Northstar Clean Technologies Inc.

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Consolidated Financial Statements

For the Years Ended December 31, 2023 and 2022 (Expressed in Canadian Dollars)

Independent Auditor's Report

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To the Shareholders of Northstar Clean Technologies Inc.:

Opinion

We have audited the consolidated financial statements of Northstar Clean Technologies Inc. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and December 31, 2022, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material 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 December 31, 2023 and December 31, 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our 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 incurred a net loss during the year ended December 31, 2023 and as of that date the Company had an accumulated deficit. 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.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in them Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Classification and Valuation of Preferred Shares and Contract Liability

Key Audit Matter Description

We draw attention to Notes 2 and 13 to the consolidated financial statements. The Company entered into a transaction which has resulted in issuing preferred shares and recording a contract liability for an exclusivity right of $5,702,727 and $2,778,252 respectively as of December 31, 2023. The Company uses its judgement to select a valuation method and make assumptions to determine the fair value of the excess premium paid related to the exclusivity right on initial measurement recorded as contract liability. The fair value of the contract liability was determined by deducting the fair value of the preference shares from the transaction price.

MNP LLP

1021 West Hastings St, Suite 2200, Vancouver BC, V6E 0C3

1.877.688.8408 T: 604.685.8408 F: 604.685.8594

We considered this to be a key audit matter due to the complexity in identifying the components of the transaction, assessing their classification and fair value. This resulted in a high degree of auditor judgment, estimation uncertainty, subjectivity, and effort in performing procedures and evaluating audit evidence.

Audit Response

We responded to this matter by performing audit procedures over the preferred shares transaction. Our audit work in relation to this included, but was not restricted to, the following:

Obtained an understanding and performed a walkthrough over the Company's process for identifying and recording the preferred shares and contract liability. Evaluated the design and implementation of essential controls identified;
Engaged our internal accounting specialists to review management's accounting assessment, challenged key assumptions and inputs, and evaluated the reasonableness of fair value initially measured;
Engaged our internal valuations specialists to provide an independent assessment of management’s approach to valuing the components of the transaction;
Reviewed related disclosures in the consolidated financial statements.

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.

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1021 West Hastings St, Suite 2200, Vancouver, BC, V6E 0C3 1.877.688.8408 T: 604.685.8408 F: 604.685.8594 MNP.ca

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.

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.

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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Brent Wolfe.

Vancouver, British Columbia

April 26, 2024

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Chartered Professional Accountants

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1021 West Hastings St, Suite 2200, Vancouver, BC, V6E 0C3 1.877.688.8408 T: 604.685.8408 F: 604.685.8594 MNP.ca

Consolidated Statements of Financial Position

(Expressed in Canadian Dollars) As at December 31, 2023 and 2022

Northstar Clean Technologies Inc. Consolidated Statements of Financial Position (Expressed in Canadian Dollars) As at December 31, 2023 and 2022
	December 31, 2023 December 31, 2022
ASSETS Current Cash Receivables GST receivable Prepaids (Note 11) Net investment in sublease (Note 4) Non-Current Deposits (Note 4) Deferred financing costs (Note 9) Property, plant and equipment (Note 6) Intangible assets (Note 8) Net investment in sublease (Note 4) Right-of-use asset (Note 4)	$ 7,648,311 $ 1,114,166 21,315 - 104,993 207,389 78,399 98,481 66,247 65,696
	7,919,265 1,485,732
	517,813 624,091 131,250 - 5,040,686 3,286,540 41,746 25,686 - 66,247 4,224,285 1,340,761
	9,955,780 5,343,325
	$ 17,875,045 $ 6,829,057
LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities (Note 11) Equity-based compensation payable (Note 14) Loans payable (Notes 9 and 11) Convertible debentures (Note 10) Lease liability (Note 4) Non-Current Equity-based compensation payable (Note 14) Loans payable (Notes 9 and 11) Convertible debentures (Note 10) Contract liability (Note 13) Lease liabilities (Note 4) Decommissioning liabilities (Note 5)	$ 1,938,863 $ 1,238,078 65,829 23,178 58,472 121,250 34,681 6,000 651,306 516,811
	2,749,152 1,905,317
	41,016 21,464 - 46,711 2,956,250 928,408 2,778,252 - 3,641,977 1,142,650 271,000 -
	12,437,648 4,044,550
Shareholders' equity Common shares (Note 12) Preferred shares (Notes 13) Reserves (Note 14) Deficit	28,137,042 25,448,274 5,631,271 - 4,539,108 3,534,330 (32,870,024) (26,198,097)
	5,437,397 2,784,507
	$ 17,875,045 $ 6,829,057

Nature and continuance of operations (Note 1) Commitments (Notes 6 and 18) Subsequent events (Notes 14 and 20) On behalf of the Board:

“Jeffrey Beyer”

Director “Aidan G. Mills”

Director

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

Northstar Clean Technologies Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars) For the years ended December 31, 2023 and 2022

	2023 2022
REVENUE Tipping Fees Recycling income RESEARCH EXPENSES Contract consulting fees Repairs and maintenance Site materials GENERAL AND ADMINISTRATIVE EXPENSES Advertising, marketing and promotion (Note 11) Bank charges, interest and finance charges (Notes 4, 9 and 10) Consulting fees (Note 11) Depreciation (Note 4, 6 and 8) Insurance IT and communications Office and administration Operating costs Professional fees (Note 11) Rent and utilities Share-based compensation (Notes 11 and 14) Transfer agent and regulatory fees Travel Wages and benefits (Note 11) OTHER ITEMS Foreign exchange gain (loss) Interest income Loss on tax receivable Other income Loss and comprehensive loss before income taxes Income tax credit recovery (Note 19) Income tax recovery (Notes 10 and 19) Loss and comprehensive loss for the year	$ 203,047 - 3,393 -
	206,440 -
	$ 283,306 $ 477,539 90,290 18,347 404,598 1,079,942
	(778,194) (1,575,828)
	312,403 609,334 638,262 228,589 201,533 276,664 1,120,283 1,075,999 112,083 128,060 89,448 159,386 79,687 55,133 75,456 - 465,118 591,795 306,502 426,116 545,787 656,932 116,522 106,671 131,460 226,945 2,288,206 2,228,134
	(6,482,750) (6,769,758)
	85,083 (988) 10,402 19,703 - (130,522) 25,316 12,136
	(120,801) (99,671)
	$ (6,933,703) $ (8,445,257) 55,018 120,359 206,758 123,962 $ (6,671,927) $ (8,200,936)
Basic and diluted loss per share Weighted average number of common shares outstanding (basic and diluted)	$ (0.06) $ (0.08) 121,031,613 106,838,232

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

Northstar Clean Technologies Inc.

Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

	Number of	Number of					Total
	Common	Preferred	Common	Preferred			Shareholders’
	Shares	Shares	Shares	Shares	Reserves	Deficit	Equity
Balance, December 31,	106,125,903	-	$24,698,274	$-	$2,571,477	$(17,997,161)	$9,272,590
2021
Private placements (Note	1,875,000	-	750,000	-	-	-	750,000
12)
Equity portion of	-	-	-	-	335,157	-	335,157
Convertible Debentures
(Note 10)
Broker warrants (Note 10)	-	-	-	-	15,406	-	15,406
Share-based payments	-	-	-	-	612,290	-	612,290
(Note 12)
Loss for the year	-	-	-	-	-	(8,200,936)	(8,200,936)
Balance, December 31,	108,000,903	-	$25,448,274	-	$ 3,534,330	$(26,198,097)	$ 2,784,507
2022
Private placement -	18,195,367	-	2,729,305	-	-	-	2,729,305
Common Shares (Note 12)
Share issue costs	-	-	(133,077)	-	56,306	-	(76,772)
Private placement –	-	29,244,756	-	5,702,727	-	-	5,702,727
Preferred Shares (Note 13)
Share issue costs	-	-	-	(71,456)	-	-	(71,456)
PSUs and RSUs issued	514,111	-	92,540	-	(92,540)	-	-
(Note 14)
Equity portion of	-	-	-	-	559,011	-	559,011
Convertible Debentures
(Note 10)
Broker warrants (Note 10)	-	-	-	-	30,322	-	30,322
Share-based payments	-	-	-	-	451,680	-	451,680
(Note 14)
Loss for the year	-	-	-	-	-	(6,671,927)	(6,671,927)
Balance, December 31,	126,710,381	29,244,756	$28,137,042	$5,631,271	$4,539,108	$(32,870,024)	$ 5,437,397
2023

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

Northstar Clean Technologies Inc.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

For the years ended December 31, 2023 and 2022

		2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year Items not affecting cash Depreciation (Notes 4, 6 and 8) Interest and finance charges on loans (Note 9 and 10) Interest on net investment in sublease (Note 4) Share-based payments (Note 14) Loss on tax receivable Income tax recovery Interest on lease liabilities Unrealized foreign exchange gain Changes in non-cash working capital items GST Receivables Receivables Prepaids Accounts payable and accrued liabilities Net cash flows used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (Note 6) Acquisition of intangible assets (Note 8) Proceeds from government PPE government grants Deposits paid Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of convertible debentures, net of issuance costs (Note 10) Proceeds from issuance of common shares, net of issuance costs (Note 12) Proceeds from issuance of preferred shares, net of issuance costs (Note 13) Deferred costs paid Loan repayments (Note 9) Repayments of lease liabilities (Note 4) Cash-settled PSUs paid-out (Note 14) Convertible debentures interest paid (Note 10) Net cash flows provided by financing activities Change in cash during the year Effect of exchange rate changes on cash Cash, beginning of year		$ (6,671,927) $ (8,200,936) 1,120,283 1,075,999 388,764 29,175 (10,237) (16,465) 545,787 656,932 - 130,522 (206,758) (123,962) 240,851 190,363 (91,333) -
		(4,684,570) (6,258,372) 102,396 32,384 (21,315) - 20,082 140,606 81,668 398,291
		(4,501,739) (5,687,091)
		(1,684,070) (716,853) (16,782) (26,036) - 100,000 106,278 (5,000)
		(1,594,574) (647,889)
		2,650,861 1,398,704 2,652,533 750,000 8,409,523 - (131,250) - (121,250) (90,000) (712,109) (558,434) (31,903) - (175,250) -
		12,541,155 1,500,270
		(6,444,842) (4,834,710) 89,303 - 1,114,166 5,948,876
Cash, end of year		$ 7,648,311 $ 1,114,166
Interest paid		$ 175,250 $ 29,442

Supplemental disclosures with respect to cash flows (Note 15)

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

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

1. NATURE AND CONTINUANCE OF OPERATIONS

Nature of operations

Northstar Clean Technologies Inc. (“Northstar” or the “Company”) is a Canadian-based clean technology company focused on the sustainable recovery and reprocessing of asphalt shingles. Northstar has developed a proprietary design process for taking discarded asphalt shingles, otherwise destined for already over-crowded landfills, and extracting the liquid asphalt for use in new hot mix asphalt, shingle manufacturing and asphalt flat roof systems, and aggregate and fiber for use in construction products and other industrial applications. Focused on the circular economy, Northstar plans to reprocess used or defective asphalt shingle waste back into its three primary components for reuse/resale at its first commercial scale up facility in Calgary, Alberta (the “Empower Calgary Facility”). Since 2017, the Company has been conducting research & development at an existing pilot facility in Delta, British Columbia (the “Empower Pilot Facility”). As an emerging innovator in sustainable processing, Northstar’s mission is to be the leader in the recovery and reprocessing of asphalt shingles in North America, extracting the recovered components from asphalt shingles that would otherwise be sent to landfill.

Northstar was incorporated on August 21, 2017 as Blocktech Ventures Inc. under the laws of the British Columbia Corporations Act. In January 2021, the Company changed its name to Northstar Clean Technologies Inc. The head office and principal address of the Company is located at 1110-396 11th Ave SW, Calgary, Alberta, its planned Empower Calgary Facility is located at 285081 Wrangler Way, Rocky View County, Alberta and the Company’s registered and records office is 7046 Brown Street, Delta, British Columbia.

The Company is currently developing the Empower Calgary Facility in Calgary, Alberta and is planning to construct and operate the Empower Calgary Facility in the near future.

Going concern

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

The Company incurred a significant operating loss of $6,671,927 during the year ended December 31, 2023 (December 31, 2022 - $8,200,936). The Company has working capital of $5,170,113 (December 31, 2022 – working capital deficit of $419,585) and is currently unable to self-finance operations, has limited resources, no source of operating cash flow, and no assurances that anticipated production revenue will be sufficient to fund operations.

In addition, the Company has funded operations with $4,325,000 of interest bearing convertible debt, of which, there are no assurances the Company will be able to generate future cash flows sufficient to repay interest and principal if not converted. While the Company has been successful at raising funds in the past, there can be no assurance that it will be able to do so in the future.

As a result, these adverse conditions result in a material uncertainty that may cast significant doubt on the validity of the going concern assumption.

2. BASIS OF PREPARATION

Statement of compliance

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee (“IFRIC”).

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The policies applied in these consolidated financial statements are based on IFRS issued and effective as of December 31, 2023. The Board of Directors approved the consolidated financial statements for issue on April 23, 2024.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value as explained in the accounting policies. These consolidated financial statements have been prepared using the accrual basis of accounting with the exception of cash flow information.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries. All financial information is expressed in Canadian dollars unless otherwise stated and have been rounded to the nearest dollar.

Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these judgments and estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those judgments and estimates.

The most significant accounts that require judgments and estimates as the basis for determining the stated amounts include the recoverability of property, plant and equipment, depreciation, asset retirement obligation, assumptions used in share-based payments and convertible debentures, recognition of deferred income tax amounts, and the going concern assumption.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments are as follows:

Significant Estimates

Recoverability of property, plant, and equipment

The carrying value of property, plant and equipment, which are included in the consolidated statements of financial position. The cost model is utilized, and the value of the property, plant and equipment is based on the expenditures incurred less any accumulated depreciation and any accumulated impairment losses. At every reporting period, management assesses the potential impairment indicators which involves assessing whether or not facts or circumstances exist that suggest the carrying amount exceeds the recoverable amount as determined on the basis of a sale of the asset in an arm’s length transaction between knowledgeable and willing parties.

Determination of market interest rate for loans and leases

The Company determined the market interest rates for loans and leases based on the Company’s debt borrowing rate from third party lenders in the marketplace and by considering other market indicators.

Valuation of convertible debentures

The determination of the fair value is an area of significant judgment given that it is subject to various inputs, assumptions and estimates including: contractual future cash flows, discount rates, credit spreads and volatility. Transaction costs are apportioned to the debt liability and equity components in proportion to the allocation of proceeds.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Valuation of contract liability

The Company uses its judgement to select a valuation method and make assumptions to determine the fair value of the excess premium paid related to the exclusivity right on initial measurement recorded as contract liability. The fair value of the contract liability was determined by deducting the fair value of the preference shares from the transaction price.

Valuation of share-based payments

Stock Option Awards

The Company uses the Black-Scholes option pricing model for valuation of share-based payments. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.

Share Unit Awards

Share Unit Awards are measured at fair value on the date of grant which is estimated by reference the Company’s quoted market price. The performance share units require the input of the expected performance factor which is a subjective assumption. Changes in this input assumption can materially affect the fair value estimate and the Company’s earnings. The performance share units are re-measured at each reporting date based on the estimated performance factor and the change in fair value is recognized as an expense in the statement of operations.

Decommissioning provision

The Company is required to remove all material and equipment from its premise at the end of the lease at its Empower Pilot Facility and, as a result of this contractual obligation, has recognized a liability in the amount of estimated costs to remove all material and equipment. The obligation at the reporting date represents management’s best estimate of the costs required.

Critical judgements

Income taxes

In assessing the probability of realizing income tax assets, management makes estimates related to expectations of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.

Going concern

As discussed in Note 1, a material uncertainty around the going concern assumption exists; however, management has plans to ensure the continuation of the operations into the foreseeable future.

Capitalization of development costs

The Company expensed research costs related to its proprietary design process technology prior to achieving technical feasibility. After technical feasibility has been achieved all development costs related to the Company’s proprietary design process technology are capitalized.

During the year the Company determined it achieved technical feasibility with respect to its proprietary design process technology related to reprocessing asphalt shingles back into its primary components. The period in

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

which technical feasibility has been achieved and the capitalization of related development costs is a critical judgement determined by management.

Government grants

The Company uses significant judgement in determining when reasonable assurance has been achieved in determining when to recognize government grants related to assets.

3. MATERIAL ACCOUNTING POLICIES

The following is a list of significant accounting policies used by the Company.

(a) Basis of consolidation

These consolidated financial statements include the financial statements of the Company and the entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All significant intercompany transactions and balances have been eliminated.

The consolidated financial statements include the accounts of the Company and its subsidiaries listed in the following table:

following table:
	Place of	Effective interest	Effective interest
	Incorporation	at	at
		December 31,	December 31,
		2023	2022
Empower Environmental Solutions Ltd	BC, Canada	100%	100%
Empower Environmental Solutions Calgary	AB, Canada	100%	100%
Ltd
Empower Environmental Solutions Toronto	ON, Canada	100%	100%
West Ltd
1284041 BC Ltd.	BC,Canada	100%	100%

(b) Cash

Cash includes highly liquid short-term interest bearing variable rate investments with an original maturity of three months or less, or which are readily convertible into a known amount of cash with no significant charges. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For the years presented, the Company did not hold any cash equivalents.

(c) Financial instruments

Classification

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

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Measurement

Financial assets and liabilities at amortized cost

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

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the profit or loss in the period in which they arise.

Financial assets at FVTOCI

Financial assets carried at FVTOCI are initially recorded at fair value. Unrealized gains and losses arising from changes in the fair value of the financial assets held at FVTOCI are included in other comprehensive income or loss in the period in which they arise.

Impairment of financial assets at amortized cost

An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period. In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of comprehensive loss.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statement of loss.

(d) Impairment of non-current assets

At each financial position reporting date, the Company’s non-current assets are reviewed to determine whether there is any indication that the carrying value of those assets are impaired and may not be recoverable. If any such indication exists, the recoverable amount of the asset is evaluated at the level of a cash-generating unit (“CGU”), the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets, where the recoverable amount of a CGU is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the year.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

(e) Loss per share

Loss per share is calculated using the weighted average number of common shares outstanding during the year. The Company determines diluted earnings/loss per share whereby the dilutive effect on earnings/loss per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

(f) Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated depreciation and impairment losses. The Company starts to depreciate property, plant and equipment when assets are ready and available for use.

Depreciation is calculated using the following methods over their respective estimated useful lives at the following annual rates:

g annual rates:
Processing equipment	20% declining balance, no residual value
Storage facility	20% declining balance, no residual value
Construction in progress	Nil until available for use
Furniture and fixtures	20% declining balance, no residual value
Leasehold improvements	Straight-line over the term of lease

Depreciation methods and useful lives are reviewed at each reporting date and adjusted prospectively. Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss.

Property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the statements of loss and comprehensive loss.

Where an item of property, plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Expenditures incurred to replace a component of an item of equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized.

(g) Intangible assets

Intangible assets are recorded at cost less accumulated amortization and any impairment losses. Amortization of definite life intangibles is calculated on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any, over the following terms:

Patents – 20 years

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The estimated useful lives, residual values and amortization methods are reviewed annually and any changes in estimates are accounted for prospectively. Intangible assets with an indefinite life or not yet available for use are not subject to amortization but are subject to an annual test of impairment.

(h) Leases

Leases are recognized as a lease liability and a corresponding right-of-use (“ROU”) asset at the date on which the leased asset is available for use by the Company. Liabilities and assets arising from a lease are initially measured at the present value of the remaining lease payments, discounted using the Company’s estimated incremental borrowing rate when the rate implicit in the lease is not readily available. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in the future lease payments arising from a change in an index or rate, if there is a change in the amount expected to be payable under a residual value guarantee or if there is a change in the assessment of whether the Company will exercise a purchase, extension or termination option that is within the control of the Company.

Lease payments are allocated between the lease liability and finance costs. Cash outflows for repayment of the principal portion of the lease liability is classified as cash flows from financing activities. The interest portion of the lease payments is classified as cash flows from operating activities.

The ROU asset is initially measured at an amount equal to the corresponding lease liability and is subsequently depreciated on a straight-line basis, over the shorter of the estimated useful life of the asset or the lease term. The ROU asset may be adjusted for certain remeasurements of the lease liability and impairment losses.

Leases that have terms of less than twelve months or leases on which the underlying asset is of low value are recognized as an expense in the consolidated statement of loss on a straight-line basis over the lease term. If the right-of-use asset is subsequently leased to a third party (a “sublease”), the Company will assess the classification of the sublease as to whether it is a finance or operating lease. Subleases that are classified as an operating lease will recognize lease income while a finance lease will recognize a lease receivable and derecognize the carrying value of the right-of-use asset, with the difference recorded in profit or loss.

(i) Income taxes

Income tax on the profit or loss for the year presented comprises current and deferred tax. Income tax is recognized in profit or loss, except to the extent that it relates to items recognized directly in equity, in which case it is recognized as equity.

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

Deferred tax is recorded, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable profit and do not give rise to equal taxable and deductible temporary differences; nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amounts of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

A deferred tax asset is recognized only 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, it does not recognize the deferred tax asset.

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

(j) Related party transactions

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.

(k) Provisions

Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events. It is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in any provision due to passage of time is recognized as interest expense.

(l) Share-based payment transactions

The Company grants stock options to acquire common shares to directors, officers, employees and consultants. The fair value of options granted is recognized as an employee or consultant expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.

Stock Options

The fair value is measured at grant date, and each tranche is recognized on the graded vesting method over the period during which the options vest. The fair value of the options granted is measured using the BlackScholes option pricing model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest. The fair value of the options is accrued and charged to operations with the offset credit to reserves, over the vesting period. If and when the stock options are exercised, the applicable amounts from reserves are transferred to capital stock.

Share-based compensation to non-employees is measured at the fair value of the goods or services received or the fair value of the equity instruments issued if the fair value of the goods or services cannot be reliably measured, and is recorded at the date the goods or services are received.

The Black-Scholes option valuation model used by the Company to determine fair values of options and similar financial instruments requires the input of highly subjective assumptions including future stock volatility and expected time until exercise. Changes in the subjective input assumptions can materially affect the fair value estimate.

Share Unit Awards

Share Unit Awards are measured at fair value on the date of grant which is estimated by reference the Company’s quoted market price. At each reporting period, the amount recognized as an expense is adjusted

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

to reflect the actual number of share unit awards that are expected to vest. The fair value of the share unit awards is accrued and charged to operations with the offset credit to reserves, for equity settled share unit awards and to liabilities, for cash settled share unit awards, over the vesting period. For cash settled share unit awards, the fair value is re-calculated based on the Company’s quoted market price at the reporting period. When the share unit awards are issued, the applicable amounts from reserves are transferred to capital stock and the applicable amounts from liabilities are charged against cash.

(m) Convertible Debentures

Convertible debentures are financial instruments which are accounted for separately dependent on the nature of their components: a financial liability and an equity instrument. The identification of such components embedded within a convertible debenture requires significant judgment given that it is based on the interpretation of the substance of the contractual arrangement. Where the conversion option has a fixed conversion rate, the financial liability, which represents the obligation to pay coupon interest on the convertible debentures in the future, is initially measured at its fair value and subsequently measured at amortized cost. The residual amount is accounted for as an equity instrument at issuance. Where the conversion option has a variable conversion rate, the conversion option is recognized as a derivative liability measured at fair value through profit and loss. The residual amount is recognized as a financial liability and subsequently measured at amortized cost. The determination of the fair value is also an area of significant judgment given that it is subject to various inputs, assumptions and estimates including: contractual future cash flows, discount rates, credit spreads and volatility. Transaction costs are apportioned to the debt liability and equity components in proportion to the allocation of proceeds.

(n) Share Capital

Common shares are classified as equity. The Company assesses classification of preferred shares as either equity or a financial liability. Where the preferred shareholder has an option to redeem their shares, or if redemption is mandatory, the shares are considered a financial liability. If the option to redeem lies with the issuer without a contractual obligation, these shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.

Equity units

The Company uses the residual value method with respect to the measurement of common shares and share purchase warrants issued as units. The proceeds from the issue of units are allocated between common shares and share purchase warrants where the fair value of the common shares is based on the market value on the date of the issuance of the placement and the balance, if any, is allocated to the attached warrants. Share issue costs are netted against common share component.

(o) Government Grants

The Company recognizes government grants in accordance with IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. Government grants are recognized when there is reasonable assurance that milestone criteria for their receipt will be met and the grant will be received. Grants related to income are recognized as income over the periods necessary to match them with the related costs that they are intended to compensate. Grants related to assets are deducted in calculating the carrying amount of the asset. The grant is recognised in profit or loss over the life of a depreciable asset as a reduced depreciation expense.

(p) Research and Development Costs

Research costs are expensed as incurred. Development costs are capitalized only after technical feasibility of the asset for sale or use has been established, and only those costs that can be measured reliably are capitalized. Development costs previously recognized as an expense are not recognized as an asset in a

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

subsequent period. Amortization of capitalized development costs begins when the asset is available for use or sale.

(q) New accounting standards adopted during the year

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

The IASB has published Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) which clarifies the guidance on whether a liability should be classified as either current or non-current. The amendments:

clarify that the classification of liabilities as current or non-current should only be based on rights that are in place “at the end of the reporting period”
clarify that classification is unaffected by expectations about whether an entity will exercise the right to defer settlement of a liability
make clear that settlement includes transfers to the counterparty of cash, equity instruments, other assets or services that result in extinguishment of the liability.

The amendment is effective for annual periods beginning on or after January 1, 2023. The Company’s adoption of this amendment will have no significant impact.

4. RIGHT-OF-USE ASSET AND LEASE LIABILITIES

Right-of-use assets

The Company’s right-of-use assets are entirely comprised of premises for operating facilities. The following is the continuity of the cost and accumulated depreciation of right-of-use assets as at December 31, 2023 and 2022:

		December 31,	December 31,	December 31,
		2023		2022
Cost
Balance at beginning of year	$	2,260,140	$	2,260,140
Additions		3,452,014			-
Balance, end of year	$	5,712,154	$	2,260,140
Accumulated depreciation
Balance at beginning of year	$	919,379	$	459,690
Depreciation		568,490		459,689
Balance, end of year	$	1,487,869	$	919,379
Net book value	$	4,224,285	$	1,340,761

During the year ended December 31, 2023, the Company recognized right-of-use assets of $3,452,014, including additions relating to lease liabilities with a fifteen year term and an incremental borrowing rate of 8.35% for $3,181,014 and decommissioning liabilities of $271,000 (Note 5).

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The Company’s Net investment assets (“NIS”) are comprised of premises under lease and are sub-leased. The following is the continuity of the NIS asset as at December 31, 2023 and 2022:

		December 31,		December 31,
Net investment insublease		2023		2022
NIS asset	$	131,943	$	191,411
Lease payments received		(75,933)		(75,933)
Finance income		10,237		16,465
Value of net investment in sublease, end of year		66,247		131,943
Current portion		(66,247)		(65,696)
Non-current portion	$	-	$	66,247

Lease liabilities

The following is the continuity of lease liabilities as at December 31, 2023 and 2022:

	December 31,	December 31,
	2023	2022
Cost
Balance at beginning of year	$ 1,659,461	$ 2,103,465
Additions	3,181,014	-
Lease payments	(788,043)	(634,367)
Interest accretion on lease liability	240,851	190,363
Balance, end of year	$ 4,293,283	$ 1,659,461
Current portion	(651,306)	(516,811)
Non-current portion	$ 3,641,977	$ 1,142,650

Variable lease payments for the year ended December 31, 2023 is $202,091 (2022 - $179,006).

Rent expense relating to short term rental for year ended December 31, 2023 is $22,200 (2022 - $60,150).

In connection with the agreement for the lease, the Company made a deposit payment of $85,000 of which $37,800 was applied to the Basic Rent due in December 2015, and the balance of $47,200 was held as a security deposit. The Company renegotiated a new lease on January 1, 2021 and the security deposit held with the addition of $402,500 formed part of the new security deposit.

In connection with the NIS lease, the Company’s lease term is until November 30, 2024. The current monthly basic rent is payable monthly in advance at a rate of $6,328 per month plus the proportion share of expense in respect of operating costs and property taxes. The Company entered into an assignment agreement whereby the assignee has accepted the terms of the Company’s lease terms and is paying the lease payments directly to the Landlord. The landlord holds a security deposit of $10,043.

5. DECOMMISSIONING LIABILITIES

In connection with the lease related to the Company’s Empower Pilot Facility, the Company is obligated to remove all equipment and materials from the location at the end of the lease which terminates on December 31, 2025. Located on the site is equipment used in the Empower Pilot Facility and roofing shingles which will be removed at the end of the term of the lease. If the lease is not extended, the Company is responsible for the costs associated with this removal. At the current level of activity at the Empower Pilot Facility, the shingles on site are not expected to be fully consumed in processing into asphalt and other roofing shingle components for research and testing. As a result, during the year ended December 31, 2023, the Company recognized a decommissioning liability in the amount of $271,000 with a corresponding amount recorded to right-of-use assets to be depreciated over the remaining term of the lease (Note 4).

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The following is a continuity of the Company’s decommissioning liabilities as at December 31, 2023 and 2022:

		December 31,	December 31,	December 31,
		2023		2022
Balance at beginning of year	$	-	$	-
Additions		271,000		-
Balance, end of year	$	271,000	$	-

6. PROPERTY, PLANT AND EQUIPMENT

	Processing equipment Storage Facility Construction in progress Furniture and Fixtures Leasehold Improve- ments Total
Cost Balance – December 31, 2021 Transfers Additions Government grant Balance – December 31, 2022 Additions Balance – December 31, 2023 Accumulated Depreciation Balance – December 31, 2021 Additions Balance – December 31, 2022 Additions Balance – December 31, 2023 Net Book Value Balance – December 31, 2021 Balance – December 31, 2022 Balance– December31,2023	$ 28,210 $ 56,468 $ 3,159,573 $ 4,178 $ - $ 3,248,429 3,130,765 - (3,130,765) - - - 308,912 - 458,326 23,856 6,001 797,095 - - (100,000) - - (100,000)
	$ 3,467,887 $ 56,468 $ 387,134 $ 28,034 $ 6,001 $3,945,524 65,058 - 2,235,898 4,261 - 2,305,217
	$ 3,532,945 $ 56,468 $ 2,623,032 $ 32,295 $ 6,001 $6,250,741
	$ 24,802 $ 15,514 $ - $ 2,709 $ - $ 43,025 604,209 8,191 - 3,309 250 615,959
	$ 629,011 $ 23,705 $ - $ 6,018 $ 250 $ 658,984 533,943 6,552 - 7,576 3,000 551,071
	$ 1,162,954 $ 30,257 $ - $ 13,594 $ 3,250 $ 1,210,055
	$ 3,408 $ 40,954 $ 3,159,573 $ 1,469 $ - $ 3,205,404 $ 2,838,876 $ 32,763 $ 387,134 $ 22,016 $ 5,751 $ 3,286,540 $ 2,369,991 $ 26,211 $ 2,623,032 $ 18,701 $ 2,751 $ 5,040,686

During the year ended December 31, 2022 the Company transferred $3,130,765 from construction in progress equipment to processing equipment and as of February 1, 2022 the Company started recording depreciation on this equipment. The Company also received a $100,000 government grant from Alberta Innovates relating directly to capitalized engineering costs.

Construction in progress consists of property, plant and equipment related to the development of the Company’s Calgary facility. As at December 31, 2023, the Company had contractual commitments to acquire property, plant and equipment for $3,651,853.

7. GOVERNMENT GRANTS

The Company’s wholly owned subsidiary, Empower Environmental Solutions Calgary Ltd., and Emissions Reduction Alberta (“ERA”) have signed a contribution agreement (the “Contribution Agreement”) dated July 31, 2023, whereby ERA will fund up to $7,088,856 (the “ERA Grant”) for the development and construction of the Empower Calgary Facility, subject to certain criteria.

The Contribution Agreement contains four funding milestones for the Empower Calgary Facility, payments for which are subject to meeting the criteria relating to achieving detailed engineering design, construction completion, commissioning completion and detailed testing completion.

Subsequent to year ended December 31, 2023, the Company received ERA approval for the Company’s submission related to the first milestone following, among other criteria completed, the completion of 75% of

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

detailed engineering and design for the Empower Calgary Facility. Subsequent to year end, payment for the first milestone was received (Note 20).

8. INTANGIBLE ASSETS

INTANGIBLE ASSETS
Cost: Balance – December 31, 2021 Additions Balance – December 31, 2022 Additions Balance – December 31, 2023 Accumulated amortization Balance – December 31, 2021 Amortization Balance – December 31, 2022 Amortization Balance – December 31, 2023 Net book value Balance – December 31, 2021 Balance – December 31, 2022 Balance – December 31,2023	Patents In Process Patents Total
	$ - $ - $ - 11,984 14,053 26,037
	$ 11,984 $ 14,053 $ 26,037 15,882 900 16,782
	$ 27,866 $ 14,953 $ 42,819
	- - - - 351 351 $ - $ 351 $ 351 - 722 722
	$ - $ 1,073 $ 1,073
	$ - $ - $ - $ 11,984 $ 13,702 $ 25,686 $ 27,866 $ 13,880 $ 41,746

9. LOANS PAYABLE

LOANS PAYABLE
	Equipment Loan
Loans payable:
Balance – December 31, 2021		239,015
Accrued interest		2,363
Repayment of loan		(92,363)
Interest accretion on low interest loan		18,946
Balance – December 31, 2022		167,961
Less current portion		(121,250)
Long term portion	$	46,711
Balance – December 31, 2022		167,961
Accrued interest		1,250
Repayment of loan		(121,250)
Interest accretion on low interest loan		10,511
Balance – December 31, 2023		58,472
Less current portion		(58,472)
Long term portion	$	-

Equipment loan:

The Company acquired $270,000 of equipment from a company controlled by a former officer of the Company during the year. The term of the loan is 30 months, beginning January 1, 2022 and ending June 30, 2024. The loan carries an annual interest rate of 1% per annum, secured by the equipment and repayable in monthly instalments of $5,000 plus interest for the first 6 months and $10,000 per month plus interest fro[m ] 7th month until fully paid. Interest payments begin in July 2022. The equipment loan was recognized as the present value using a 10% market rate of interest. The difference was recognized as a shareholder contribution in reserves on low interest loan. The amount outstanding as at December 31, 2023 was $58,472 (December 31, 2022 - $167,961).

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

10.

Senior Secured Debt:

During the year ended December 31, 2023, the Company entered into binding Letter of Offer credit agreement with the Business Development Bank of Canada ("BDC") for project financing (the “BDC Financing”) of the Empower Calgary Facility of up to $8,750,000 in non-revolving senior secured debt. The Company will use the proceeds from the BDC Financing for the development and construction of its Empower Calgary Facility in Calgary, AB.

The following is a summary of the material terms of the BDC Financing:

BDC will provide a senior secured project loan of up to $8,750,000;
15-year repayment period, with a 2-year interest only payment period; and
Fixed 5-year interest rate of 7.95% payable monthly.

The BDC Financing is subject to a one-time fee of $43,750, which has already been paid by Northstar and recorded in the deferred costs, and an annual fee of $1,000.

In connection with the BDC Financing, the Company paid a finder's fee to of $87,500 in cash, recorded in the deferred costs, and subsequent to year ended December 31, 2023, issued 250,000 common share purchase warrants exercisable at $0.35 per common share of the Company expiring on July 5, 2026, with the fair value of $87,500 (Note 20). The financing and payment of the finder's fee remain subject to regulatory and exchange approvals to the extent required.

Drawing on the debt is subject to a number of conditions precedent and is secured with a first security interest over the assets of Empower Environmental Solutions Calgary Ltd. and guarantees from Northstar Clean Technologies Inc. and Empower Environmental Solutions Ltd. supported by a first security interest from both guarantors.

As of December 31, 2023, the Company has not drawn any funds from the senior secured debt.

CONVERTIBLE DEBENTURES

Balance – December 31, 2021	$	-
Additions		924,179
Accretion		4,229
Accrued interest		6,000
Balance – December 31, 2022		934,408
Less current portion		6,000
Long term portion	$	928,408
Balance – December 31, 2022	$	934,408
Additions		1,854,770
Accretion		173,072
Accrued interest		203,931
Interest paid		(175,250)
Balance – December 31, 2023		2,990,931
Less current portion		34,681
Long term portion	$	2,956,250

Convertible Debentures: First Tranche (December 2022)

On December 15, 2022, the Company issued $1,440,000 in aggregate principal amount of Convertible Debentures. The Convertible Debentures are unsecured, mature on December 15, 2025, and bear cash interest semi-annually at a rate of 10% per annum, calculated in arrears.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Holders may convert all or a portion of all the Convertible Debentures together with any and all accrued but unpaid interest on conversion amount at any time at a conversion price per Unit of $0.25 per Unit. Each Unit consists of one common share and one-half of one non-transferable warrant, with each Warrant entitling the holder to purchase one additional common share at a price of $0.35 per Warrant Share until December 31, 2025. Northstar will be entitled to force the conversion of the principal amount and any accrued and unpaid interest then outstanding at the respective conversion price and interest conversion price on not more than sixty (60) days’ notice and not less than thirty (30) days’ notice in the event that the daily volume weighted average trading price of the shares on the TSX Venture Exchange is greater than $0.75 per share for ten (10) consecutive trading days of the shares on the TSXV preceding such notice.

The Company determines the carrying amount of the financial liability using present value of future cashflows with the principal amount of $1,440,000 and a market rate of interest of 25%. The debt component is being amortized using an effective interest rate of 26.56% over its remaining term. The liability component is then increased by accretion of the discounted amounts to reach the nominal value of the convertible notes at maturity which is recorded in the statements of loss and comprehensive loss as accretion expense.

The carrying amount of the equity component is calculated by deducting the carrying amount of the financial liability from the amount of the principal and is presented in Equity as an equity component of convertible notes in reserves.

The transaction costs are distributed between liability and equity components on a pro-rata basis according to their carrying amounts. Included in transaction costs are 157,200 broker warrants valued at $15,406 which are exercisable to purchase on additional common share at $0.35 per share until December 15, 2025.

On initial recognition, the financial liability was recognized at its present value of $924,179, which represents the principal amount of $1,440,000 less $477,939 allocated to the equity component less transaction costs of $37,882. The equity component has been recorded net of deferred tax impacts resulting in the equity component being recorded at $335,157. For the year ended December 31, 2023, the Company incurred interest expense of $144,000 (December 31, 2022 - $6,000) and accretion expense of $126,660 (December 31, 2022 - $4,229).

Management capitalized transaction costs which are directly attributable to the issuance of the Convertible Debentures. These transaction costs total $56,702 and have been netted against the principal amount of the debt and the equity option on a pro-rata basis.

As of December 31, 2023, $1,440,000 (December 31, 2022 - $1,440,000) principal amount of the Convertible Debentures is outstanding and $144,000 (December 31, 2022 - $6,000) interest has been accrued and $144,000 (December 31, 2022 – $Nil) interest has been paid out.

Convertible Debentures: Second Tranche (February 2023)

On February 28, 2023, the Company issued $625,000 in aggregate principal amount of Convertible Debentures. The Convertible Debentures are unsecured, mature on February 28, 2026, and bear cash interest semi-annually at a rate of 10% per annum, calculated in arrears.

Northstar will be entitled to force the conversion of the principal amount and any accrued and unpaid interest then outstanding at the respective conversion price and interest conversion price on not more than sixty (60) days’ notice and not less than thirty (30) days’ notice in the event that the daily volume weighted average trading price of the shares on the Exchange is greater than $0.75 per share for ten (10) consecutive trading days of the shares on the TSXV preceding such notice.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The Company determines the carrying amount of the financial liability using present value of future cashflows with the principal amount of $625,000 and a market rate of interest of 25%. The debt component is being amortized using an effective interest rate of 25.21% over its remaining term. The liability component is then increased by accretion of the discounted amounts to reach the nominal value of the convertible notes at maturity which is recorded in the statements of loss and comprehensive loss as accretion expense.

The transaction costs are distributed between liability and equity components on a pro-rata basis according to their carrying amounts. Included in transaction costs are 24,000 broker warrants valued at $3,216 which are exercisable to purchase on additional common share at $0.35 per share until February 28, 2026.

On initial recognition, the financial liability was recognized at its present value of $419,645, which represents the principal amount of $625,000 less $199,005 allocated to the equity component less transaction costs of $6,350. The equity component has been recorded net of deferred tax impacts resulting in the equity component being recorded at $143,108. For the year ended December 31, 2023, the Company incurred interest expense of $52,084 (December 31, 2022 - $Nil) and accretion expense of $42,176 (December 31, 2022 - $Nil).

Management capitalized transaction costs which are directly attributable to the issuance of the Convertible Debentures. These transaction costs total $9,316 and have been netted against the principal amount of the debt and the equity option on a pro-rata basis.

As of December 31, 2023, $625,000 (December 31, 2022 – $Nil) principal amount of the Convertible Debentures is outstanding and $52,084 (December 31, 2022 - $Nil) interest has been accrued and $31,250 (December 31, 2022 - $Nil) interest has been paid out.

Convertible Debenture Units: First Tranche (December 2023)

On December 21, 2023, the Company issued $2,260,000 in aggregate principal amount of convertible debenture units (each a “Convertible Debenture Unit”). Each Convertible Debenture Unit consists of one 12.5% unsecured convertible debenture of the Company (“Convertible Debenture”) in the Principal Amount of $5,000 and 25,000 common share purchase warrants (“Warrant”), with each Warrant entitling the holder to purchase one additional common share at a price of $0.30 per common share until December 21, 2026.

The Convertible Debentures are unsecured, mature on December 21, 2026, and bear cash interest semi-annually at a rate of 12.5% per annum, calculated in arrears.

Holders may convert all or a portion of all the Convertible Debentures at any time at a conversion price of $0.20 per common share. In addition, at the time of any conversion of principal amount, the holder may also elect to convert any accrued and unpaid interest into common shares at a conversion price equal to the market price in effect on the conversion date.

Northstar will be entitled to force the conversion of the principal amount and any accrued and unpaid interest then outstanding at the respective conversion price and market price on not more than sixty (60) days’ notice and not less than thirty (30) days’ notice in the event that the daily volume weighted average trading price of the common shares on the TSXV Exchange is greater than $0.50 per common share for ten (10) consecutive trading days preceding the date of delivery of such notice.

The Company determines the carrying amount of the financial liability using present value of future cashflows with the principal amount of $2,260,000 and a market rate of interest of 25%. The debt component is being amortized using an effective interest rate of 30.31% over its remaining term. The liability component is then increased by accretion of the discounted amounts to reach the nominal value of the convertible notes at maturity which is recorded in the statements of loss and comprehensive loss as accretion expense.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The transaction costs are distributed between liability and equity components on a pro-rata basis according to their carrying amounts. Included in transaction costs are 420,000 broker warrants valued at $27,106 which are exercisable to purchase on additional common share at $0.30 per share until December 21, 2026.

On initial recognition, the financial liability was recognized at its present value of $1,435,125, which represents the principal amount of $2,260,000 less $642,238 allocated to the equity component less transaction costs of $182,637. The equity component has been recorded net of deferred tax impacts resulting in the equity component being recorded at $415,903. For the year ended December 31, 2023, the Company incurred interest expense of $7,847 (December 31, 2022 - $Nil) and accretion expense of $4,236 (December 31, 2022 - $Nil).

Management capitalized transaction costs which are directly attributable to the issuance of the Convertible Debentures. These transaction costs total $255,145 and have been netted against the principal amount of the debt and the equity option on a pro-rata basis.

As of December 31, 2023, $2,260,000 (December 31, 2022 – $Nil) principal amount of the Convertible Debentures is outstanding and $7,847 (December 31, 2022 - $Nil) interest has been accrued and $Nil (December 31, 2022 - $Nil) interest has been paid out.

11. RELATED PARTY TRANSACTIONS AND BALANCES

(a) As at December 31, 2023, accounts payable and accrued liabilities include $672,690 (December 31, 2022 - $754,656) owing to companies with certain directors in common and companies controlled by certain directors and officers or former directors. The amounts are unsecured, non-interest bearing and due on demand.
(b) Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. During the years presented the Company paid or accrued the following key management personnel compensation to directors, officers, and/or companies controlled by directors and officers and/or companies with certain directors in common:

	December 31,	December 31,	December 31,	December 31,
		2023		2022
Advertising, marketing and promotion	$	81,750	$	55,800
Consulting fees		24,000		42,000
Professional fees		-		80,000
Share-based compensation		391,569		453,994
Wages and benefits		1,391,915		1,166,210
	$	1,889,234	$	1,798,004

(c) During the year ended December 31, 2021, the Company acquired equipment in the amount of $270,000 plus GST and PST from a company with certain controlled by a former officer of the Company. See Note 9 for additional disclosure.
(d) During the year ended December 31, 2023, the amount of $325,000 (December 31, 2022 - $360,000) was received in convertible debenture proceeds by officers or directors of the Company.
(e) As at December 31, 2023 prepaids includes $Nil (December 31, 2022 – $45,000) to a company controlled by a director.
(f) During the year ended December 31, 2023, 401,757 common shares were issued to key management personnel for equity-settled RSUs and PSUs for 92,712 and 309,045 common shares, respectively.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

12. COMMON SHARES

Authorized Share Capital:

Unlimited number of common shares without par value.

During the period ended December 31, 2023, the Company completed the following share transactions:

A non-brokered private placement of 18,195,367 units for aggregate gross proceeds of $2,729,305. Each unit consisted of one common share of the Company and one common share purchase warrant of the Company with each warrant entitling the holder thereof to acquire one additional common share at an exercise price of $0.20 per warrant for a period of 36 months following the closing date of the private placement. As part of the transaction, 511,819 broker warrants were issued at a price of $0.20 with an expiry of three years and a value of $56,305, and cash finders fees of $76,773 were paid. The residual method was applied and $Nil was assigned to the warrants.
Issued 514,111 common shares for equity settled PSUs and RSUs that vested on June 23, 2023.

During the year ended December 31, 2022, the Company completed the following share transactions:

Issued a total of 1,875,000 common shares for proceeds of $750,000.

13. PREFERRED SHARES

On July 31, 2023, Northstar received a signed subscription agreement from Allmine Paving, LLC, an affiliate of TAMKO Building Products LLC (“TAMKO”), for 29,244,756 Preferred Shares of Northstar at $0.29 per share for total proceeds of $8,480,979, which represents 18.75% ownership of Northstar once the transaction is complete. Preferred Shares are convertible to Common Shares of the Company at a ratio of 1:1.

As part of the transaction, Northstar also signed a Memorandum of Understanding (“MOU”) with TAMKO Building Products LLC, relating to the proposed construction and operation of the first three shingle reprocessing facilities built by Northstar in the U.S. The agreement includes providing a supply agreement from the TAMKO facilities to the Empower facilities for asphalt shingles, a take or pay offtake agreement for the sale of asphalt oil and aggregate from the Empower facilities to the TAMKO facilities, a licensing agreement, and the obligation to purchase two sets of Northstar convertible debentures of $2,376,000 each after the acceptance of certain milestones in the ERA Contribution Agreement.

As part of the MOU, TAMKO agreed to an exclusivity period that shall begin on July 31, 2023 and shall end on the date that is three years following the acceptance by ERA of certain milestones with ERA. This exclusivity period may be extended based on criteria set out in the MOU.

At the option of the Company, for a period of 60 days commencing after the expiration of the exclusivity period, the Series A Preferred Shares may be redeemed for an amount equal to the applicable original issue price, plus dividends declared but unpaid thereon. The Company will provide a redemption notice defining the redemption date(s), the number of shares to be redeemed and all other terms of the redemption. On each redemption date, the Company shall redeem in cash, on a pro rata basis in accordance with the number of Series A Preferred Shares owned by each holder, that number of outstanding Series A Preferred Shares determined by dividing (i) the total number of Series A Preferred Shares outstanding immediately before such redemption date by (ii) the number of remaining redemption dates (including the redemption date to which such calculation applies).

The proceeds received for the preferred shares, exclusivity right, licensing agreement and other contractual matters are allocated to their components by fair valuing the liability and allocating the remaining proceeds to the preferred share equity component. The liability was fair valued at the differential between the traded common share price on the date of issuance and the price paid which amounts to $2,778,252 and is classified as a contract liability which will be realized on a straight-line basis over a three year period commencing when ERA milestone 3 has been achieved. The residual amount of $5,702,727 is classified as equity.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Management capitalized transaction costs which are directly attributable to the issuance of the Preferred Shares. These transaction costs total $71,456 and have been netted against the Preferred Shares which have been classified as an equity item.

14. RESERVES

Stock options

The Company grants stock options to acquire common shares to directors, officers, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the plan, the exercise price of each option is as determined by the Board at the time of grant. Options vest as determined by the Board of Directors. The options can be granted for a maximum term of 10 years.

Stock option transactions are summarized as follows:

Stock option transactions	are	summarized as follows:
				Weighted
			Number		Average
			ofOptions	ExercisePrice
Outstanding, December	31,	2021	6,675,000	$	0.35
Issued			580,854	$	0.35
Outstanding, December	31,	2022	7,255,854	$	0.35
Issued			1,481,472	$	0.24
Expired			(1,300,000)	$	0.35
Outstanding, December	31,	2023	7,437,326	$	0.33

Share-based compensation recognized for options vested during the year ended December 31, 2023 was $228,379 (December 31, 2022 - $519,021).

Outstanding and exercisable stock options as at December 31, 2023:

		Number of Options
		Exercise
	ExpiryDate	Price	Outstanding	Exercisable
	December 15, 2024	$ 0.35	475,000	475,000
	February 16, 2026	$ 0.35	2,500,000	2,500,000
	June 12, 2026	$ 0.35	300,000	300,000
	July 12, 2026	$ 0.35	2,100,000	2,100,000
	December 15, 2026	$ 0.35	400,000	400,000
	February 7, 2027	$ 0.35	200,000	150,000
	April 19, 2027	$ 0.35	260,854	86,951
	August 30, 2027	$ 0.35	20,000	20,000
	March 2, 2028	$ 0.21	11,000	2,750
	September 7, 2028	$ 0.21	1,145,472	750,000
	October 4,2028	$0.21	25,000	-
Total Outstanding			7,437,326	6,784,701

The estimated remaining life of the stock options at December 31, 2023 is 2.7 years.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Outstanding and exercisable stock options as at December 31, 2022:

		Number of Options
		Exercise
	ExpiryDate	Price	Outstanding	Exercisable
	May 31,2023	$ 0.35	850,000	850,000
	December 15, 2024	$ 0.35	625,000	312,500
	February 16, 2026	$ 0.35	2,800,000	2,800,000
	July 12, 2026	$ 0.35	2,100,000	2,100,000
	December 15, 2026	$ 0.35	400,000	200,000
	February 7, 2027	$ 0.35	200,000	50,000
	April 19, 2027	$ 0.35	260,854	-
	August 30,2027	$0.35	20,000	-
Total Outstanding			7,255,854	6,312,500

The estimated remaining life of the stock options at December 31, 2022 is 2.95 years.

The fair value of stock options was calculated using the Black-Scholes option pricing model with the following weighted average assumptions:

weighted average assumptions:
	December 31,	December 31,
	2023	2022
Expected volatility	124%	128%
Risk-free interest rate	3.96%	2.21%
Expected life	4.59 years	4.34 years
Dividend yield	-	-
Forfeiture rate	-	-
Range of exercise prices	$0.21 – $0.35	$0.35
Range of share prices on date of issue	$0.14 – $0.21	$0.155 – 0.36
Estimated fair value per option	$0.12	$0.24

The expected volatility was estimated using the average historical volatility of comparable companies.

Warrants

Warrant transactions are summarized as follows:

				Weighted	Weighted
			Number		Average
			ofWarrants	ExercisePrice

Outstanding, December	31,	2021	25,184,738	$	0.46
Issued			157,200	$	0.35
Outstanding, December	31,	2022	25,341,938	$	0.46
Issued			30,451,186	$	0.24
Expired			(19,487,149)	$	0.50
Outstanding, December	31,	2023	36,305,975	$	0.25

The estimated remaining life of the warrants at December 31, 2023 is 2.55 years (December 31, 2022 - 1.18 years).

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Outstanding and exercisable warrants as at December 31, 2023:

		Exercise	December 31,	December 31,
	ExpiryDate	Price	2023	2022
	July 13, 2026(1)	$ 0.279	4,596,268	4,596,268
Finders warrants	July 13, 2026(1)	$ 0.279	406,249	406,249
	July 13, 2026(1)	$ 0.465	490,615	490,615
Finders warrants	July 13, 2026(1)	$ 0.465	204,457	204,457
	June 22, 2023	$ 0.500	-	17,472,584
Broker warrants	June 22, 2023	$ 0.500	-	2,014,565
Broker warrants	December 15, 2025	$ 0.350	157,200	157,200
Broker warrants	February 28, 2026	$ 0.350	24,000	-
Broker warrants	April 19, 2026	$ 0.200	511,819	-
	April 19, 2026	$ 0.200	18,195,367	-
	December 21, 2026	$ 0.300	11,300,000	-
Broker warrants	December 21, 2026	$ 0.300	420,000	-
Outstanding and exercisable			36,305,975	25,341,938

(1)The warrants outstanding on acquisition (Note 4) were converted at a ratio of 1 old for 1.0747 new warrants on December 23, 2020 and the price was adjusted by the same ratio. All warrants were reissued on July 13, 2021, for a period of 5 years when the Company became publicly listed and commenced trading, with a new expiry date of July 13, 2026. These warrants are non-transferable.

The fair value of warrants issued were calculated using the Black-Scholes option pricing model with the following weighted average assumptions:

ollowing weighted average assumptions:
	December 31,	December 31,
	2023	2022
Expected volatility	119%	129%
Risk-free interest rate	3.74%	3.4%
Expected life	3 years	3 years
Dividend yield	-	-
Estimated fair value per warrant	$0.09	$0.10

Restricted Stock Units and Performance Stock Units

The Company grants restricted stock units and performance stock units to employees as share-base payments enabling them to acquire up to 6,500,000 of the issued and outstanding common stock of the Company. Under the plan, the quantity of each restricted stock unit is as determined by the Board at the time of grant. The maximum quantity of each performance stock unit is determined by the Board at the time of grant but the quantity is then adjusted at the first vesting date by the performance factor achieved during the performance period. The restricted stock units and performance stock units vest over 3 years. The fair value is determined using the stock price at the date of grant.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Issued Restricted Stock Units and Performance Stock Units outstanding at December 31, 2023:

	VestingDate	Issued	CashSettled	Stocksettled
2022 Restricted Stock Units	March 31, 2024	130,424	11,785	118,639
2022 Restricted Stock Units	March 31, 2025	130,424	11,785	118,639
2023 Restricted Stock Units	September 7, 2024	296,606	29,464	267,142
2023 Restricted Stock Units	March 31, 2025	296,606	29,464	267,142
2022 Actual Performance Stock Units	March 31, 2024	652,135	256,663	395,472
2022 Actual Performance Stock Units	March 31, 2025	652,135	256,663	395,472
2023 Maximum Performance Stock Units	September 7, 2024	4,449,103	2,445,533	2,003,570
2023 Maximum Performance Stock Units	March 31, 2025	4,449,103	2,445,533	2,003,570
Total Restricted Stock Units and		11,056,536	5,486,890	5,569,646
Performance Stock Units

6,165,470 of the Performance Stock Units were issued under the Company’s Equity Incentive Plan and 4,891,066 were issued outside of the plan. The Company has initiated a restructuring of the cash settled performance stock units to be completed subsequent to December 31, 2023.

Issued Restricted Stock Units and Performance Stock Units outstanding at December 31, 2022:

	VestingDate	Issued	CashSettled	Stocksettled
2022 Restricted Stock Units	June 23, 2023	130,424	11,785	118,639
2022 Restricted Stock Units	March 31, 2024	130,424	11,785	118,639
2022 Restricted Stock Units	March 31, 2025	130,424	11,785	118,639
2022 Actual Performance Stock Units	June 23, 2023	1,956,421	769,996	1,186,425
2022 Actual Performance Stock Units	March 31, 2024	1,956,421	769,996	1,186,425
2022 Actual Performance Stock Units	March 31, 2025	1,956,421	769,996	1,186,425
Total Restricted Stock Units and		6,260,535	2,345,343	3,915,192
Performance Stock Units

The fair value of the Restricted Stock Units was calculated using the stock price at the date of granting and then amortized over the vesting schedule. The cash-settled Restricted Stock Units were re-valued at each reporting date and classified as liabilities.

The fair value of the Performance Stock Units was calculated using the stock price at the date of granting multiplied by the anticipated achievable performance factor and then amortized over the vesting schedule. The cash-settled Performance Stock Units were re-valued at each reporting date. For the year ended December 31, 2023, the Company anticipated a performance factor of 135% for stock-settled PSUs and 100% for cash-settled PSUs (2022 – 100% and 100% respectively).

Certain cash-settled PSUs were paid-out in the amount of $31,903 during the year ended December 31, 2023.

Share based compensation recognized for RSUs and PSUs vested during the year ended December 31, 2023, was $317,408 (2022 - $137,911) of which $62,203 is recorded as equity-based compensation payable.

15. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS

Significant non-cash transactions during the period ended December 31, 2023:

Property, plant and equipment included in accounts payable and accrued liabilities - $670,709.
Issued 444,000 Broker Warrants as finders fees on Convertible Debt issuance valued at $30,322.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

Significant non-cash transactions during the period ended December 31, 2022:

Property, plant and equipment included in accounts payable and accrued liabilities - $49,561.
Issued 157,200 Broker Warrants as finders fees on Convertible Debt issuance valued at $15,406.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

a) Capital Management

The Company manages its capital to ensure that it will be able to continue as going-concern while maximizing the return to shareholders through the optimization of debt and equity balances.

The capital of the Company consists of items included in Shareholders’ Equity of $5,437,397.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may issue equity or return capital to shareholders. There were no changes to the Company’s approach to capital management during the year ended December 31, 2023. The Company is not subject to externally imposed capital requirements.

b) Financial Risk Management Objectives

The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk and interest rate risk. Where material, these risks are reviewed and monitored.

i) Credit Risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.

Cash is held with reputable banks in Canada. The long-term credit rating of these banks, as determined by Standard and Poor’s, was A+.

ii) Liquidity Risk

Liquidity risk is the risk that the Company will not meet its financial obligations as they become due.

Accounts payables and accrued liabilities are paid in the normal course of business generally according to their terms. In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. As at December 31, 2023, the Company had $7,648,311 cash to settle current liabilities of $2,749,152.

iii) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. The Company is not subject to interest rate risk.

iv) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s cash balances held in United States dollars and US dollar denominated payables.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

As at December 31, 2023, the Company has certain monetary items denominated in United States dollars. Based on these net exposures, a 10% change of the Canadian dollar against the United States dollar would result in an impact on net loss of $612,259 (2022 – $Nil). The Company does not hedge its risk from changes in foreign currency exchange rates.

c) Fair Value Measurements Recognized in the Statement of Financial Position

The following table summarizes the carrying values of the Company’s financial instruments.

		December 31,	December 31,	December 31,
			2023	2022
Financial assets at amortized cost (i) and (ii)		$	7,669,626	$ 1,114,166
Financial liabilities atamortized cost(ii)		$	5,095,111	$2,385,089
(i)	Cash
(ii)	Trade receivables
(iii)	Accounts payable and accrued liabilities and equity-based compensation payable, loans payable,
	and convertible debentures.

The Company categorizes its financial assets and liabilities measured at the fair value into one of three different levels depending on the observability of the inputs used in the measurement.

The three levels are defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – inputs to valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Cash is measured at fair value using Level 1 inputs. There has been no change to the fair value hierarchy levels during the year.

The fair values of other financial liabilities approximate their carrying value, due to their short-term nature or market rate of interest.

17. SEGMENTED INFORMATION

The Company currently operates in one business segment in Canada, being the repurposing and reprocessing of asphalt shingles and the extraction and recovery of asphalt cement, fiberglass/felt and mineral aggregates to be sold and used in asphalt pavement, shingle manufacturing, construction products, and other industrial applications.

18. COMMITMENTS

Lease Commitments

Calgary

Northstar’s wholly owned subsidiary, Empower Environmental Solutions Calgary Ltd., negotiated a new lease for the planned scale up facility in Rocky View County, near Calgary, Alberta effective August 18, 2023 for an initial term of 15-years with an option to extend for two additional 5 year terms.

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The basic annual rents are as follows:

from August 18, 2023 to August 17, 2028 - $346,516 per annum
from August 18, 2028 to August 17, 2033 - $381,168 per annum, and
• from August 18, 2033 to August 17, 2038 - $419,284 per annum

Delta

Northstar’s wholly owned subsidiary, Empower Environmental Solutions Ltd., has a 5-year lease for the pilot facility in Delta, BC, which expires December 2025, but has a 5 year renewal option. The basic annual rents remaining are as follows:

from January 1, 2023 to December 31, 2024 - $583,563 per annum
• from January 1, 2025 to December 31, 2025 - $609,838 per annum

Loans Payable

Principal payments due within 1 year $60,000

Convertible debentures

Principal payments due within 2-5 years $4,325,000

19. INCOME TAXES

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

	2023	2022
Loss beforetax	$ (6,933,703)	$ (8,445,257)
Expected income tax recovery	(1,872,100)	(2,280,219)
Non-deductible items and other	139,526	190,530
Scientific Research & Experimental Development	(55,018)	(120,359)
Adjustment to prior year provision versus statutory tax returns and expiry of non-capital losses	235,642	815,312
Change in unrecognized deductible temporarydifferences	1,290,174	1,150,415
Total income tax recovery	$ (261,776)	$ (244,321)

The total income tax recovery comprises of the following:

	2023		2022
Income tax credit recovery	$ (55,018)	$	(120,359)
Deferred tax recovery	(206,758)		(123,962)
Total income tax recovery	$ (261,776)	$	(244,321)

Northstar Clean Technologies Inc. Notes to the Consolidated Financial Statements (Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The significant components of the Company’s deferred tax assets and liabilities are as follows:

	2023		2022
Deferred tax assets (liabilities)
Non-capital losses	$ 325,000	$	132,919
Lease liability	1,023,000		398,000
Financing costs	87,000		5,081
Deferred costs	(30,000)		-
Right-of-use assets	(1,035,000)		(398,000)
Convertible debenture	(370,000)		(138,000)
Net deferred tax assets	$ -	$	-

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the statement of financial position are as follows:

		Expiry Date		Expiry Date
	2023	Range	2022	Range
Temporary differences
Right-of-use assets, net investment in sublease, and lease liabilities	$ 48,309	No expiry date	$ 186,757	No expiry date
Property and equipment	3,057,731	No expiry date	2,505,939	No expiry date
Share issue costs	332,851	2024 to 2027	486,220	2023 to 2026
Asset retirement obligation	271,000	2025	-	-
Non-capital losses	19,061,064	2031 to 2043	14,779,765	2029 to 2042

Tax attributes are subject to review, and potential adjustment, by tax authorities.

20. SUBSEQUENT EVENTS

Subsequent to December 31, 2023:

The Company closed the second and final tranche (“the Second Tranche”) of its previously announced private placement offering of Convertible Debenture Units (Note 10) of the Company at a price of $5,000 per Convertible Debenture Unit for gross proceeds of $1,375,000. Each Convertible Debenture Unit consists of one 12.5% unsecured Convertible Debenture in the Principal Amount of $5,000 and 25,000 Warrants, with each Warrant entitling the holder to purchase one additional common share at a price of $0.30 per common share until February 16, 2027. The Company issued 6,875,000 Warrants in connection with the Convertible Debenture units.

As consideration for the services of the Agent in connection with the closing of the Second Tranche of the Brokered Offering, the Company paid to the Agent: a cash commission of $11,200 and issued to the Agent 56,000 compensation warrants (the “Agent’s Warrants”). Each Agent’s Warrant is exercisable for a period of 36 months and entitles the holder to acquire one common share at an exercise price of $0.30 per share. In connection with the closing of the Second Tranche of the Non-Brokered Offering, the Company paid finders fees in the aggregate amount of $15,050 and issued 75,250 non-transferable broker warrants (the “Broker Warrants”), with each Broker Warrant exercisable for a period of 36 months and entitling the holder thereof to acquire one common share at an exercise price of $0.30 per share.

Northstar Clean Technologies Inc.

Notes to the Consolidated Financial Statements

(Expressed in Canadian Dollars) For the years ended December 31, 2023 and December 31, 2022

The Company granted 261,000 stock options to an employee of the Company at an exercise price of $0.21 for a 5-year term.
As a result of ERA's approval, the payment for the first milestone in the amount of $1,340,722 had been received by the Company (Note 7).
The Company issued 722,152 common shares for equity-settled Restricted and Performance Stock Units.
In connection with the BDC Financing (Note 9), the Company issued 250,000 warrants for finder’s fees, exercisable at $0.35 and with an expiry date of July 5, 2026.

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Northstar Clean Technologies Inc. — Audit Report / Information 2023

48098_rns_2024-04-26_dfde620e-23a2-4356-83c7-eba67e9fafaf.pdf

Consolidated Financial Statements

Opinion

Basis for Opinion

Material Uncertainty Related to Going Concern

Key Audit Matters

Classification and Valuation of Preferred Shares and Contract Liability

Key Audit Matter Description

Audit Response

Other Information

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Northstar Clean Technologies Inc.

Consolidated Statements of Financial Position

Northstar Clean Technologies Inc.

Consolidated Statements of Loss and Comprehensive Loss

Northstar Clean Technologies Inc.

Consolidated Statements of Changes in Shareholders’ Equity

Northstar Clean Technologies Inc.

Consolidated Statements of Cash Flows

1. NATURE AND CONTINUANCE OF OPERATIONS

Nature of operations

Going concern

2. BASIS OF PREPARATION

Statement of compliance

Basis of measurement

Functional and presentation currency

Use of estimates and judgements

Significant Estimates

Recoverability of property, plant, and equipment

Determination of market interest rate for loans and leases

Valuation of convertible debentures

Valuation of contract liability

Valuation of share-based payments

Stock Option Awards

Share Unit Awards

Decommissioning provision

Critical judgements

Income taxes

Going concern

Capitalization of development costs

Government grants

3. MATERIAL ACCOUNTING POLICIES

(a) Basis of consolidation

(b) Cash

(c) Financial instruments

Classification

Measurement

Financial assets and liabilities at amortized cost

Financial assets and liabilities at FVTPL

Financial assets at FVTOCI

Impairment of financial assets at amortized cost

Derecognition

Financial assets

Financial liabilities

(d) Impairment of non-current assets

(e) Loss per share

(f) Property, plant and equipment

(g) Intangible assets

(h) Leases

(i) Income taxes

(j) Related party transactions

(k) Provisions

(l) Share-based payment transactions

Stock Options

Share Unit Awards

(m) Convertible Debentures

(n) Share Capital

Equity units

(o) Government Grants

(p) Research and Development Costs

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

4. RIGHT-OF-USE ASSET AND LEASE LIABILITIES

Right-of-use assets

Lease liabilities

5. DECOMMISSIONING LIABILITIES

6. PROPERTY, PLANT AND EQUIPMENT

7. GOVERNMENT GRANTS

Northstar Clean Technologies Inc. Audit Report / Information 2023