Phenom Resources Corp. — Annual Report 2019

Mar 23, 2020

Consolidated Financial Statements of

First Vanadium Corp.

For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

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INDEPENDENT AUDITORS’ REPORT

To the Shareholders of: First Vanadium Corp.

Opinion

We have audited the consolidated financial statements of First Vanadium Corp. (the “Company”), which comprise the consolidated statement of financial position as at November 30, 2019 and 2018, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at November 30, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

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

Other Information

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

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

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Robert G. Charlton, CPA, CA.

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CHARTERED PROFESSIONAL ACCOUNTANTS

1735-555 Burrard Street Vancouver, BC V7X 1M9

March 20, 2020

First Vanadium Corp. Consolidated Statements of Financial Position As at November 30, 2019 and 2018

(Expressed in Canadian dollars)

	Note	2019	2018
		$	$
ASSETS
Current
Cash and cash equivalents		1,263,901	2,389,327
GST and other receivables		7,141	20,106
Prepaid expenses		68,502	203,360
		1,339,544	2,612,793
Deposit		10,954	10,954
Equipment		8,780	-
Reclamation bonds	6	24,371	24,371
Mineral properties	6 & Sch. 1	6,630,307	5,203,429
		8,013,956	7,851,547
LIABILITIES
Current
Accounts payable and accrued liabilities	9	429,448	448,671
SHAREHOLDERS' EQUITY
Share capital	7	15,761,409	13,464,009
Shares to be issued	6	-	1,222,000
Contributed surplus	7	4,608,149	3,878,721
Deficit		(12,785,050)	(11,161,854)
		7,584,508	7,402,876
		8,013,956	7,851,547

Approved on behalf of the Board:

“Michael Mracek” “Paul S. Cowley” Director – Michael Mracek Director – Paul S. Cowley

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

First Vanadium Corp. Consolidated Statements of Loss and Comprehensive Loss For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

Note 2019	2018
$ Audit, accounting and legal 9 123,408 Consulting fees 9 646,564 Depreciation 4,390 Directors fees 9 24,792 Exploration 6 22,353 Foreign exchange loss 10,995 Investor relations and marketing 219,302 Office expenses 113,068 Stock based compensation 7, 9 347,928 Transfer agent and filing fees 76,932	$ 146,075 795,117 - 40,309 - 10,708 318,970 63,078 1,608,325 75,743
Travel and accommodation 33,464	44,777
(1,623,196) Impairment on mineral properties 6 & Sch. 1 - Loss on marketable securities -	(3,103,102) (130,083) (2,210)
Net loss (1,623,196) Other comprehensive income Marketable securities - Comprehensive loss for the year (1,623,196)	(3,235,395) 680 (3,234,715)
Basic and diluted lossper common share (0.04)	(0.12)
Weighted average number of common shares outstanding 40,499,892	27,893,668

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

First Vanadium Corp. Consolidated Statements of Cash Flows For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

	2019	2018
	$	$
Cash flows provided by (used in):
Operating activities
Net loss for the year	(1,623,196)	(3,235,395)
Common shares issued for consulting fees	-	162,000
Share-based compensation	347,928	1,608,325
Impairment on mineral properties	-	130,083
Loss on marketable securities	-	2,210
Depreciation	4,390	-
	(1,270,878)	(1,332,777)
Net changes in non-cash working capital items:
GST and other receivables	12,965	(16,540)
Prepaid expenses	134,858	(168,164)
Accounts payable and accrued liabilities	(27,785)	190,269
	(1,150,840)	(1,327,212)
Investing activities
Deposit paid	-	(10,954)
Purchase of equipment	(13,170)	-
Mineral property deferred exploration expenditures	(1,418,316)	(1,683,551)
	(1,431,486)	(1,694,505)
Financing activities
Proceeds from private placement	1,375,000	3,000,000
Proceeds from exercise of warrants	95,625	1,575,323
Proceeds from exercise of options	-	126,500
Share issuance costs	(13,725)	(75,362)
	1,456,900	4,626,461
(Decrease) Increase in cash and cash equivalents during the year	(1,125,426)	1,604,744
Cash and cash equivalents, beginning of year	2,389,327	784,583
Cash and cash equivalents, end ofyear	1,263,901	2,389,327
Cash	63,901	2,389,327
Cash equivalents	1,200,000	-

Supplemental disclosure with respect to cash flows (Note 13)

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

First Vanadium Corp. Consolidated Statements of Changes in Equity For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

	Common	Share	Contributed	Shares to
	shares	Capital	surplus	be issued	Deficit	AOCI	Total
	number	$	$	$	$	$	$
Balance – November 30, 2017	20,410,131	7,393,636	1,932,308	-	(7,926,459)	(680)	1,398,805
Shares issued for:
cash pursuant to private placement	10,000,000	2,025,000	975,000	-	-	-	3,000,000
cash pursuant to exercise of warrants	5,265,784	2,114,910	(539,587)	-	-	-	1,575,323
cash pursuant to exercise of options	690,000	223,825	(97,325)	-	-	-	126,500
Shares issued for mineral property	1,000,000	1,620,000	-	1,222,000	-	-	2,842,000
Shares issued for consulting	100,000	162,000	-	-	-	-	162,000
Share issuance costs - cash	-	(75,362)	-	-	-	-	(75,362)
Share-based compensation	-	-	1,608,325	-	-	-	1,608,325
Net loss and comprehensive loss	-	-	-	-	(3,235,395)	680	(3,234,715)
Balance– November 30, 2018	37,465,915	13,464,009	3,878,721	1,222,000	(11,161,854)	-	7,402,876
Shares issued for:
cash pursuant to private placement	3,437,500	951,000	424,000	-	-	-	1,375,000
cash pursuant to exercise of warrants	212,500	138,125	(42,500)	-	-	-	95,625
Shares issued for mineral property	1,300,000	1,222,000	-	(1,222,000)	-	-	-
Share issuance costs - cash	-	(13,725)	-	-	-	-	(13,725)
Share-based compensation	-	-	347,928	-	-	-	347,928
Net loss and comprehensive loss	-	-	-	-	(1,623,196)	-	(1,623,196)
Balance– November 30, 2019	42,415,915	15,761,409	4,608,149	-	(12,785,050)	-	7,584,508

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

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

1. NATURE OF OPERATIONS

First Vanadium Corp. (“the Company” or “First Vanadium”) is in the business of the acquisition, exploration and evaluation of mineral properties, and either joint venturing or developing these properties further or disposing of them when the evaluation is completed. On September 20, 2018, the Company changed its name from Cornerstone Metals Inc. to First Vanadium Corp. The Company has an interest in properties located in Arizona and Nevada, USA. The Company’s corporate head office is located at 2200 - 1055 Dunsmuir Street, Four Bentall Centre, Vancouver, British Columbia, Canada.

2. BASIS OF PRESENTATION

Statement of compliance

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

These consolidated financial statements were approved by the board of directors on March 20, 2020.

Basis of presentation

The consolidated annual financial statements have been prepared on a historical cost basis, except for financial instruments classified as available for sale, which are stated at their fair value.

3. SIGNIFICANT ACCOUNTING POLICIES

Consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Appleton Chile Exploration Limitada and Copper One USA Inc. (“CO USA”). The results of Appleton Chile Exploration Limitada and CO USA will continue to be included in the consolidated financial statements of the Company until the date that the Company's control over the subsidiary ceases. 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.

Inter-company balances and transactions, including unrealized income and expenses arising from intercompany transactions, are eliminated on consolidation.

Foreign currencies

The functional currency of a company is the currency of the primary economic environment in which the company operates. The presentation currency for a company is the currency in which the company chooses to present its financial statements. These consolidated financial statements are presented in Canadian dollars. The Canadian dollar is considered the functional currency and the presentation currency of the Company and all of its subsidiaries.

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. All gains and losses on translation of these foreign currency transactions are charged to the statement of operations.

Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments held in the form of guaranteed investment certificates that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

Mineral properties

The Company records its interests in mineral properties at cost less option payments received and other recoveries. Exploration and development costs relating to these interests are capitalized until the properties to which they relate are placed into production, sold or allowed to lapse. Acquisition costs and deferred exploration and development costs will be amortized over the useful life of the mine following attainment of commercial production or will be written off if the property or project is abandoned.

Exploration costs that are not attributable to a specific property are charged to operations as general exploration expense. Exploration costs incurred prior to the Company acquiring the legal rights to a property are charged to operations as general exploration expense.

The Company is in the process of developing its mineral properties. Management reviews the carrying value of mineral properties on a periodic basis and will recognize impairment in value based upon current exploration and development results, the prospect of further work being carried out by the Company, the assessment of future probability of profitable revenues from the property or from the sale of the property. Amounts shown for properties represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values. The ultimate recovery of such capitalized costs is dependent upon the development of economic ore reserves or the sale of mineral rights.

Equipment

Equipment is carried at cost less accumulated depreciation and any recognized impairment loss, net of reversals. Depreciation is computed using the straight-line method over estimated useful lives as follows:

Furniture and equipment	5 years
Computer hardware	3 years
Computer software	1 year
Vehicles	5 years

Impairment

At the end of each reporting period the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between 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 of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

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

Decommissioning and restoration provisions

The Company recognizes a provision for statutory, contractual, constructive or legal obligations associated with decommissioning of mining operations and reclamation and rehabilitation costs arising when environmental disturbance is caused by the exploration or development of mineral properties. Provisions for site closure and restoration are recognized in the period in which the obligation is incurred or acquired, and are measured based on expected future cash flows to settle the obligation, discounted to their present value. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the liability. As at November 30, 2018, the Company had not recognized any decommissioning liabilities.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

When an obligation is initially recognized, the corresponding cost is capitalized to the carrying amount of the related mineral property. These costs are charged against profit or loss over the economic life of the related asset, through amortization using the unit-of production method.

The obligation is accreted over time for the change in their present value, with this accretion charge recognized as a finance expense in profit or loss. The obligation is also adjusted for changes in the estimated timing, amount of expected future cash flows, and changes in the discount rate. Such changes in estimates are added to or deducted from the related asset except where deductions are greater than the carrying value of the related asset in which case, the amount of the excess is recognized in profit or loss.

Due to uncertainties concerning environmental remediation, the ultimate cost to the Company of future site restoration could differ from the amounts provided. The estimate of the total provision for future site closure and restoration costs is subject to change based on amendments to laws and regulations, changes in technology, price increases and changes in interest rates, and as new information concerning the Company’s closure and restoration obligations becomes available.

Recognition of Financial Instruments

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes a party to the contractual provisions of the financial instrument.

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 if the Company has opted to measure them at FVTPL.

Financial assets at FVTOCI

Investments in equity instruments designated at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with both realized and unrealized gains and losses recognized in other comprehensive income (loss) in the period in which they arise.

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 profit or loss in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income (loss).

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Derecognition of financial assets and liabilities

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 profit or loss in the period in which they arise. However, gains and losses on derecognition of financial assets designated as FVTOCI are recorded in other comprehensive income (loss) in the period in which they arise. Cumulative gains and losses on derecognized financial assets designated as FVTOCI are reclassified from accumulated other comprehensive income (loss) to deficit.

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and stock options are recognized as a deduction from equity, net of any tax effects.

Broker warrants and warrants

Warrants issued to agents or brokers in connection with a financing are recorded at fair value using the Black-Scholes option pricing model and charged to issue costs associated with the offering with an offsetting credit to contributed surplus in shareholders' equity.

Warrants included in units offered to subscribers in connection with financings are recorded at fair value in contributed surplus in shareholders' equity with an offsetting reduction in the value ascribed to the shares issued in the units.

Proceeds of the exercise of these warrants are credited to share capital together with the corresponding amount, if any, of the original warrant charge included in contributed surplus.

Share-based payments

The Company has established a stock option plan for the benefit of full-time and part-time employees, officers, directors and consultants of the Company and its affiliates.

The fair value of all stock options granted is recorded as a charge to operations or deferred exploration costs and a credit to contributed surplus under the graded attribution method. The fair value, as adjusted for the expected level of vesting of the options and of stock options which vest immediately is recorded at the date of grant; the fair value, as adjusted for the expected level of vesting of the options and of options which vest in the future is recognized over the vesting period. Stock options granted to non-employees are measured at their fair value on the vesting date. Prior to the vesting date, the thencurrent fair value of stock options granted to consultants is recognized as share-based payment expense from the date of grant to the reporting date and credited to contributed surplus.

Any consideration received on the exercise of stock options together with the related portion of contributed surplus is credited to share capital. The fair value of stock options is estimated using the Black-Scholes option pricing model.

Income tax

Income tax on the profit or loss for the periods 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 in equity.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

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

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Company does not provide for temporary differences relating to differences relating to investments in subsidiaries, associates, and joint ventures 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 amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet reporting date applicable to the period of expected realization or settlement.

A deferred tax asset is recognized only to the extent that it is probable that future taxable incomes will be available against which the asset can be utilized.

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.

Loss per share

Basic loss per share is calculated by dividing the net loss for the year available to common shareholders by the weighted average number of shares outstanding during the year. Diluted loss per share represents the loss for the year, divided by the weighted average number of common shares outstanding during the year plus the weighted average number of dilutive shares resulting from the exercise of stock options, warrants and other similar instruments where the inclusion of these would not be anti-dilutive. During the years ended November 30, 2019 and 2018, potentially dilutive common shares totaling 14,201,500 (2018 – 10,571,500) were not included in the calculation of basic and diluted loss per share because their effect was anti-dilutive.

4. NEW ACCOUNTING STANDARDS

i) Standards issued but not yet effective

IFRS 16 Leases

In January 2016, the IASB published a new standard, IFRS 16, Leases. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Under the new standard, a lessee recognizes a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly. The liability accrues interest. This will typically produce a front-loaded expense profile (whereas operating leases under IAS 17 would typically have had straight-line expenses). The standard is effective for annual periods beginning after January 1, 2019 and interim periods thereafter.

ii) Standards adopted during the current year

IFRS 9 Financial Instruments

This standard replaces IAS 39 Financial Instruments: Recognition and Measurement and became effective for the Company on January 1, 2018. IFRS 9 includes requirements for classification and measurement of financial assets and financial liabilities; impairment methodology for financial instruments; and general hedge accounting. IFRS 9 has specific requirements for whether debt instruments are accounted for at amortized cost, fair value through other comprehensive income or fair value through profit or loss. IFRS 9 requires equity instruments to be measured at fair value through profit or loss unless an irrevocable election is made to measure them at fair value through other comprehensive income, which results in changes in fair value not being recycled to the income statement. The adoption of this standard did not have a material measurement or disclosure impact on the Company’s financial statements.

The Company completed a detailed assessment of its financial assets and liabilities as at December 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

	Original classification	New classification
	IAS 39	IFRS 9
Cash and cash equivalents	Loans & receivables	Amortized cost
Accounts receivable	Loans & receivables	Amortized cost
Accounts payable	Other financial liabilities	Amortized cost

The Company did not restate prior periods as there was no impact at the date of initial application. The adoption of IFRS 9 resulted in no impact to the opening accumulated deficit nor to the opening balance of accumulated comprehensive income on December 1, 2018.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements requires management to use judgement in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgements are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances.

Judgments

• The assumption that the Company is a going concern and will continue in operation for the foreseeable future and at least one year.

• The assessment of indicators of impairment for the mineral properties and the related determination of the recoverable amount and write-down of the properties where applicable.

• The determination of functional currency.

Estimates

• The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they were granted. Estimating the fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, and dividend yield and making assumptions about them.

6. MINERAL PROPERTIES – Schedule 1

Carlin Vanadium Property

On September 22, 2017 the Company signed an assignment agreement with AGEI. Pursuant to the assignment agreement, AGEI assigned to the Company all of AGEI’s interest in an option agreement between AGEI and Golden Predator US Holding Corp. (“GPUS”) dated June 14, 2017 as amended September 12, 2017. The option agreement grants to First Vanadium the option to acquire a 100% interest in the Carlin Vanadium Project (the “Property”).

The total consideration applicable to First Vanadium’s acquisition of the Property under both the assignment agreement and the option agreement, is set out below for the Company’s fiscal years ended November 30 as indicated:

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

	Cash	Common shares	Exploration Commitment
2017	US$50,000 to AGEI_(paid)_	1,000,000 shares to AGEI (issued at a value of $410,000)
2018	US$25,000 to GPUS_(paid)_	1,000,000 shares to AGEI (issued at a value of $1,620,000)	US$50,000 expenditures on Property_(completed)_
2019	US$50,000 to GPUS (paid)		US$125,000 expenditures on Property (completed)
2020	-	-	US$225,000 expenditures on Property_(completed)_
2021	-	-	US$250,000 expenditures on Property_(completed)_
2022	US$1,910,000 to GPUS(1)		US$372,000 expenditures on Property_(completed)_

Notes:

(1) The remaining cash payment of US$1.91M may be paid to GPUS at any time before June 14, 2022, the payment of which will complete the option exercise requirements, at which time First Vanadium would then be deemed to have exercised the option and to have acquired a 100% interest in the Property (and any requirements to incur further expenditures would then terminate).

At such time as First Vanadium has exercised the option in full and acquired a 100% interest in the Property, a 1.5% NSR was to be granted to AGEI under the assignment agreement and a 2% NSR will be granted to GPUS under the option agreement. On November 23, 2018, the Company purchased the 1.5% NSR and adopted certain amendments to the assignment agreement for 1,300,000 common shares (valued at $1,222,000). The common shares were issued on December 5, 2018. The GPUS 2% NSR may be purchased by the Company at the time of the option exercise for US$4 million.

A finder’s fee of US$5,000 and 100,000 common shares (valued at $41,000) of the Company was also paid and issued in relation to this transaction during the year ended November 30, 2017. During the year ended November 30, 2018, the Company issued an additional 100,000 common shares (valued at $162,000) in relation to the finder’s fee.

On January 17, 2019, the Company entered into an Access and Mineral Lease Agreement which increased mineral rights adjacent to the Carlin Vanadium property (referred to as the “Cole Creek Property”). Under the terms of the Access and Mineral Lease Agreement the Company has paid the lessor US$50,000 on signing (paid) and is required to pay an additional US$20,000 annually for the lease (paid subsequently). In addition, the Company is to incur an aggregate of US$100,000 in expenditures before January 19, 2022. In the event the Company commences mining operations on the Cole Creek Property, the annual payments will be replaced with a 5% NSR royalty in favour of the lessor. The lessor also owns or has rights to certain lands containing roads which the Company wishes to use for access to the Cole Creek Property and the Carlin Vanadium property. The Access and Mineral Lease Agreement grants to the Company the right to access such lands and roads for a payment of US$15,000 (paid) on signing and US$5,000 annually (paid subsequently) which will terminate at the Company’s start of development and mining operations. The Company has the right to terminate the lease portion of the agreement without termination the road access portion of the agreement.

The Company has paid $15,371 (US$11,556) (November 30, 2018 - $15,371) into a reclamation bond for the Carlin Vanadium Property. Subsequent to November 30, 2019 the Company paid an additional $906 (US$697).

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

West Jerome, USA

On August 22, 2013, the Company acquired all of the issued and outstanding shares of CO USA. The acquisition included an undivided 100% interest in West Jerome located in Arizona. The property is subject to a 1.5% NSR to one party and a 0.5% NSR to another party.

As there is no further planned expenditures for exploration of the West Jerome property, the costs of $130,083 that had been previously capitalized were written off as at November 30, 2018. (refer to Schedule 1)

During the year ended November 30, 2019 the Company paid $22,353 in permitting fees to keep the West Jerome property in good standing. These costs have been expensed as exploration costs on the Statement of Loss and Comprehensive Loss.

Other

As at November 30, 2019, the Company holds a total of $9,000 (November 30, 2018 - $9,000) in reclamation bonds related to its previously held Spences Bridge prospect.

7. SHARE CAPITAL

• a) Authorized: Unlimited common shares without par value

• b) Financing:

During the year ended November 30, 2019, the Company closed a non-brokered private placement of 3,437,500 units at $0.40 per unit for total gross proceeds of $1,375,000. Each unit consists of one common share and one purchase warrant. Each purchase warrant is exercisable into one common share for a period of three years at an exercise price of $0.65 per share. The value of $424,000 attributed to the warrants was estimated using the Black-Scholes pricing model with the following weighted average assumptions: share price - $0.39; exercise price - $0.65; risk-free rate – 1.46%; expected life – 2.0 years; expected volatility – 109%; and expected dividends – nil. Additionally, in connection with the private placement, the Company incurred $13,725 in cash share issuance costs.

During the year ended November 30, 2019 a total of 212,500 warrants with an exercise price of $0.45 per share were exercised for gross proceeds of $95,625.

On March 27, 2018 the Company closed a private placement of 10,000,000 units at a price of $0.30 per unit for gross proceeds of $3,000,000. Each unit consists of one common share and one half share purchase warrant, each warrant entitling the holder to purchase one common share at $0.45 for two years from closing date. The warrants are subject to an acceleration clause should the common shares trade at a price of $0.70 or greater for 10 consecutive trading days. The value of $975,000 attributed to the warrants was estimated using the Black-Scholes pricing model with the following assumptions: share price - $0.42; exercise price - $0.45; risk-free rate – 1.00%; expected life – 2.0 years; expected volatility – 145%; and expected dividends – nil. Additionally, in connection with the private placement, the Company incurred $75,362 in cash share issuance costs.

During the year ended November 30, 2018, a total of 690,000 options with a weighted average exercise price of $0.18 per share were exercised for gross proceeds of $126,500, and a total of 5,265,784 warrants with a weighted average exercise price of $0.30 per share were exercised for gross proceeds of $1,575,323.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

c) Options:

The balance of options outstanding and related information for the years ended November 30, 2019 and 2018 are as follows:

ws:
		Weighted
		Average	Weighted
	Options	Exercise Price	Average Life
	Outstanding	Per Share	(Years)
Balance, November 30, 2017	1,645,000	$0.21	4.43
Exercised	(690,000)	$0.18
Expired	(270,000)	$0.73
Granted	2,295,000	$0.78
Balance, November 30, 2018	2,980,000	$0.60	4.17
Expired	(280,000)	$0.56
Granted	685,000	$0.30
Balance, November 30, 2019	3,385,000	$0.37	3.42
Exercisable, November 30, 2019	3,366,250	$0.37	3.42

During the year ended November 30, 2019, the Company granted 685,000 stock options. All options vested immediately upon issuance, except for the options granted on January 18, 2019 which vest quarterly over the first year. The weighted average fair value per option of the share options granted during the year was $0.42. The fair value of the options was estimated on the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions: share price - $0.49; exercise price - $0.51; dividend yield – nil; volatility – 142%; risk-free interest rate – 1.46%; expected life of options (years) – 4 years; forfeiture rate – nil.

On November 15, 2019, the Company amended certain options by reducing the exercise price to $0.255, with all other terms of the Options remaining unchanged. The fair value per option of the modification was $0.18. The fair value of the modification was estimated using the Black-Scholes option valuation model with the following weighted average assumptions: share price - $0.26; exercise price - $0.255; dividend yield – nil; volatility – 117%; risk-free interest rate – 2%; expected life of options (years) – 3 years; forfeiture rate – nil.

During the year ended November 30, 2018, the Company granted 2,295,000 stock options of which 2,135,000 stock options vested immediately upon issuance. The remainder 160,000 stock options were vested quarterly. The weighted average fair value per option of the share options granted during the year was $0.70. The fair value of the options was estimated on the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions: Dividend yield – nil; volatility – 160%; risk-free interest rate – 2%; expected life of options (years) – 4.5 years; forfeiture rate – nil.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

As at November 30, 2019, the Company had the following options outstanding:

	Exercise	Remaining life	Options	Options
Expiry Date	Price	(Years)	outstanding	exercisable
October 11, 2021	$0.10	1.87	350,000	350,000
October 25, 2022	$0.30	2.90	495,000	495,000
November 9, 2022	$0.31	2.95	200,000	200,000
January 22, 2023	$0.30	3.15	10,000	10,000
April 6, 2023	$0.26	3.35	100,000	100,000
April 6, 2023	$0.56	3.35	845,000	845,000
June 12, 2023	$0.98	3.53	175,000	175,000
July 30, 2023	$0.26	3.67	150,000	150,000
October 23, 2023	$0.26	3.90	175,000	175,000
October 30, 2023	$0.26	3.92	200,000	200,000
January 18, 2024	$0.26	4.14	75,000	56,250
March 18, 2024	$0.26	4.30	320,000	320,000
March 18, 2024	$0.60	4.30	90,000	90,000
November 8, 2024	$0.25	4.95	100,000	100,000
November 18, 2024	$0.25	4.97	100,000	100,000
			3,385,000	3,366,250

d) Warrants:

The balance of warrants outstanding and related information for the years ended November 30, 2019 and 2018 were as follows:

ws:
		Weighted
		Average	Weighted
	Warrants	Exercise Price	Average
	Outstanding	(per share)	Life (years)
Balance, November 30, 2017	7,857,284	$0.24	2.64
Issued	5,000,000	$0.45
Exercised	(5,265,784)	$0.30
Balance, November 30, 2018	7,591,500	$0.34	1.62
Exercised	(212,500)	$0.45
Issued	3,437,500	$0.65
Balance, November 30, 2019	10,816,500	$0.43	1.24

As at November 30, 2019, the Company had the following warrants outstanding:

	Exercise	Remaining life	Warrants
Expiry Date	Price	(Years)	outstanding
March 27, 2020	$0.45	0.32	3,304,000
October 18, 2020	$0.24	0.88	4,075,000
June 6, 2022	$0.65	2.52	2,125,500
July 3, 2022	$0.65	2.59	1,312,000
			10,816,500

Subsequent to November 30, 2019 a total of 20,000 warrants were exercised at a weighted average exercise price of $0.24.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

8. INCOME TAXES

A reconciliation from the Company’s income tax provision computed at statutory rates to the reported income tax provision for the years ended November 30, 2019 and 2018 is as follows:

	2019 2018
Statutory tax rate Loss for the year before income taxes Expected income tax recovery Financing costs Unrealized foreign exchange gain Other Change in unrecognized deferred tax assets	27% 27% $ $ (1,623,196) (3,235,395)
	(438,000) (896,000) (4,000) (6,000) (54,000) 4,000 226,000 393,000 270,000 505,000
Income taxexpense (recovery)	- -

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

	November 30	November 30
	2019	2018
	$	$
Deferred income tax assets
Non-capital tax losses carried forward	1,997,000	1,729,000
Resource pools	878,000	817,000
Share issuance costs and others	24,000	25,000
Total unrecognized deferred income tax assets	2,899,000	2,571,000

Losses in Canada that reduce future income for tax purposes expire as follows:

			$
2026	-	2030	1,851,000
2031	-	2035	1,236,000
2036	-	2039	3,137,000
			6,224,000

At November 30, 2019, the Company also has non-capital losses of approximately US$1,133,714 (2018 – US$960,000) that arose in the United States of which US$1,101,907 will expire by 2028 to 2039 and US$31,807 is carried forward indefinitely. At November 30, 2019, in addition to the tax losses listed above, there are resource related expenditures of approximately $3 million (2018 – $3 million) which can be used to offset future Canadian income indefinitely. At November 30, 2019, management considers that it is not “more likely than not” that these losses will be utilized and accordingly a full valuation allowance has been recognized against these losses.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018

(Expressed in Canadian dollars)

9. RELATED PARTY TRANSACTIONS

Compensation paid or payable to the directors, the Chief Executive Officer and the Chief Financial Officer for services provided during the years ended November 30, 2019 and 2018 was as follows:

	2019	2018
	$	$
Accounting fees	29,273	21,283
Consulting fees	330,900	399,720
Director fees	24,792	40,309
Stock-based compensation	26,190	543,523
	411,155	1,004,835

The Company incurred additional expenditures charged by related parties during the year ended November 30, 2019 and 2018 was as follows:

018 was as follows:
	2019	2018
	$	$
Consultingfees	21,300	16,580

As at November 30, 2019, accounts payable and accrued liabilities include an amount of $177,385 (November 30, 2018 – $221,654) due to officers of the Company and/or companies controlled by officers of the Company. Included in the consulting fees and accounts payable above, is $153,010 related to bonus payments earned by officers and directors of the Company. The payment will be deferred until such time as the Company’s Board of Directors approves payment.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

10. MANAGEMENT OF CAPITAL

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern to pursue the development of its mineral properties and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. In the management of capital, the Company includes the components of shareholders’ equity as well as cash.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue debt, acquire or dispose of assets or adjust the amount of cash.

The Company is dependent on the capital markets as its primary source of operating capital and the Company’s capital resources are largely determined by the strength of the junior resource markets and by the status of the Company’s projects in relation to these markets, and its ability to compete for investor support of its projects. The Company is not subject to any capital requirements imposed by a regulator, other than continued listing requirements of the TSX-V.

11. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, other receivables and accounts payable and accrued liabilities. All financial insturments are designated as amortized cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value, by reference to the reliability of the inputs used to estimate the fair values.

• Level 1 – Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

• Level 2 – Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or modelderived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

• Level 3 – Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

As at November 30, 2019, the Company believes that the carrying values of cash, other receivables, and accounts payable and accrued liabilities approximate their fair values because of their nature and relatively short maturity dates or durations.

Discussions of risks associated with financial assets and liabilities are detailed below:

Foreign Exchange Risk

As at November 30, 2019, the Company’s current assets were held in US and Canadian dollars. A 5% change in the exchange rate would not result in a material change to the Company’s current assets.

Credit Risk

Credit risk arises from cash and cash equivalents held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The Company’s cash and cash equivalents, aside from the nominal holdings in USA is held with a large Canadian bank. Other receivables consist of accrued interest receivable from a large Canadian bank. Management believes that the credit risk concentration with respect to accrued interest receivable is remote.

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

Interest Rate Risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that the Company will realize such a loss is limited as its interest bearing financial instrument is redeemable at any time.

Liquidity Risk

The Company manages liquidity risk by maintaining sufficient cash to enable settlement of transactions as they come due. Management monitors the Company’s contractual obligations and other expenses to ensure adequate liquidity is maintained.

Price Risk

Price risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. The Company does not hold any financial instruments with price risk.

Commodity Price Risk

The Company’s ability to raise capital to fund exploration or development activities is subject to risks associated with fluctuations in the market prices of gold, silver and copper.

12. SEGMENTED INFORMATION

The Company has identified its operating segments based on the internal reports that are reviewed and used by the chief executive officer and the executive management in assessing performance and in determining the allocation of resources. The Company considers the business from a geographic perspective and assesses the performance of the operating segments based on measures such as net property and equipment as well as operational results.

Operating Segment

The Company’s operations are limited to a single industry segment, being the acquisition, exploration and development of mineral properties.

Geographic Segments

As at November 30, 2019, the Company’s operations and assets are located in Canada and the USA. By geographic areas, the Company’s losses for the years ended November 30, 2019 and 2018 are as follows:

	2019	2018
	$	$
Canada	1,569,633	3,060,806
USA	53,563	174,589
	1,623,196	3,235,395

By geographic areas, the Company’s non-current assets as at November 30, 2019 and November 30, 2018 are as follows:

	2019	2018
	$	$
Canada	28,734	19,954
USA	6,645,678	5,218,800
	6,674,412	5,238,754

First Vanadium Corp. Notes to the Consolidated Financial Statements For the years ended November 30, 2019 and 2018 (Expressed in Canadian dollars)

13. SUPPLEMENTAL CASH FLOW INFORMATION

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the year ended November 30, 2019 there is $198,988 (2018 - $190,426) in accounts payable related to mineral property deferred exploration costs. In addition, there were common shares valued at $1,222,000 (2018 - $2,842,000) issued for the acquisition of a mineral property.

14. COMMITMENTS

The following table summarizes the contractual maturities of the Company’s significant financial liabilities and capital commitments, including contractual obligations for the years ended November 30 indicated:

	2020	2021	2022	2023	2024	Total
	$	$	$	$	$	$
Accounts payable and accrued
liabilities	429,448	-	-	-	-	429,448
Consulting agreement obligations	201,000	201,000	201,000	201,000	201,000	1,005,000
Mineral Property obligations(1)	33,223	33,223	2,704,312	33,222	33,221	2,837,201
Rent obligations	63,324	15,831	-	-	-	79,155
	726,995	250,054	2,905,312	234,222	234,221	4,350,804

(1) Mineral Property obligations include all option payments, mineral access, mineral lease, and exploration expenditure obligations for the Company's mineral properties.

First Vanadium Corp. SCHEDULE 1 Consolidated Schedule of Mineral Properties For the year ended November 30, 2019 and 2018 (Unaudited - Expressed in Canadian dollars)

	West Jerome	Carlin	Total
		Vanadium
	$	$
Balance as at November 30, 2017	109,622	521,808	631,430
Acquisition expenditures	-	2,874,183	2,874,183
Deferred Exploration Expenditures
Assaying	-	60,554	60,554
Licenses, permits and fees	20,461	43,203	63,664
Consulting	-	520,490	520,490
Drilling	-	1,066,069	1,066,069
Surveying	-	70,281	70,281
Travel	-	46,841	46,841
Impairment	(130,083)	-	(130,083)
Balance as at November 30, 2018	-	5,203,429	5,203,429
Acquisition expenditures	-	153,752	153,752
Deferred Exploration Expenditures
Assaying	-	361,591	361,591
Consulting	-	805,110	805,110
Licenses, permits and fees	-	34,951	34,951
Staking	-	12,337	12,337
Surveying	-	23,627	23,627
Other	-	35,510	35,510
	-	1,426,878	1,426,878
Balance as at November 30, 2019	-	6,630,307	6,630,307