrow		Number	Percentage of class(3)
						of
					Percentage of class(2)	securities to be held in escrow
Jeff Tindale Vancouver, BC	Issuer Shares	500,000	20%	200,000	0.34%	200,000	0.31%
Martin Cronin Kelowna, BC	Issuer Shares	500,000	20%	200,000	0.34%	200,000	0.31%
Greg Clough Surrey, BC	Issuer Shares	500,000	20%	200,000	0.34%	200,000	0.31%
Cannon Bridge Capital Corp. Vancouver, BC	Issuer Shares	500,000	20%	200,000	0.34%	200,000	0.31%

Note:

(1) Based on 10,000,000 Issuer Shares issued and outstanding as at the date of this Filing Statement.

(2) Assumes completion of the Concurrent Private Placement resulting in 58,814,286 Resulting Issuer Shares issued and outstanding on an undiluted basis.

(3) Assumes completion of the Concurrent Private Placement and NEXE Unit Financing resulting in 60,064,286 Resulting Issuer Shares issued and outstanding on an undiluted basis.

As mentioned, the CPC Escrow Shares are currently held in escrow pursuant to the CPC Escrow Agreement. The Transfer Agent is the escrow agent for the purposes of the CPC Escrow Agreement. There are 2,500,000 CPC Escrow Shares currently in escrow. At the time of Completion of the Transaction, it is expected that each of the persons listed in the table above will hold 1,000,000 Resulting Issuer Shares subject to escrow in the amount listed beside such person’s name.

The CPC Escrow Shares are currently subject to the release schedule set out in Schedule B(1) to the Exchange’s Form 2F – CPC Escrow Agreement. Pursuant to Schedule B(1) of Form 2F, 10% of the CPC Escrow Shares are to be released upon the date of issuance of the Final Exchange Bulletin respecting the Transaction and an additional 15% of the CPC Escrow Shares are to be released every 6 months thereafter until all CPC Escrow Shares have been released (36 months following the date of issuance of the Final Exchange Bulletin). Should the Resulting Issuer be accepted by the Exchange as a Tier 1 Issuer, the CPC Escrow Shares will be released on an accelerated schedule, as set out in Schedule B(2) of Form 2F. Pursuant to Schedule B(2) of Form 2F, 25% of the CPC Escrow Shares would be released upon the date of issuance of the Final Exchange Bulletin and an additional 25% of the CPC Escrow Securities would be released every 6 months thereafter, until all CPC Escrow Shares have been released (18 months following the date of issuance of the Final Exchange Bulletin).

The CPC Escrow Agreement provides that the CPC Escrow Shares are held in escrow pursuant to its terms and the beneficial ownership thereof may not be sold, assigned, hypothecated, transferred within escrow or otherwise dealt with in any manner without the prior written consent of the Exchange. In the event of the bankruptcy of an escrow Shareholder, provided the Exchange does not object, the CPC Escrow Shares held by such escrow Shareholder may be transferred to the trustees in the bankruptcy or such person legally entitled to the CPC Escrow Shares which shares will remain in escrow subject to the CPC Escrow Agreement. In the event of the death of an escrow Shareholder, provided the Exchange does not object, the CPC Escrow Shares held by the escrow Shareholder will be released from escrow.

Value Escrow Shares

Pursuant to the policies of the Exchange and in addition to the CPC Escrow Shares, the following securities of the Resulting Issuer are expected to be held in escrow after giving effect to the Transaction (the “ Transaction Escrowed Securities ”) (on a non-diluted basis):

Name and Municipality of Residence of Securityholder	Number of Resulting Issuer Shares and Options Held in Escrow(1)	Percentage of Resulting Issuer Shares(1)	Percentage of Resulting Issuer Shares(2)
Darren Footz Surrey, B.C.	11,092,949 Shares 500,000 Options	18.86%	17.21%
Ashvani Guglani Vancouver,B.C.	2,100,001 Shares 855,859 Options	3.57%	3.26%
Robert Smith Vancouver,BC	1,600,001 Shares	2.72%	2.48%
Varshney Capital Corp. Vancouver,B.C.	1,600,000 Shares	2.72%	2.48%
GCUP Technology Corp. Surrey,B.C.	389,052 Shares	0.66%	0.60%
Bhupinder Singh Nagra Burnaby,BC	700,000 Shares	1.19%	1.09%
Tejinder Sekhon Calgary,AB	700,000 Shares	1.19%	1.09%
Steve Lockhart Delta, B.C.	76,923 Shares 250,000 Options 100,000 NEXE Performance Warrants	0.13%	0.12%
Total:	18,258,926 Shares 1,605,859 Options 100,000 NEXE Performance Warrants	31.05%	28.34%

Notes:

(1) Assumes completion of the Concurrent Private Placement resulting in 58,814,286 Resulting Issuer Shares issued and outstanding on an undiluted basis

(2) Assumes completion of the Concurrent Private Placement and the maximum NEXE Unit Financing resulting in 64,439,286 Resulting Issuer Shares issued and outstanding on an undiluted basis.

Pursuant to the terms of the Definitive Agreement and due to the fact the Resulting Issuer will be a Tier 2 industrial issuer, a total of 18,258,926 of the Resulting Issuer Shares, 1,605,859 Resulting Issuer Options and 100,000 NEXE Performance Warrants held by Darren Footz, Ashvani Guglani, Roberts Smith, Varshney Capital Corp., GCUP Technology Corp., Bhupinder Singh Nagra, Tejinder Sekhon, Haytham Hodaly, Graham Gilley and Killian Ruby, will be subject to the release schedule set out in “Schedule B(2) – Tier 2 Value Security Escrow Agreement” of Exchange Form 5D, which provides for the release of 10% of the securities on the date of the Final Exchange Bulletin and the release of 15% of the securities on the dates that are 6, 12, 18, 24, 30 and 36 months from the date of the Final Exchange Bulletin.

Voluntary Hold Periods

In addition to the CPC escrow and seed share resale hold periods described above, certain of the Resulting Issuer Shares will be subject to voluntary hold periods pursuant to the Definitive Agreement, as follows: (i) 18,182,004 released as to 10% on the Listing Date and an additional 15% every six months after the Listing Date (which is described in detail above); (ii) 7,835,817 released as to 25% on the Listing Date, an additional 25% three months after the Listing Date and the remaining 50% six months after the Listing Date; (iii) 12,906,106 released as to 20% on the Listing Date, an additional 30% on four months after the Listing Date and an additional 50% on eight months after the Listing Date and; (iv) 4,359,109 released as to 15% on the Listing Date, an additional 25% four months after the Listing Date and an additional 30% every three months thereafter.

AUDITOR, TRANSFER AGENT AND REGISTRAR

Auditor

Upon Completion of the Transaction, MNP LLP will be appointed as auditor of the Resulting Issuer. Their offices are located at Suite 2200, MNP Tower, 1021 West Hastings Street, Vancouver, BC V6E 0C3.

Transfer Agent and Registrar

Upon Completion of the Transaction, the transfer agent and registrar for the Resulting Issuer will continue to be TSX Trust located at 2700 – 650 West Georgia Street, Vancouver, B.C., V6B 4N9.

GENERAL MATTERS

Agent Relationship

NEXE entered into an engagement agreement dated June 24, 2020 whereby the Agent agreed to provide financial advisory services to NEXE for $16,750 per month (the “ Advisory Services Agreement ”). The term of the Advisory Services Agreement was two (2) months.

EXPERTS

Opinions

The following is a list of persons or companies whose profession or business gives authority to a statement made by a person or company named in this Filing Statement as having prepared or certified a part of that document or report described in the Filing Statement:

Shim & Associates LLP, the auditor to the Issuer and Subco; and
MNP LLP, the auditor to NEXE.

Interests of Experts

To the knowledge of managements of the Issuer (with respect to information about the Issuer) and NEXE (with respect to information about NEXE), as of the date hereof, no person or company whose profession or business gives authority to a statement made by the person or company and who is named as having prepared or certified a part of this Filing Statement or prepared or certified a report or valuation described or included in this Filing Statement, and no Associate or Affiliate of such person, have any beneficial interest, direct or indirect, in the securities or property of the Issuer or NEXE.

Expertised Reports

No expertised report was prepared to support the recommendations of the board of directors of the Issuer for the Transaction.

OTHER MATERIAL FACTS

To the knowledge of managements of the Issuer (with respect to information about the Issuer) and NEXE (with respect to information about NEXE), there are no other material facts relating to the Issuer, NEXE, the Resulting Issuer, and the Transaction that are not otherwise disclosed in this Filing Statement or are necessary for the Filing Statement to contain full, true and plain disclosure of all material facts relating to the Transaction.

BOARD APPROVAL

The Board of the Issuer has approved the contents of this Filing Statement. Where information contained in this Filing Statement rests particularly within the knowledge of a person other than the Issuer, the Issuer has relied upon information furnished by that person, including NEXE.

CERTIFICATE OF THE ISSUER

The foregoing constitutes full, true and plain disclosure of all material facts relating to the securities of Whatcom Capital Corp. assuming Completion of the Qualifying Transaction.

DATED November 30, 2020.

WHATCOM CAPITAL CORP.

“Darren Tindale”

_______ Darren Tindale Director, CEO, CFO, Corporate Secretary & Promoter

On behalf of the Board of Whatcom Capital Corp.

“Jeff Tindale”

_______ Jeff Tindale Director

“Greg Clough”

_______ Greg Clough Director

CERTIFICATE OF NEXE

The foregoing, as it relates to Nexe Innovations Inc. constitutes full, true and plain disclosure of all material facts relating to the securities of Nexe Innovations Inc.

DATED November 30, 2020.

NEXE TECHNOLOGY INC.

“Darren Footz”

_______ Darren Footz Chief Executive Officer & Director

“Raj Kang”

_______ Raj Kang Chief Financial Officer

On behalf of the Board of Nexe Innovations Inc.

“Ashvani Guglani”

_______ Ashvani Guglani Director

“Steve Lockhart”

_______ Steve Lockhart Director

ACKNOWLEDGEMENT – PERSONAL INFORMATION

“ Personal Information ” means any information about an identifiable individual, and includes information contained in any Items in the attached filing statement that are analogous to Items 4.2, 11, 12.1, 15, 17.2, 18.2, 23, 24, 26, 31.3, 32, 33, 34, 35, 36, 37, 38, 40 and 41 of TMX Form 3B2 - Information Required In A Filing Statement For A Qualifying Transaction (“ Form 3B2 ”), as applicable.

The undersigned hereby acknowledges and agrees that it has obtained the express written consent of each individual to:

(a) the disclosure of Personal Information by the undersigned to the Exchange (as defined in Appendix 6B) pursuant to Form 3B2; and

(b) the collection, use and disclosure of Personal Information by the Exchange for the purposes described in Appendix 6B or as otherwise identified by the Exchange, from time to time.

DATED November 30, 2020.

WHATCOM CAPITAL CORP.

“Darren Tindale”

_______Darren Tindale Director, CEO, CFO, Corporate Secretary & Promoter

SCHEDULE “A”

Financial Statements of the Issuer

[see attached]

WHATCOM CAPITAL CORP.

(A Capital Pool Company) Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited)

(Expressed in Canadian dollars)

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Condensed Interim Statements of Financial Position

(Unaudited) (Expressed in Canadian dollars)

July 31, 2020	October 31, 2019 (Audited)
Assets Current Cash (Note 3) $ 730,212 Amounts receivable 3,150 Prepaids 1,120	$ 124,383 - -
Total Assets 734,482	124,383
Liabilities Current Accounts payable and accrued liabilities 24,221 Due to related party (Note 5) 5,250	5,925 -
Total Liabilities 29,471	5,925
Shareholders’ Equity Share capital (Note 4) 780,134 Contributed Surplus (Note 4) 49,145 Deficit (124,268)	125,000 - (6,542)
Total Shareholders’Equity 705,011	118,458
Total Liabilities and Shareholders’Equity $ 734,482	$ 124,383

Nature of Operations and Going Concern (Note 1) Subsequent Events (Note 7)

Approved and authorized for issuance on behalf of the Board of Directors on September 28, 2020 by:

/s/ Darren Tindale /s/ Martin Cronin

Darren Tindale, Director

Martin Cronin, Director

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

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Condensed Interim Statements of Net and Comprehensive Loss (Unaudited) (Expressed in Canadian dollars)

Three Months Ended July 31, Nine Months Ended July 31,	Three Months Ended July 31, Nine Months Ended July 31,
2020 $ 2019 $ 2020 $	2019 $
General and Administration Expenses Bank fees and interest 139 - 223 Filing fees 13,485 - 31,783 Professional fees 26,759 - 51,202 Rent 4,000 - 4,000 Share-based compensation 29,560 - 29,560 Transfer agent 958 - 958	- - - - - -
Net and Comprehensive Loss (74,901) - (117,726)	-
Net lossper share, basic and diluted (0.02) - (0.07)	-
Weighted average shares outstanding, basic and diluted(Note 6) 4,809,783 - 1,614,964	-

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

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Condensed Interim Statement of Changes in Shareholders’ Equity (Unaudited) (Expressed in Canadian dollars)

	Common Shares Number of Shares Amount Contributed Surplus Deficit Equity - $ - $ - $ - $ - 2,500,000 125,000 - - 125,000 - - - (6,542) (6,542) 2,500,000 $ 125,000 $ - $ (6,542) $ 118,458 7,500,000 750,000 - - 750,000 - (75,281) - - (75,281) - (19,585) 19,585 - - - - 29,560 - 29,560 - - - (117,726) (117,726) 10,000,000 $ 780,134$ 49,145 $ (124,268) $ 705,011
Balance, September 19, 2019 (Date of Incorporation) Shares issued for cash (Note 4) Netlossforthe period
Balance, October 31, 2019 Shares issued for cash (Note 4) Share issue costs (Note 4) Fair value of warrants issued (Note 4) Share-based compensation (Note 4) Netlossforthe period
Balance, July 31, 2020

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

WHATCOM CAPITAL CORP.

(A Capital Pool Company)

Condensed Interim Statements of Cash Flows (Unaudited) (Expressed in Canadian dollars)

			September 19,
		Nine Months	2019
		Ended	(Incorporation)
		July 31,	to October 31,
		2020	2019
			(Audited)
Cash Flows from Operating Activities
Net loss for the period	$	(117,726) $	(6,542)
Items not affecting cash:
Share-based compensation		29,560	-
Changes in non-cash working capital items
Increase in amounts receivable		(3,150)	-
Increase in prepaids		(1,120)	-
Increase in accounts payable and accrued liabilities		18,296	5,925
Increaseindue torelated party		5,250	-
Net cashusedinoperating activities		(68,890)	(617)
Cash Flows from Financing Activities
Issuance ofcommonshares,net ofshareissue costs		674,719	125,000
Net cashprovided byfinancing activities		674,719	125,000
Change in Cash During the Period		605,829	124,383
Cash, Beginning of Period		124,383	-
Cash, End of Period	$	730,212$	124,383
Cash Paid During the Period for Interest	$	-$	-
Cash Paid During the Period for Income Taxes	$	-$	-

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

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

Whatcom Capital Corp. (the “Company”) was incorporated under the Business Corporations Act (British Columbia) on September 19, 2019. The Company is classified as a Capital Pool Company (“CPC”) while the principal business is the identification and evaluation of assets or a business (the “Qualifying Transaction” (“QT”)) and, once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities. There is no assurance that the Company will identify a Qualifying Transaction within the time limitations permissible under the policies of the Exchange, at which time the Exchange may suspend or delist the Company's shares from trading. The registered and head office of the Company is located at 750-1095 West Pender Street, Vancouver, B.C. V6E 2M6.

During the nine months ended July 31, 2020, the Company filed a prospectus dated January 17, 2020, an amended and restated prospectus dated April 3, 2020 and an amended and restated prospectus dated April 29, 2020 with the securities regulatory authorities in the provinces of British Columbia, Alberta, Saskatchewan and Ontario. On June 2, 2020, the Company completed its initial public offering (“IPO”) of 3,750,000 common shares of the Company (“Shares”) at a price of $0.10 per Share for aggregate gross proceeds of $375,000. The Shares were listed on June 2, 2020 on the TSX Venture Exchange (the “Exchange”) and commenced trading on the Exchange under the trading symbol “WHAT.P”. Industrial Alliance Securities Inc. (the “Agent”) acted as exclusive agent in respect of the IPO on a best efforts basis. Pursuant to the IPO, the Agent received a cash commission of $37,500 and an aggregate of 375,000 non-transferable warrants entitling the Agent and members of its selling group to purchase 375,000 Shares at $0.10 per Share at any time until June 2, 2022. The Agent also received a corporate finance fee of $22,123. Concurrently with the closing of the IPO, the Company completed a non-brokered private placement offering of 3,750,000 common shares at a price of $0.10 per common share for aggregate gross proceeds of $375,000 (the “Private Placement”). The Company will use the net proceeds of the IPO and the Private Placement to identify and evaluate potential Qualifying Transactions pursuant to the policies of the Exchange.

These condensed interim financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. As at July 31, 2020 the Company has not generated any revenues from operations and has an accumulated deficit of $124,268 (October 31, 2019 - $6,542). The Company expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that sufficient working capital will be obtained from external financing to meet the Company’s liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These financial statements do not reflect any adjustments to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used that may be necessary if the Company is unable to continue as a going concern.

COVID-19

On March 11, 2020, the World Health Organization declared the global outbreak of COVID-19 a pandemic. During this time, the Company has been actively responding to the pandemic. The Company is doing its part in managing the current ongoing crisis within the local community, and is taking a careful approach at managing its business and shifting much of the Company’s activities from the physical office setting to taking place remotely through telecommuting. The Company does not believe COVID-19 will have any material impact to the Company’s operations at this time.

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

2. BASIS OF PRESENTATION

Statement of Compliance

These condensed interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”), and in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). These condensed interim financial statements should be read in conjunction with the audited financial statements for the period from date of incorporation (September 19, 2019) to October 31, 2019, which have been prepared in accordance with IFRS as issued by the IASB. The accounting policies followed in these condensed interim financial statements are consistent with those applied in the Company’s audited financial statements for the period from Date of Incorporation (September 19, 2019) to October 31, 2019.

Basis of Preparation

The condensed interim financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of accounting except for cash flow information. These condensed interim financial statements are presented in Canadian dollars, unless specifically indicated otherwise, which is the Company’s functional currency.

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. The estimates and associated assumptions are based on anticipations and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods. There have been no significant judgments made by management in the application of IFRS that have a significant effect on these financial statements.

Change in Accounting Policy

IFRS 16, Leases:

Under IFRS 16, the Company is required to review all of its contracts if they contain leases or leasetype arrangements. Virtually all leases are required to be accounted for as finance leases rather than operating leases, where the required lease payments are disclosed as a commitment in the notes to the financial statements. As a result, the Company will be required to recognize lease assets (“right-of-use” assets) and the related lease liability on the statement of financial position.

Management has assessed that IFRS 16 did not have any effect on the Company’s current financial statements, but could have an impact in the future.

3. CASH RESTRICTION

The proceeds raised from the issuance of common shares may only be used to identify and evaluate assets or businesses for future investment, with the exception that not more than the lesser of 30% of the gross proceeds from the issuance of shares or $210,000 may be used to cover prescribed costs of issuing the common shares or administrative and general expenses of the Company.

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

3. CASH RESTRICTION (Cont'd)

These restrictions apply until completion of a Qualifying Transaction by the Company as defined under the Exchange Policy 2.4.

4. SHARE CAPITAL

Authorized share capital

Unlimited Class A Common Shares without par value; and Unlimited Class B Preferred Shares without par value

Share issuances

On September 19, 2019, the Company issued 2,000,000 common shares at $0.05 per share to the directors of the Company for proceeds of $100,000.

On September 30, 2019, the Company completed a financing by issuing 500,000 common shares at $0.05 per share for proceeds of $25,000.

On June 2, 2020, the Company completed its initial public offering (“IPO”) and issued 3,750,000 common shares (“Shares”) at a price of $0.10 per Share for aggregate gross proceeds of $375,000. Industrial Alliance Securities Inc. (the “Agent”) acted as exclusive agent in respect of the IPO on a best efforts basis. Pursuant to the IPO, the Agent received a cash commission of $37,500 and an aggregate of 375,000 non-transferable warrants (“Agent Warrants”) entitling the Agent and members of its selling group to purchase 375,000 Shares at $0.10 per Share at any time until June 2, 2022. The Agent also received a corporate finance fee of $22,123.

The fair value of the 375,000 Agent Warrants was $19,585 and was estimated using the BlackScholes pricing model with the following assumptions:

Risk free interest rate	0.372%
Expected life	2 years
Expected volatility	100%
Expected dividends	0%

Concurrently with the closing of the IPO, the Company completed a non-brokered private placement and issued 3,750,000 common shares at a price of $0.10 per common share for aggregate gross proceeds of $375,000.

A total of 2,500,000 of the Company’s issued and outstanding common shares are subject to a CPC Escrow Agreement. Under the CPC Escrow Agreement, 10% of the escrowed common shares will be released from escrow on the issuance of the Final Exchange Bulletin (the “Initial Release”) and an additional 15% will be released on the dates 6, 12, 18, 24, 30 and 36 months following the Initial Release. All common shares acquired on the exercise of stock options granted to directors, officers and non-employees prior to the completion of a qualifying transaction must also be deposited in escrow until the Final Exchange Bulletin is issued. In addition, all common shares of the Company acquired in the secondary market prior to the completion of a qualifying transaction by any person or company who becomes a control person are required to be deposited in escrow. Subject to certain exemptions permitted by the Exchange, all securities of the Company held by principals of the resulting issuer will also be escrowed.

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

4. SHARE CAPITAL (Cont'd)

Warrants

The following table summarizes warrant transactions:

	Number of	Weighted average
	warrants	exercise price
		$
Outstanding, October 31, 2019	-	-
Issued	375,000	0.10
Outstanding,July31,2020	375,000	0.10

The following table summarizes the warrants outstanding and exercisable as at July 31, 2020:

Exercise price	Number of warrants	Exercisable	Expiry date
$0.10	375,000	-	June 2,2022

The weighted average remaining useful life of outstanding warrants is approximately 1.85 years as at July 31, 2020.

Stock Options

On November 12, 2019, the Company adopted an incentive stock option plan (the “Option Plan”) which allows the Company’s Board of Directors, at its discretion and in accordance with TSX Venture Exchange requirements, to grant non-transferable options to purchase common shares to its directors, officers, employees and technical consultants to the Company. The number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares. Such options will be exercisable for a period of up to ten years from the date of grant and vesting terms will be determined at the time of grant by the Board of Directors.

On June 2, 2020, the Company granted 400,000 stock options to a director and officer of the Company. The stock options are exercisable at $0.10 per share and expire on June 2, 2025. The fair value of the 400,000 stock options was $29,560 and was estimated using the Black-Scholes pricing model with the following assumptions:

Risk free interest rate	0.372%
Expected life	5 years
Expected volatility	100%
Expected dividends	0%

The following table summarizes stock option transactions:

	Number of	Weighted average
	options	exercise price
		$
Outstanding, October 31, 2019	-	-
Granted	400,000	0.10
Outstanding,July31,2020	400,000	0.10

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

4. SHARE CAPITAL (Cont'd)

The following table summarizes the stock options outstanding and exercisable as at July 31, 2020 as follows:

follows:
Exercise price	Number of options	Exercisable	Expiry date
$0.10	400,000	-	June 2,2025

The weighted average remaining useful life of outstanding options is approximately 4.85 years as at July 31, 2020.

5. TRANSACTIONS WITH RELATED PARTIES

Related parties include the Board of Directors and officers of the Company, including close family members and enterprises which are controlled by these individuals as well as persons performing similar functions.

During the nine month period ended July 31, 2020, the Company accrued accounting fees of $5,000 to an officer and director of the Company.

6. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital Management

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

The Company includes share capital in the definition of capital.

The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the identification and evaluation of potential acquisitions. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity or by securing strategic partners.

The Company is not subject to externally imposed capital requirements other than the cash restriction disclosed in Note 3.

Risk Disclosures and Fair Values

The Company's financial instruments, consisting of cash and accounts payable and accrued liabilities, approximate fair values due to the relatively short-term maturities of the instruments. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

As at July 31, 2020, the Company had accounts payable and accrued liabilities of $24,221 (October 31, 2019 - $5,925), which are due within 12 months, $5,250 due to a related party and had cash of $730,212 (October 31, 2019 - $124,383) to meet its current obligations. As a result the Company has minimal liquidity risk.

Credit Risk

Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. The Company believes it has no significant credit risk.

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the Condensed Interim Financial Statements For the nine months ended July 31, 2020 (Unaudited) (Expressed in Canadian dollars)

7. SUBSEQUENT EVENTS

On July 28, 2020, the Company announced that it has entered into a letter of intent (the “LOI”) with NEXE Innovations Inc. (“NEXE”, formerly known as G-PAK Technology Inc.), regarding a proposed transaction to acquire all of the issued and outstanding securities of NEXE (the “Transaction”). The Transaction is intended to constitute the “Qualifying Transaction” of Whatcom, as such a term is defined in Policy 2.4 – “Capital Pool Companies” of the TSX Venture Exchange (the “Exchange”). NEXE Innovations Inc. is a private British Columbia-based advanced materials company which has developed a fully compostable (plant-based) single-serve coffee pod for use in Keurig Brewing Systems and was incorporated on April 27, 2015.

On August 11, 2020, the Company announced that it entered into a three-cornered amalgamation agreement (the "Definitive Agreement") with NEXE Innovations Inc. ("NEXE") and 1260350 B.C. Ltd., a newly incorporated wholly-owned subsidiary of Whatcom, superseding the LOI. Pursuant to the Definitive Agreement, the Company will acquire all of the issued and outstanding securities of NEXE from NEXE's securityholders. Each holder of NEXE common shares will receive one common share of the Resulting Issuer (hereinafter defined) ("Resulting Issuer Share") for each NEXE Share held, each holder of NEXE Class A Preferred Shares, Series A ("Series A Share") will receive one Resulting Issuer Share for each Series A Share held, each holder of NEXE Class A Preferred Shares, Series A Preferred ("Series A Preferred Share") will receive one Resulting Issuer Share for each Series A Preferred Share held, and each holder of NEXE Class A Preferred Shares, Series 1 ("Series 1 Share") will receive one and one-half Resulting Issuer Shares for each Series 1 Share held. All outstanding convertible securities of NEXE, including NEXE common share purchase warrants and NEXE stock options will be exchanged or replaced with convertible securities of the Resulting Issuer based on a one-to-one basis and on the same economic terms and conditions as previously issued. Upon completion of the Transaction, NEXE will become a wholly-owned subsidiary of the Company and the Company will change its name to "NEXE Innovations Inc.", or such other name as the parties may reasonably agree upon. The combined entity (the "Resulting Issuer") will continue the business of NEXE as a Tier 1 “technology” issuer on the Exchange.

The Transaction is conditional upon, among other things: (i) the parties receiving all requisite regulatory approval, including the approval of the Exchange and any third party approvals and authorizations; (ii) NEXE obtaining the requisite shareholder approval for the Transaction; (iii) completion by Whatcom of a consolidation of the Whatcom securities on a 2.5 for 1 basis and (iv) completion of the Concurrent Financing discussed below.

The Company announced that NEXE and Whatcom have engaged Canaccord Genuity Corp. (the "Canaccord") to act as lead agent and sole bookrunner, on its own behalf and on behalf of a syndicate of agents, who have agreed to sell on a commercially reasonable efforts basis a financing of subscription receipts (each, a "Subscription Receipt") at a price of $0.80 per Subscription Receipt, subject to the approval by the Exchange, for gross proceeds of a minimum of $5,000,000 and a maximum of $7,000,000 (the "Offering").

The Offering is being completed in connection with the Transaction. The Company and NEXE have also granted Canaccord an option to increase the Offering by up to an additional fifteen percent (15%) at any time up to forty-eight (48) hours prior to the closing of the Offering.

Each Subscription Receipt will, prior to the effective time of the Transaction, automatically convert into one NEXE common share and one-half of one NEXE common share purchase warrant (each a "Financing Warrant"), with each whole Financing Warrant exercisable into a NEXE common share at an exercise price of $1.00 for a period of twelve months, for no additional consideration upon the satisfaction of certain escrow release conditions, including the conditional approval of the Exchange for the Transaction and satisfaction or waiver of all of the conditions precedent to the Transaction as set out in the Definitive Agreement.

WHATCOM CAPITAL CORP.

(A Capital Pool Company)

Financial Statements

For the period from Date of Incorporation (September 19, 2019)

to October 31, 2019

(Expressed in Canadian dollars)

SHIM & Associates LLP Chartered Professional Accountants Suite 970 – 777 Hornby Street Vancouver, B.C. V6Z 1S4 T: 604 559 3511 | F: 604 559 3501

S H I M

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Whatcom Capital Corp.

Opinion

We have audited the accompanying financial statements of Whatcom Capital Corp. (the Company), which comprise the statement of financial position as at October 31, 2019, and the statements of net and comprehensive loss, changes in shareholders’ equity and cash flows for the period from the date of incorporation on September 19, 2019 to October 31, 2019, 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 October 31, 2019, and its financial performance and cash flows for the period from the date of incorporation on September 19, 2019 to October 31, 2019 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 of the financial statements, which indicates that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information, other than the financial statements and our auditors’ report thereon, in the Prospectus.

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 IFRS, 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.

SHIM & Associates LLP Chartered Professional Accountants

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 scepticism 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 Dong H. Shim.

==> picture [253 x 41] intentionally omitted <==

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, Canada 15 January 2020

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Statement of financial position (Expressed in Canadian dollars)

	Oct 31,
	2019
	$
Assets
Current assets
Cash (Note 4)	124,383
Total assets	124,383
Liabilities and shareholders’ equity
Current liability
Accountspayable and accrued liabilities	5,925
Shareholders’ equity
Share capital (Note 5)	125,000
Deficit	(6,542)
Total shareholders’equity	118,458
Total liabilities and shareholders’ equity	124,383

Subsequent events (Note 10)

Approved and authorized for issuance on behalf of the Board of Directors on January 15, 2020 by:

_/s/_Darren Tindale Darren Tindale, Director	_/s/_Martin Cronin
	Martin Cronin, Director

The accompanying notes are an integral part of these financial statements

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Statement of net and comprehensive loss (Expressed in Canadian dollars)

	September 19,
	2019
	(Incorporation) to
	October 31,
	2019
	$
Expenses
Bank fees and interest	134
Office expenses	483
Professional fees	5,925
Net and comprehensive loss for theperiod	(6,542)
Net lossper share,basic and diluted(Note 7)	-
Weighted average shares outstanding,basic and diluted(Note 7)	-

The accompanying notes are an integral part of these financial statements

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Statement of changes in shareholders’ equity (Expressed in Canadian dollars)

	Share capital Number of shares Amount $ Deficit $ Total shareholders’ equity $
Balance, September 19, 2019 (Date of Incorporation) Shares issued for cash Net loss for the period	- - - - 2,500,000 125,000 - 125,000 - - (6,542) (6,542)
Balance,October 31,2019	2,500,000 125,000 (6,542) 118,458

The accompanying notes are an integral part of these financial statements

Statement of cash flows (Expressed in Canadian dollars)

WHATCOM CAPITAL CORP. (A Capital Pool Company)

	September 19,
	2019
	(Incorporation) to
	October 31,
	2019
	$
Operating activities
Net loss for the period	(6,542)
Adjustment for non-cash working capitals:
Increase in accountspayable and accrued liabilities	5,925
Net cash used in operatingactivities	(617)
Financing activity
Issuance of common shares	125,000
Net cashprovided byfinancingactivity	125,000
Increase in cash, beingcash end ofperiod	124,383

The accompanying notes are an integral part of these financial statements

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

1. NATURE OF OPERATIONS

There is no assurance that the Company will identify a Qualifying Transaction within the time limitations permissible under the policies of the Exchange, at which time the Exchange may suspend or delist the Company's shares from trading.

The registered and head office of the Company is located at 750-1095 West Pender Street, Vancouver, B.C. V6E 2M6.

These financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. As at October 31, 2019, the Company has not generated any revenues from operations and has an accumulated deficit of $6,542. The Company expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that sufficient working capital will be obtained from external financing to meet the Company’s liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These financial statements do not reflect any adjustments to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used that may be necessary if the Company is unable to continue as a going concern.

2. BASIS OF PRESENTATION

Statement of Compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the IFRS Interpretation Committee.

Basis of Preparation

The financial statements are presented in Canadian dollars, which is the Company's functional and presentation currency. The financial statements are prepared on a historical cost basis except for financial instruments classified as fair value through profit or loss ("FVTPL"), which are stated at their fair value. The accounting policies have been applied consistently throughout the entire period presented in these financial statements.

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

2. BASIS OF PRESENTATION (Cont'd)

Significant Accounting Judgments, Estimates and Assumptions

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards within the framework of the significant accounting policies described below:

Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

i) Financial assets

The Company adopted IFRS 9, Financial Instruments, on its incorporation. IFRS 9 replaces International Accounting Standards (IAS) 39, Financial Instruments: Recognition and Measurement. Classification

The Company classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and
those to be measured at amortized cost.

The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses are either recorded in profit or loss or OCI.

At present, the Company classifies all financial assets as held at amortized cost. Cash is classified as a financial asset.

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

Financial Instruments (Cont'd)

i) Financial assets (Cont'd)

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Financial assets are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Subsequent measurement of financial assets depends on their classification. There are three measurement categories under which the Company classifies its financial assets:

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included as finance income using the effective interest rate method.
Fair value through OCI (FVOCI): Debt instruments that are held for collection of contractual cash flows and for selling the debt instruments, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains and losses, interest revenue, and foreign exchange gains and losses which are recognized in profit or loss. When the debt instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains (losses). Interest income from these debt instruments is included as finance income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on an investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net as revenue in the statement of loss and comprehensive loss in the period in which it arises.

ii) Financial liabilities

A financial liability is classified as at FVTPL if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred. The fair value changes to financial liabilities at FVTPL are presented as follows: where the Company optionally designates financial liabilities at FVTPL the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and the remaining amount of the change in the fair value is presented in profit or loss. The Company does not designate any financial liabilities at FVTPL.

Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.

At present, the Company classifies all of its financial liabilities as held at amortized cost. These financial liabilities are classified as current liabilities as the payment is due within 12 months.

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Deferred Taxes

Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or 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 (loss) in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits 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.

4. CASH RESTRICTION

5. SHARE CAPITAL

Authorized share capital

Unlimited Class A Common Shares without par value; and Unlimited Class B Preferred Shares without par value

Share issuances

On September 19, 2019, the Company issued 2,000,000 common shares at $0.05 per share to the directors of the Company for proceeds of $100,000.

On September 30, 2019, the Company completed a financing by issuing 500,000 common shares at $0.05 per share for proceeds of $25,000.

WHATCOM CAPITAL CORP. (A Capital Pool Company)

Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

5. SHARE CAPITAL (Cont'd)

The issued and outstanding common shares are subject to a CPC Escrow Agreement. Under the CPC Escrow Agreement, 10% of the escrowed common shares will be released from escrow on the issuance of the Final Exchange Bulletin (the “Initial Release”) and an additional 15% will be released on the dates 6, 12, 18, 24, 30 and 36 months following the Initial Release. All common shares acquired on the exercise of stock options granted to directors, officers and non-employees prior to the completion of a qualifying transaction must also be deposited in escrow until the Final Exchange Bulletin is issued. In addition, all common shares of the Company acquired in the secondary market prior to the completion of a qualifying transaction by any person or company who becomes a control person are required to be deposited in escrow. Subject to certain exemptions permitted by the Exchange, all securities of the Company held by principals of the resulting issuer will also be escrowed.

6. TRANSACTIONS WITH RELATED PARTIES

Related parties include the Board of Directors, close family members and enterprises which are controlled by these individuals as well as persons performing similar functions.

During the period ended October 31, 2019, there were no related party transactions. There was no compensation to key management personnel.

7. LOSS PER SHARE

The calculation of basic and diluted loss per share for the period ended October 31, 2019 was based on the loss attributable to common shareholders of $6,542 and the average weighted average number of capital stock is nil as all outstanding shares have been escrowed and therefore are contingently returnable.

8. INCOME TAXES

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

	2019
	$
Loss before income taxes	(6,542)
Expected income tax (recovery)	(1,766)
Change in valuation allowance	1,766
Total income tax recovery	-

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

8. INCOME TAXES

The significant components of the Company's deferred income tax assets that have not been included on the statement of financial position are as follows:

	2019
	$
Deferred income tax assets:
Non-capital loss carryforwards	1,766
	1,766
Valuation allowance	(1,766)
Net deferred taxassets	-

The tax pools relating to these deductible temporary differences expire as follows:

	Expiry Date Range
Temporary Differences
Non-capital losses available for future period (Canada)	2039

9. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital Management

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

The Company includes share capital in the definition of capital.

The Company is not subject to externally imposed capital requirements other than the cash restriction disclosed in Note 4.

WHATCOM CAPITAL CORP. (A Capital Pool Company) Notes to the financial statements For the Period from Date of Incorporation (September 19, 2019) to October 31, 2019 (Expressed in Canadian dollars)

9. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d)

Risk Disclosures and Fair Values

As at October 31, 2019, the Company had accounts payable and accrued liabilities of $5,925 due within 12 months and had cash of $124,383 to meet its current obligations. As a result the Company has minimal liquidity risk.

Credit Risk

Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. The Trust believes it has no significant credit risk.

10. SUBSEQUENT EVENTS

The Company intends to file a prospectus with the securities regulatory authorities in the provinces of British Columbia, Alberta, Saskatchewan and Ontario, and pursuant to an Agency Agreement (the "Agency Agreement") to be entered into between the Company and Industrial Alliance Securities Inc. (the "Agent"), to offer 5,000,000 Common Shares at $0.10 (the “Offering”) per share to the public for total estimated proceeds of $500,000 (before transaction costs). The Agent will be granted options to purchase up to 10% of the total common shares sold under the offering at a price of $0.10 per share, and expiring 24 months from the closing date. The Company also intends to grant 750,000 share options immediately after the closing of the Offering to directors and officers under the Company’s share option plan at a price of $0.10 per share and an expiry date of five years from the date of grant.

The Company will pay the agent a commission equal to 10% of the gross proceeds, a corporate finance fee of $15,000 and reasonable expenses estimated to be $15,000.

SCHEDULE “B”

Management’s Discussion and Analysis of the Issuer

[see attached]

WHATCOM CAPITAL CORP.

(A Capital Pool Company)

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED JULY 31, 2020

(Expressed in Canadian dollars unless otherwise stated)

Introduction

The following management discussion and analysis (“MD&A”), prepared as at September 28, 2020, should be read in conjunction with Whatcom Capital Corp.’s (the “Company”, “Whatcom”) unaudited condensed interim financial statements and the accompanying notes for the nine months ended July 31, 2020 and the audited financial statements and accompanying notes for the period from incorporation (September 19, 2019) to October 31, 2019. The unaudited condensed interim financial statements for the nine months ended July 31, 2020 have been prepared in accordance with IAS 34 and International Financial Reporting Standards (“IFRS”). Except as otherwise disclosed, all dollar figures included therein and in the following MD&A are quoted in Canadian dollars. For further information on the Company reference should be made to the Company’s public filings which are available on SEDAR.

Description of Business

The Company was incorporated under the Business Corporations Act (British Columbia) on September 19, 2019 and is classified as a capital pool company as defined in Policy 2.4 of the TSX Venture Exchange Inc. (the “TSX-V”). From the period of incorporation (September 19, 2019) to July 31, 2020, the Company had no business operations. The Company’s principal business is the identification and evaluation of assets or a business (the “Qualifying Transaction” (“QT”)) and, once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities. The Company’s registered and head office address is 750-1095 West Pender Street, Vancouver, B.C. V6E 2M6. There is no assurance that the Company will identify a QT within the time limitations permissible under the policies of the Exchange, at which time the Exchange may suspend or delist the Company's shares from trading.

During the nine months ended July 31, 2020, the Company filed a prospectus dated January 17, 2020, an amended and restated prospectus dated April 3, 2020 and an amended and restated prospectus dated April 29, 2020 with the securities regulatory authorities in the provinces of British Columbia, Alberta, Saskatchewan and Ontario. On June 2, 2020, the Company completed its initial public offering (“IPO”) of 3,750,000 common shares of the Company (“Shares”) at a price of $0.10 per Share for aggregate gross proceeds of $375,000. The Shares were listed on June 2, 2020 on the TSX Venture Exchange (the “Exchange”) and commenced trading on the Exchange under the trading symbol “WHAT.P”. Industrial Alliance Securities Inc. (the “Agent”) acted as exclusive agent in respect of the IPO on a best efforts basis. Pursuant to the IPO, the Agent received a cash commission of $37,500 and an aggregate of 375,000 non-transferable warrants entitling the Agent and members of its selling group to purchase 375,000 Shares at $0.10 per Share at any time until June 2, 2022. The Agent also received a corporate finance fee of $22,123. Concurrently with the closing of the IPO, the Company completed a non-brokered private placement offering of 3,750,000 common shares at a price of $0.10 per common share for aggregate gross proceeds of $375,000 (the “Private Placement”). No commission or other fee was paid to the Agent in connection with the Private Placement. The Company will use the net proceeds of the IPO and the Private Placement to identify and evaluate potential Qualifying Transactions pursuant to the policies of the Exchange.

Letter of Intent

-1-

Definitive Agreement & Concurrent Financing

On August 11, 2020, the Company announced that it entered into a three-cornered amalgamation agreement (the "Definitive Agreement") with NEXE Innovations Inc. ("NEXE") and 1260350 B.C. Ltd., a wholly-owned subsidiary of Whatcom, superseding the LOI. Pursuant to the Definitive Agreement, the Company will acquire all of the issued and outstanding securities of NEXE from NEXE's securityholders. Each holder of NEXE common shares will receive one common share of the Resulting Issuer (hereinafter defined) ("Resulting Issuer Share") for each NEXE Share held, each holder of NEXE Class A Preferred Shares, Series A ("Series A Share") will receive one Resulting Issuer Share for each Series A Share held, each holder of NEXE Class A Preferred Shares, Series A Preferred ("Series A Preferred Share") will receive one Resulting Issuer Share for each Series A Preferred Share held, and each holder of NEXE Class A Preferred Shares, Series 1 ("Series 1 Share") will receive one and one-half Resulting Issuer Shares for each Series 1 Share held. All outstanding convertible securities of NEXE, including NEXE common share purchase warrants and NEXE stock options will be exchanged or replaced with convertible securities of the Resulting Issuer based on a one-to-one basis and on the same economic terms and conditions as previously issued. Upon completion of the Transaction, NEXE will become a wholly-owned subsidiary of the Company and the Company will change its name to "NEXE Innovations Inc.", or such other name as the parties may reasonably agree upon. The combined entity (the "Resulting Issuer") will continue the business of NEXE as a Tier 1 “technology” issuer on the Exchange. The Transaction is conditional upon, among other things: (i) the parties receiving all requisite regulatory approval, including the approval of the Exchang and any third party approvals and authorizations; (ii) NEXE obtaining the requisite shareholder approval for the Transaction; (iii) completion by Whatcom of a consolidation of the Whatcom securities on a 2.5 for 1 basis and (iv) completion of the Concurrent Financing discussed below.

Whatcom and Nexe have engaged Canaccord Genuity Corp. (the "Canaccord") to act as lead agent and sole bookrunner, on its own behalf and on behalf of a syndicate of agents, who have agreed to sell on a commercially reasonable efforts basis a financing of subscription receipts (each, a "Subscription Receipt") at a price of $0.80 per Subscription Receipt, subject to the approval by the Exchange, for gross proceeds of a minimum of $5,000,000 and a maximum of $7,000,000 (the "Offering"). The Offering is being completed in connection with the Transaction. The Company and NEXE have also granted Canaccord an option to increase the Offering by up to an additional fifteen percent (15%) at any time up to forty-eight (48) hours prior to the closing of the Offering. Each Subscription Receipt will, prior to the effective time of the Transaction, automatically convert into one NEXE common share and one-half of one NEXE common share purchase warrant (each a "Financing Warrant"), with each whole Financing Warrant exercisable into a NEXE common share at an exercise price of $1.00 for a period of twelve months, for no additional consideration upon the satisfaction of certain escrow release conditions, including the conditional approval of the Exchange for the Transaction and satisfaction or waiver of all of the conditions precedent to the Transaction as set out in the Definitive Agreement.

Selected Financial Data - Summary of Quarterly Results

The following selected financial information is derived from the unaudited interim financial statements prepared in accordance with IFRS.

accordance with IFRS.
	July 31, 2020 $	April 30, 2020 $	January 31, 2020 $	From the Date of Incorporation Sep 19, 2019 to October 31, 2019 $
General and administrative expenses	(74,901)	(9,456)	(33,369)	(6,542)
Net and comprehensive loss	(74,901)	(9,456)	(33,369)	(6,542)
Basic and diluted lossper share	-	-	-	-
Workingcapital	705,011	75,633	85,089	118,458
Total assets	734,482	81,833	93,531	124,383
Non-current liabilities	-	-	-	-

-2-

Three Months Ended July 31, 2020 compared to the period from incorporation (September 19, 2019) to October 31, 2019

During the three months ended July 31, 2020, (the “2020 Quarter”) the Company incurred net and comprehensive loss of $74,901 compared to a net and comprehensive loss of $6,542 for the period from incorporation (September 19, 2019) to October 31, 2019 (the “2019 Period”). During the 2020 Quarter, general and administration expense included the following: $13,485 (2019 Period - $Nil) for filing fees, $26,759 (2019 Period - $5,925) for professional fees, $139 (2019 Period - $134) for bank fees and interest, $4,000 (2019 Period - $Nil) for rent, $958 (2019 Period - $Nil) for transfer agent fees, $29,560 (2019 Period - $Nil) for share-based compensation, and $Nil (2019 Period - $483) for office expenses.

Nine Months Ended July 31, 2020 compared to the period from incorporation (September 19, 2019) to October 31, 2019

During the nine months ended July 31, 2020, (the “2020 Period”) the Company incurred net and comprehensive loss of $117,726 compared to a net and comprehensive loss of $6,542 for the 2019 Period. During the 2020 Period, general and administration expense included the following: $31,783 (2019 Period - $Nil) for filing fees, $51,202 (2019 Period - $5,925) for professional fees, $223 (2019 Period - $134) for bank fees and interest, $4,000 (2019 Period - $Nil) for rent, $29,560 (2019 Period - $Nil) for share-based compensation, $958 (2019 Period - $Nil) for transfer agent fees and $Nil (2019 Period - $483) for office expenses.

Financial Condition / Capital Resources

At July 31, 2020, the Company had a net working capital of $705,011 (October 31, 2019 – $118,458), cash of $730,212 (October 31, 2019 – $124,383), accounts payable and accrued liabilities of $24,221 (October 31, 2019 – $5,925), due to related party of $5,250 (October 31, 2019 – $Nil) and had a deficit of $124,268 (October 31, 2019 – $6,542).

Cash Flows

Net cash used in operating activities in the 2020 Period was $68,890 (2019 Period – $617). The cash used in operating activities for the current period consists primarily of the operating loss, share-based compensation and changes in noncash working capital accounts.

During the 2020 Period, financing activities provided $674,719 (2019 Period – $125,000) relating to net proceeds from the issuance of common shares.

During the 2020 and 2019 Period, investing activities did not provide any cash inflows or outflows.

Financings and Related

On September 19, 2019, the Company issued 2,000,000 common shares at $0.05 per share to the directors of the Company for proceeds of $100,000.

On September 30, 2019, the Company completed a financing by issuing 500,000 common shares at $0.05 per share for proceeds of $25,000.

The fair value of the 375,000 Agent Warrants was $19,585 and was estimated using the Black-Scholes pricing model with the following assumptions:

Risk free interest rate	0.372%
Expected life	2 years
Expected volatility	100%
Expected dividends	0%

-3-

Stock Options

Risk free interest rate	0.372%
Expected life	5 years
Expected volatility	100%
Expected dividends	0%

CPC Escrow Agreement

2,500,000 of the Company’s issued and outstanding common shares of the Company are subject to a CPC Escrow Agreement. Under the CPC Escrow Agreement, 10% of the escrowed common shares will be released from escrow on the issuance of the Final Exchange Bulletin (the “Initial Release”) and an additional 15% will be released on the dates 6, 12, 18, 24, 30 and 36 months following the Initial Release. All common shares acquired on the exercise of stock options granted to directors, officers and non-employees prior to the completion of a QT must also be deposited in escrow until the Final Exchange Bulletin is issued. In addition, all common shares of the Company acquired in the secondary market prior to the completion of a qualifying transaction by any person or company who becomes a control person are required to be deposited in escrow. Subject to certain exemptions permitted by the Exchange, all securities of the Company held by principals of the resulting issuer will also be escrowed.

Related Party Transactions

During the nine month period ended July 31, 2020, the Company accrued accounting fees of $5,000 to an officer and director of the Company.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Financial Instruments

i) Financial assets

The Company classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and

-4-

those to be measured at amortized cost.

At present, the Company classifies all financial assets as held at amortized cost. Cash is classified as a financial asset.

Measurement

Subsequent measurement of financial assets depends on their classification. There are three measurement categories under which the Company classifies its financial assets:

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included as finance income using the effective interest rate method.
Fair value through OCI (FVOCI): Debt instruments that are held for collection of contractual cash flows and for selling the debt instruments, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains and losses, interest revenue, and foreign exchange gains and losses which are recognized in profit or loss. When the debt instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains (losses). Interest income from these debt instruments is included as finance income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on an investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net as revenue in the statement of loss and comprehensive loss in the period in which it arises.

ii)

Financial liabilities

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Financial Risk Management

Capital Management

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

The Company includes share capital in the definition of capital.

Cash Restrictions

Risk Disclosures and Fair Values

As at July 31, 2020, the Company had accounts payable and accrued liabilities of $24,221 (October 31, 2019 - $5,925) due within 12 months, $5,250 (October 31, 2019 - $Nil) due to a related party and had cash of $730,212 (October 31, 2019 - $124,383) to meet its current obligations. As a result the Company has minimal liquidity risk.

Credit Risk

Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. The Company believes it has no significant credit risk.

Significant Accounting Judgments, Estimates and Assumptions

Investor Relations Activities

The Company does not have any investor relations arrangements.

Outstanding Share Data

The Company’s authorized share capital is unlimited Class A Common Shares without par value and unlimited Class B Preferred Shares without par value.

As at July 31, 2020, there were 10,000,000 (October 31, 2019 – 2,500,000) issued common shares, 400,000 (October 31, 2019 – Nil) stock options outstanding with an exercise price of $0.10 per share and expiring on June 2, 2025 and 375,000 (October 31, 2019 – Nil) warrants outstanding with an exercise price of $0.10 per share and expiring on June 2, 2022. As at the date of this report there were there were 10,000,000 (October 31, 2019 – 2,500,000) issued common shares, 400,000 (October 31, 2019 – Nil) stock options outstanding with an exercise price of $0.10 per share and expiring on June 2, 2025 and 375,000 (October 31, 2019 – Nil) warrants outstanding with an exercise price of $0.10 per share and expiring on June 2, 2022.

-6-

Corporate Governance

The Company’s Board of Directors substantially follow the recommended corporate governance guidelines for public companies to ensure transparency and accountability to shareholders. The current Board is comprised of 4 individuals, Darren Tindale, Martin Cronin, Jeff Tindale and Greg Clough. Martin Cronin, Jeff Tindale and Greg Clough are neither executive officers nor employees of the Company and are unrelated in that they are independent of management. The Audit Committee is comprised of 3 directors, Darren Tindale, Martin Cronin and Jeff Tindale. Mr. Martin Cronin and Jeff Tindale are independent of management.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this MD&A are forward-looking statements or forward-looking information (collectively “forward-looking statements”) within the meaning of applicable securities legislation. We are hereby providing cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forwardlooking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. The Company believes that the assumptions and expectations reflected in such forward-looking information are reasonable.

While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predicted outcomes may not occur or may be delayed.

Readers are cautioned that the foregoing lists of factors are not exhaustive.

The forward-looking statements in this MD&A are based on the reasonable beliefs, expectations and opinions of management on the date of this MD&A. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There is no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

-7-

WHATCOM CAPITAL CORP.

(A Capital Pool Company)

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE PERIOD FROM DATE OF INCORPORATION (SEPTEMBER 19, 2019) TO OCTOBER 31, 2019

(Expressed in Canadian dollars unless otherwise stated)

Introduction

The following management discussion and analysis (“MD&A”), prepared as at January 15, 2020, should be read in conjunction with Whatcom Capital Corp.’s (the “Company”, “Whatcom”) audited financial statements and accompanying notes for the period from incorporation (September 19, 2019) to October 31, 2019. The following disclosure and associated financial statements are presented in accordance with International Financial Reporting Standards (“IFRS”). Except as otherwise disclosed, all dollar figures included therein and in the following MD&A are quoted in Canadian dollars. For further information on the Company reference should be made to the Company’s public filings which are available on SEDAR.

Description of Business

The Company was incorporated under the Business Corporations Act (British Columbia) on September 19, 2019. The Company is classified as a Capital Pool Company (“CPC”) while the principal business is the identification and evaluation of assets or a business (the “Qualifying Transaction” (“QT”)) and, once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities. There is no assurance that the Company will identify a Qualifying Transaction within the time limitations permissible under the policies of the Exchange, at which time the Exchange may suspend or delist the Company's shares from trading. The registered and head office of the Company is located at 750-1095 West Pender Street, Vancouver, B.C. V6E 2M6. The audited financial statements for the period from incorporation (September 19, 2019) to October 31, 2019 have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. As at October 31, 2019, the Company has not generated any revenues from operations and has an accumulated deficit of $6,542. The Company expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that sufficient working capital will be obtained from external financing to meet the Company’s liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These financial statements do not reflect any adjustments to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used that may be necessary if the Company is unable to continue as a going concern.

Selected Financial Data - Summary of Quarterly Results

The following selected financial information is derived from the audited financial statements prepared in accordance with IFRS.

	From the Date of Incorporation (Sep 19, 2019) to October 31, 2019 $
General and administrative expenses	(6,542)
Net and comprehensive loss	(6,542)
Basic and diluted lossper share	-
Workingcapital	118,458
Total assets	124,383
Non-current liabilities	-

-1-

For the period from incorporation (September 19, 2019) to October 31, 2019

During the period from incorporation (September 19, 2019) to October 31, 2019, the Company incurred net and comprehensive loss of $6,542. During the period from incorporation (September 19, 2019) to October 31, 2019 general and administration expense included the following: $134 for bank fees and interest, $483 for office expenses and $5,925 for professional fees.

Liquidity and Capital Resources

At October 31, 2019, the Company had a net working capital of $118,458, cash of $124,383, accounts payable and accrued liabilities of $5,925 and had a deficit of $6,542.

Cash Flows

Net cash used in operating activities for the period from incorporation (September 19, 2019) to October 31, 2019 was $617 and consisted primarily of the operating loss and changes in non-cash working capital accounts.

During the period from incorporation (September 19, 2019) to October 31, 2019, financing activities provided $125,000 relating to proceeds from the issuance of common shares.

During the period from incorporation (September 19, 2019) to October 31, 2019, investing activities did not provide any cash inflows or outflows.

Financings and Related

On September 19, 2019, the Company issued 2,000,000 common shares at $0.05 per share to the directors of the Company for proceeds of $100,000.

On September 30, 2019, the Company completed a financing by issuing 500,000 common shares at $0.05 per share for proceeds of $25,000.

Subsequent Events

The Company will pay the agent a commission equal to 10% of the gross proceeds, a corporate finance fee of $15,000 and reasonable expenses estimated to be $15,000.

CPC Escrow Agreement

-2-

All common shares acquired on the exercise of stock options granted to directors, officers and non-employees prior to the completion of a qualifying transaction must also be deposited in escrow until the Final Exchange Bulletin is issued. In addition, all common shares of the Company acquired in the secondary market prior to the completion of a qualifying transaction by any person or company who becomes a control person are required to be deposited in escrow. Subject to certain exemptions permitted by the Exchange, all securities of the Company held by principals of the resulting issuer will also be escrowed.

Related Party Transactions

During the period ended October 31, 2019, there were no related party transactions. There was no compensation to key management personnel.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Financial Instruments

i) Financial assets

The Company classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and
those to be measured at amortized cost.

At present, the Company classifies all financial assets as held at amortized cost. Cash is classified as a financial asset.

Measurement

Subsequent measurement of financial assets depends on their classification. There are three measurement categories under which the Company classifies its financial assets:

-3-

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included as finance income using the effective interest rate method.
Fair value through OCI (FVOCI): Debt instruments that are held for collection of contractual cash flows and for selling the debt instruments, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains and losses, interest revenue, and foreign exchange gains and losses which are recognized in profit or loss. When the debt instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains (losses). Interest income from these debt instruments is included as finance income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on an investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net as revenue in the statement of loss and comprehensive loss in the period in which it arises.

ii) Financial liabilities

Financial Risk Management

Capital Management

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

The Company includes share capital in the definition of capital.

Cash Restrictions

-4-

Risk Disclosures and Fair Values

Credit Risk

Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. The Trust believes it has no significant credit risk.

Significant Accounting Judgments, Estimates and Assumptions

Investor Relations Activities

The Company does not have any investor relations arrangements.

Outstanding Share Data

The Company’s authorized share capital is unlimited Class A Common Shares without par value and unlimited Class B Preferred Shares without par value.

As at October 31, 2019, there were 2,500,000 issued common shares, Nil stock options outstanding and Nil warrants outstanding.

As at the date of this report there were 2,500,000 issued common shares, Nil stock options outstanding and Nil warrants outstanding.

Corporate Governance

Cautionary Statement Regarding Forward-Looking Statements

-5-

Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. The Company believes that the assumptions and expectations reflected in such forward-looking information are reasonable.

Readers are cautioned that the foregoing lists of factors are not exhaustive.

-6-

SCHEDULE “C”

Financial Statements of NEXE

[see attached]

NEXE Innovations Inc. (formerly G-Pak Technology Inc.)

CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS For the Three Months Ended August 31, 2020

(Expressed in Canadian Dollars)

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Interim Statements of Financial Position

(Expressed in Canadian Dollars)

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August 31, May 31,
Note 2020 2020
ASSETS
Current assets
Cash and cash equivalents $ 2,939,871 $ 3,311,463
Term deposits 5 14,000 14,000
Trade and other receivables 277,042 274,718
Due from related parties 11 32 32
Prepaid expenses and deposits 6,162 931
Total current assets 3,237,106 3,601,144
Non-current assets
Prepaid expenses and deposits 1,133,527 761,260
Plant and equipment 6 2,416,266 2,585,563
Intangible assets 7 1,591,127 1,694,740
Total assets $ 8,378,026 $ 8,642,707
LIABILITIES
Current liabilities
Current portion of Government loan payable 8 333,336 208,335
Trade and other payables 973,314 664,793
Due to related parties 11 15,074 15,074
Total current liabilities 1,321,724 888,202
Non-current liabilities
Government loan payable 8 1,106,656 1,254,214
Total liabilities $ 2,428,380 $ 2,142,416
Shareholder's equity
Share capital 9 11,263,184 11,141,565
Share option reserve 10 919,254 836,639
Contributed surplus 10 439,809 411,678
Deficit (6,672,601) (5,889,591)
Total equity 5,949,646 6,500,291
Total liabilities and shareholders' equity $ 8,378,026 $ 8,642,707
Nature of operations and going concern (Note 1)
Commitments (Note 16)
Subsequent events (Note 17)
Approved and authorized on behalf of the Board:
"Darren Footz" "Ash Guglani"
Director Director
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The accompanying notes are an integral part of these consolidated interim financial statements.

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Condensed Interim Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars)

Note Administrative $ Advisory and consulting fees 11 Contractor expense Depreciation 6 Interest expense 8 Legal expense Meals and Entertainment Property tax Research and development Salary 11 Stock based compensation 10 Travelexpense	August 31, 2020 August 31, 2019 94,603 $ 20,962 269,478 32,151 - 16,818 52,371 56,902 116,139 48,182 83,856 9,074 5,437 3,439 9,288 - 21,538 22,323 50,584 63,753 82,614 81,001 5,495 7,846 For the Three Months Ended
Operating loss before other items Other items Foreign exchange gain Interests income and others	791,403 362,451 (5,901) - (2,199) -
	(8,100) -
Loss and Comprehensive for the period $ 783,303 $ 362,451
Basic and diluted lossper share 9 $ 0.04 $ 0.02
18,182,004 18,182,004 Weighted average number of shares outstanding

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

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Condensed Interim Statements of Changes in Shareholders' Equity

(Expressed in Canadian Dollars)

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Number Common Number Preferred
of Share of Share Option Contributed Total
Common Shares Capital Preferred Shares Capital Reserve Surplus Deficit Equity
- -
Balance, May 31, 2019 18,182,004 $ 23,715 16,000,044 $ 7,757,708 $ 504,536 $ (516,699) $ (3,793,190) $ 3,976,070
- - - - - -
Net loss for the period ended August 31, 2019 (362,451) (362,159)
Share issued for private placement, net of costs - - 322,949 170,485 - 39,432 - 209,917
Stock-based compensation - - - - 81,001 - - 81,001
Balance, August 31, 2019 18,182,004 $ 23,715 16,322,993 $ 7,928,193 $ 585,537 $ (477,267) $ (4,155,641) $ 3,904,827
Balance, May 31, 2020 18,182,004 $ 23,715 22,791,251 $ 11,117,850 $ 836,639 $ 411,678 $ (5,889,591) $ 6,500,291
- - - - - -
Net loss for the period ended August 31, 2020 (783,303) (783,303)
Share issued for private placement, net of costs - - 230,385 121,620 - 28,131 - 149,751
Stock-based compensation - - - - 82,614 - - 82,614
Balance, August 31, 2020 18,182,004 $ 23,715 23,021,636 $ 11,239,470 $ 919,253 $ 439,809 $ (6,672,894) $ 5,949,646
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(The accompanying notes are an integral part of these consolidated condensed interim financial statements)

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Condensed Interim Statements of Cash Flow

(Expressed in Canadian Dollars)

Cash flows from operating activities Net loss for the period $ Items not affecting cash: Accretion Stock based compensation Write off of investment Depreciationofproperty, plant and equipment	August 31, 2020 August 31, 2019 (783,303) $ (362,451) 116,593 54,674 82,615 81,001 - (91,208) 38,904 121,963 Three months ended
Change in non-cash working capital balances: Increase in trade and other recievables Increase/(decrease) in trade and other payables Increase in bank indebtedness Increase/(decrease)inprepaids expenses and deposits	(545,191) (196,021) (2,034) (6,516) 307,935 (28,510) - (94,688) (376,911) 2,123
	(616,201) (323,612)
Cash flows from investing activities Purchase of property, plant and equipment Investmentin intangible assets	(8,755) (69,562) (146,387) (73,432)
	(155,142) (142,994)
Cash flows from financial activities Proceeds from issuance of capital stock Proceeds from government grant Redemptionoftermdeposit	149,751 209,917 250,000 - - 728,567
	399,751 938,484
Net change in cash and cash equivalents during the period Cash and cash equivalents, beginning of the period	(371,592) 471,878 3,311,463 -
Cash and cash equivalents, end of the period $	2,939,871 $ 471,878

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

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

1. NATURE OF OPERATIONS AND GOING CONCERN

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) (the “Company”) was incorporated under the Business Corporations Act (British Columbia). Through its wholly owned subsidiary, GCup Technology Corp., the Company mainly focuses on developing fully composable single-serve coffee pods made from readily renewable materials.

The head office and principal address of the Company is Unit 109 – 19353 22nd Avenue, Surrey, British Columbia, V3Z 3S6.

Going Concern

These consolidated condensed financial statements have been prepared assuming the Company will continue on a going- concern basis. The Company has incurred losses since its inception and the ability of the Company to continue depends upon its ability to raise adequate financing and to commence profitable operations. This represents a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

While the Company has been successful in the past at raising funds, there can be no assurance that it will be able to do so in the future. See Note 17 - Subsequent Events.

The Company has predominately experienced operating losses and negative operating cash flows; operations of the Company having been primarily funded by the issuance of share capital. The Company expects to incur further losses in the development of its business. Management has estimated that the Company has sufficient financing to complete current work plans; however, future development will require additional financing in order to complete and commence profitable operations.

These consolidated condensed financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis was not appropriate for these condensed consolidated financial statements, then adjustments to the carrying values of assets and liabilities would be necessary.

		August 31,	May 31,
		2020	2020
Deficit	$	6,672,601	$ 5,889,591
Working capital	$	1,915,382	$ 2,712,942

There continues to be a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. While the extent of the impact is unknown, we anticipate this outbreak may cause staff shortages, and increased government regulations, all of which may negatively impact the Company’s business and financial condition. The Company continues to raise financing and receive government grants.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

2. BASIS OF PRESENTATION

Statement of compliance

These consolidated interim financial statements, including comparatives 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”).

These consolidated interim financial statements are for the three months ended August 31, 2020 and have been prepared in accordance with IAS 34 "Interim Financial Reporting" as issued by the International Accounting Standards Board (IASB). They do not include all the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the audited consolidated financial statements for the year ended May 31, 2020. The policies applied in these consolidated interim financial statements are consistent with the accounting policies disclosed in Notes 2, 3 and 4 of the audited consolidated financial statements for the year ended May 31, 2020.

These consolidated condensed financial statements were approved and authorized for issue by the Board of Directors on November 16, 2020.

Operations

To date, the Company has not earned significant revenues and is considered to be in the development stage. The Company’s operations are funded from equity financings as well as financial support from various federal government programs which are dependent upon many external factors. Although management considers that the Company has adequate resources to continue the development phase of its first product for the next twelve months, the Company recognizes that research and development expenditures may change as it transitions towards production and, as a result, it may be required to obtain additional financing. The Company believes that, based on forecasts and the ability to reduce expenditures if required, along with indications of shareholder support, it will be able to continue as a going concern for the foreseeable future. While the Company has been successful in securing financings in the past there can be no assurance that it will be able to do so in the future. These consolidated condensed financial statements do not reflect any adjustments to the carrying values of the Company’s assets and liabilities, revenue and expenses, and the statement of financial position clarifications used, that would necessary if the going concern assumption were not appropriate. Such adjustments could be material.

Basis of measurement

These consolidated condensed financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at their fair value as explained in the accounting policies set out below. In addition, these consolidated condensed financial statements have been prepared using the accrual basis of accounting except for cash flow information.

Functional and presentation currency

These consolidated condensed financial statements are presented in Canadian dollars, which is the Company’s functional and reporting currency.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the condensed consolidated financial statements.

Principles of consolidation

These consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries, G-Cup Technology Corp., G-Pak Holdings Ltd.

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiary are included in the consolidated condensed financial statements from the date that control commences until the date that control ceases.

All significant inter-company balances and transactions between the Company and its subsidiaries have been eliminated in preparing the condensed consolidated financial statements.

Functional and presentation currency

The consolidated condensed financial statements are presented in Canadian dollars, which is also the Company's functional currency.

4. STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED

The following new standards, amendments and interpretations have been issued but are not effective for the three months year ended August 31, 2020 and, accordingly, have not been applied in preparing these financial statements.

Insurance Contracts

In May 2017, the International Accounting Standards Board (“IASB”) issued IFRS 17 – Insurance Contracts (“IFRS 17”), that replaces IFRS 4 – Insurance Contracts and establishes a new model for recognizing insurance policy obligations, premium revenue, and claims-related expenses. IFRS 17 is effective for annual periods beginning on or after January 1, 2021. In June 2019, the IASB proposed an amendment to IFRS 17 providing a deferral of one year of the effective date to January 1, 2022. Early adoption is permitted. The Company is currently assessing the potential impact of this standard.

NEWLY ADOPTED ACCOUNTING STANDARDS

The Company adopted the following accounting standards that are effective for annual accounting periods:

New Interpretation IFRIC 23 - Uncertainty over Income Tax Treatments On June 7, 2017, the IASB issued IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments ("IFRIC 23"). IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

4. STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED (continued)

Interest Rate Benchmark Reform: Amendments to IFRS 9 and IFRS 7

In September 2019, IASB issued Phase 1 of its amendments to IFRS 9 – Financial Instrument sand IFRS 7 – Financial Instruments: Disclosures, to amend certain requirements for hedge accounting and provide relief during the period of uncertainty arising from the phase out of interest rate benchmarks (e.g. interbank offered rates [“IBOR”s]). These amendments modify hedge accounting requirements, allowing entities to assume that the interest rate benchmark on which the cash flows of the hedged item and the hedging instrument are based are not altered as a result of IBOR reform, thereby allowing hedge accounting to continue. Mandatory application of the amendments ends at the earlier of when the uncertainty regarding the timing and amount of interest rate benchmark-based cash flows is no longer present and the discontinuation of the hedging relationship. Phase 2 of the IASB’s project on IBOR is underway and will address transition from IBOR. The Phase 1 amendments will be effective for annual periods beginning on or after January 1, 2020, with early adoption permitted. The Company is currently assessing the potential impact of this standard. Business Combinations

IFRS 3, Business Combinations – issued by the IASB in January of 2008. IASB has issued the amendments to IFRS 3, which relate to the definition of a business. The amendments are as follows:

Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
Add an optional concentration test that permits a simplified assessment of whether an acquired set of activities.

The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after January 1, 2020, and to asset acquisitions that occur on or after the beginning of that period. Early adoption of this amendment is permitted.

Management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.

5. TERM DEPOSITS

The term deposits are short-term GICs held with a Canadian bank that mature between three months and a year.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

6. PLANT AND EQUIPMENT

Plant and equipment as at August 31, 2020 and May 31, 2020 were as follows:

	Computer Equipment Furniture and Equipment Machinary Building Improvement Manufacturing Facility Land Government Loan Benefit Total
Net book value at May 31, 2020 Additions Depreciation	2,126 $ 611,046 $ 989,082 $ 49,156 $ 1,760,025 $ 341,270 $ (1,167,144) $ 2,585,562 $ - 6,807 1,950 - - (139,149) (130,392) (106) (27,598) (34,624) (1,414) (25,315) - 50,153 (38,904)
Net book value at August 31, 2020	2,020 590,255 956,408 47,742 1,734,710 341,270 (1,256,140) 2,416,266
Consisting of: Cost Accumulated depreciation	6,268 872,669 1,323,445 56,577 2,025,185 341,270 (1,548,262) 3,077,153 (4,248) (282,413) (367,037) (8,835) 290,475 - - 292,122 (660,887)
	2,020 $ 590,256 $ 956,408 $ 47,742 $ 1,734,710 $ 341,270 $ (1,256,140) $ 2,416,266 $
Net book value at May 31, 2019 Additions Disposition of subsidiaries Depreciation
	944 $ 741,708 $ 1,185,505 $ 43,055 $ 1,844,221 $ 341,270 $ (964,760) $ 3,191,943 $ 2,347 12,143 5,339 18,691 - (332,504) (293,984) - (7,182) (62,487) (7,868) - - - (77,537) (1,165) (135,622) (139,276) (4,723) (84,196) - 130,121 (234,860)
Net book value at May 31, 2020	2,126 611,046 989,082 49,156 1,760,025 341,270 1,167,144 2,585,562
Consisting of: Cost Accumulated depreciation	6,268 865,862 1,321,495 56,577 2,025,185 341,270 (1,409,113) 3,207,545 (4,142) (254,815) (332,413) (7,421) (265,160) - 241,969 (621,983)
	2,126 $ 611,046 $ 989,082 $ 49,156 $ 1,760,025 $ 341,270 $ (1,167,144) $ 2,585,562 $

7. INTANGIBLE ASSETS

Intangible assets as at August 31, 2020 and May 31, 2019 were as follows:

		August 31,		May 31,
		2020		2020
Patents	$	102,665	$	78,980
Intangible Asset		1,488,462		1,615,761
Net book value	$	1,591,127	$	1,694,740

Amortization will be recorded for intangible assets upon commencement of production for past research stage and development assets. The intangible asset has been determined to have a useful life of 13 years from the commencement of production. During the three months ended August 31, 2020, the Company received the initial tranche of a Governmental grant totaling $250,000, the remaining tranches totaling $750,000 will be received in equal quarterly installments by May 31, 2021. The grant proceeds have been recorded to offset Intangible Asset.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020 (EXPRESSED IN CANADIAN DOLLARS)

8. GOVERNMENT LOAN PAYABLE

During the year ended May 31, 2017, the Company was approved to receive up to $2,500,000 of loans from Western Economic Diversification Canada. The project costs include but not limited to:

Equipment costs
Production materials
Salary for employees who devoted time to the project
Travel costs
Contractors and professional fees
Production testing costs
Manufacturing facility leasehold improvement costs

The Company drew down its final tranche of the loan during the year ended May 31, 2020 in the amount of $580,590. The Company is required to make repayments of $41,667, which were to commence August 1, 2020, however an extension has been granted to January 1, 2021. As at August 31, 2020, the current portion of the loan repayable is $333,336 and has been recorded in current liabilities section of the statements of financial position. The average bank rate plus 3% of interests accrues only during the period beginning of due date of repayments and interests are calculated and compounded monthly. Therefore, the loan was considered as interest free loan and the difference between the fair value of loan and the principal was credited against plant and equipment.

quipment.
Government loan - May 31, 2019	$	996,929
Loan received		580,590
Accretion		217,533
Grantportion		(332,504)
Government loan - May 31, 2020	$	1,462,548
Accretion		116,593
Payment extension adjustment		(139,147)
Government loan - August 31,2020	$	1,439,993

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020 (EXPRESSED IN CANADIAN DOLLARS)

9. SHARE CAPITAL

Authorized:

Common Shares: unlimited without par value

Preferred Shares Class A Series A: convertible to common shares at the conversion rate of 1:1 Preferred Shares Class A Series 1: 1.5 times liquidation preferred, non-convertible to common shares

Issued and outstanding:

During the three months ended August 31, 2020, the Company issued 230,385 (2019: 322,949) units (the “Units”) at a price of $0.65 per Unit, raising gross proceeds of $149,750 (2019: $209,917). Each Unit comprised of one Class A Series A preferred share (the “Preferred Shares”) and one share purchase warrant (the “Warrants”), each Warrant exercisable into one Preferred Share of the Company at a price of $1.10 per share for a period of two years from the issuance date.

During the year ended May 31, 2020, the Company issued 6,791,207 (2019: 187,866) units (the “Units”) at a price of $0.65 per Unit, raising gross proceeds of $4,414,285. Each Unit comprised of one Class A Series A preferred share (the “Preferred Shares”) and one share purchase warrant (the “Warrants”), each Warrant exercisable into one Preferred Share of the Company at a price of $1.10 per share for a period of two years from the issuance date. In connection with the financing, the Company paid cash issuance costs of $125,766 and issued a total of 332,052 brokers’ warrants, with a fair value of $75,711, exercisable under the same terms of the Warrants.

As at August 31, 2020, the Company has 18,182,004 (2020: 18,182,004) common shares; 2,906,073 (2020: 2,906,073) Class A, Series 1 shares; 12,906,106 (2020: 12,906,106) Class A, Series A; and 7,209,457 (2020: 6,979,072) Class A Series A preferred shares.

10. STOCK OPTIONS AND WARRANTS

Continuity of the Company’s share purchase warrants issued and outstanding was as follows:

August 31, 2020 May 31, 2020	August 31, 2020 May 31, 2020
Number of warrants Weighted average exercise price	Number of warrants Weighted average exercise price
Outstanding, beginning of period 7,311,425 $ 1.10 Issued 230,385 1.10	187,866 $ 1.10 7,123,559 1.08
Outstanding, end of theperiod 7,541,810 $ 1.08	7,311,425 $ 1.08

The weighted average remaining life of warrants outstanding as at August 31, 2020 is 1.50 years (May 31, 2020: 1.9 years).

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

10. STOCK OPTIONS AND WARRANTS (continued)

The following assumptions were used for the Black-Scholes valuation of warrants issued during the period ended August 31, 2020:

	August 31, 2020	May 31, 2020
Risk-free interest rate	1.06%	1.06%
Expected life of warrants	24 months	24 months
Fair value per warrant issued	$0.13- $0.23	$0.13- $0.23
Annualized volatility	62.89%	62.89%
Dividend rate	0.00%	0.00%

Continuity of the Company’s stock options issued and outstanding was as follows:

August 31, 2020 May 31, 2020	August 31, 2020 May 31, 2020
Number of options (#) Weighted average exercise price	Number of options (#) Weighted average exercise price
Outstanding, beginning of year 4,294,020 $ 0.51 Granted - - Forfeited/cancelled - -	2,285,492 $ 0.38 2,370,000 0.63 (361,472) 0.53
Outstanding, end of period 4,294,020 $ 0.51	4,294,020 $ 0.51

As at August 31, 2020, the following stock options were outstanding and exercisable with an average remaining life of 2.37 years (May 31, 2020: 2.31 years):

			Number of options
Exercise	Number of options	Expiry date	vested and
price($)	outstanding		exercisable
0.28	1,283,788	From Sept 30, 2021 to Jan 31, 2022	1,175,036
0.53	160,000	From Feb 17, 2022 to Jul 27, 2022	124,948
0.53	480,232	March 31, 2024	403,602
0.63	2,370,000	FromOct 9,2025 toFeb 3,2026	-
0.51	4,294,020		1,299,984

The following assumptions were used for the Black-Scholes valuation of stock options issued during the years ended May 31, 2020:

	2020
Risk-free interest rate	0.56- 1.60%
Expected life of options	72 months
Fair value per options issued	$0.35- $0.39
Annualized volatility	60%
Dividend rate	0.00%

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

11. RELATED PARTY TRANSACTIONS

The related party transactions are in the normal course of operations and have been valued in these consolidated condensed financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions not disclosed elsewhere in these consolidated condensed financial statements are listed below.

During the three months ended August 31, 2020, the Company paid $45,000 (2019: $30,000) of consulting fees to a director of the Company, $21,000 (2019: $nil) of consulting fees to the CFO of the Company, $7,000 (2019: $21,000) of consulting fees and $46,800 (2019: $15,600) of salaries to the CEO and director of operations of the Company. Additionally, the Company accrued a bonus payment in the amount of $100,000 for certain senior management.

12. FINANCIAL INSTRUMENTS

Fair value of financial instruments

Financial instruments recorded at fair value are measured using a three-level fair value hierarchy:

Level 1 Fair value is determined by reference to quoted prices in active markets for identical assets and liabilities.
Level 2 Fair value is determined based on inputs other than quoted prices for which all significant inputs are observable, either directly or indirectly.
Level 3 Fair value is determined based on inputs that are unobservable and significant to the overall fair value measurement.

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as follows:

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

13. FINANCIAL INSTRUMENTS (continued)

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----- Start of picture text -----

August 31, 2020 Level 1 Level 2 Level 3 Total
Financial Assets
- -
Cash and cash equivalents $ 2,939,871 $ $ $ 2,939,871
- -
Term deposits 14,000 14,000
Trade and other receivables - 277,042 - 277,042
-
$ 2,953,871 $ 277,042 $ $ 3,230,913
Financial Liabilities
- - - -
Cash and cash equivalents $ $ $ $
- - - -
Trade and other payables
- -
Government loan payable 1,439,993 1,439,993
- - - -
Due to related parties
$ - $ 1,439,993 $ - $ 1,439,993
May 31, 2020 Level 1 Level 2 Level 3 Total
Financial Assets
- -
Cash and cash equivalents $ 3,311,463 $ $ $ 3,311,463
- -
Term deposits 14,000 14,000
Trade and other receivables - 274,718 - 274,718
-
$ 3,325,463 $ $ 274,718 $ 3,600,181
Financial Liabilities
- - - -
Cash and cash equivalents $ $ $ $
- - - -
Trade and other payables
- -
Government loan payable 1,462,548 1,462,548
- - - -
Due to related parties
- -
$ $ 1,462,548 $ $ 1,462,548
----- End of picture text -----

Financial risk management

The risks associated with financial instruments and the policies on how to mitigate these risks are set out below. Management monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. The Company’s cash and cash equivalents as well as trade and other receivables are subject to credit risk for a maximum of the amount shown on the consolidated statements of financial position. The Company limits its exposure to credit risk on cash and cash equivalents by depositing only with reputable financial institutions, and limits its exposure to credit risk on trade and other receivables by only working with large and well-funded organizations. Management believes that the Company is subject to 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 purpose of liquidity risk management is to maintain a sufficient amount of cash and cash equivalents to meet its liquidity requirements at any point in time. The Company uses cash to settle its financial obligations as they fall due.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020 (EXPRESSED IN CANADIAN DOLLARS)

13. FINANCIAL INSTRUMENTS (continued)

Interest rate risk

Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is only subject to interest rate risk on its cash and term deposits in the bank and there is unlikely to be a material impact on net income (loss) as the bank deposits are short term.

14. CAPITAL RISK MANAGEMENT

The Company’s primary objective when managing capital is to maintain sufficient resources and raise funding to support current and long-term operating needs. The ability to continue as a going concern is essential to the Company’s goal of providing returns to shareholders and other stakeholders. The capital structure of the Company consists of shareholders’ equity. The Company manages its capital structure and makes adjustments to it, based on the level of funds available to the Company to manage its operations. The Company balances its overall capital through new share issuances or by undertaking other activities as deemed appropriate in the circumstances. The Company is not subject to externally imposed capital requirements. There have been no significant changes in the Company’s approach to capital management during the year. These objectives and strategies are reviewed on a continuous basis.

15. SEGMENT DISCLOSURES

The Company operates in one reporting segment. All of the Company’s plant and equipment are located in Canada.

16. COMMITMENTS

The Company is committed to purchasing production equipment for the amount of EUR1,183,000 ($1,798,160). The initial deposit 30% deposit of EUR507,000 ($761,261) has been remitted and recorded in long-term prepaids. The remaining balance is due in stages with the final payment due on delivery, which is expected to be in fiscal Q3, 2021.

17. SUBSEQUENT EVENTS

On July 28, 2020, the Company entered into a Letter of Intent with Whatcom Capital Corp. (“Whatcom”) regarding a proposed transaction to acquire all of the issued and outstanding securities of the Company (the “Transaction”). Upon completion of the Transaction, the combined entity (the “Resulting Issuer”) will continue the business of NEXE as a “technology” issuer. The Transaction is intended to constitute the “Qualifying Transaction” of Whatcom, as such a term is defined in Policy 2.4 – “Capital Pool Companies” of the TSX Venture Exchange (the “Exchange”).

On August 11, 2020, the Company announced that it had entered into a three-cornered amalgamation agreement dated effective August 11, 2020 (the “Definitive Agreement“) with the Company and 1260350 B.C. Ltd., a wholly-owned subsidiary of Whatcom, pursuant to which Whatcom will acquire all of the issued and outstanding securities of the Company, as more particularly described below.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 2020 (EXPRESSED IN CANADIAN DOLLARS)

17. SUBSEQUENT EVENTS (continued)

The Transaction

Pursuant to the Definitive Agreement, Whatcom will acquire all of the issued and outstanding securities of the Company from the Company’s securityholders. Each holder of the Company’s common shares will receive one common share of the Resulting Issuer (hereinafter defined) (“Resulting Issuer Share“) for each Share held, each holder of Class A Preferred Shares, Series A (“Series A Share“) will receive one Resulting Issuer Share for each Series A Share held, each holder of the Company’s Class A Preferred Shares, Series A Preferred (“Series A Preferred Share“) will receive one Resulting Issuer Share for each Series A Preferred Share held, and each holder of the Company’s Class A Preferred Shares, Series 1 (“Series 1 Share“) will receive one and one-half Resulting Issuer Shares for each Series 1 Share held. All outstanding convertible securities of NEXE, including the Company’s common share purchase warrants and the Company’s stock options will be exchanged or replaced with convertible securities of the Resulting Issuer based on a one-to-one basis and on the same economic terms and conditions as previously issued. Upon completion of the Transaction, the Company will become a wholly-owned subsidiary of the Whatcom and Whatcom will change its name to “NEXE Innovations Inc.”, or such other name as the parties may reasonably agree upon. The combined entity (the “Resulting Issuer“) will continue the business of the Company as a Tier 1 “technology” issuer on the Exchange.

On September 30, 2020, the Company announced a brokered private placement (the “Brokered Private Placement“) of 11,437,500 subscription receipts (each, a “Subscription Receipt“) at a price of $0.80 per Subscription Receipt for aggregate gross proceeds of $9,150,000. The Brokered Private Placement was led by Canaccord Genuity Corp. (“Canaccord“). The net proceeds of the Brokered Private Placement are being held in escrow by TSX Trust Company (the “Escrow Agent“) pursuant to the subscription receipt agreement among Whatcom, the Company, Canaccord and the Escrow Agent.

In connection with the Transaction, Whatcom will also be completing a consolidation of its common shares (the “Consolidation“), wherein every shareholder will receive one new Whatcom common share (a “New Whatcom Share“) for every two and a half (2.5) pre-Consolidation Whatcom common shares. Upon the closing of the Transaction, the securities issuable pursuant to each Subscription Receipt will automatically be exchanged for one New Whatcom Share and one Whatcom common share purchase warrant (each a “Financing Warrant“), with each whole Financing Warrant exercisable into a New Whatcom Share at an exercise price of $1.00 for a period of twelve months from the escrow release date.

Additionally, the Company will also be completing a non-brokered private placement of units at a price of $0.80 per unit (each a “Unit“) in conjunction with closing the Transaction. Each Unit will consist of one common share of the Company and one share purchase warrant, with each warrant entitling the holder to purchase a common share of the Company at a price of $1.00 per share for a period of twelve months from the date of closing.

NEXE Innovations Inc. (formerly G-Pak Technology Inc.)

CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended May 31, 2020 and May 31, 2019

(Expressed in Canadian Dollars)

Independent Auditor's Report

To the Shareholders of NEXE Innovations Inc. (formerly G-Pak Technology Inc.):

Opinion

We have audited the consolidated financial statements of NEXE Innovations Inc. (formerly G-PAK Technology Inc.) and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at May 31, 2020 and May 31, 2019, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

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

Basis for Opinion

We conducted our audits 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 Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company, as at May 31, 2020, had an accumulated deficit of $5,889,591. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

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

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

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits 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 Consolidated Financial Statements

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

In preparing the consolidated 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 Consolidated Financial Statements

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

Vancouver, British Columbia October 30, 2020

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Chartered Professional Accountants

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NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Statements of Financial Position As At May 31, 2020 and 2019

			May 31,		May 31,
	Note		2020		2019
ASSETS
Current assets
Cash and cash equivalents		$	3,311,463	$	-
Term deposits	6		14,000		728,567
Trade and other receivables	7		274,718		229,447
Due from related parties	13		32		32
Prepaid expenses and deposits			932		2,836
Total current assets			3,601,144		960,882
Non-current assets
Prepaid expenses and deposits			761,260		-
Plant and equipment	8		2,585,563		3,191,943
Intangible assets	9		1,694,740		1,212,467
Total assets		$	8,642,707		5,365,292
LIABILITIES
Current liabilities
Bank Indebtness		$	-		94,688
Current portion of Government loan payable	10		208,335		-
Trade and other payables			664,793		191,329
Due to related parties	13		15,074		15,074
Total current liabilities			888,202		301,091
Non-current liabilities
Government loan payable	10		1,254,214		996,929
Total liabilities			2,142,416		1,298,020
Shareholder's equity
Share capital	11		11,141,565		7,781,423
Share option reserve	12		836,639		504,536
Contributed surplus	13		411,678		(516,699)
Deficit			(5,889,591)		(3,701,988)
Total equity			6,500,291		4,067,272
Total liabilities and shareholders' equity		$	8,642,707	$	5,365,292
Nature of operations and going concern (Note 1)
Subsequent events (Note 18)

Approved and authorized on behalf of the Board:

"Darren Footz"	"Ash Guglani"
Director	Director

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

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Statements of Loss and Comprehensive Loss For the Years Ended May 31, 2020 and 2019

Note Administrative $ Advisory and consulting fees 13 Contractor expense Depreciation 8 Legal expense Meals and Entertainment Rent expense Research and development Salary 13 Stock based compensation 12 Travel expense	May 31, 2020 May 31, 2019 478,703 $ 382,649 393,500 187,394 38,474 96,036 234,860 245,882 184,429 17,383 17,019 10,495 1,771 - 46,839 15,635 121,349 299,824 332,103 47,677 56,719 46,216
Operating loss before other items Other items Grants Interests income and others	1,905,768 1,349,191 (8,898) (166,220) (42,406) (24,644)
	(51,304) (190,864)
Loss before discontinued operations Loss from discontinued operations 1	1,854,464 1,158,327 333,139 -
Loss and Comprehensive for theyear $ 2,187,603 $ 1,158,327

Basic and diluted lossper share 11 $ 0.12 $ 0.06
11 $ 0.02 $ - Basic and diluted loss per share from discontinued operations
18,182,004 18,182,004 Weighted average number of shares outstanding

(The accompanying notes are an integral part of these consolidated financial statements)

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Statements of Changes in Equity For the years ended May 31, 2020 and May 31, 2019

	Number			Common	Number		Preferred
	of			Share	of		Share		Option		Contributed					Total
(Expressed in Canadian Dollars)	Common Shares			Capital	Preferred Shares		Capital		Reserve			Surplus		Deficit		Equity
					-		-
Balance, May 31, 2018	18,182,004		$	23,715	15,812,178	$	7,635,594	$	456,859		$	(516,699)	$	(2,543,661)	$	5,055,808
Net loss for the year ended May 31, 2019		-		-	-		-			-		-		(1,158,327)		(1,158,327)
Share issued for private placement, net of costs		-		-	187,866		122,114			-		-		-		122,114
Stock-based compensation		-		-	-		-		47,677			-		-		47,677

Balance, May 31, 2019	18,182,004		$	23,715	16,000,044	$	7,757,708	$	504,536		$	(516,699)	$	(3,701,988)	$	4,067,272
Net loss for the year ended May 31, 2020		-		-	-		-			-		-		(2,187,603)		(2,187,603)
Share issued for private placement, net of costs		-		-	6,791,207		3,360,142			-		928,377		-		4,288,519
Stock-based compensation		-		-	-		-		332,103			-		-		332,103

Balance, May 31, 2020	18,182,004		$	23,715	22,791,251	$	11,117,850	$	836,639		$	411,678	$	(5,889,591)	$	6,500,291

(The accompanying notes are an integral part of these consolidated financial statements)

NEXE Innovations Inc. (formerly G-Pak Technology Inc.) Consolidated Statements of Cash Flow For the Years Ended May 31, 2020 and May 31, 2019

Cash flows from operating activities Net loss for the period $ Items not affecting cash: Accretion Stock based compensation Write down of subsidiary Write off of investment Depreciation of property, plant and equipment	Year Ended May 31, 2020 Year Ended May 31, 2019 (2,187,603) $ (1,158,327) 217,196 151,140 332,103 47,677 103,094 - - 15,000 236,860 357,730
	(1,298,350) (586,780)
Change in non-cash working capital balances: Increase in trade and other recievables Increase/(decrease) in trade and other payables Increase in bank indebtedness Increase in prepaids expenses and deposits	(12,170) (47,493) 415,729 139,787 (94,688) 94,688 (759,941) 1,373
	(1,749,420) (398,425)
Cash flows from investing activities Purchase of property, plant and equipment Investment in intangible assets	(40,520) (752,253) (482,273) (341,878)
	(522,793) (1,094,131)
Cash flows from financial activities Proceeds from issuance of capital stock Redemption of term deposit Proceeds from government loan	4,288,519 122,114 714,567 501,382 580,590 340,080
	5,583,676 963,576
Net change in cash and cash equivalents during the year Cash and cash equivalents, beginning of the year	3,311,463 (528,980) - 528,980
Cash and cash equivalents, end of the year $	3,311,463 -

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

1. NATURE OF OPERATIONS AND GOING CONCERN

The head office and principal address of the Company is Unit 109 – 19353 22nd Avenue, Surrey, British Columbia, V3Z 3S6.

Going Concern

These consolidated financial statements have been prepared assuming the Company will continue on a going- concern basis. The Company has incurred losses since its inception and the ability of the Company to continue depends upon its ability to raise adequate financing and to commence profitable operations. This represents a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

While the Company has been successful in the past at raising funds, there can be no assurance that it will be able to do so in the future. See Note 18 - Subsequent Events.

These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis was not appropriate for these consolidated financial statements, then adjustments to the carrying values of assets and liabilities would be necessary.

			May 31,	May 31,
			2020	2019
Deficit		$	5,889,591	$ 3,701,988
Working	capital	$	2,712,942	$ 659,791

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

1. NATURE OF OPERATIONS AND GOING CONCERN (continued)

Discontinued Operations

Effective June 3, 2020, the Company divested its 70% interest in Granville Island Packaging Ltd. (“GI”) which was held by Scepter Industries Inc. Management concluded that the Company’s focus had shifted and this distribution arm was no longer required.

The Company recorded a forgiveness of debt totalling $208,720 and made cash payment of $230,045 to the remaining shareholders of GI.

2. BASIS OF PRESENTATION

Statement of compliance

These consolidated financial statements of the Company and its subsidiaries are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements were approved and authorized for issue by the Board of Directors on October 29, 2020.

Operations

To date, the Company has not earned significant revenues and is considered to be in the development stage. The Company’s operations are funded from equity financings as well as financial support from various federal government programs which are dependent upon many external factors. Although management considers that the Company has adequate resources to continue the development phase of its first product for the next twelve months, the Company recognizes that research and development expenditures may change as it transitions towards production and, as a result, it may be required to obtain additional financing. The Company believes that, based on forecasts and the ability to reduce expenditures if required, along with indications of shareholder support, it will be able to continue as a going concern for the foreseeable future. While the Company has been successful in securing financings in the past there can be no assurance that it will be able to do so in the future. These consolidated financial statements do not reflect any adjustments to the carrying values of the Company’s assets and liabilities, revenue and expenses, and the statement of financial position clarifications used, that would necessary if the going concern assumption were not appropriate. Such adjustments could be material.

Basis of measurement

These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at their fair value as explained in the accounting policies set out below. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional and reporting currency.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements.

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, G-Cup Technology Corp., G-Pak Holdings Ltd. The Company expensed its interests in Scepter Industries Ltd. which the Company plans to wind up the subsidiary. The purpose of Scepter was for research and development which is being conducted in-house.

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that control ceases.

All significant inter-company balances and transactions between the Company and its subsidiaries have been eliminated in preparing the consolidated financial statements.

Functional and presentation currency

The consolidated financial statements are presented in Canadian dollars, which is also the Company's functional currency.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Company and its subsidiary at the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in other than the functional currency are translated at the exchange rates in effect at the financial position date. The resulting exchange gains and losses are recognized in profit or loss. Non-monetary assets and liabilities denominated in other than the functional currency that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value is determined. Non-monetary items that are measured in terms of historical cost in other than the functional currency are translated using the exchange rate at the date of transaction.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and cash equivalents

Cash and cash equivalents consist of cash, cheque issued in excess of cash and highly liquid instruments that are readily convertible to cash with a maturity of three months or less when initially purchased.

Intangible assets

Intangible assets comprise patents of design and formulation of single-serve coffee pods and accumulated internally generated development costs. Patents are measured on initial recognition at cost. Following initial recognition, patents are carried at cost less any accumulated amortization and accumulated impairment losses. The useful lives of patents are assessed as 20 years.

Development costs are recognized as an intangible asset when the Company can demonstrate:

The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
Its intention to complete and its ability and intention to use or sell the asset
How the asset will generate future economic benefits
The availability of resources to complete the asset
The ability to measure reliably the expenditure during development

The Company is in the development phase and development costs capitalized are those associated with enhancing design and formulation of coffee pods for large scale production. Development costs incurred during the research phase of an internal project are expensed in the period in which they are incurred. Amortization of capitalized development costs begins when development is complete, and the assets are available for use.

Amortization is recorded on a straight-line basis over its estimated finite useful life. Patents are amortized over the period of expected future benefit.

During the period of development, the capitalized development costs are tested for impairment annually. The useful life or amortization method for capitalized development costs is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the consolidated statement of Loss and comprehensive loss in the expense category that is consistent with the function of the intangible assets. Intangible assets are derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on disposal of the assets, determined as the difference between the net disposal proceeds and the carrying amount of the assets, is recognized in profit or loss.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of equipment includes the acquisition cost and any direct costs to bring the asset into productive use at its intended location.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Depreciation

Depreciation is calculated on a declining balance basis over the equipment’s estimated useful lives. Depreciation methods and useful lives are reviewed at each reporting date and adjusted if appropriate.

Computer equipment	55%
Furniture and equipment	20%
Machinery	10 years
Manufacturing facility	20 years
Software	100%
Leasehold Improvement	5 years

Property and equipment are written down to the net recoverable value when management determines there has been a change in circumstances which indicates its carrying amount may not be recoverable. Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss within the period of disposal.

Provisions

Provisions for legal or constructive obligations are recognized when the Company has a present legal or constructive obligation that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

Government loan payable

Government loans are recognized at their fair value where there is a reasonable assurance that the grants will be received and the Company will comply with all attached conditions.

The benefit of the loans from government at a below-market interest rate is measured and recognized as the difference between the initial carrying value of the loans determined using the effective interest method and the proceeds received. The benefit amount will be amortized over the repayment period of the loans.

Grant income

Grants received for expenses incurred by the Company are recognized in the Statement of Loss and Comprehensive Loss as other income.

Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated by reference to the higher of the value in use and fair value less costs to sell.

Fair value less costs to sell is defined as the estimated price that would be received on the sale of the asset in an orderly transaction between market participants at the measurement date.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other groups of assets.

An impairment loss is recognized if the carrying amount of an asset or group of assets exceeds the estimated recoverable amount. Impairment losses are recognized in the statement of profit or loss. When impairment subsequently reverses, the carrying amount of the asset is increased to the revised estimated recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Share capital

The Company’s ordinary common shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares, warrants and stock options, net of any tax effects, are recognized as a deduction from equity.

Valuation of equity units issued in private placements

The Company has adopted a residual value method with respect to the measurement of shares and share purchase warrants issued as private placement units. The residual method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurement component.

The fair value of the share purchase warrants issued in private placements is determined to be the more easily measurable component as they are valued at the fair value using the black-Scholes model. The remaining balance, if any, is allocated to the attached share purchase preferred shares. Any fair value attributable to the share purchase warrants is recorded to reserves.

Income taxes

The Company follows the asset and liability method of accounting for income tax. Income tax expense comprises current and deferred tax. Income tax expense is recognized in the consolidated statement of income (loss) except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

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

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination, nor is it recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Leases

The Company assesses at inception of a contract, whether the contract is, or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses whether the customer has the following through the period of use:

The right to obtain substantially all of the economic benefits from use of the identified asset; and the right to direct the use of the identified asset.

This policy is applied to contracts entered into, or changed, on or after June 1, 2019.

Where the Company is a lessee in a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of the relative standalone price of the lease component and the aggregate stand-alone price of the non-lease components.

At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost. The cost of the right-of-use asset is comprised of the initial amount of the lease liability, any lease payments made at or before the commencement date less any lease incentives received, initial direct costs incurred by the Company, and an estimate of the costs to be incurred by the Company in dismantling and removing the underlying asset and restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

After the commencement date, the Company measures all right-of-use assets by applying the cost model, whereby the right-of-use asset is measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liability. The right-of-use assets are depreciated using the straight-line method from the commencement date to the end of the lease term or the end of the useful life of the right-of-use asset. The estimated useful life of the right-of-use assets are determined on the same basis as those of property, plant and equipment. The determination of the depreciation period is dependent on whether the Company expects that the ownership of the underlying asset will transfer to the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option.

The lease liability is initially measured at the present value of the lease payments not paid at the lease commencement date, discounted using the interest rate implicit in the lease or the Company’s incremental borrowing rate, if the interest rate implicit in the lease cannot be readily determined. The lease payments included in the measurement of the lease liability comprise of fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or rate, amounts expected to be payable by the Company under a residual value guarantee, the exercise price of a purchase option that the Company is reasonably certain to exercise, and payment of penalties for terminating the lease if the lease term reflects the Company exercising an option to terminate the lease. After the commencement date, the Company measures the lease liability at amortized cost using the effective interest method.

The Company remeasures the lease liability when there is a change in the lease term, a change in the Company’s assessment of an option to purchase the underlying asset, a change in the Company’s estimate of amounts expected to be payable under a residual value guarantee, or a change in future lease payments resulting from a change in an index or a rate used to determine those payments. On remeasurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Other comprehensive income (loss)

Other comprehensive income (loss) is the change in the Company's net assets that results from transactions, events and circumstances from sources other than the Company's shareholders and includes items that would not normally be included in net income (loss) such as unrealized gains or losses on available-for-sale investments and translation gains or losses on translation of foreign operations to the presentation currency of the Company.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Discontinued operations

A discontinued operation is a component of the Company’s business that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statements of comprehensive loss and cash flows are represented as if the operation had been discontinued from the start of the comparative period. In doing this, the Company excludes the results of the discontinued operations and any gain or loss from disposal from the consolidated statements of operations from continuing operations and presents them on a separate line as profit or loss (net of tax) from the discontinued operation. Per share information and changes to other consolidated comprehensive income (loss) related to discontinued operations are presented separately from continuing operations. Cash flows from discontinued operations are presented separately from cash flows from continuing operations in the consolidated statements of cash flows.

4. CRITICAL JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Use of estimates

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for the periods reported. The estimates and associated assumptions are based on historical experience and various other factors that are considered to be relevant. Actual results could differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis and may change if new information becomes available. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected

The critical judgments that the Company’s management has made in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

Going concern

The determination if the Company has the ability to continue as a going concern is dependent on its ability to achieve profitable operations. There is an assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. Certain judgements are made by management when determining if and when the Company will achieve profitable operations.

Capitalization of development expenditures

The application of the Company’s accounting policy for capitalization of development expenditures requires judgment in determining which development expenditures are recognized as intangible assets and applying the policy consistently. In making this determination, the Company considers the degree to which the development expenditure can be associated with developing and enhancing its technology and know-how in manufacturing and distributing coffee pods.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

4. CRITICAL JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Key sources of estimation uncertainty

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the statement of the financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

Depreciation

Equipment are depreciated based on the estimated useful life less their estimated residual value. Significant assumptions are involved in the determination of useful life and residual values and no assurance can be given that actual useful lives and residual values will not differ significantly from current assumptions. Actual useful life and residual values may vary depending on a number of factors including internal technical evaluation, physical condition of the assets and experience with similar assets. Changes to these estimates may affect the carrying value of equipment, net loss and comprehensive loss in future periods.

Current and deferred taxes

Accounting for income taxes is a complex process requiring management to interpret frequently changing laws and regulations and make judgments relating to the application of tax law, the estimated timing of temporary difference reversals, and the estimated realization of tax assets. The Company recognizes the deferred tax benefit related to deferred tax assets to the extent recovery is probable. Assessing the recoverability of deferred tax assets requires management to make significant estimates of future taxable profit. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in the future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted. In addition, all tax filings are subject to subsequent government audits and potential reassessment. These interpretations, judgments and changes related to them impact current and deferred tax provisions, deferred tax assets and liabilities and results of operations.

Share-based payments

The Company has an incentive stock option plan for employees, consultants, directors and officers. Services received and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non-market vesting conditions. The fair value of share options is estimated by using the Black-Scholes valuation model on the date of stock option grant or date of warrant issuance based on certain assumptions. Those assumptions are described in Notes 12 and include, among others, expected volatility, expected life and number expected to vest.

Government loan payable

The determination of fair value of the interest-free government loan is based on a number of assumptions, including contractual future cashflow and discount rate.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

5. STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED

The following new standards, amendments and interpretations have been issued but are not effective for the fiscal year ended May 31, 2020 and, accordingly, have not been applied in preparing these financial statements.

Interest Rate Benchmark Reform: Amendments to IFRS 9 and IFRS 7

Insurance Contracts

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

5. STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED (continued)

Business Combinations

IFRS 3, Business Combinations – issued by the IASB in January of 2008. IASB has issued the amendments to IFRS 3, which relate to the definition of a business. The amendments are as follows:

Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
Add an optional concentration test that permits a simplified assessment of whether an acquired set of activities.

NEWLY ADOPTED ACCOUNTING STANDARDS

The Company adopted the following accounting standards that are effective for annual accounting periods beginning on or after January 1, 2019:

New standard IFRS 16 - Leases

IFRS 16, Leases ("IFRS 16") was issued by the IASB on January 13, 2016, and replaced IAS 17, Leases. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, IFRS 16 requires a single, on-balance sheet accounting model that is similar to current finance lease accounting. Leases become an on-balance sheet liability that attract interest, together with a new asset.

The Company has owns the building. Accordingly, management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

New Interpretation IFRIC 23 - Uncertainty over Income Tax Treatments

On June 7, 2017, the IASB issued IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments ("IFRIC 23"). IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments.

Management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

6. TERM DEPOSITS

The term deposits are short-term GICs held with a Canadian bank that mature between three months and a year. All of which were redeemed during the year ended May 31, 2020.

7. TRADE AND OTHER RECEIVABLES

Trade and other receivables include only GST receivables.

	May 31, 2020	May 31, 2019
GST-PST receivable	274,718	229,447
Trade and other receivables	$ 274,718	$ 229,447

8. PLANT AND EQUIPMENT

Plant and equipment as at May 31, 2020 and 2019 were as follows:

	Computer Equipment	Computer Equipment	Furniture and Equipment	Furniture and Equipment		Machinary	Building Improvemen t	Building Improvemen t	Manufacturing Facility	Manufacturing Facility		Land	Government Loan Benefit	Government Loan Benefit		Total
Net book value at May 31, 2019	$	944	$	741,708	$	1,185,505	$	43,055	$	1,844,221	$	341,270	$	(964,760)	$	3,191,943
Additions		2,347		12,143		5,339		18,691		-				(332,504)		(293,984)
Disposition of subsidiaries		-		(7,182)		(62,487)		(7,868)		-		-		-		(77,537)
Depreciation		(1,165)		(135,622)		(139,276)		(4,723)		(84,196)		-		130,121		(234,860)
Net book value at May 31, 2020		2,126		611,046		989,082		49,155		1,760,025		341,270		(1,167,143)		2,585,562
Consisting of:
Cost		6,268		865,862		1,321,495		56,577		2,025,185		341,270		(1,409,113)		3,207,545
Accumulated depreciation		(4,142)		(254,815)		(332,413)		(7,421)		(265,160)		-		241,969		(621,983)
	$	2,126	$	611,046	$	989,082	$	49,156	$	1,760,025	$	341,270	$	(1,167,144)	$	2,585,562

Net book value at May 31, 2018	$	2,098	$	470,364	$	1,113,066	$	15,832	$	1,924,147	$	341,270	$	(511,270)	$	3,355,508
Additions		-		390,537		193,418		29,502		34,200				(565,338)		82,319
Acquisition of subsidiaries		-										-				-
Depreciation		(1,154)		(119,193)		(120,978)		(2,279)		(114,126)				111,848		(245,882)
Net book value at May 31, 2019		944		741,708		1,185,505		43,055		1,844,221		341,270		(964,760)		3,191,943
Consisting of:
Cost		3,921		860,901		1,378,643		45,753		2,025,185		341,270		(1,076,608)		3,579,066
Accumulated depreciation		(2,977)		(119,193)		(193,138)		(2,698)		(180,964)		-		111,848		(387,122)
	$	944	$	741,708	$	1,185,505	$	43,055	$	1,844,221	$	341,270	$	(964,760)	$	3,191,943

9. INTANGIBLE ASSETS

Intangible assets as at May 31, 2020 and 2019 were as follows:

		May 31,		May 31,
		2020		2019
Patents	$	78,980	$	44,100
Intangible Asset		1,615,761		1,168,367
Net book value	$	1,694,740	$	1,212,467

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

9. INTANGIBLE ASSETS (continued)

10. GOVERNMENT LOAN PAYABLE

During the year ended May 31, 2017, the Company is approved to receive up to $2,500,000 of loans from Western Economic Diversification Canada. The Company drew down its second tranche of the loan during the year ended May 31, 2019 in the amount of $340,080. The project costs include but not limited to:

Equipment costs
Production materials
Salary for employees who devoted time to the project
Travel costs
Contractors and professional fees
Production testing costs
Manufacturing facility leasehold improvement costs

The Company drew down its final tranche of the loan during the year ended May 31, 2020 in the amount of $580,590. The Company is required to make repayments of $41,667, which were to commence August 1, 2020, however an extension has been granted to January 1, 2021. As at May 31, 2020, the current portion of the loan repayable is $208,335. The average bank rate plus 3% of interests accrues only during the period beginning of due date of repayments and interests are calculated and compounded monthly. Therefore, the loan was considered as interest free loan and the different between the fair value of loan and the principal was credited against plant and equipment.

Government loan - May 31, 2018	$	683,674
Loan received		340,080
Accretion		151,140
Grantportion		(177,965)
Government loan - May 31, 2019	$	996,929
Loan received		580,590
Accretion		217,533
Grantportion		(332,504)
Government loan - May31,2020	$	1,462,548

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

11. SHARE CAPITAL

Authorized:

Common Shares: unlimited without par value

Preferred Shares Class A Series A: convertible to common shares at the conversion rate of 1:1 Preferred Shares Class A Series 1: 1.5 times liquidation pref, non-convertible to common shares

Issued and outstanding:

As at May 31, 2020, the Company has 18,182,004 common shares; 2,906,073 Class A, Series 1 shares; 12,906,106 Class A, Series A; and 6,979,072 Class A Series A preferred shares.

12. STOCK OPTIONS AND WARRANTS

During the year ended May 31, 2020, the Company issued a total of 6,791,207 (2019: 187,866) share purchase warrants exercisable at $1.10 per share, with a 2-year life from issuance date and remain outstanding.

Continuity of the Company’s share purchase warrants issued and outstanding was as follows:

May 31, 2020 May 31, 2019	May 31, 2020 May 31, 2019
Number of warrants Weighted average exercise price	Number of warrants Weighted average exercise price
Outstanding, beginning of year 187,866 $ 1.10 Issued 7,123,559 1.08	- $ - 187,866 1.10
Outstanding, End of theyear 7,311,425 $ 1.08	187,866 $ 1.10

The weighted average remaining life of warrants outstanding as at May 31, 2020 is 1.51 years (2019: 2 years).

The following assumptions were used for the Black-Scholes valuation of warrants issued during the year ended May 31, 2020:

ear ended May 31, 2020:
	2020
Risk-free interest rate	1.06%
Expected life of warrants	24 months
Fair value per warrant issued	$0.13- $0.23
Annualized volatility	62.89%
Dividend rate	0.00%

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

12. STOCK OPTIONS AND WARRANTS (continued)

Continuity of the Company’s stock options issued and outstanding was as follows:

May 31, 2020 May 31, 2019	May 31, 2020 May 31, 2019
Number of options (#) Weighted average exercise price	Number of options (#) Weighted average exercise price
Outstanding, beginning of year 2,285,492 $ 0.38 Granted 2,370,000 0.63	2,285,492 $ 0.38 -
Exercised - - Forfeited/cancelled (361,472) (0.50) - Expired - -
Outstanding, End of Period 4,294,020 $ 0.55	2,285,492 $ 0.38

As at May 31, 2020, the following stock options were outstanding and exercisable with an average remaining life of 2.67 years (2019: 2.61 years):

			Number of options
Exercise	Number of options	Expiry date	vested and
price($)	outstanding		exercisable
0.28	1,283,788	From Sept 30, 2021 to Jan 31, 2022	1,175,036
0.53	160,000	From Feb 17, 2022 to Jul 27, 2022	124,948
0.53	480,232	March 31, 2024	403,602
0.63	2,370,000	FromOct 9,2025 toFeb 3,2026	-
0.51	4,294,020		1,299,984

The following assumptions were used for the Black-Scholes valuation of stock options issued during the years ended May 31, 2020 and 2019:

	2020
Risk-free interest rate	0.56- 1.60%
Expected life of options	72 months
Fair value per options issued	$0.35- $0.39
Annualized volatility	60%
Dividend rate	0.00%

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

13. RELATED PARTY TRANSACTIONS

The related party transactions are in the normal course of operations and have been valued in these consolidated financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are listed below.

During the year ended May 31, 2020, the Company paid $107,000 (2019: $60,000) of consulting fees to a director of the Company, $35,000 (2019: $nil) of consulting fees to the CFO of the Company, $77,000 (2019: $84,000) of consulting fees and $75,400 (2019: $56,160) of salaries to the CEO and director of operations of the Company.

As at May 31, 2020 the Company owed to the CEO of the Company $15,042 (2019: 15,042) for expenditures incurred on behalf of the Company.

14. FINANCIAL INSTRUMENTS

Fair value of financial instruments

Financial instruments recorded at fair value are measured using a three-level fair value hierarchy:

Level 1 Fair value is determined by reference to quoted prices in active markets for identical assets and liabilities.
Level 2 Fair value is determined based on inputs other than quoted prices for which all significant inputs are observable, either directly or indirectly.
Level 3 Fair value is determined based on inputs that are unobservable and significant to the overall fair value measurement.

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as follows:

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

14. FINANCIAL INSTRUMENTS (continued)

2020		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	3,311,463	$	-	$	-	$	3,311,463
Term deposits		14,000		-		-		14,000
Trade and other receivables						274,718		274,718
	$	3,325,463	$	-	$	274,718	$	3,600,181
Financial Liabilities
Cash and cash equivalents	$	-	$	-	$	-	$	-
Government loan payable		-		1,462,548		-		1,462,548
	$	-	$	1,462,548	$	-	$	1,462,548
2019		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents	$	-	$	-	$	-	$	-
Term deposits		728,567		-		-		728,567
Trade and other receivables						229,447		229,447
	$	728,567	$	-	$	229,447	$	958,014
Financial Liabilities
Cash and cash equivalents	$	94,688	$	-	$	-	$	94,688
Government loan payable		-		996,929		-		996,929
	$	94,688	$	996,929	$	-	$	1,091,616

Financial risk management

Credit risk

Liquidity risk

Interest rate risk

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

15. CAPITAL RISK MANAGEMENT

16. SEGMENT DISCLOSURES

The Company operates in one reporting segment. All of the Company’s plant and equipment are located in Canada.

17. INCOME TAX

The following table reconciles the expected income tax expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of operations and comprehensive loss for the years ended May 31, 2020 and 2019:

	Year	Ended May	Year	Ended May
		31, 2020		31, 2019
Net loss before tax	$	(2,187,600)	$	(1,158,327)
Statutorytax rate		27%		27%
Expected tax recovery		(590,652)		(312,748)
Non-deductible items		92,141		25,981
Change in estimates		(11,415)
Debt forgiveness		60,092		-
Share issuance costs		(54,399)		-
Change in deferred tax assets not recognized		504,233		286,767
Total tax expense (recovery)	$	-	$	-

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

17. INCOME TAX (continued)

The significant components of the Company’s deferred tax assets that have not been included on the consolidated statement of financial position are as follows:

	2020		2019
Deferred tax assets (liabilities)
Government loan payable	$ (280,112)		-
Low interest government loan–WINN benefit	280,112		-
Net deferred tax assets	$-	$	-

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax values. The unrecognized deductible temporary differences as at May 31, 2020 and 2019 are as follows:

	2020	2019
Non-capital loss carryforwards	$ 3,999,026	$ 2,709,353
Share issuance costs	161,945	1,526
Property and equipment	919,252	599,060
Low interest government loan – WINN benefit	129,691	-
Eligible capital property	450	450
Unrecognized deductible temporarydifferences	$5,210,364	$3,310,389

The Company has non-capital loss carryforwards of approximately $3,999,026 (2019: $2,709,353) which may be carried forward to apply against future income for Canadian tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

		2020		2019
2035	$	64,519	$	64,519
2036		308,120		308,120
2037		697,140		714,315
2038		638,876		799,475
2039		822,924		822,924
2040		1,467,447		-
TOTAL	$	3,999,026	$	2,709,353

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

18. SUBSEQUENT EVENTS

The Transaction

NEXE INNOVATIONS INC. (FORMERLY G-PAK TECHNOLOGY INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MAY 31, 2020 AND MAY 31, 2019 (EXPRESSED IN CANADIAN DOLLARS)

18. SUBSEQUENT EVENTS (continued)

SCHEDULE “D”

Management’s Discussion and Analysis of NEXE

[see attached]

==> picture [186 x 69] intentionally omitted <==

NEXE INNOVATIONS INC. (formerly G-PAK Technology Inc.)

FOR THE THREE MONTHS ENDED AUGUST 31, 2020 MANAGEMENT DISCUSSION AND ANALYSIS

DATE _____________ 2 DESCRIPTION OF BUSINESS __________ 3 OBJECTIVES AND STRATEGY __________ 3 OVERVIEW OF PERFORMANCE __________ 4 FINANCING ACTIVITIES ___________ 6 LIQUIDITY AND CAPITAL RESOURCES __________ 7 OUTLOOK _____________ 7 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT _______ 20 OFF BALANCE SHEET ARRANGEMENTS _________ 21 OTHER MD&A REQUIREMENTS _________ 23 ADDITIONAL INFORMATION __________ 24

FOR THE THREE MONTHS ENDED AUGUST 31, 2020 MANAGEMENT DISCUSSION AND ANALYSIS

DATE

This Management Discussion & Analysis (“MD&A”) of NEXE Innovations Inc. and its subsidiaries (referred to as the “Company” or “NEXE”) was prepared by management as at November 15, 2020 and was reviewed and approved by the Board of Directors of NEXE. The following discussion of performance, financial condition and future prospects should be read in conjunction with the consolidated condensed interim financials statements for the three months ended August 31, 2020 and 2019 and the annual audited consolidated financial statements for the year ended May 31, 2020 and 2019, and notes thereto (the “Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The information provided herein supplements but does not form part of the Financial Statements. This discussion covers the three month period ended August 31, 2020, and the subsequent period up to the date of issue of this MD&A.

The Company has prepared this MD&A following the requirements of National Instrument 51-102 (“NI-51-102”). These statements are filed with the relevant regulatory authorities in Canada. All currency amounts are expressed in Canadian dollars unless otherwise noted.

Forward-Looking Information

This MD&A contains “forward-looking information” within the meaning of Canadian securities legislation and “forwardlooking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forwardlooking statements in this MD&A include, but are not limited to, statements with respect to:

the available funds of the Company upon completion of the Concurrent Private Placement and Completion of the Transaction, and the anticipated use of those funds by the Company;
the Company’s anticipated directors, officers and insiders;
any of the Company’s potential acquisitions;
any of the Company’s potential transactions;
the Company’s expectations about the timing of achieving milestones and the related costs;
expectations about the Company’s services and products;
the commercial development to roast, produce and package coffee into the Company’s proprietary and fully compostable capsules, known as of the NEXE Pod (the “NEXE POD”) and other soluble format capsules;
the effectiveness of the NEXE’s products and ability to develop products for other single service coffee brewing systems;
the ability of NEXE to devise a marketing and pricing strategy for the NEXE POD;
• NEXE achieving brand awareness with respect to the NEXE POD.

The forward-looking statements contained in this MD&A reflect the current views of the Company and are based on certain assumptions, including assumptions regarding:

the ability of the Company to satisfy all conditions precedent and obtain all regulatory approvals for the Transaction, including by the dates indicated;
that there will be no regulation or law that will prevent NEXE from operating its business;
the ability of NEXE to achieve its goals on time and on budget;
• the anticipated costs to complete the Transaction; and

that Company will be able to execute its business strategy successfully such that the future growth, results of operations, operating costs, performance and business prospects and opportunities of the Company, will be as anticipated.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the ability of the Issuer to obtain necessary financing; the ability to attract and retain key personnel; the ability to successful commercialize the NEXE POD for coffee; NEXE will enter into purchase orders to sell the NEXE POD; the ability of NEXE to carry out large scale production of the NEXE POD and such production does not affect the quality of the product; ability to adequately protect proprietary information and technology from competitors; the satisfaction of the conditions under the Definitive Agreement; satisfaction of the requirements of the Exchange with respect to the Transaction; the economy generally; competition; and anticipated and unanticipated costs. Such statements could also be materially affected by regulatory changes, competition, stock market volatility and the ability to access sufficient capital from internal or external sources.

Actual results, performance or achievement could differ materially from those expressed herein. While the Company anticipate that subsequent events and developments may cause its views to change, the Issuer specifically disclaims any obligation to update these forward-looking statements, except as otherwise required by applicable securities laws. These forward-looking statements should not be relied upon as representing the Issuer’s views as of any date subsequent to the date of this MD&A. Although the Company have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forwardlooking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

DESCRIPTION OF BUSINESS

NEXE is a private British Columbia-based company that is currently developing its proprietary compostable (plant-based) single-serve coffee pods. Incorporated on April 27, 2015, the Company purchased its facility in Surrey, British Columbia in 2016. Since incorporation the Company’s focus has been to roast, produce and package coffee into the Company’s proprietary and fully compostable capsules, known as “NEXE PODs”. The Company through purchase a variety of equipment and also the purchase of three-dimensional printers, which have been beneficial to the Company developing numerous versions of single-serve coffee capsules for use with the Keurig K-Cup and Nespresso brewing systems. This in-house testing process contributes toward the Company developing the NEXE POD for commercialization. The Company is also developing compostable Nespresso-sized pods as well as assessing other fully compostable packaging opportunities. The Company will continue to commercialize the NEXE POD for coffee and soluble format capsules and intends to develop the NEXE brand as the standard in fully compostable packaging. Ultimately, the Company aspires to be a leading partner to major Consumer Packaging Companies (“CPG”) to provide compostable solutions for a variety of beverages, including coffee, tea and others.

OBJECTIVES AND STRATEGY

The focus and belief of the Company is that the NEXE POD can eradicate the waste created by single-serve plastics pods. The Company’s goal is to attract and sustain a significant portion of the single-serve pod beverage market, as there is a growing demand for environmentally friendly and sustainable products, brands will continue to shift to environmentally sustainable solutions for pods for Keurig and Nespresso single-serve brewing systems.

The Company’s technology platform consists of the patented, fully compostable, “NEXE POD” as well as the proprietary equipment involved with the process of making the NEXE POD. Hundreds of municipalities in the European Union, Canada, and the United States are moving in the direction of introducing comprehensive compost systems, making the NEXE POD a viable alternative to the typical plastic coffee capsules out in the marketplace.

OVERVIEW OF PERFORMANCE

During the three month period ended Augsut 31, 2020, the Company has been focused on completing certain key milestones towards commercialization of the NEXE POD. These milestones included:

Completing NEXE’s coffee transport system, which roasts and grinds coffee in a contained environment.
Completing factory and site acceptance testing for dosing and sealing machines in the NEXE POD for the Keurig market.
Completion and commercialization of the NEXE POD for the soluble market (ie. hot chocolate, tea, latte, etc.).

NEXE also received the results of its final compost study in think we had earlier, which states that the NEXE POD is fully compostable after 35 days. Furthermore, NEXE is in discussions with various commercial entities which could eventually serve as customers.

The Company has placed equipment orders for acquisition proprietary equipment in the amount of $1,183,000 EUR (CAD- $1,798,160) which is scheduled to be delivered in in the first calendar quarter 2021. Orders for an injection molding machine and a prototype machine due for delivery in the fourth calendar quarter of 2020, with total commitments of US$138,330 and $229,806 respectively. The Company has prepaid 90% of these commitments as at August 31, 2020 and they are recorded in long-term prepaids of the balance sheet.

The Company announced on July 28, 2020, the Company entered into a Letter of Intent with Whatcom Capital Corp. (“Whatcom”) regarding a proposed transaction to acquire all of the issued and outstanding securities of the Company (the “Transaction”). Upon completion of the Transaction, the combined entity (the “Resulting Issuer”) will continue the business of NEXE as a “technology” issuer. The Transaction is intended to constitute the “Qualifying Transaction” of Whatcom, as such a term is defined in Policy 2.4 – “Capital Pool Companies” of the TSX Venture Exchange (the “Exchange”).

The Transaction

(“Canaccord“). The net proceeds of the Brokered Private Placement are being held in escrow by TSX Trust Company (the “Escrow Agent“) pursuant to the subscription receipt agreement among Whatcom, the Company, Canaccord and the Escrow Agent.

Additionally, the Company will also be completing a non-brokered private placement (“NBPP”) of units at a price of $0.80 per unit (each a “Unit“) in conjunction with closing the Transaction. Each Unit will consist of one common share of the Company and one share purchase warrant, with each warrant entitling the holder to purchase a common share of the Company at a price of $1.00 per share for a period of twelve months from the date of closing.

The Transaction is expected to close before the end of November 2020.

The Company received $250,000 from the Department of Natural Resources – Innovative Solutions Canada (“NRCAN”) for the development of the NEXE POD after submitting a bio-based application, a total of $1 million is receivable by the Company from NRCAN in staged quarterly payments.

SINGLE-SERVE BEVERAGE MARKET

According to a report published by Fior Markets, the global annual single-serve coffee pod and capsule market is expected to grow from USD 15.23 billion to USD 29.2 billion by 2025 at a compound annual growth rate (CAGR) of 8.5% during the forecast period of 2018-2025[1] . Although some of these pods are recyclable, unfortunately, many of these pods are thrown in the garbage where they ultimately end up in either a landfill or in the ocean resulting in significant environmental damage. NEXE’s fully compostable coffee NEXE POD intends to address this issue.

1 https://www.globenewswire.com/news-release/2020/03/16/2000705/0/en/Global-Coffee-Pod-and-Capsule-Market-isExpected-to-Reach-USD-29-2-Billion-by-2025-Fior-Markets.html.

SUBSEQUENT EVENTS

The Company received a total of $9,150,000 in Subscription Receipts held in escrow through the Brokered Private Placement at a price of $0.80 per Subscription Receipt. Additionally, the Company have received Subscriptions to the NBPP totaling $4,511,046 in gross proceeds. Each Unit at a price of $0.80 per unit in conjunction with closing the Transaction. Each Unit will consist of one common share of the Company and one share purchase warrant, with each warrant entitling the holder to purchase a common share of the Company at a price of $1.00 per share for a period of twelve months from the date of closing.

OVERVIEW OF BUSINESS DEVELOPMENT

Since incorporation, the Company has focused its resources on developing the NEXE POD, acquiring its operating facility, developing its own customized automation equipment to produce the NEXE PODs, protecting its intellectual property and raising capital to finance its active operations.

In 2015, the Company was formed and obtained a U.S. patent on the NEXE POD (US Patent No. 8,960,489). The Company then engaged third parties to carry out a preliminary compostable study with the University of British Columbia. The results indicated that the NEXE POD would fully breakdown (degrade) after twelve (12) weeks.

In 2016, the Company focused on the acquisition of a commercial facility in Surrey B.C. The facility will be used to produce the NEXE PODs once commercialized. The acquisition was financed by way of two private placements and is mortgage-free.

Additionally in 2016, the Company focused on the build out of its facility and received a financial contribution from the Minister responsible for Western Economic Diversification Canada (the “ WINN Contribution ”). The WINN Contribution provided the Company with $2,500,000 of funding. The purpose of the WINN Contribution was to provide the Company with funding to acquire custom manufacturing equipment to commercialize the NEXE Pods. The Company received approximately $1 million of the WINN Contribution in calendar 2017; approximately $1 million in calendar 2018 and approximately $0.5 million in calendar 2019. The Company is required to repay the WINN Contribution with monthly installments of $41,667 per month commencing January 1, 2021 (from the original commencement date of August 1, 2020). The Company also entered into a contribution agreement with the National Research Council of Canada, as represented by its Industrial Research Assistance Program (“ IRAP ”) in February 2017 (the “ IRAP Contribution ”) whereby IRAP provided $473,800 in funding. The purpose of the IRAP Contribution was for the Company to design, develop and test a fully automated proof of concept prototype capable of producing compostable single serve coffee pods.

In 2018, the Company received its first high-speed automation equipment, which it then customized for producing NEXE PODs. With its first customized automation equipment, the Company was able to test the production of NEXE PODs for the coffee and soluble pod market for Keurig Brewing systems with the objective of commercializing these products. The Company also began discussions with various coffee producers on using the NEXE POD once commercialized. The result of these discussions was a letter of understanding with Kicking Horse Coffee (the “ Kicking Horse LOU ”) whereby Kicking Horse Coffee confirmed that it was evaluating the use of the NEXE POD.

FINANCING ACTIVITIES

The Company issued 230,383 (2019 –Nil) Class A Series A preferred shares at $0.65 per unit, for proceeds of $149,749 (2019 – $Nil). The Company received subscriptions to issue 322,949 Class A Series A preferred shares at $0.65 per unit which were issued subsequent to August 31, 2019. A total of 230,383 (2019 – Nil) share purchase warrants exercisable at $1.10 per share were issued, with a 2-year life from issuance date and remain outstanding. A total of 332,052 finder’s warrants were issued to arm’s length finder’s which are exercisable at $0.65 per Series A Preferred Share for a period of two years from the date of issue.

See Subsequent Events section of the MD&A.

RESULTS OF OPERATIONS

Three months ended August 31, 2020

The Company recorded a net loss of $783,303 or $0.04 per share (2020 – $362,451 or $0.02) for the three months ended August 31, 2020.

Corporate general and administrative expenditure for the three months ended August 31, 2020 totaled $94,603 (2020 – $20,962), which includes increased marketing and promotional activities during the year. Advisory and consulting fees increased to $269,478 (2020 – $32,151) due to the increased involvement of certain consultants rounding out the vacant functions such as business and corporate development. Additionally, the Company accrued a bonus payment in the amount of $100,000 for certain senior management. Legal costs of $83,856 (2020 – $9,074) were incurred due to the increased activities of the Company and the pursuit of legal remedy related to a breach of contract for machinery ordered. Salary of $50,584 (2020 – $63,753), was incurred, of which $105,819 was capitalized and recorded as an intangible asset due to the development and testing of the NEXE POD. Non-cash stock-based compensation expense of $82,614 (2020 – $81,001) was recorded. The Company recorded non-cash interest expense of $116,139 (2020 – $48,182) related to the fair value of interest associated to the interest free Government loan from the Western Innovation program.

For the three months ended August 31, 2020, the Company recorded a interest income of $5,901 (2020 – $Nil) due to holding a larger cash balance on deposit during the year.

LIQUIDITY AND CAPITAL RESOURCES

As of August 31, 2020, the Company had working capital of $1,915,382 (2020 - $2,719,942), with cash and cash equivalents totaling $2,939,871 (2020 - $3,311,463). The Company received $250,000 from the NRCAN, see the ‘Overview of Performance’ section of this MD&A.

See Subsequent Events and Financing Activities section of the MD&A for financing details related to private placements and subscription receipts in 2020.

The Company’s ability to raise additional capital is subject to a number of factors, uncertainties and risks including market conditions that could make it difficult or impossible for the Company to raise necessary funds to meet our capital and operating requirements. If we are unable to obtain financing through commercial profitability or equity investments, we may consider other financing solutions including, but not limited to credit facilities or debenture issuances.

All cash is held with Schedule A banks either in deposit accounts or guaranteed investment certificates, and the Company has no joint ventures with any parties that potentially create derivative or hedge risk.

OUTLOOK

The Company’s proprietary equipment, is currently able to manufacture up to 20 million NEXE POD annual capacity in its facility but, the Company intends to increase its scale to a potential 220 million NEXE POD volume within the next few years. This volume will comprise of Nespresso format, K-Cup coffee format, and soluble (hot chocolate, tea, etc.) markets. NEXE has various strategic partnerships with various government organizations, such as the City of Surrey, innovate British Columbia, the University of British Columbia, Western Economic Diversification Canada, the National Research Council Canada, and the Natural Sciences and Engineering Research Council to name a few. In addition to the NEXE governmental ties, NEXE has also won several awards for its technology.

Furthermore, NEXE is in discussions with various commercial entities which could eventually serve as customers.

Upon closing the Transaction, the Company intends to use the proceeds of the Transaction (including the Concurrent Private Placement) to:

Commercialize the NEXE POD. The Resulting Issuer plans to complete the commercialization of the NEXE PODs for Keurig and Keurig compatible brewing systems. In order to complete this objective, the Resulting Issuer has ordered new customized automation equipment that will be delivered between the fourth quarter of 2020 and first quarter of 2021.
Increase Production Capacity to 220 Million Units. The Resulting Issuer plans to scale up its production to 220 million units by purchasing additional customized automation equipment. By fourth quarter of 2021, it is anticipated that NEXE will have the capacity to produce up to 220 million units.
Ensure Protection of Proprietary Property . The Resulting Issuer will continue with the NEXE strategy of increasing its intellectual property of its products and equipment by filing additional patent applications. Further, the Resulting Issuer plans to ensure all molding for the NEXE PODs are done at its facility instead of out-of-country. By keeping molding and other facets of the intellectual process in-country, this better enables NEXE to not only have full control of the intellectual process but also significantly reduces time to development and costs while minimizing time associated with logistics. Each molding machine will cost approximately $520,000 with the first molding machine to be delivered to the Resulting Issuer in the first quarter of 2021.
Secure Purchase Orders for NEXE PODs. As a pre-requisite to receiving significant purchase orders of at least 50 million units of NEXE pods, a number of these coffee producers will require the Resulting Issuer to be certificated under Safe Quality Food (SQFL). The Resulting Issuer anticipates it will achieve SQFL certification by the end of 2020 and plans to pursue significant purchase orders in the first quarter of 2021. It is anticipated that having the SQFL certification should make it easier for the Resulting Issuer to enter into large purchasing orders.

SELECTED ANNUAL INFORMATION

The financial statements have been prepared in accordance with IFRS for fiscal years 2020 and 2019, and are expressed in Canadian dollars.

As at May 31: Total Assets Current Liabilities Long-term Liabilities(1) Shareholders’ Equity Total Shareholders’ Equity & Liabilities For the year ended May 31: Total Revenue Net Loss (2) Basic and diluted loss per share Weighted average number of common shares outstanding	2020 2019 2018
	$ 8,642,707 $ 5,365,292 $ 5,791,043 888,202 301,091 66,615 1,254,214 996,929 683,674 6,500,291 4,067,272 5,040,753
	$ 8,642,707 $ 5,365,292 $ 5,791,043
	2020 2019 2018
	$- $- $-
	(2,187,603) (1,158,327) (1,048,918)
	$ (0.12) $ (0.06) $ (0.06) 18,182,004 18,182,004 18,182,004

(1) WINN Contribution repayable January 1, 2021 at $41,667 per month

(2) Net Loss for 2020 included $333,139 related to the write down of Sceptre Industries and GI Packaging

RISKS AND UNCERTAINTIES

The following are certain factors relating to the business of the Company. If any such risks actually occur, the financial condition, liquidity and results of operations of the Company could be materially adversely affected and the ability of the Company to implement its growth plans could be adversely affected. The Company will face a number of challenges in the development of its business.

Prospects for companies in the technology industry generally may be regarded as uncertain given the nature of the industry and, accordingly, investments in technology companies should be regarded as highly speculative. Technology research and development involves a significant degree of risk. An investor should carefully consider the risks and uncertainties described below. The risks and uncertainties described below are not an exhaustive list. Additional risks and uncertainties not presently known to NEXE or that NEXE believes to be immaterial may also adversely affect NEXE’s business. If any one or more of the following risks occur, the Company's business, financial condition and results of operations could be seriously harmed. Further, if the Company fails to meet the expectations of the public market in any given period, the market price of the Company's Shares could decline.

If any such risks actually occur, shareholders could lose all or part of their investment and the financial condition, liquidity and results of operations of the Company could be materially adversely affected and the ability of the Company to implement its growth plans could be adversely affected. Potential investors should consult with their professional advisors to assess an investment in the Company.

The risks and uncertainties described in this section are not inclusive of all the risks and uncertainties to which the Company may be subject.

Limited operating history.

The Company has limited operating history. NEXE was incorporated on April 27, 2015. The Company will be subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its growth objectives. To the extent that such expenses do not result in revenue gains that are adequate to sustain and expand its business, the Company’s long-term viability may be materially and adversely affected. To date, NEXE has not generated any revenues.

Negative Cash Flow from Operating Activities

NEXE has had negative cash flow from operating activities since inception. Significant capital investment will be required to achieve NEXE’s existing plans. There is no assurance that the Company’s business will generate earnings, operate profitably or provide a return on investment in the near future. Accordingly, the Company may be required to obtain additional financing in order to meet its future cash commitments.

Further, NEXE has a history of operating losses and may not sustain profitability. The Company cannot guarantee investors that it will become profitable, and even if the Company achieves profitability, given the competitive and evolving nature of industry in it operates, the Company may not be able to sustain or increase profitability and its failure to do so could adversely affect its business, including its ability to raise additional funds.

Going-concern risks.

The financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Company’s future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Company will be successful in completing an equity or debt financing or in achieving profitability.

The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

Commercialization of the NEXE PODs

Although NEXE is able to manufacture and produce a NEXE POD for the soluble market, NEXE has not commercialized the NEXE PODs for the coffee markets. In order to commercialize the NEXE PODs for these markets, NEXE will be required to acquire certain customized automation equipment that permits the commercial production (ie. sufficient number) of these NEXE PODs. Further, certain customers will require NEXE to obtain SQFL Certification prior to delivering any purchase orders to NEXE. If NEXE is unable to acquire this automation equipment or SQFL Certification, it may not be able to properly commercialize the NEXE PODS for the coffee markets.

Future performance is highly dependent upon the sales of Keurig® and Nespresso® beverage systems.

Continued acceptance and adoption of Keurig® and Nespresso ® beverage systems are significant factors in the Company’s growth plans. Any substantial or sustained decline in the sale of Keurig® and Nespresso ® hot system brewers, failure of consumers to adopt those beverage system, would materially adversely affect the Company’s business.

The research and development of the single-serve beverage pods has required and will continue to require a significant investment and commitment of resources, is subject to numerous risks and uncertainties, and ultimately may not prove successful.

The Company cannot be certain that the Keurig® and Nespresso ® hot system brewers will be widely accepted by consumers or that they will be willing to pay a higher price for these products. In addition, the Company may not be able to sufficiently scale or find other ways to reduce the costs of manufacturing the pods. Because the introduction of and investment in a new pod is inherently risky, no assurance can be given that the NEXE PODs will ultimately be successful or that it will not materially adversely affect the Company’s reputation, financial condition, and operating results.

Continued innovation and the successful development and timely launch of new platforms, products and product extensions are critical to the Company’s financial results and achievement of its growth strategy.

The Company may not be successful in developing innovative new products or the new products may not be commercially successful. Additionally, new product introductions are often time sensitive, and thus failure to deliver innovations on schedule could be detrimental to the Company’s ability to successfully launch such new products and retain partners, in addition to potentially harming the Company’s reputation and customer loyalty. The Company’s financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the direction of its key marketplaces and successfully identify, develop, manufacture, market and sell new or improved products in these changing marketplaces. As the Company and its industry evolve, the Company expects to face new challenges with respect to the introduction of innovative products and the changing competitive landscape within the single-serve category and the beverage industry. These challenges can occur at various stages, including design, supply chain and sales cycle.

Future financial results are difficult to predict, and failure to meet market expectations for the Company’s financial performance or its publicly announced guidance may cause the price of its securities to decline.

The Company’s public forecasts regarding the expected performance of the business and future operating results are forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in other public statements, and necessarily reflect current assumptions and judgments that may prove incorrect. As a result, there can be no assurance that the Company’s performance will be consistent with any public forecasts or that any variation from such forecasts will not be material and adverse.

Changes in the beverage environment and retail landscape could impact the Company’s financial results.

Failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact the Company’s future growth and business.

Any of the Company’s strategic partners may make their own business decisions which may not align with the Company’s interests. If the Company’s is unable to provide an appropriate mix of incentives to its strategic partners through a combination of pricing and marketing and advertising support, or if its strategic partners are not satisfied with its brand innovation and technological or other development efforts, they may take actions, including entering into agreements with competing pod contract manufacturers or vertically integrating to manufacture their own pods. Increasing competition among pod manufacturers and the move to vertical integration may result in price compression, which could have an adverse effect on the Company’s gross margins. The loss of strategic partners could also adversely impact the Company’s future profitability and growth, its ability to attract additional branded or private label parties to do business with the Company or its ability to attract new customers.

In order to grow its business, the Company anticipates that it will continue to depend on its relationships with third parties, such as alliance partners, distributors, equipment supplies, and manufacturers. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. The Company’s competitors may be effective in providing incentives to third parties to favor their products or services, or to prevent or reduce the Company’s products and services. In addition, acquisitions of the Company’s partners by its competitors could result in a decrease in the number of current and potential customers, as its partners may no longer facilitate the adoption of the Company’s products and services by potential customers.

If the Company is unsuccessful in establishing or maintaining its relationships with third parties, its ability to compete in the marketplace or to grow its revenue could be impaired, and its operating results may suffer. Even if the Company is successful, the Company cannot assure investors that these relationships will result in increased customer usage of the Company’s services or increased revenue and/or profitability. Furthermore, if the Company’s partners fail to perform as expected, the Company’s reputation may be harmed, and its business and operating results could be adversely affected.

Product safety and quality concerns could negatively affect the Company’s business.

The Company’s success depends in part on its ability to maintain consumer confidence in the safety and quality of all of its products. Product safety or quality issues, or mislabeling, actual or perceived, or allegations of product contamination or quality or safety issues, even when false or unfounded, could subject the Company to product liability and consumer claims, negative publicity, a loss of consumer confidence and trust, may require the Company from time to time to conduct costly recalls from some or all of the channels in which the affected product was distributed, could damage the goodwill associated with its brands, and may cause consumers to choose other products. Such issues could result in the destruction of product inventory, lost sales due to the unavailability of product for a period of time, and higher than anticipated rates of warranty returns and other returns of goods, all of which could cause the Company’s business to suffer and affect its results of operations.

The Company’s long-term purchase commitments for certain strategic materials critical for the manufacture of pods could impair its ability to be flexible in its business without penalty.

In order to ensure a continuous supply of high-quality materials some of the Company’s inventory purchase obligations may long-term purchase commitments for certain strategic materials critical for the manufacture of pods. The timing of these may not always coincide with the period in which the Company needs the supplies to fulfill customer demand. This could lead to higher and more variable inventory levels and/or higher material costs.

Risk related to technological obsolescence and difficulty in obtaining equipment.

To remain competitive, the Company will continue to invest in equipment at its facilities required for maintaining the Company’s activities. Should competitors introduce new technologies, the Company recognizes its equipment and its underlying technology may become obsolete and require substantial capital to replace such equipment, which could adversely affect an investment in the Company.

Risks related to insurance of the Company’s operations.

The Company maintains insurance coverage including directors’ and officers’ insurance and commercial insurance covering the facility and the equipment within the facility. Nevertheless, given the novelty of development of biodegradable pods and associated businesses, such insurance may become unavailable, uneconomical for the Company, or the nature or level may be insufficient to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the Company. While the Company believes its insurance coverage will address all material risks to which it is exposed and could be adequate and customary in its current state of operations, such insurance will be subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Company’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.

Risks related to product development and technology change.

The Company’s success could be seriously affected by a competitor’s ability to develop and market technologies that compete with the Company’s technologies. To remain competitive, the Company must continue to enhance and improve the responsiveness, functionality and features of its technology. The single-serve beverage industry are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices that could render the Company’s existing operations and proprietary technology and systems obsolete. There can be no assurance the Company will successfully implement new technologies and systems to meet industry standards and if unable to adapt in a timely matter, the business of the Company could be materially affected.

Risks related slow acceptance of products.

The marketplace may be slow to accept or understand the significance of the Company’s technology due to its unique nature and the competitive landscape. If the Company is unable to promote, market and sell its products and secure relationships with partners and purchasers, the Company’s business and financial condition will be adversely affected, which could adversely affect an investment in the Company.

Company has an evolving business model and thus its services and products could change.

To stay current with the industry, the Company’s business model may need to evolve as well. From time to time, it may modify aspects of the Company’s business model relating to Company’s product mix and service offerings. The Company cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. The Company may not be able to manage growth effectively, which could damage the Company’s reputation, limit the Company’s growth and negatively affect its operating results.

If the Company’s revenue is primarily derived from a limited number of customers, the loss of such customer could have an adverse impact on the Company.

Although the Company intends to seek a broad base of customers, if the Company’s revenue is concentrated in one or a few larger customers, and such customers become dissatisfied with the Company’s products and services, or the Company’s pricing, or ceases to do business with the Company for any other reason, the operating results of the Company would be negatively and substantially impacted.

Interruptions or delays in service from the Company’s facilities could impair the delivery of the Company’s services and harm its business.

similar misconduct. Any damage to, or failure of, the Company’s systems generally could result in stoppage interruptions in its service. Interruptions in its service may reduce its revenue, cause the Company to issue credits or pay penalties, cause customers to terminate their contracts and adversely affect the Company’s renewal rate and its ability to attract new customers. The Company’s business will also be harmed if its customers and potential customers believe the Company’s service and product is unreliable. Despite precautions taken such as disaster recovery plans at these facilities, the occurrence of a natural disaster, an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the Company’s services. Even with the disaster recovery arrangements and precautions taken at its facilities, the Company’s services could be interrupted. Further, as the Company continues to grow and scale its business to meet the needs of its customers, additional burdens may be placed on its facilities. These interruptions, stoppages and burdens could adversely affect an investment in the Company.

The Company depends on highly skilled personnel to grow and operate its business, and if the Company is unable to hire, retain and motivate its personnel, the Company may not be able to grow effectively.

The Company’s future success will depend upon its continued ability to identify, hire, develop, motivate and retain highly skilled personnel, including senior management, engineers, designers, product managers, sales representatives, and customer support representatives. The Company’s ability to execute efficiently is dependent upon contributions from its employees, including its senior management team. In addition, there may occasionally be changes in the Company’s senior management team that may be disruptive to its business. If the Company’s senior management team, including any new hires that the Company may make, fails to work together effectively and to execute on its plans and strategies on a timely basis, its business could be harmed.

The Company’s growth strategy also depends on its ability to expand its organization with highly skilled personnel. Identifying, recruiting, training and integrating qualified individuals will require significant time, expense and attention. In addition to hiring new employees, the Company must continue to focus on retaining its best employees. The Company may need to invest significant additional amounts of cash and equity to attract and retain new employees, and the Company may never realize returns on these investments. If the Company is not able to effectively add and retain employees, its ability to achieve its strategic objectives could be adversely impacted, and its business could be harmed.

If the Company is unable to maintain and promote its brand, its business and operating results may be harmed.

The Company believes that maintaining and promoting its brand is critical to expanding its customer base. Maintaining and promoting its brand will depend largely on its ability to continue to provide useful, reliable and innovative services, which the Company may not do successfully. The Company may introduce new features, products, services or terms of service that its customers do not like, which may negatively affect its brand and reputation. Maintaining and enhancing the Company’s brand may require it to make substantial investments, and these investments may not achieve the desired goals. If the Company fails to successfully promote and maintain its brand or if the Company incurs excessive expenses in this effort, its business and operating results could be adversely affected.

Risks associated with acquisitions.

If appropriate opportunities present themselves, the Company intends to acquire businesses, technologies, services or products that the Company believes are strategic. There can be no assurance that the Company will be able to identify, negotiate or finance future acquisitions successfully, or to integrate such acquisitions with its current business. The process of integrating an acquired business, technology, service or product into the Company may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of the Company’ business. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could materially adversely affect the Company’s business, results of operations and financial condition. Any such future acquisitions of other businesses, technologies, services or products might require the Company to obtain additional equity or debt financing, which might not be available on terms favourable to the Company, or at all, and such financing, if available, might be dilutive.

The Company in the future may invest, in new business strategies, acquisitions and/or joint ventures. New ventures are inherently risky and may not be successful. In evaluating such endeavors, the Company is required to make difficult judgments regarding the value of business strategies, opportunities, technologies and other assets, and the risks and cost of potential liabilities. Furthermore, acquisitions and investments involve certain other risks and uncertainties, including the risks involved with entering new competitive categories or regions, the difficulty in integrating newly-acquired businesses, the challenges in achieving strategic objectives and other benefits expected from acquisitions, investments or joint ventures, the diversion of the Company’s attention and resources from its operations and other initiatives, the potential impairment of acquired assets and liabilities, the performance of underlying products, capabilities or technologies and the potential loss of key employees and customers of the acquired businesses.

The expansion or development of the business, including through acquisitions, increased product offerings or other strategic growth opportunities, may cause disruptions in the Company’s business, which may have an adverse effect on the Company’s business, operations or financial results.

The Company may seek to expand and develop its business, including through acquisitions, increased product offerings, or other strategic growth opportunities. In the ordinary course of business, the Company may review, analyze, and evaluate various potential transactions or other activities in which it may engage. Such transactions or activities could cause disruptions in, increase risk or otherwise negatively impact its business. Among other things, such transactions and activities may:

disrupt the Company’s business relationships with its customers, depending on the nature of or counterparty to such transactions and activities;
direct the time or attention of management away from other business operations;
fail to achieve revenue or margin targets, operational synergies or other benefits contemplated;
increase operational risk or volatility in the Company’s business; and/or
result in current or prospective employees experiencing uncertainty about their future roles with the Company, which might adversely affect the Company’s ability to retain or attract key managers or other employees.

The Company may be vulnerable to security breaches that could adversely affect its operations, business, operations, and reputation.

The Company’s infrastructure may be vulnerable to damage, disruptions, or shutdowns due to unauthorized access, computer viruses, cyber-attacks, and other security breaches. An attack attempt or security breach could potentially result in interruption or cessation of certain of the Company’s services to its customers or the Company’s inability to meet expected levels of service. The Company cannot guarantee that its security measures will not be circumvented, resulting in production interruptions and have a material adverse effect on its business, financial condition, or operational results. The Company may be required to expend significant resources to protect against or recover from such threats. If an actual or perceived breach of its security occurs, the market perception of the effectiveness of its security measures could be harmed, and the Company could lose customers. Further, the perpetrators of cyber-attacks are not restricted to particular groups or persons. These attacks may be committed by the Company’s employees, contractors or external actors operating from any geography. Any such events could result in legal claims or penalties, disruption in operations, misappropriation of sensitive data, damage to the Company’s reputation, negative market perception, or costly response measures, which could adversely affect its business.

Risks related to regulation by governmental authorities.

The activities of the Company may be subject to regulation by governmental authorities wherever its business is conducted. Achievement of the Company’s business objectives are contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals. The Company cannot predict the time required to secure all appropriate regulatory approvals for its products, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failure to obtain regulatory approvals could have a material adverse effect on the business, results of operations and financial condition of the Company.

The business of the Company is subject to rapid regulatory changes. Failure to keep up with such changes may adversely affect the business of the Company. Failure to follow regulatory requirements will have a detrimental impact on the business. Timing and nature of changes in legislation cannot be predicted and could irreparably harm the business.

Risks related to protection of intellectual property rights.

The future success of the Company’s business is dependent upon the intellectual property rights surrounding the technology, including trade secrets, know-how and continuing technological innovation. Although the Company will seek to protect its proprietary rights through trademark registrations and patent applications, its actions may be inadequate to protect any proprietary rights or to prevent others from claiming violations of their proprietary rights. As of the date of this MD&A, NEXE has one (1) U.S. patent, one (1) pending PCT application (PCT/CA2020/050015), six (6) US provisional patent applications and one (1) pending Canadian trademark application for “NEXE INNOVATIONS” There can be no assurance that other companies are not investigating or developing other technologies that are similar to the technology. In addition, effective intellectual property protection may be unenforceable or limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate designation of the Company’s technology. Any of these claims, with or without merit, could subject the Company to costly litigation. If the protection of proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of the Resulting Issuer’s brand and other intangible assets may be diminished. Any of these events could have an adverse effect on the Company’s business and financial results.

If third party patents or patent applications contain claims infringed by the Company’s technology and these claims are valid, the Company may be unable to obtain licenses to these patents at a reasonable cost, if at all, and may also be unable to develop or obtain alternative technology. If such licenses cannot be obtained at a reasonable cost, the business could be significantly impacted. Further, the enforceability of the patents owned by the Company may be challenged and the Company’s patents could be partially or wholly invalidated following challenges by third parties.

If a third party accuses the Company of infringing its intellectual property rights or if a third party commences litigation against the Company for the infringement of patent or other intellectual property rights, the Company may incur significant costs in defending such action, whether or not it ultimately prevails. Typically, patent litigation in the technology industry is expensive. Costs that the Company incurs in defending third party infringement actions would also include diversion of management’s and technical personnel’s time. In addition, parties making claims against the Company may be able to obtain injunctive or other equitable relief that could prevent the Company from further developing discoveries or commercializing its technology. In the event of a successful claim of infringement against the Company, it may be required to pay damages and obtain one or more licenses from the prevailing third party. If it is not able to obtain these licenses at a reasonable cost, if at all, it could encounter delays in product introductions and loss of substantial resources while it attempts to develop alternative technology. Defense of any lawsuit or failure to obtain any of these licenses could prevent the Company or its partners from commercializing available technology and could cause it to incur substantial expenditure.

The Company also relies on its trade secrets, which include information relating to the manufacture, development and administration of its technology. The protective measures that the Company employs may not provide adequate protection for its trade secrets. This could erode the Company’s competitive advantage and materially harm its business. The Company cannot be certain that others will not independently develop the same or similar technologies on their own or gain access to trade secrets or disclose such technology, or that the Company will be able to meaningfully protect its trade secrets and unpatented know-how and keep them secret.

Risks related to competition.

To remain competitive, the Company will require a continued high level of investment in research and development, marketing, sales and client support. The Company may not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations of the Company.

appliance companies that operate in multiple geographic areas, as well as numerous companies that are primarily local in operation. The Company’s ability to gain a share of sales in the global marketplace or in various local marketplaces or maintain or enhance its relationships with its partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the food and beverage industry and an increase in the number of competitive pod contract manufacturers.

Many of the Company’s competitors and potential competitors are larger and have greater name recognition, longer operating histories, larger marketing budgets and significantly greater resources than the Company does. With the introduction of new technologies and market entrants, the Company expects competition to continue to intensify in the future. If the Company fails to compete effectively, its business will be harmed. For these reasons, the Company may not be able to compete successfully against its current and future competitors.

Some of the Company’s current and potential competitors have significantly greater resources and better competitive positions in certain markets than the Company does. These factors may allow the Company’s competitors to respond more effectively than the Issuer to new or emerging technologies and changes in market requirements. The Company’s competitors may develop products, features, or services that are similar to the Company or that achieve greater market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. Certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against the Company. As a result, the Company’s competitors may acquire and engage users at the expense of the growth or engagement of its user base, which may negatively affect the Company’s business and financial results.

The Company believes that its ability to compete effectively depends upon many factors both within and beyond the Company’s control, including:

the usefulness, ease of use, performance, and reliability of the Company’s products and services compared to its competitors;
customer service and support efforts;
marketing and selling efforts;
the Company’s financial condition and results of operations;
changes mandated by legislation, regulatory authorities, or litigation, some of which may have a disproportionate effect on the Company;
acquisitions or consolidation within the Company’s industry, which may result in more formidable competitors;
• the Company’s ability to attract, retain, and motivate talented employees and consultants;
the Company’s ability to cost-effectively manage and grow its operations; and
the Company’s reputation and brand strength relative to that of its competitors.

For further information on the competitors of NEXE and the Company see “Part II – Information Concerning NEXE – Narrative Description of the Business – Competitive Conditions.”

Risks related to management of growth.

The Company may in the future, experience rapid growth and development in a relatively short period of time by aggressively marketing its products and services. The Company may be subject to growth related risks including capacity constraints and pressure on its internal systems and controls. The ability of the Company to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Company to deal with this growth may have a material adverse effect on the Company’s business, financial condition, results of operations and prospects.

Risks related to conflicts of interest.

companies. In addition, as applicable, such directors and officers will refrain from voting on any matter in which they have a conflict of interest.

Additional financing requirements and access to capital.

The Company may require additional funds for further research and development, sales and marketing, operations, working capital, and general corporate purposes. The Company may attempt to raise additional funds for these purposes through public or private equity or debt financing, collaborations with other companies, government grants and/or from other sources. There can be no assurance that additional funding or partnership will be available on terms acceptable to the Company. If additional funds are raised through further issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to those of holders of Company Shares. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained, the Company may be required to reduce, curtail, or discontinue operations.

Product recalls and/or product liability may adversely impact the Company.

The Company will be subject to regulation by a variety of regulatory authorities. In the event that the Company, does not adhere to product safety requirements or its quality control standards, it might not identify a deficiency before its ships its products to customers. The failure to produce products that adhere to the Company’s quality control standards could damage its reputation and brands and lead to customer litigation against the Company and the Company may be required to remove or recall those products at a substantial cost. The Company may be unable to recover costs related to product recalls.

The Company’s business will be highly dependent on sales of coffee, and if demand for coffee decreases, its business would suffer.

Because the Company is highly dependent on consumer demand for coffee, a shift in consumer preferences away from coffee or its product offerings would harm the business more than if it had more diversified product offerings. If customer demand for coffee decreases, its sales would decrease and the Company would be materially adversely affected.

Future revenues are dependent on demand for coffee. Demand for coffee and demand for single-cup brewing systems is affected by many factors, including:

Changes in consumer tastes and preferences;
Changes in consumer lifestyles;
National, regional and local economic conditions;
Perceptions or concerns about the environmental impact of the products;
Demographic trends; and
Perceived or actual health benefits or risks.

Risks related to volatility of share price, absence of dividends and fluctuation of operating results.

Market prices for the securities of technology companies have historically been highly volatile. Factors such as fluctuation of the Company’s operating results, announcements of technological innovations, patents or new commercial products by the Company or competitors, and other factors could have a significant effect on the share price or trading volumes for the Company Shares. The Company has not paid dividends to date and the Company does not expect to pay dividends in the foreseeable future.

Risks related to no assurance of active trading market.

There can be no assurances that an active trading market in the Company Shares on the Exchange will be sustained.

Risks related to equity dilution to shareholders.

The issuance of any equity securities could, and the issuance of any additional shares will, cause the Company’s existing shareholders to experience dilution of their ownership interests.

Risks related to value of securities.

The value of the Company’s Shares may be reduced for a number of reasons, many of which are outside the control of the Company, including:

general economic and political conditions in Canada, the United States and globally;
governmental regulation of the beverage industry including coffee pods;
failure to achieve desired outcomes by the Company;
failure to obtain industry partner and other third-party consents and approvals, when required;
stock market volatility and market conditions;
competition for, among other things, capital, and skilled personnel;
the need to obtain required approvals from regulatory authorities;
revenue and operating results failing to meet expectations in any particular period;
investor perception of the beverage, coffee and single-serve coffee industries;
limited trading volume of the Company’s Shares;
announcements relating to the Company’s business or the businesses of the Company’s competitor’s; and
the Company’s ability or inability to raise additional funds.

Risks related to use of proceeds.

Although the Company has set out its intended use of proceeds in this MD&A, these intended uses are estimates only and subject to change. While management does not contemplate any material variation, management does retain broad discretion in the application of such proceeds. The failure by the Company to apply these funds effectively could have a material adverse effect on the Issuer’s business, including the Company’s ability to achieve its stated business objectives.

Risks related to global economic and financial deterioration impeding access to capital or increasing the cost of capital.

Market events and conditions, including disruption in the Canadian, U.S. and international financial markets and other financial systems and the deterioration of Canadian, U.S. and global economic and financial market conditions, could, among other things, impact currency trading and impede access to capital or increase the cost of capital, which would have an adverse effect on the Company’s ability to fund its working capital and other capital requirements. Current and future conditions in the domestic and global economies remain uncertain. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the market area in which the Company will participate.

Risks related to litigation.

The Company and/or its directors and officers may be subject to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its business, the Company may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause the Company to incur significant expenses. Furthermore, because litigation is inherently

unpredictable, the results of any such actions may have a material adverse effect on the Company’s business, operating results or financial condition.

Risks related to reporting issuer status.

As a reporting issuer, the Company will be subject to reporting requirements under applicable securities law and stock exchange policies. Compliance with these requirements will increase legal and financial compliance costs, make some activities more difficult, time consuming or costly, and increase demand on existing systems and resources. Among other things, the Company will be required to file annual, quarterly and current reports with respect to its business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm the Company’s business and results of operations. The Company may need to hire additional employees to comply with these requirements in the future, which would increase its costs and expenses.

Management of the Company expects that being a reporting issuer will make it more expensive to maintain director and officer liability insurance. This factor could also make it more difficult for the Company to retain qualified directors and executive officers.

Economic environment and global economic risk.

The Company’s operations could be affected by the economic context should the unemployment level, interest rates or inflation reach levels that influence consumer trends and consequently, impact the Company’s sales and profitability.

Any economic slowdown and downturn of global capital markets could make the raising of capital by equity or debt financing more difficult. Access to financing has been negatively impacted by the ongoing global economic risks. These factors may impact the Company’s ability to raise equity or obtain loans and other credit facilities in the future and on terms favourable to the Company. If uncertain market conditions persist, the Company’s ability to raise capital could be jeopardized, which could have an adverse impact on the Company’s operations and the trading price of the Company’s Shares on the stock exchange.

Climate change may have a long-term adverse impact on the Company’s business and results of operations.

There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Decreased agricultural productivity in certain regions of the world as a result of changing weather patterns may limit availability or increase the cost of key agricultural commodities, such as coffee, which are important sources of ingredients for the Company’s business and products, and could impact the food security of communities around the world. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt the Company’s supply chain or impact demand for its products. As a result, the effects of climate change could have a long-term adverse impact on the business and results of operations.

Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption to the development and distribution of products and adversely impact business.

new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. The continued spread of COVID-19 globally could adversely impact the Company’s product distribution, business relationships and sales, both locally and internationally. COVID-19 may also affect the Company’s management personnel and employees as well as employees of third-parties located in affected geographies that it relies upon.

Completion of the Transaction and Exchange Approval

Currency risk exposures.

The Company may have financial risk exposure to varying degrees relating to the currency risk and volatility of each of the countries where it operates.

Disclosure Controls and Procedures

Management is responsible for the preparation and integrity of the Financial Statements and maintains appropriate information systems, procedures and controls to ensure that information used internally and disclosed externally is complete and reliable. Management is also responsible for the design of the Company’s internal controls over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes in accordance with IFRS.

Readers are cautioned that the Company is not required to certify the design and evaluation of its disclosure controls and procedures and internal controls over financial reporting and has not completed such an evaluation. The inherent limitations on the ability of the Company’s certifying officers to design and implement on a cost-effective basis disclosure controls and procedures and internal controls over financial reporting for the Company may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company’s financial instruments include cash and cash equivalents, receivables and advances, advances and deposits, accounts payable, accrued liabilities and loan payable. The carrying values of these financial instruments approximate their fair values with the exception of loan payable due to their relatively short periods to maturity.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of financial instruments.

This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and processes for measuring and managing these risks. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies.

(a) Credit risk:

to credit risk on trade and other receivables by only working with large and well-funded organizations. Management believes that the Company is subject to minimal credit risk.

(b) Liquidity risk:

The Company prepares annual expenditure budgets, which are regularly monitored and updated as considered necessary. To facilitate its expenditure program, the Company raises funds through private equity placements. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions.

As at August 31, 2020, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities, which have a maturity of less than one year and loan payable, payable over five years commencing January 1, 2021.

(c) Interest rate risk:

OFF BALANCE SHEET ARRANGEMENTS

The Company had no Off-Balance Sheet Arrangements.

TRANSACTIONS WITH RELATED PARTIES

During the three months ended August 31, 2020, officers of the Company charged management and consulting fees totaling $219,800 (2019 – $66,600) of which $46,800 (2019 – $Nil) has been capitalized to Intangible assets and an accrued a bonus payment in the amount of $100,000 for certain senior management.. These amounts were incurred in the ordinary course of business.

The Company has entered into an employment agreement with Darren Footz (the “Footz Agreement”) whereby Mr. Footz has agreed to serve as Chief Executive Officer of NEXE for a three year term. Under the terms of the Footz Agreement, Mr. Footz receives a salary of $180,000 per annum (the “Footz Salary”). The Footz Salary will increase to: (i) $240,000 per annum upon NEXE completing a minimum $5 million financing, (ii) $300,000 per annum upon NEXE obtaining $10,000,000 in total revenue, and (iii) $360,000 per annum upon NEXE obtaining $20,000,000 in total revenue. Mr. Footz may also receive a significant cash or NEXE Share payments upon the Performance Bonuses being satisfied. Further, if the Company experiences a change of control Mr. Footz may, within 60 days of the triggering event provide 60 days written notice to the Company and the Company must pay a severance payment of (a) salary accrued to the date of termination; (2) three years of salary; (3) payment and immediate vesting of all Performance Bonuses; and (4) immediate vesting of all unvested stock options (the “Severance Payment”) to Mr. Footz. If the Company terminates the Footz Agreement without cause, NEXE must pay Mr. Footz the Severance Payment.

The Company has entered into a management consulting agreement (the “Guglani Agreement”) with 1060383 B.C. Ltd. (“1060383”) and Ashvani Guglani whereby Mr. Guglani has agreed to serve as Vice President Finance of NEXE. 1060383 is a company controlled by Mr. Guglani. Under the terms of the Guglani Agreement, 1060383 receives a fee of $15,000 per month (the “1060383 Fee”). The 1060383 Fee will increase to: (i) $20,000 per month upon NEXE completing a minimum $5 million financing, (ii) $25,000 per month upon NEXE obtaining $10,000,000 in total revenue, and (iii) $30,000 per month upon NEXE obtaining $20,000,000 in total revenue. 1060383 may also receive significant cash or NEXE Share payments upon the Performance Bonuses being satisfied. Further, if the Company experiences a change of control, Mr. Guglani may, within 60days of the triggering event, provide 60 days written notice to the Company and the Company must pay Mr. Guglani the Severance Payment. If the Company terminates the Guglani Agreement without cause, the Company must pay Mr. Guglani the Severance Payment.

FUTURE ACCOUNTING STANDARDS

Future accounting standards issued and adopted

Interest Rate Benchmark Reform: Amendments to IFRS 9 and IFRS 7

Insurance Contracts

Business Combinations

IFRS 3, Business Combinations – issued by the IASB in January of 2008. IASB has issued the amendments to IFRS 3, which relate to the definition of a business. The amendments are as follows:

Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
Add an optional concentration test that permits a simplified assessment of whether an acquired set of activities.

NEW ACCOUNTING PROUNCEMENTS

The Company adopted the following accounting standards that are effective for annual accounting periods beginning on or after January 1, 2019:

New standard IFRS 16 - Leases

a new asset. The Company has owns the building. Accordingly, management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

New Interpretation IFRIC 23 - Uncertainty over Income Tax Treatments

Management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.

Critical Accounting Estimates

Please refer to Note 4 of the Company’s Audited Financial Statements for the year ended May 31, 2020, for additional information under “Significant Accounting Policies”.

Significant areas requiring the use of management estimates include the collectability of amounts receivable, balances of accrued liabilities, the fair value of financial instruments, the rates for depreciation of property and equipment, the recoverability of mineral property interests, determination of estimates of deferred tax assets and liabilities, and the determination of variables used in the calculations of share-based payments. While management believes that these estimates are reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.

OTHER MD&A REQUIREMENTS

Disclosure of Outstanding Share Data

The following table states the diluted share capital of the Issuer as at August 31 and November 15, 2020:

	Common Shares Outstanding (Diluted) Preference Shares Outstanding (Diluted)
Outstanding as at May 31, 2020 Private placement Outstanding as at August 31, 2020 Private placement Outstanding as at November 15, 2020 Shares reserved for issuance pursuant share purchase warrants outstanding Shares reserved for issuance pursuant share purchase options outstanding DILUTED TOTAL AS AT NOVEMBER 15, 2020	18,182,004 22,791,251 - 230,383
	18,182,004 22,791,251 - 626,361
	18,182,004 23,647,995 - 10,891,508(1) 5,444,020(2) -
	23,626,024 34,539,503

Notes

(1) As at November 15, 2020, the Company had outstanding share purchase warrants, enabling holders to acquire common shares as follows:

i 7,309,456 NEXE Warrants are exercisable at $1.10 per Series A Preferred Share for a period of two years. ii 332,052 NEXE Warrants are exercisable at $0.65 per NEXE Share for a period of two years. iii 3,250,000 NEXE Warrants are exercisable at $0.35 per NEXE Share for a period of five years.

(2) As at November 15, 2020, the Company had outstanding share purchase options, enabling holders to acquire common shares and are exercisable at prices between $0.275 to $0.80 per common share with varying expiry dates.

Disclosure Controls and Procedures

the end period covered by this MD&A, management believes such controls and procedures are effective in providing reasonable assurance that material items requiring disclosure are identified and reported in a timely manner.

Approval

This MD&A has been prepared by management with an effective date of November 15, 2020. The MD&A and the Consolidated Financial Statements were approved by the Board of Directors of the Company.

ADDITIONAL INFORMATION

Additional information relating to the Company can be found on the Company’s website at www.NEXE.ca.

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NEXE INNOVATIONS INC. (formerly G-PAK Technology Inc.)

FOR THE YEAR ENDED MAY 31, 2020 MANAGEMENT DISCUSSION AND ANALYSIS

______________ TABLE OF CONTENTS DATE ____________ 2 DESCRIPTION OF BUSINESS ___________ 3 OBJECTIVES AND STRATEGY ___________ 3 OVERVIEW OF PERFORMANCE __________ 4 FINANCING ACTIVITIES __________ 6 LIQUIDITY AND CAPITAL RESOURCES _________ 6 OUTLOOK _____________ 7 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT _______ 20 OFF BALANCE SHEET ARRANGEMENTS _________ 20 OTHER MD&A REQUIREMENTS __________ 23 ADDITIONAL INFORMATION __________ 23

FOR THE YEAR ENDED MAY 31, 2020 MANAGEMENT DISCUSSION AND ANALYSIS

DATE

This Management Discussion & Analysis (“MD&A”) of NEXE Innovations Inc. and its subsidiaries (referred to as the “Company” or “NEXE”) was prepared by management as at October 29, 2020 and was reviewed and approved by the Board of Directors of NEXE. The following discussion of performance, financial condition and future prospects should be read in conjunction with the annual audited consolidated financial statements for the year ended May 31, 2020 and 2019, and notes thereto (the “Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The information provided herein supplements but does not form part of the Financial Statements. This discussion covers the year ended May 31, 2020, and the subsequent period up to the date of issue of this MD&A.

Forward-Looking Information

the available funds of the Company upon completion of the Concurrent Private Placement and Completion of the Transaction, and the anticipated use of those funds by the Company;
the Company’s anticipated directors, officers and insiders;
any of the Company’s potential acquisitions;
any of the Company’s potential transactions;
the Company’s expectations about the timing of achieving milestones and the related costs;
expectations about the Company’s services and products;
the commercial development to roast, produce and package coffee into the Company’s proprietary and fully compostable capsules, known as of the NEXE Pod (the “NEXE POD”) and other soluble format capsules;
the effectiveness of the NEXE’s products and ability to develop products for other single service coffee brewing systems;
the ability of NEXE to devise a marketing and pricing strategy for the NEXE POD;
• NEXE achieving brand awareness with respect to the NEXE POD.

The forward-looking statements contained in this MD&A reflect the current views of the Company and are based on certain assumptions, including assumptions regarding:

the ability of the Company to satisfy all conditions precedent and obtain all regulatory approvals for the Transaction, including by the dates indicated;
that there will be no regulation or law that will prevent NEXE from operating its business;
the ability of NEXE to achieve its goals on time and on budget;
the anticipated costs to complete the Transaction; and
that Company will be able to execute its business strategy successfully such that the future growth, results of operations, operating costs, performance and business prospects and opportunities of the Company, will be as anticipated.

DESCRIPTION OF BUSINESS

OBJECTIVES AND STRATEGY

OVERVIEW OF PERFORMANCE

During the fiscal year ended May 31, 2020, the Company has been focused on completing certain key milestones towards commercialization of the NEXE POD. These milestones included:

Completing NEXE’s coffee transport system, which roasts and grinds coffee in a contained environment.
Completing factory and site acceptance testing for dosing and sealing machines in the NEXE POD for the Keurig market.
Completion and commercialization of the NEXE POD for the soluble market (ie. hot chocolate, tea, latte, etc.).

The Company issued 6,791,207 (2019 –187,866) Class A Series A preferred shares for proceeds of $4,518,000 (2019 – $122,114). A total of 6,791,207 (2019 – 187,866) share purchase warrants exercisable at $1.10 per share were issued, with a 2-year life from issuance date and remain outstanding. A total of 332,052 finder’s warrants were issued to arm’s length finder’s which are exercisable at $0.65 per Series A Preferred Share for a period of two years from the date of issue.

SINGLE-SERVE BEVERAGE MARKET

SUBSEQUENT EVENTS

The Transaction

1 https://www.globenewswire.com/news-release/2020/03/16/2000705/0/en/Global-Coffee-Pod-and-Capsule-Market-isExpected-to-Reach-USD-29-2-Billion-by-2025-Fior-Markets.html.

On September 30, 2020, the Company completed a brokered private placement (the “Brokered Private Placement“) of 11,437,500 subscription receipts (each, a “Subscription Receipt“) at a price of $0.80 per Subscription Receipt for aggregate gross proceeds of $9,150,000. The Brokered Private Placement was led by Canaccord Genuity Corp. (“Canaccord“). The net proceeds of the Brokered Private Placement are being held in escrow by TSX Trust Company (the “Escrow Agent“) pursuant to the subscription receipt agreement among Whatcom, the Company, Canaccord and the Escrow Agent.

OVERVIEW OF BUSINESS DEVELOPMENT

Contribution provided the Company with $2,500,000 of funding. The purpose of the WINN Contribution was to provide the Company with funding to acquire custom manufacturing equipment to commercialize the NEXE Pods. The Company received approximately $1 million of the WINN Contribution in calendar 2017; approximately $1 million in calendar 2018 and approximately $0.5 million in calendar 2019. The Company is required to repay the WINN Contribution with monthly installments of $41,667 per month commencing January 1, 2021 (from the original commencement date of August 1, 2020). The Company also entered into a contribution agreement with the National Research Council of Canada, as represented by its Industrial Research Assistance Program (“ IRAP ”) in February 2017 (the “ IRAP Contribution ”) whereby IRAP provided $473,800 in funding. The purpose of the IRAP Contribution was for the Company to design, develop and test a fully automated proof of concept prototype capable of producing compostable single serve coffee pods.

FINANCING ACTIVITIES

During the year ended May 31, 2020, the Company issued 6,791,207 (2019 – 187,866) Class A Series A preferred shares for proceeds of $4,518,000 (2019 – $122,114). A total of 6,791,207 (2019 – 187,866) share purchase warrants exercisable at $1.10 per share were issued, with a 2-year life from issuance date and remain outstanding.

See Subsequent Events section of the MD&A.

RESULTS OF OPERATIONS

Year ended May 31, 2020

The Company recorded a net loss of $2,187,603 or $0.12 per share (2019 – $1,158,327 or $0.06) for the year ended May 31, 2020.

Corporate general and administrative expenditure for the year ended May 31, 2020 totaled $478,703 (2019 – $382,649), which includes increased marketing and promotional activities during the year. Advisory and consulting fees increased to $393,500 (2019 – $187,394) due to the increased involvement of certain consultants rounding out the vacant functions such as business and corporate development. Legal costs of $184,429 (2019 – $17,383) were incurred due to the increased activities of the Company and the pursuit of legal remedy related to a breach of contract for machinery ordered. Salary of $398,548 (2019 – $299,824), was incurred, of which $277,199 was capitalized and recorded as an intangible asset due to the development and testing of the NEXE POD. Non-cash stock-based compensation expense of $332,103 (2019 – $47,677) was recorded.

For the year ended May 31, 2020, the Company recorded a loss from discontinued operations of $333,139 (2019 – $nil) related to the disposition of GI Packaging and cessation of business related to Sceptre Industries. Interest income increased versus the prior comparable year and totaled $42,406 (2019 – $24,644) due to holding a larger cash balance on deposit during the year.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2020, the Company had working capital of $2,712,942 (2019 - $659,791), with cash and cash equivalents totaling $3,311,463 (2019 - $nil). The Company redeemed its term deposits during the year ended May 31, 2020 (2019 – $728,567).

See Subsequent Events and Financing Activities section of the MD&A for financing details related to the closing of the private placement in 2020.

OUTLOOK

Furthermore, NEXE is in discussions with various commercial entities which could eventually serve as customers.

Upon closing the Transaction, the Company intends to use the proceeds of the Transaction (including the Concurrent Private Placement) to:

Commercialize the NEXE POD. The Resulting Issuer plans to complete the commercialization of the NEXE PODs for Keurig and Keurig compatible brewing systems. In order to complete this objective, the Resulting Issuer has ordered new customized automation equipment that will be delivered between the fourth quarter of 2020 and first quarter of 2021.
Increase Production Capacity to 220 Million Units. The Resulting Issuer plans to scale up its production to 220 million units by purchasing additional customized automation equipment. By fourth quarter of 2021, it is anticipated that NEXE will have the capacity to produce up to 220 million units.
Ensure Protection of Proprietary Property . The Resulting Issuer will continue with the NEXE strategy of increasing its intellectual property of its products and equipment by filing additional patent applications. Further, the Resulting Issuer plans to ensure all molding for the NEXE PODs are done at its facility instead of out-of-country. By keeping molding and other facets of the intellectual process in-country, this better enables NEXE to not only have full control of the intellectual process but also significantly reduces time to development and costs while minimizing time associated with logistics. Each molding machine will cost approximately $520,000 with the first molding machine to be delivered to the Resulting Issuer in the first quarter of 2021.
Secure Purchase Orders for NEXE PODs. As a pre-requisite to receiving significant purchase orders of at least 50 million units of NEXE pods, a number of these coffee producers will require the Resulting Issuer to be certificated under Safe Quality Food (SQFL). The Resulting Issuer anticipates it will achieve SQFL certification by the end of 2020 and plans to pursue significant purchase orders in the first quarter of 2021. It is anticipated that having the SQFL certification should make it easier for the Resulting Issuer to enter into large purchasing orders.

SELECTED ANNUAL INFORMATION

The financial statements have been prepared in accordance with IFRS for fiscal years 2020 and 2019, and are expressed in Canadian dollars.

As at May 31: Total Assets Current Liabilities Long-term Liabilities(1) Shareholders’ Equity Total Shareholders’ Equity & Liabilities For the year ended May 31: Total Revenue Net Loss (2) Basic and diluted loss per share Weighted average number of common shares outstanding	2020 2019 2018
	$ 8,642,707 $ 5,365,292 $ 5,791,043 888,202 301,091 66,615 1,254,214 996,929 683,674 6,500,291 4,067,272 5,040,753
	$ 8,642,707 $ 5,365,292 $ 5,791,043
	2020 2019 2018
	$- $- $-
	(2,187,603) (1,158,327) (1,048,918)
	$ (0.12) $ (0.06) $ (0.06) 18,182,004 18,182,004 18,182,004

(1) WINN Contribution repayable January 1, 2021 at $41,667 per month

(2) Net Loss for 2020 included $333,139 related to the write down of Sceptre Industries and GI Packaging

RISKS AND UNCERTAINTIES

Prospects for companies in the technology industry generally may be regarded as uncertain given the nature of the industry and, accordingly, investments in technology companies should be regarded as highly speculative. Technology research and development involves a significant degree of risk. An investor should carefully consider the risks and uncertainties described below. The risks and uncertainties described below are not an exhaustive list. Additional risks and uncertainties not presently known to NEXE or that NEXE believes to be immaterial may also adversely affect NEXE’s business. If any one or more of the following risks occur, the Company's business, financial condition and results of operations could be seriously harmed. Further, if the Company fails to meet the expectations of the public market in any given period, the market price of the Company's Shares could decline.

The risks and uncertainties described in this section are not inclusive of all the risks and uncertainties to which the Company may be subject.

Limited operating history.

Negative Cash Flow from Operating Activities

Going-concern risks.

The financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The Company’s future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that the Company will be successful in completing an equity or debt financing or in achieving profitability.

Commercialization of the NEXE PODs

Future performance is highly dependent upon the sales of Keurig® and Nespresso® beverage systems.

The research and development of the single-serve beverage pods has required and will continue to require a significant investment and commitment of resources, is subject to numerous risks and uncertainties, and ultimately may not prove successful.

Continued innovation and the successful development and timely launch of new platforms, products and product extensions are critical to the Company’s financial results and achievement of its growth strategy.

Future financial results are difficult to predict, and failure to meet market expectations for the Company’s financial performance or its publicly announced guidance may cause the price of its securities to decline.

Changes in the beverage environment and retail landscape could impact the Company’s financial results.

Failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact the Company’s future growth and business.

successful, the Company cannot assure investors that these relationships will result in increased customer usage of the Company’s services or increased revenue and/or profitability. Furthermore, if the Company’s partners fail to perform as expected, the Company’s reputation may be harmed, and its business and operating results could be adversely affected.

Product safety and quality concerns could negatively affect the Company’s business.

The Company’s long-term purchase commitments for certain strategic materials critical for the manufacture of pods could impair its ability to be flexible in its business without penalty.

Risk related to technological obsolescence and difficulty in obtaining equipment.

Risks related to insurance of the Company’s operations.

Risks related to product development and technology change.

Company will successfully implement new technologies and systems to meet industry standards and if unable to adapt in a timely matter, the business of the Company could be materially affected.

Risks related slow acceptance of products.

Company has an evolving business model and thus its services and products could change.

If the Company’s revenue is primarily derived from a limited number of customers, the loss of such customer could have an adverse impact on the Company.

Interruptions or delays in service from the Company’s facilities could impair the delivery of the Company’s services and harm its business.

The facilities may be vulnerable to damage or interruption due to floods, fires, power loss, telecommunications failures, and similar events. The facilities may also be subject to destruction, break-ins, sabotage, intentional acts of vandalism and similar misconduct. Any damage to, or failure of, the Company’s systems generally could result in stoppage interruptions in its service. Interruptions in its service may reduce its revenue, cause the Company to issue credits or pay penalties, cause customers to terminate their contracts and adversely affect the Company’s renewal rate and its ability to attract new customers. The Company’s business will also be harmed if its customers and potential customers believe the Company’s service and product is unreliable. Despite precautions taken such as disaster recovery plans at these facilities, the occurrence of a natural disaster, an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the Company’s services. Even with the disaster recovery arrangements and precautions taken at its facilities, the Company’s services could be interrupted. Further, as the Company continues to grow and scale its business to meet the needs of its customers, additional burdens may be placed on its facilities. These interruptions, stoppages and burdens could adversely affect an investment in the Company.

The Company depends on highly skilled personnel to grow and operate its business, and if the Company is unable to hire, retain and motivate its personnel, the Company may not be able to grow effectively.

If the Company is unable to maintain and promote its brand, its business and operating results may be harmed.

Risks associated with acquisitions.

The expansion or development of the business, including through acquisitions, increased product offerings or other strategic growth opportunities, may cause disruptions in the Company’s business, which may have an adverse effect on the Company’s business, operations or financial results.

disrupt the Company’s business relationships with its customers, depending on the nature of or counterparty to such transactions and activities;
direct the time or attention of management away from other business operations;
fail to achieve revenue or margin targets, operational synergies or other benefits contemplated;

increase operational risk or volatility in the Company’s business; and/or
result in current or prospective employees experiencing uncertainty about their future roles with the Company, which might adversely affect the Company’s ability to retain or attract key managers or other employees.

The Company may be vulnerable to security breaches that could adversely affect its operations, business, operations, and reputation.

Risks related to regulation by governmental authorities.

Risks related to protection of intellectual property rights.

Risks related to competition.

The beverage industry is intensely competitive with respect to product, quality, convenience and price. NEXE faces significant competition in each of its channels and marketplaces. NEXE competes with major international beverage and appliance companies that operate in multiple geographic areas, as well as numerous companies that are primarily local in operation. The Company’s ability to gain a share of sales in the global marketplace or in various local marketplaces or maintain or enhance its relationships with its partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the food and beverage industry and an increase in the number of competitive pod contract manufacturers.

The Company believes that its ability to compete effectively depends upon many factors both within and beyond the Company’s control, including:

the usefulness, ease of use, performance, and reliability of the Company’s products and services compared to its competitors;
customer service and support efforts;
marketing and selling efforts;
the Company’s financial condition and results of operations;
changes mandated by legislation, regulatory authorities, or litigation, some of which may have a disproportionate effect on the Company;
acquisitions or consolidation within the Company’s industry, which may result in more formidable competitors;
• the Company’s ability to attract, retain, and motivate talented employees and consultants;
the Company’s ability to cost-effectively manage and grow its operations; and
• the Company’s reputation and brand strength relative to that of its competitors.

For further information on the competitors of NEXE and the Company see “Part II – Information Concerning NEXE – Narrative Description of the Business – Competitive Conditions.”

Risks related to management of growth.

Risks related to conflicts of interest.

Certain of the directors and officers of the Company are also directors and officers of other companies, and conflicts of interest may arise between their duties as officers and directors of the Company and as officers and directors of such other companies. In addition, as applicable, such directors and officers will refrain from voting on any matter in which they have a conflict of interest.

Additional financing requirements and access to capital.

Product recalls and/or product liability may adversely impact the Company.

The Company’s business will be highly dependent on sales of coffee, and if demand for coffee decreases, its business would suffer.

Future revenues are dependent on demand for coffee. Demand for coffee and demand for single-cup brewing systems is affected by many factors, including:

Changes in consumer tastes and preferences;
Changes in consumer lifestyles;
National, regional and local economic conditions;
Perceptions or concerns about the environmental impact of the products;
Demographic trends; and
Perceived or actual health benefits or risks.

Risks related to volatility of share price, absence of dividends and fluctuation of operating results.

Risks related to no assurance of active trading market.

There can be no assurances that an active trading market in the Company Shares on the Exchange will be sustained.

Risks related to equity dilution to shareholders.

The issuance of any equity securities could, and the issuance of any additional shares will, cause the Company’s existing shareholders to experience dilution of their ownership interests.

Risks related to value of securities.

The value of the Company’s Shares may be reduced for a number of reasons, many of which are outside the control of the Company, including:

general economic and political conditions in Canada, the United States and globally;
governmental regulation of the beverage industry including coffee pods;
failure to achieve desired outcomes by the Company;
failure to obtain industry partner and other third-party consents and approvals, when required;
stock market volatility and market conditions;
competition for, among other things, capital, and skilled personnel;
the need to obtain required approvals from regulatory authorities;
revenue and operating results failing to meet expectations in any particular period;
investor perception of the beverage, coffee and single-serve coffee industries;
limited trading volume of the Company’s Shares;
announcements relating to the Company’s business or the businesses of the Company’s competitor’s; and
the Company’s ability or inability to raise additional funds.

Risks related to use of proceeds.

Risks related to global economic and financial deterioration impeding access to capital or increasing the cost of capital.

Market events and conditions, including disruption in the Canadian, U.S. and international financial markets and other financial systems and the deterioration of Canadian, U.S. and global economic and financial market conditions, could, among other things, impact currency trading and impede access to capital or increase the cost of capital, which would have an adverse effect on the Company’s ability to fund its working capital and other capital requirements. Current and future conditions in the domestic and global economies remain uncertain. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the market area in which the Company will participate.

Risks related to litigation.

Risks related to reporting issuer status.

Economic environment and global economic risk.

Any economic slowdown and downturn of global capital markets could make the raising of capital by equity or debt financing more difficult. Access to financing has been negatively impacted by the ongoing global economic risks. These factors may impact the Company’s ability to raise equity or obtain loans and other credit facilities in the future and on terms favourable to the Company. If uncertain market conditions persist, the Company’s ability to raise capital could be jeopardized, which could have an adverse impact on the Company’s operations and the trading price of the Company’s Shares on the stock exchange.

Climate change may have a long-term adverse impact on the Company’s business and results of operations.

Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption to the development and distribution of products and adversely impact business.

Public health crises such as pandemics or similar outbreaks could adversely impact the Company’s business. In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes COVID-19 surfaced in Wuhan, China and has reached multiple other regions and countries, including Surrey, British Columbia, Canada where NEXE’s primary office and facility is located. The coronavirus pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures. The extent to which the coronavirus impacts the demand for the Company’s products and the Company’s operations or those of third-party partners, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. The continued spread of COVID-19 globally could adversely impact the Company’s product distribution, business relationships and sales, both locally and internationally. COVID-19 may also affect the Company’s management personnel and employees as well as employees of third-parties located in affected geographies that it relies upon.

Completion of the Transaction and Exchange Approval

Currency risk exposures.

The Company may have financial risk exposure to varying degrees relating to the currency risk and volatility of each of the countries where it operates.

Disclosure Controls and Procedures

complete and reliable. Management is also responsible for the design of the Company’s internal controls over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes in accordance with IFRS.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

(a) Credit risk:

(b) Liquidity risk:

As at May 31, 2020, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities, which have a maturity of less than one year and loan payable, payable over five years commencing January 1, 2021.

(c) Interest rate risk:

OFF BALANCE SHEET ARRANGEMENTS

The Company had no Off-Balance Sheet Arrangements.

TRANSACTIONS WITH RELATED PARTIES

During the year ended May 31, 2020, officers of the Company charged management and consulting fees totaling $327,400 (2019 – $202,540) of which $100,212 (2019 – $ nil) has been capitalized to Intangible assets. These amounts were incurred in the ordinary course of business.

FUTURE ACCOUNTING STANDARDS

Future accounting standards issued and adopted

Interest Rate Benchmark Reform: Amendments to IFRS 9 and IFRS 7

Insurance Contracts

Business Combinations

IFRS 3, Business Combinations – issued by the IASB in January of 2008. IASB has issued the amendments to IFRS 3, which relate to the definition of a business. The amendments are as follows:

Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;
Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;
Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;
Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and
Add an optional concentration test that permits a simplified assessment of whether an acquired set of activities.

NEW ACCOUNTING PROUNCEMENTS

The Company adopted the following accounting standards that are effective for annual accounting periods beginning on or after January 1, 2019:

New standard IFRS 16 - Leases

New Interpretation IFRIC 23 - Uncertainty over Income Tax Treatments

Management has concluded that there was no impact to the Company's financial statements as a result of adopting this new standard.

Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.

Critical Accounting Estimates

Please refer to Note 4 of the Company’s Audited Financial Statements for the year ended May 31, 2020, for additional information under “Significant Accounting Policies”.

OTHER MD&A REQUIREMENTS

Disclosure of Outstanding Share Data

The following table states the diluted share capital of the Issuer as at May 31 and October 29, 2020:

	Common Shares Outstanding (Diluted) Preference Shares Outstanding (Diluted)
Outstanding as at May 31, 2019 and 2018 Private placement Outstanding as at May 31, 2020 Private placement Outstanding as at October 29, 2020 Shares reserved for issuance pursuant share purchase warrants outstanding Shares reserved for issuance pursuant share purchase options outstanding DILUTED TOTAL AS AT OCTOBER 29, 2020	18,182,004 16,000,044 - 6,791,207
	18,182,004 22,791,251 - 856,744
	18,182,004 23,647,995 - 10,891,508(1) 5,444,020(2) -
	23,626,024 34,539,503

Notes

(1) As at October 29, 2020, the Company had outstanding share purchase warrants, enabling holders to acquire common shares as follows:

i 7,309,456 NEXE Warrants are exercisable at $1.10 per Series A Preferred Share for a period of two years. ii 332,052 NEXE Warrants are exercisable at $0.65 per NEXE Share for a period of two years. iii 3,250,000 NEXE Warrants are exercisable at $0.35 per NEXE Share for a period of five years.
(2) As at October 29, 2020, the Company had outstanding share purchase options, enabling holders to acquire common shares and are exercisable at prices between $0.275 to $0.80 per common share with varying expiry dates.

Disclosure Controls and Procedures

Management is responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Company. Based on an evaluation of the Company’s disclosure controls and procedures as of the end period covered by this MD&A, management believes such controls and procedures are effective in providing reasonable assurance that material items requiring disclosure are identified and reported in a timely manner.

Approval

This MD&A has been prepared by management with an effective date of October 29, 2020. The MD&A and the Consolidated Financial Statements were approved by the Board of Directors of the Company.

ADDITIONAL INFORMATION

Additional information relating to the Company can be found on the Company’s website at www.NEXE.ca.

SCHEDULE “E”

Pro Forma Consolidated Statement of Financial Position of the Resulting Issuer

[see attached]

NEXE Innovations Inc. (formerly G-Pak Technology Inc.)

PRO FORMA CONSOLIDATED INTERIM FINANCIAL STATEMENTS

August 31, 2020

(Expressed in Canadian Dollars)

Pro-Forma Consolidated Statement of Financial Position Unaudited

Unaudited
As at	NEXE Whatcom Innovations Inc. Holdings Inc. Pro Forma Pro-Forma August 31,2020 July31,2020 Notes Adjustments Consolidated
Assets Current assets: Cash and cash equivalents Term Deposits Trade & other receivables Due from related parties Prepaid expenses and deposit Total current assets Property, plant & equipment Intangible assets Prepaid Expenses Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities Current portion of Government loan payable Due to related parties Total current liabilities Government loan payable Total liabilities Share Capital and Deficit: Share capital, less share issuance costs Contributed surplus Share option reserve Accumulated other comprehensive (loss) Deficit Total equity Total liabilities and shareholders' equity	2,939,871 $ 730,212 $ 4a 13,661,046 $ 16,070,385 $ 4a (956,273) 4c (200,000) 4c (75,000) 4d (29,471) 14,000 $ 14,000 277,042 3,150 280,192 32 32 6,162 1,120 7,282
	3,237,106 734,482 12,400,302 16,371,890 2,416,266 - 2,416,266 1,591,127 - 1,591,127 1,133,527 - 1,133,527
	8,378,026 $ 734,482 $ 12,400,302 $ 21,512,810 $
	973,314 $ 24,221 $ 4b (24,221) $ 973,314 $ 333,336 333,336 $ 15,074 5,250 4b (5,250) 15,074 $
	1,321,724 29,471 (29,471) 1,321,724 1,106,656 1,106,656 $
	2,428,380 29,471 (29,471) 2,428,380
	11,263,184 780,134 4a 13,661,046 27,092,957 4a (956,273) 4b 2,419,866 4c (75,000) 439,809 49,145 4b (49,145) 439,809 919,254 919,254 - - (6,672,601) (124,268) 4b (2,370,721) (9,367,590) 4c (200,000)
	5,949,646 705,011 12,429,773 19,084,430
	8,378,026 $ 734,482 $ 12,400,302 $ 21,512,809 $

1. BASIS OF PRESENTATION

The unaudited pro-forma consolidated interim statement of financial position of Nexe Innovations Inc. (“Nexe” or the “Company”) have been prepared by management in accordance with International Financial Reporting Standards for inclusion in the Filing Statement of Whatcom Capital Corp. (“Whatcom” or the “Issuer”). The Filing Statement describes a proposed transaction (the “Transaction”) involving Nexe and Whatcom which is described in more detail in note 2.

The unaudited pro forma consolidated interim statement of financial position of the Company has been compiled from the following financial information:

Audited consolidated financial statements of the Company for the year ended May 31, 2020;
Unaudited consolidated interim financial statements of the Company for the three months ended August 31, 2020; and
Unaudited interim consolidated financial statements of the Company for the three and nine months ended July 31, 2020.

These unaudited pro forma consolidated interim financial statements have not been intended to reflect the financial position or performance of the Company that would have resulted had the proposed transactions described in note 2 and other pro-forma adjustments occurred as assumed. Further, these unaudited pro forma consolidated interim financial statements are not necessarily indicative of the financial position or performance that may be attained in the future. These unaudited pro forma consolidated interim financial statements should be read in conjunction with the financial information referred to above.

Amounts in these pro forma consolidated financial statements are denominated in Canadian dollars.

The Transaction is subject to, among other things, receipt of requisite shareholder approvals, regulatory approvals, including approval of the Toronto Securities Exchange Venture (“TSXV”), and additional conditions, as described in the governing agreement between the parties.

2. DESCRIPTION OF THE TRANSACTION

a) The Transaction

The deemed consideration of the Transaction is approximately $34,626,428, represented by issuing 43,283,036 Resulting Issuer Shares to the NEXE Shareholders at a deemed price of $0.80 per Resulting Issuer Share. After the Completion of the Transaction, the NEXE securityholders will become securityholders of the Resulting Issuer. The number of shares to be issued in connection with the Transaction was determined pursuant to arm’s length negotiations between management of each of the Issuer and NEXE.

(i). Prior to or concurrently with the Completion of the Transaction, the Issuer intends to complete the Consolidation. For the purposes of this Filing Statement, the Transaction assumes that the Consolidation will occur prior to the Completion of the Transaction such that the Issuer will have 4,000,000 Issuer Shares issued and outstanding prior to Completion of the Transaction.
(ii). NEXE will also complete the Concurrent Private Placement prior to completion of the Transaction. Under the Concurrent Private Placement, NEXE and the Issuer engaged the Agent to act as lead agent and sole book runner on a commercially reasonable efforts basis financing of Subscription Receipts at a price of $0.80 per Subscription Receipt for gross proceeds of $9,150,000.

(iii). Under the Concurrent Private Placement, the Agent will receive the Broker’s Commission, being a cash commission of up to 7% of the total proceeds of the Concurrent Private Placement and payable at the date when the Escrow Release Conditions are satisfied and, issued such number of non-transferable common share purchase warrants (each an “ Agent’s Warrant ”) of up to 7% of the Subscription Receipts sold under the Concurrent Private Placement. Each Agent’s Warrant will be exercisable into one NEXE Share at a price of $0.80 for a period of 12 months following the date the Escrow Release Conditions are satisfied. Each Agent’s Warrant will be exchanged into a Resulting Issuer Warrant with the same terms pursuant to the Amalgamation. The Agent will also receive the Corporate Finance Fee consisting of $75,000 in cash and $75,000 in Issuer Shares (“ CF Shares ”) and the payment of its reasonable out-of-pocket expenses, including legal fees, plus disbursements and taxes. The cash portion of Corporate Finance Fee will be paid from the proceeds of the Concurrent Private Placement held by the Escrow Agent on the date the Escrow Release Conditions are satisfied and the CF Shares will be converted into Resulting Issuer Shares upon the closing of the Transaction.
(iv). NEXE will also complete the NEXE Unit Financing (“NBPP”) of up to 5,638,808 NEXE Units at a price of $0.80 per NEXE Unit for gross proceeds of up to $4,511,046 in conjunction with closing the Transaction. Each NEXE unit will consist of one NEXE Share and one share purchase warrant, with each share purchase warrant entitling the holder to purchase one additional NEXE Share at a price of $1.00 per NEXE Share for a period of twelve months from the date of issue. The Company will pay arm’s length finder’s fee, of up to 7% of the total proceeds of the NBPP, payable on closing and, issue a non-transferable common share purchase warrants of up to 7% of the unit’s sold under the NBPP.

The Transaction is subject, but not limited, to regulatory and shareholder approvals.

b) Accounting for the Transaction

On completion of the Transaction, the shareholders of NEXE will obtain control of the Resulting Issuer by obtaining approximately 93.78% of the common shares of the Resulting Issuer and the resulting power to govern the financial and operating policies of the combined entities, as further supported by NEXE holding all of the Board positions of the Resulting Issuer.

Although the Transaction results in a single entity, control passed to the former shareholders of NEXE and the Transaction constitutes a reverse takeover of Whatcom by NEXE and has been accounted for as a reverse takeover transaction in accordance with the guidance provided in IFRS 2 Share-based Payments and IFRS 3 Business Combinations. As Whatcom did not qualify as a business according to the definitions within IFRS 3, the reverse takeover does not constitute a

business combination; rather the Transaction was accounted for as an asset acquisition and including Whatcom’s public listing. Accordingly, no goodwill or intangible assets were recorded with respect to the Transaction as it does not constitute a business.

For accounting purposes, NEXE will be treated as the accounting parent company (legal subsidiary) and Whatcom as the accounting subsidiary (legal parent).

The Transaction is measured at the fair value of the shares that NEXE would have had to issue to shareholders of Whatcom to give shareholders of Whatcom the same percentage equity interest in the combined entity that results from the reverse takeover had it taken the legal form of NEXE acquiring Whatcom. The fair value of the common shares was determined to be $0.80 based on the concurrent NEXE Private Placement and is considered as a significant estimate and judgement.

A listing expense of $2,494,989 has been charged to profit or loss to reflect the difference between the fair value of the consideration paid, and the fair value of the net liabilities acquired from Whatcom in accordance with IFRS 2 Share-based Payments.

3. SIGNIFICANT ACCOUNTING POLICIES

The unaudited pro-forma financial statements have been compiled using the significant accounting policies, as set out in the audited consolidated financial statements of CNX as at and for the year ended December 31, 2017 and the unaudited condensed interim financial statements of CNX for the three months ended March 31, 2018. Management has determined that no material pro forma adjustments are necessary to conform the Company's accounting policies to the accounting policies used by CNX in the preparation of its financial statements. The annual and interim consolidated financial statements of CNX were presented using the US dollar as its presentation currency. The same annual and interim consolidated financial statements of CNX have been restated to adopt the same presentation currency as Theia for these pro forma consolidated financial statements. The presentation currency of these pro forma consolidated financial statements is the Canadian dollar.

As such, the unaudited pro-forma consolidated financial statements should be read in conjunction with CNX’s December 31, 2017 audited annual financial statements and the March 31, 2018 interim financial statements, together with Theia’s audited financial statements as at and for the year ended January 31, 2018.

4. PRO-FORMA ADJUSTMENTS

The fair value of the net assets (liabilities) of Whatcom as at July 31, 2020, prior to the Transaction were:

Cash $ Other current assets Trade and other payables $	734,482 4,270 (29,471)
	705,011

These pro-forma consolidated financial statements were prepared based on the following assumptions:

a) Whatcom share issuances

Prior to the closing of the Transaction, NEXE will complete a series of private placements for gross proceeds of $13,661,046 issuing 17,076,308 common shares at a price of $0.80 per common share.

NEXE expects to incur commissions and finders fees on the brokered portion and non-brokered private placements. NEXE anticipates that approximately it will incur a cash commission of 7% ($956,273) and issue broker warrants of 7% (1,195,342 broker warrants exercisable under the same

terms of the Units).

b) Share consideration to Whatcom

Whatcom will receive 1.0 share for each 2.5 shares, its issued and outstanding common shares of 10,000,000 will amount to 4,000,000 in the Resulting Issuer.

As a result of the share exchange and the RTO described in note 2 between the Company and the Issuer, NEXE shareholders will acquire control of the Company.

Th cost of an acquisition should be based on the fair value of consideration given. The consideration of the acquisition is therefore $3,200,000, calculated as 4,000,000 common shares at $0.80 per share, and is determined as the fair value of the number of shares that Whatcom in NEXE. The total purchase price of $3,200,000 has been allocated as follows:

Cash	$	730,212
Other current assets		4,270
PP&E		-
Total liabilities		(29,471)
Net assets		705,011
Purchaseprice		3,200,000
Listingexpense	$	2,494,989

c) Other fees

The Company anticipates that it will incur professional fees of approximately $200,000 in connection with the share issuances and Corporate finance fees of cash $75,000 and warrants of $75,000 being 93,750 warrants exercisable under the same terms of the Units

5. PRO-FORMA SHARE CAPITAL

Share capital as at August 31, 2020 in the unaudited pro-forma consolidated interim statement of financial position is comprised of the following:

NEXE INNOVATIONS INC.

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----- Start of picture text -----

No. of
Notes Common shares Amounts
Pre-closing shares of Whatcom 10,000,000 $ 780,134
Post-closing (2.5 for 1) 4,000,000 780,134
NEXE Shares 43,283,036 11,263,184
-
47,283,036 12,043,318
shares of Nexe pursuant to brokered PP 4(a) 11,437,500 9,150,000
shares of Nexe pursuant to Non broker PP 4(a) 5,638,808 4,511,046
Commissions for PP commissions 4(a) - (956,273)
-
Adjustment to equity on recapitalization 4(b) 3,200,000
Elimination of Whatcom common shares 4(b) (780,134)
Corporate finance fees 4(c) (75,000)
64,359,343 $ 27,092,957
----- End of picture text -----

AI assistant

Nexe Innovations Inc. — M&A Activity 2020

47866_rns_2020-12-03_f6b75934-5bdb-404d-9dbe-a59cff489220.pdf

WHATCOM CAPITAL CORP.

FILING STATEMENT

Dated as at November 30, 2020

TABLE OF CONTENTS

LIST OF SCHEDULES

GLOSSARY OF TERMS

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Recent Developments

MARKET AND INDUSTRY DATA

SUMMARY OF FILING STATEMENT

GENERAL

THE QUALIFYING TRANSACTION

THE RESULTING ISSUER

INTERESTS OF INSIDERS, PROMOTERS OR CONTROL PERSONS

Notes:

Notes:

ARM’S LENGTH QUALIFYING TRANSACTION

AVAILABLE FUNDS AND PRINCIPAL PURPOSES

Notes:

SELECTED PRO FORMA FINANCIAL INFORMATION

MARKET FOR SECURITIES

EXCHANGE APPROVAL

CONFLICTS OF INTERESTS

SPONSORSHIP

EXPERTS

SUMMARY OF RISK FACTORS

PART I - RISK FACTORS

Limited operating history.

Negative Cash Flow from Operating Activities

Going-concern risks.

Commercialization of the NEXE PODs

Future performance is highly dependent upon the sales of Keurig® and Nespresso® beverage systems.

The research and development of the single-serve beverage pods has required and will continue to require a significant investment and commitment of resources, is subject to numerous risks and uncertainties, and ultimately may not prove successful.

Continued innovation and the successful development and timely launch of new platforms, products and product extensions are critical to the Resulting Issuer’s financial results and achievement of its growth strategy.

Future financial results are difficult to predict, and failure to meet market expectations for the Resulting Issuer’s financial performance or its publicly announced guidance may cause the price of its securities to decline.

Changes in the beverage environment and retail landscape could impact the Resulting Issuer’s financial results.

Failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact the Resulting Issuer’s future growth and business.

Product safety and quality concerns could negatively affect the Resulting Issuer’s business.

The Resulting Issuer’s long-term purchase commitments for certain strategic materials critical for the manufacture of pods could impair its ability to be flexible in its business without penalty.

Risk related to technological obsolescence and difficulty in obtaining equipment.

Risks related to insurance of the Resulting Issuer’s operations.

Risks related to product development and technology change.

Risks related slow acceptance of products.

Resulting Issuer has an evolving business model and thus its services and products could change.

If the Resulting Issuer’s revenue is primarily derived from a limited number of customers, the loss of such customer could have an adverse impact on the Resulting Issuer.

Interruptions or delays in service from the Resulting Issuer’s facilities could impair the delivery of the Resulting Issuer’s services and harm its business.

The Resulting Issuer depends on highly skilled personnel to grow and operate its business, and if the Resulting Issuer is unable to hire, retain and motivate its personnel, the Resulting Issuer may not be able to grow effectively.

If the Resulting Issuer is unable to maintain and promote its brand, its business and operating results may be harmed.

Risks associated with acquisitions.

The Resulting Issuer may be vulnerable to security breaches that could adversely affect its operations, business, operations, and reputation.

Risks related to regulation by governmental authorities.

Risks related to protection of intellectual property rights.

Risks related to competition.

Risks related to management of growth.

Risks related to conflicts of interest.

Additional financing requirements and access to capital.

Product recalls and/or product liability may adversely impact the Resulting Issuer.

The Resulting Issuer’s business will be highly dependent on sales of coffee, and if demand for coffee decreases, its business would suffer.

Risks related to volatility of share price, absence of dividends and fluctuation of operating results.

Risks related to no assurance of active trading market.

Risks related to equity dilution to shareholders.

Risks related to value of securities.

Risks related to use of proceeds.

Risks related to global economic and financial deterioration impeding access to capital or increasing the cost of capital.

Risks related to litigation.

Risks related to reporting issuer status.

Economic environment and global economic risk.

Climate change may have a long-term adverse impact on the Resulting Issuer’s business and results of operations.

Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption to the development and distribution of products and adversely impact business.

Completion of the Transaction and Exchange Approval

Currency risk exposures.

PART II - INFORMATION CONCERNING THE ISSUER

CORPORATE STRUCTURE

Name and Incorporation

GENERAL DEVELOPMENT OF THE BUSINESS

History

PROPOSED FINANCINGS

Nexe Innovations Inc. M&A Activity 2020