Pioneering Technology Corp. — Annual Report 2020

Jan 29, 2021

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Pioneering Technology Corp. Audited Financial Statements

September 30, 2020 and 2019

Pioneering Technology Corp. For the years ended September 30, 2020 and 2019

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying financial statements of Pioneering Technology Corp. (the "Company") are the responsibility of management and have been approved by the Board of Directors of the Company.

The financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with International Financial Reporting Standards as disclosed in the notes to the financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement of financial position date. In the opinion of management, the financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards.

Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.

The Board of Directors is responsible for reviewing and approving the financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the audited financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

“Kevin Callahan”

“Richard Adair”

Kevin Callahan CEO

Richard Adair

Chair – Audit Committee

January 28, 2021

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KPMG LLP Commerce Place 21 King Street West, Suite 700 Hamilton ON L8P 4W7 Canada Tel 905-523-8200 Fax 905-523-2222

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Pioneering Technology Corp.

Opinion

We have audited the financial statements of Pioneering Technology Corp. (the “Company”), which comprise:

• the statement of financial position as at September 30, 2020

• the statement of loss and comprehensive loss for the year then ended

• the statement of changes in equity for the year then ended

• the statement of cash flows for the year then ended

• and notes to the financial statements, including a summary of significant accounting policies.

(Hereinafter referred to as the “financial statements”).

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

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Other Information – Comparative Information

The financial statements for the year ended September 30, 2019 were audited by another auditor who expressed an unmodified opinion on those financial statements on January 28, 2020.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and 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 identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ 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 in the auditors’ report.

We have nothing to report in this regard.

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

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

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

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

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Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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

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

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

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• 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.

• 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.

• 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 auditors’ report is John J. Pryke.

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Chartered Professional Accountants, Licensed Public Accountants Hamilton, Canada January 28, 2021

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Pioneering Technology Corp. Statements of Financial Position As at September 30[th] (Expressed in Canadian Dollars)

	Note		2020		2019
ASSETS
CURRENT ASSETS
Cash		$	2,157,373	$	1,930,945
Trade and other receivables	14		1,231,172		423,815
Inventories	6		2,229,899		4,281,612
Prepaid expenses and deposits			947,845		88,656
			6,566,289		6,725,028
Property and equipment	9		2,050,645		826,572
Patents and intangibles	10		201,097		72,752
TOTAL ASSETS			8,818,031		7,624,352
LIABILITIES
CURRENT LIABILITIES
Trade payables and accrued liabilities	15	$	1,731,888	$	1,004,677
Derivative liability	11(d)		1,236		216
Currentportion of lease obligations	8		75,278		-
			1,808,402		1,004,893
Other long-term liabilities	2.3		-		353,617
Long-term lease obligations	8		1,594,942		-
TOTAL LIABILITIES		$	3,403,344	$	1,358,510
SHAREHOLDERS' EQUITY
Common share capital	11(a)	$	17,974,857	$	17,974,857
Preferred shares	11(a)		1		1
Contributed surplus	11(c)		2,086,442		2,060,719
Accumulated other comprehensive loss			(189,080)		(118,183)
Deficit			(14,457,533)		(13,651,552)
TOTAL SHAREHOLDERS' EQUITY			5,414,687		6,265,842
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY		$	8,818,031	$	7,624,352

Commitments and contingencies 12 Approved by:

"Kevin Callahan"

"Richard Adair"

Kevin Callahan

Director

Richard Adair

Director

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

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Pioneering Technology Corp.

Statements of Loss and Comprehensive Loss For the year ended September 30[th]

(Expressed in Canadian Dollars)

	Note		2020		2019
REVENUE		$	6,540,550	$	3,941,621
COST OF GOODS SOLD			3,866,542		1,706,426
GROSS PROFIT			2,674,008		2,235,195
EXPENSES
Sales and marketing	11(c)		1,477,805		1,782,480
Administration	11(c)		1,458,050		2,371,234
Warehousing, distribution and warranty costs			116,265		293,838
Foreign exchange (gain) loss			(9,200)		105,269
Research and development costs	11(c)		166,165		163,212
Depreciation of property and equipment	9		231,907		149,506
Amortization ofpatents and intangibles	10		24,574		25,370
TOTAL EXPENSES			3,465,566		4,890,909
OPERATING LOSS			(791,558)		(2,655,714)
Interest expense	8		(90,689)		(865)
Fair value movement - derivative liability	11(d)		(1,020)		841
LOSS BEFORE INCOME TAXES			(883,267)		(2,655,738)
Income tax expense	13		-		(1,200,000)
LOSS FOR THE YEAR		$	(883,267)	$	(3,855,738)
OTHER COMPREHENSIVE INCOME (LOSS)
Currencytranslation differences(maybe subsequentlyreclassified to net income)			(70,897)		224,411
COMPREHENSIVE LOSS FOR THE YEAR		$	(954,164)	$	(3,631,327)
Loss per share - basic		$	(0.02)	$	(0.07)
Loss per share - diluted		$	(0.02)	$	(0.07)
Comprehensive loss per share - basic		$	(0.02)	$	(0.06)
Comprehensive lossper share - diluted		$	(0.02)	$	(0.06)
Weighted average number of common shares outstanding
Outstanding - basic			56,041,746		56,041,746
Outstanding- fullydiluted			56,041,746		56,041,746

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

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Pioneering Technology Corp. Statements of Changes in Equity For the year ended September 30[th] (Expressed in Canadian Dollars)

Note	Accumulated other comp- Contributed rehensive Total Number Amount Number Amount surplus loss Deficit Equity Common shares Prefered shares
Balance, October 1, 2019 Stock-based compensation expense 11 Stock options expired and forfeited 11 Comprehensive loss for theyear	56,041,746 17,974,857 $ 20,533,133 1 $ 2,060,719 $ (118,183) $ (13,651,552) $ 6,265,842 $ - - - - 103,009 - - 103,009 - - - - (77,286) - 77,286 - - - - - - (70,897) (883,267) (954,164)
Balance, September 30, 2020	56,041,746 17,974,857 $ 20,533,133 1 $ 2,086,442 $ (189,080) $ (14,457,533) $ 5,414,687 $
Note	Accumulated other comp- Contributed rehensive Total Number Amount Number Amount surplus loss Deficit Equity Common shares Prefered shares
Balance, October 1, 2018 Stock-based compensation expense 11 Stock options expired and forfeited 11 Comprehensive(loss)income for theyear	56,041,746 17,974,857 $ 20,533,133 1 $ 3,683,410 $ (342,594) $ (11,490,077) $ 9,825,597 $ - - - - 71,572 - - 71,572 - - - - (1,694,263) - 1,694,263 - - - - - - 224,411 (3,855,738) (3,631,327)
Balance, September 30, 2019	56,041,746 17,974,857 $ 20,533,133 1 $ 2,060,719 $ (118,183) $ (13,651,552) $ 6,265,842 $

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

Pioneering Technology Corp. Statements of Cash Flows For the year ended September 30[th] (Expressed in Canadian Dollars)

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		2020		2019
OPERATING ACTIVITIES
Loss for the year	$	(883,267)	$	(3,855,738)
Items not affecting cash
Depreciation of property and equipment		231,907		149,506
Amortization of patents and intangibles		24,574		25,370
Income tax expense		-		1,200,000
Fair value movement - derivative liability		1,020		(841)
Unrealized foreign exchange loss		11,919		12,010
Interest expense on lease obligations		88,683		-
Stock-based compensation expense		103,009		71,572
		(422,155)		(2,398,121)
Change in non-cash working capital balances
Trade and other receivables		(811,399)		358,387
Inventories		2,004,370		31,357
Prepaid expenses and deposits		(867,196)		302,683
Trade payables and accrued liabilities		711,112		(50,315)
Other long-term liabilities		-		2,807
		614,732		(1,753,202)
INVESTING ACTIVITIES
Purchase of property and equipment		(78,563)		(35,189)
Purchase ofpatents and intangibles		(152,919)		(20,800)
		(231,482)		(55,989)
FINANCING ACTIVITIES
Repayment of lease obligations		(156,409)		-
		(156,409)		-
NET CHANGE IN CASH DURING IN THE YEAR		226,841		(1,809,191)
Foreign currency movement in cash balances		(413)		71,776
CASH - BEGINNING OF YEAR		1,930,945		3,668,360
CASH - END OF YEAR	$	2,157,373	$	1,930,945
SUPPLEMENTAL DISCLOSURE
Interest paid	$	90,689	$	865

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

Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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1. NATURE OF OPERATIONS

Pioneering Technology Corp. (“Pioneering” or the “Company”) is incorporated under the laws of Ontario, Canada and is an energy smart technology and consumer products company focused on developing advanced thermo‐based technology solutions for opportunities that exist to improve the safety and/or energy efficiency of some of the most common household products and appliances.

Pioneering is a public company listed on the Toronto Venture Stock Exchange (TSX‐V: PTE). The Company’s principal place of business is located at 7‐2400 Skymark Ave., Mississauga, ON L4W 5K5. The Company`s website is www.pioneeringtech.com.

2. BASIS OF PREPARATION AND CHANGE IN ACCOUNTING POLICY

The 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 set out in Note 3.

2.1 Statement of compliance

These financial statements, including comparative balances for the year ended September 30, 2019, have been prepared in accordance with and using policies in compliance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements were approved and authorized by the Board of Directors of the Company on January 28, 2021.

2.2 Functional currency

The Company’s functional currency is U.S. dollars based on the primary economic environment in which the Company operates. The Company’s presentation currency is Canadian dollars.

2.3 Adoption of new accounting standards

IFRS 16, Leases (“IFRS 16”)

Pioneering has initially adopted IFRS 16 from October 1, 2019. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right‐of‐use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.

Pioneering has applied IFRS 16 with a date of initial application of October 1, 2019 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings at October 1, 2019. Under this approach, Pioneering has not restated comparative information presented for 2019. Comparative information for 2019 is presented as previously reported under IAS 17 and related interpretations. Pioneering has changed its accounting policy for lease contracts as detailed below.

Definition of a lease

Previously, Pioneering determined at contract inception whether an arrangement is or contains a lease under International Financial Reporting Interpretations Committee 4, Determining Whether an Arrangement contains a Lease ("IFRIC 4"). Under IFRS 16, Pioneering assesses whether a contract is or contains a lease based on the new definition of a lease provided in IFRS 16. IFRS 16 provides that a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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2. BASIS OF PREPARATION AND CHANGE IN ACCOUNTING POLICY (CONT’D)

2.3 Adoption of new accounting standards (cont’d)

On transition to IFRS 16, Pioneering elected to apply the practical expedient to grandfather the assessment of which transactions are leases. IFRS 16 was only applied to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed to determine whether they met the IFRS 16 definition of a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after October 1, 2019.

At inception or on reassessment of a contract that contains a lease component, in which Pioneering is a lessee, Pioneering allocates the consideration in the contract to each lease and non‐lease component on the basis of their relative stand‐alone prices.

As a lessee

Pioneering previously classified leases as operating or finance leases. Pioneering assessed whether a lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset to Pioneering, in which case it was classified as a finance lease and recognized on the statement of financial position. Payments made under operating leases were recognized in net income on a straight‐line basis over the term of the lease (i.e. they were off‐balance sheet). Under IFRS 16, Pioneering recognizes right‐of‐use assets and lease liabilities for most leases (i.e. leases are on‐balance sheet).

On transition to IFRS 16, Pioneering elected to apply recognition exemptions for short‐term leases (i.e. leases with terms less than 12 months or entered into on a month‐to‐month basis) and leases of IT equipment that are considered to be low‐dollar value leases. For leases of other assets, which were classified as operating leases under IAS 17, Pioneering recognized right‐of‐use assets and lease liabilities.

Significant Accounting Policy (applicable from October 1, 2019)

Pioneering recognizes a right‐of‐use asset and a lease liability at the lease commencement date. The right‐ of‐use asset is initially measured at cost. Subsequent to initial application, the right‐of‐use asset is measured at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability. In comparison, the lease liability is increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Pioneering has applied judgment to determine the lease term for lease contracts in which it is a lessee that include renewal options. The assessment of whether Pioneering is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right‐of‐use assets recognized.

Transition of leases classified as operating leases under IAS 17

At transition from IAS 17 to IFRS 16, lease liabilities were measured at the present value of the remaining lease payments, discounted at Pioneering’s incremental borrowing rate as at October 1, 2019. Right‐of‐use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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2. BASIS OF PREPARATION AND CHANGE IN ACCOUNTING POLICY (CONT’D)

2.3 Adoption of new accounting standards (cont’d)

Impacts on financial statements

Impact on transition

On transition to IFRS 16, Pioneering recognized $1,737,946 of right‐of‐use assets and lease liabilities.

When measuring lease liabilities, Pioneering discounted lease payments using its incremental borrowing rate at October 1, 2019. The incremental borrowing rate was 5.2%.

Leasehold improvements at September 30, 2019 Adjustment (1) Leasehold improvements at October 1, 2019	Accumulated Net Book Cost Depreciation Value 766,365 $ 99,168 $ 667,197 $ (405,826) (25,336) (380,490)
	360,539 $ 73,832 $ 286,707 $

(1) As at September 30, 2019, the Company had a liability for landlord incentive of $380,490, of which $26,873 was recorded as short‐term and included in trade payables and accrued liabilities. The remaining $353,617 was recorded as Other long term liabilities in the statement of financial position. Upon transition to IFRS 16, Pioneering determined that the landlord incentive was not in the scope of IFRS 16 as it was a reimbursement of leasehold improvement costs which are not included within the right‐of‐use asset.

Right‐of‐use asset at October 1, 2019 Operating lease commitments as September 30, 2019 Adjustment (2) Impact of discounting using the incremental borrowing rate Lease liability recognized at October 1, 2019	1,737,946 $
	1,524,716 $ 949,036 (735,806)
	1,737,946 $

(2) Adjustment relates to the impact of judgment applied with regard to leases in which Pioneering is a lessee that include renewal options.

Current year impact

As a result of the initial adoption of IFRS 16 and Pioneering recognizing right‐of‐use assets in the amount of $1,737,946, during the year ended September 30, 2020, there was depreciation expense of $125,635 related to these assets. Due to the addition of lease liabilities at the present value of their lease payments, during the year ended September 30, 2020, Pioneering recognized interest costs of $88,683 related to these liabilities.

IFRIC 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)

In June 2017, the IASB issued IFRIC 23 which clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. The Interpretation requires:

• An entity to contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

• An entity to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and

• If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty.

IFRIC 23 was effective for annual periods beginning on or after January 1, 2019. The interpretation requires retrospective application, with some practical expedients available on adoption. The Company has assessed the impact of IFRIC 23 on its financial statements and did not note any significant impact.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES

Use of estimates and judgments

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are outlined below. Actual results may differ from those estimates.

The following are management’s key estimates and judgements:

• Inventory valuation – inventories are valued at the lower of cost, using FIFO, and net realizable value, which requires the Company to utilize estimates related to future sell‐through of units and costs necessary to sell the inventory. The Company records a write‐down to reflect management’s best estimate of the net realizable value of inventory based on the above factors;

• Trade receivable valuation – expected credit losses associated with accounts receivable require management to assess certain forward looking and macroeconomic factors to determine whether there is a significant increase in credit risk as well as the expected provision on the balance outstanding as at year‐end (refer to note 14);

• Functional currency – judgment is required in determining the Company’s functional currency based on the economic environment in which it primarily generates and expends cash;

• Stock‐based compensation – the amounts recorded for stock‐based compensation are based on estimates. The Black Scholes model is used to estimate the fair value of stock options at the date of grant based on estimates of assumptions for share price, expected volatility, expected number of options to vest, dividend yield, risk‐free interest rate, and expected life of the options. Changes in these assumptions may result in a material change to the amounts recorded for the issuance of stock options (refer to note 11);

• Determination of variable consideration – judgment is exercised in estimating variable consideration which is determined having regard to past experience with respect to the product returned to the Company where the customer maintains a right of return pursuant to the customer contract or where the product has a variable component. Revenue will only be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved;

• Recovery of deferred income tax assets – assessing whether the realization of tax losses against future taxable income is probable (refer to note 13);

• Discount rate of lease liability ‐ the lease liability is measured at the present value of expected lease payments and discounted using the interest rate implicit in the lease, unless this is not readily determinable, in which case the Company’s incremental borrowing rate on commencement of the lease is used. The Company determines its incremental borrowing rate as the rate of interest it would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of similar value to the right‐of‐use asset in a similar economic environment;

• Warranties – significant judgements and assumptions may be involved in the determination of future obligations associated with product sales recognized in the current year. Additionally, management has assessed that all warranties associated with products sold are “assurance‐type” warranties, as defined within IFRS 15, and therefore, recognized and measured in accordance with IAS 37, Provisions, contingent liabilities and contingent assets;

• Useful lives of assets ‐ significant estimates are involved in the determination of the useful lives of property and equipment and patents and intangible assets to determine their expected depreciation and amortization rates.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Revenue recognition

Revenue is derived primarily from the sales of product, the Company’s only performance obligation, which is comprised of fire safety cooking equipment. Revenue is measured at the transaction price agreed to under the contract and excludes any amounts collected on behalf of third parties. The Company allocates the transaction price to the performance obligation in the contract which is the product sold. The transaction price is adjusted for variable consideration such as allowance for returns, early payment discounts and rebates based on volume shipped to the customer. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved.

For performance obligations satisfied at a point in time, revenue is recognized when the Company has a present right to payment, the buyer has legal title to the asset, physical possession of the asset has transferred to the buyer, the buyer has the significant risks and rewards of ownership and the buyer has accepted the asset. Generally, the buyer obtains control at the time goods are shipped, the product is delivered or services are rendered.

Stock‐based compensation

The fair value of all stock options granted to employees (including directors and senior executives) is determined using the Black‐Scholes option pricing model and incorporates a number of assumptions. The resulting value is charged to operations over the vesting period of the underlying options. A corresponding increase in contributed surplus is recorded when employee stock options are expensed.

The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non‐market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non‐market performance conditions at the vesting date.

Where equity instruments are granted to non‐employees, they are recorded at the fair value of the goods or services received in the statement of loss and comprehensive loss, unless the fair value of the goods or services received cannot be estimated reliably. Amounts related to the issuance of shares are recorded as a reduction of share capital. When the value of goods or services received in exchange for the share‐based payment cannot be reliably estimated, the goods or services received, and the corresponding increase in equity are measured, indirectly, by reference to the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders service.

For stock‐based compensation with non‐vesting conditions, the grant date fair value of the stock‐based payment is measured to reflect such conditions and there is no adjustment for differences between expected and actual outcomes. When a stock option is exercised, share capital is recorded at the sum of the proceeds received plus the amount previously recorded in contributed surplus relating to the options exercised.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Inventories

Inventories are valued at the lower of cost and net realizable value. Cost is determined on a first‐in, first‐out basis. The cost is comprised of the purchase price plus the direct costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. A provision for obsolescence is calculated based on historical experience and management’s sales expectations.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated on a declining balance basis based on the following rates:

Computer hardware and software	45%
Equipment, small tools and molds	30%
Fixtures and fittings	30%
Automobiles	30%
Leasehold improvements	Straight‐line over the initial term of the lease

Residual value and estimated useful lives are reviewed at least annually.

Research and development costs

Expenditure on research activities is recognized as an expense in the year in which it is incurred. Internally developed intangibles assets are capitalized as intangible assets when the Company can demonstrate that the technical feasibility of the project has been established; the Company intends to complete the asset for use or sale and has the ability to do so; the asset can generate probable future economic benefits; the technical and financial resources are available to complete the development; and the Company can reliably measure the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally‐generated intangibles is the sum of the expenditure incurred from the date when the intangibles first meets the recognition criteria listed above. Where no internally‐generated intangibles can be recognized, development costs are recognized in profit or loss in the year in which it is incurred. Subsequent to initial recognition, internally‐generated intangibles are reported at cost less accumulated depreciation and accumulated impairment losses, on the same basis as intangibles that are acquired separately.

Patents and intangibles

Costs directly related to the acquisition of patents and intangibles are capitalized and then amortized over their estimated useful life on a declining balance basis based on the following rates:

Safe‐T‐Sensor	30%
Trademarks	30%
Patents	30%
Website	30%

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Impairment

Property and equipment and intangible assets with a finite useful life

Property and equipment and intangible assets with a finite life are assessed for indications of impairment at the end of each reporting period. If such indications exist, then the recoverable amount of the cash generating unit (“CGU”) is compared to the carrying value of the CGU. An impairment loss is recognized when the carrying amount of the CGU exceeds its recoverable amount. The recoverable amount of the CGU is the greater of its value in use and its fair value less costs to sell. 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 risks specific to the asset. Impairment losses are recognized in operations for the year in which they are identified. Intangible assets not yet available for use are tested for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during an annual period, provided it is performed at the same time every year. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss have been recognized.

Current income tax

Current income tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted on the date of the statement of financial position.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the date of the statement of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax assets are recognized for all deductible temporary differences, and the carry forward of unused tax losses, to the extent that it is probable that taxable income will be available against which the deductible temporary differences and the carry forward of unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each date of the statement of financial position and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each date of the statement of financial position and are recognized to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the date of the statement of financial position.

Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of loss and comprehensive loss.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Deferred income tax assets and deferred income tax liabilities are offset if, and only if, a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority or to realize the assets and settle the liabilities simultaneously, in each future year in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Earnings (loss) per share

The Company presents basic and diluted earnings (loss) per share (“EPS”) for its common shares. Basic EPS is calculated by dividing earnings by the weighted average number of common shares outstanding during the year. The diluted income (loss) / earnings per share reflect the potential dilution of common share equivalents, such as outstanding stock options and share purchase warrants, in the weighted average number of common shares outstanding during the year, if dilutive. The “treasury stock method” is used for the assumed proceeds upon the exercise of the options and warrants that are used to purchase common shares at the average market price during the year.

Financial instruments

Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or liabilities at FVTPL are recognized immediately in the statements of loss.

Financial assets are classified as amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided.

Impairment of financial assets

As the Company’s financial assets are substantially made up of trade receivables, the Company has opted to use the simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses (“ECL”). The simplified approach does not require the tracking of changes in credit risk, but instead requires the recognition of lifetime ECLs at all times. Lifetime ECL represents the ECL that would result from all possible default events over the expected life of a financial instrument. The ECL on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Specifically but not all inclusive, the forecast factors include forward looking information by way of trended loss patterns in industries and customer geographies, forecasting adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the customer’s ability to meet its debt obligation, and predicting significant deterioration in the operating results of the customer.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Fair value hierarchy

All financial assets and liabilities are initially recognized at fair value. In subsequent years, financial assets and liabilities which are held for trading are recorded at fair value with gains and losses recognized in income; financial assets which are available for sale are recorded at fair value with gains and losses recognized (net of applicable taxes) in other comprehensive income (loss). Financial instruments require disclosure about inputs to fair value measurements within the fair value measurement hierarchy as follows:

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

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

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

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre‐tax rate that reflects current market assessments of the time value of money and the risk specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense.

Foreign currency transactions

Foreign currency transactions are translated into the functional currency using exchange rates in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate in effect at the measurement date. Non‐monetary assets and liabilities denominated in foreign currencies are translated using the historical exchange rate or the exchange rate in effect at the measurement date for items recognized at fair value through profit or loss (“FVTPL”). Gains and losses arising from foreign exchange are included in the statement of loss and comprehensive loss.

Assets and liabilities are translated into the Company's presentation currency using the exchange rates at the reporting date. The revenues and expenses are translated using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the accumulated other comprehensive loss in equity.

Government assistance

The Company applied for assistance from multiple assistance programs, including the Canada Emergency Wage Subsidy (“CEWS”) program as a result of the impact COVID‐19 had on Company operations. The assistance has been recognized as an offsetting reduction to the salary expenses. During the year, $175,475 (2019 ‐ $nil) in assistance was deducted from expenses.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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4. CAPITAL MANAGEMENT

The Company defines capital as total shareholders’ equity and long‐term debt excluding other long‐term liabilities. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the growth and development of its operations and to bring new products to market. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company will continue to assess new opportunities and seek to acquire an interest in growth situations if it feels there is sufficient economic potential and if it has adequate financial resources to do so.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the year ended September 30, 2020.

5. FINANCIAL INSTRUMENTS

Financial instruments, by classification, comprise the following:

	Fair value hierarchy		2020		2019
Financial assets
Amortized cost
Cash		$	2,157,373	$	1,930,945
Trade and other receivables			1,231,172		423,815
Financial liabilities
Amortized cost
Trade payables and accrued liabilities			1,731,888		1,004,677
Fair value through profit or loss
Derivative liability	Level 2		1,236		216

A summary of the Company's risk exposures as it relates to financial instruments is reflected below:

Credit risk

Credit risk is the risk that the counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss to the Company. The Company is exposed to credit risk from its operating activities (primarily from trade and other receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Credit risk relates to cash and trade and other receivables and arises from the possibility that any counterparty to an instrument fails to perform. The Company has adopted a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment terms and conditions are offered. The Company’s exposure to credit risk with its customers is influenced mainly by the individual characteristics of each customer. All of the Company’s customers are located in either Canada or the United States. When available, the Company reviews credit bureau ratings, bank accounts and financial information for each new customer. As at September 30, 2020 and 2019, the Company's maximum exposure to credit risk was the carrying value of cash and trade and other receivables.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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5. FINANCIAL INSTRUMENTS (CONT’D)

Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company establishes a representative estimate of expected credit losses using the simplified approach.

The Company’s trade receivables are concentrated among customers in the distribution and retail industry. As at September 30, 2020, three (2019 – three) customers accounted for greater than 10% of the Company’s trade receivable balance. In total, these customers accounted for 80% of the Company’s trade receivable balance as at September 30, 2020 (2019 – 62%).

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company's treasury function in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counter party.

Liquidity risk

Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they become due. The Company is growing and in order to meet its short and longer‐term working capital requirements, the Company will attempt, if necessary, to secure further financing to ensure that those obligations are properly discharged.

Operationally, the Company manages its liquidity by continuously monitoring forecasted and actual gross profit, expenses, and cash flows from operations.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, commodity prices and/or stock market movements (price risk). Market risks material to Pioneering include the following:

Foreign currency risk

The Company is exposed to foreign currency risk on its Canadian dollar (CAD) denominated transactions and balances.

At present the Company has no plans in place to hedge its foreign exchange exposures. As the Company has expenditures and sales in both USD and CAD, the Company realizes the benefit of a partial natural hedge against this risk. The Company’s CAD monetary balances consist of the following:

		2020		2019
Cash	$	86,446	$	104,684
Trade and other receivable		167,239		116,932
Tradepayables and accrued liabilities		1,039,488		928,254

A sensitivity analysis is presented below on its exposure to foreign currency risk on the CAD.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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5. FINANCIAL INSTRUMENTS (CONT’D)

Interest rate risk

The Company is exposed to interest rate risk arising from fluctuations in the bank’s prime rate related to its bank indebtedness. With all other factors held constant, a 1% fluctuation in the bank’s prime rate would not have a significant impact on the Company’s earnings.

Sensitivity analysis – foreign exchange risk

Based on management’s knowledge and experience of the financial markets, the Company believes the following movements are reasonably possible over a one‐year period. The Company's operating activities are substantially denominated in both Canadian and US dollars. The Company's funds are kept in CAD and USD with a major Canadian financial institution.

The table below summarizes the effects on foreign exchange gains and losses as a result of a 10% change in the value of the foreign currencies where the Company has significant exposure. The analysis assumes that other variables remain constant.

	Income effect of a 10% increase in	Loss effect of a 10% decrease in
	foreign exchange rates on translation	foreign exchange rates on translation
	of CAD monetarybalances	of CAD monetarybalances
CAD	$ 78,580	$(78,580)

6. INVENTORIES

Inventories are comprised of the following:

		2020		2019
Finishedgoods	$	2,229,899	$	4,281,612
	$	2,229,899	$	4,281,612

Inventory expensed to cost of goods sold during the year is $3,862,943 (2019 ‐ $1,687,766).

7. BANK INDEBTEDNESS

The Company has a $500,000 (2019 ‐ $500,000) revolving demand facility with a Canadian chartered bank bearing interest at the lender‘s prime rate plus 2% per annum. The Company has provided a general security to the lender over the personal property of the Company. No amounts have been drawn on the facility at year‐end (2019 – $nil).

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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8. LEASE OBLIGATIONS

		2020		2019
Property and office space lease bearing interest at an estimated rate of 5.2%. The
lease extends through fiscal 2033.	$	1,670,220	$	-
Less: currentportion		(75,278)		-
	$	1,594,942	$	-

Included in interest expense is $88,683 (2019 ‐ $nil) of interest expense on lease obligations. Total cash outflows relating to leases consist of payments in the amount of $156,409 (2019 ‐ $nil). Included in administration expense is $65,596 (2019 ‐ $nil) relating to variable lease payments not included in the measurement of lease liabilities.

The lease is secured by the underlying asset. Future minimum lease payments for the next five years and thereafter are as follows:

2021	$	160,366
2022		164,340
2023		168,421
2024		172,671
2025		176,997
Thereafter		1,474,549
		2,317,344
Less: imputed interest		647,123
	$	1,670,220

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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9. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

		Computer		Equipment
	hardware and			small tools		Fixtures				Leasehold	Right of use
Cost		software		and molds		and fittings	Automobiles		improvements				assets		Total
October 1, 2018	$	69,542	$	338,104	$	75,381	$	20,752	$	735,026	$		-	$	1,238,805
Additions		11,205		12,797		1,380		-		9,807			-		35,189
Disposals		-		-		-		-		-			-		-
Net currencytranslation		-		-		-		-		21,532			-		21,532
October 1, 2019		80,747		350,901		76,761		20,752		766,365			-		1,295,526
Adoption of IFRS 16		-		-		-		-		(405,826)		1,737,946			1,332,120
Additions		2,140		70,928		-		-		5,495			-		78,563
Disposals		-		-		-		-		-			-		-
Net currencytranslation		-		-		-		-		27,643			-		27,643
September 30, 2020	$	82,887	$	421,829	$	76,761	$	20,752	$	393,677	$	1,737,946		$	2,733,852

		Computer		Equipment
Accumulated	hardware and			small tools		Fixtures				Leasehold	Right		of use
Depreciation		software		and molds		and fittings	Automobiles		improvements			assets			Total
October 1, 2018	$	41,319	$	225,128	$	12,369	$	15,121	$	23,358	$		-	$	317,295
Depreciation		17,240		37,671		19,249		1,689		73,657			-		149,506
Disposals		-		-		-		-		-			-		-
Net currencytranslation		-		-		-		-		2,153			-		2,153
October 1, 2019		58,559		262,799		31,618		16,810		99,168			-		468,954
Adoption of IFRS 16		-		-		-		-		(25,336)			-		(25,336)
Depreciation		10,185		47,708		13,543		1,183		33,653		125,635			231,907
Disposals		-		-		-		-		-			-		-
Net currencytranslation		-		-		-		-		7,682			-		7,682
September 30, 2020	$	68,744	$	310,507	$	45,161	$	17,993	$	115,167	$	125,635		$	683,207

		Computer		Equipment
	hardware and			small tools		Fixtures				Leasehold	Right of use
		software		and molds		and fittings	Automobiles		improvements			assets		Total
October 1,2018	$	28,223	$	112,976	$	63,012	$	5,631	$	711,668	$	-	$	921,510
October 1,2019	$	22,188	$	88,102	$	45,143	$	3,942	$	667,197	$	-	$	826,572
September 30, 2020	$	14,143	$	111,322	$	31,600	$	2,759	$	278,510	$	1,612,311	$	2,050,645

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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10. PATENTS AND INTANGIBLES

Patents and intangible assets are comprised of the following:

Cost	Safe-T-Sensor	Safe-T-Sensor	Development	Development	Trademarks	Trademarks		Patents		Website		Total
October 1, 2018	$	66,681	$	-	$	44,235	$	45,688	$	27,584	$	184,188
Additions		-		-		-		-		20,800		20,800
Disposals		-		-		-		-		-		-
October 1, 2019		66,681		-		44,235		45,688		48,384		204,988
Additions		-		141,919		-		-		11,000		152,919
Disposals		-		-		-		-		-		-
September 30, 2020	$	66,681	$	141,919	$	44,235	$	45,688	$	59,384	$	357,907
Accumulated amortization	Safe-T-Sensor		Development		Trademarks			Patents		Website		Total
October 1, 2018	$	66,681	$	-	$	1,106	$	38,388	$	691	$	106,866
Amortization		-		-		12,939		2,190		10,241		25,370
Disposals		-		-		-		-		-		-
October 1, 2019		66,681		-		14,045		40,578		10,932		132,236
Amortization		-		-		9,057		1,533		13,984		24,574
Disposals		-		-		-		-		-		-
September 30, 2020	$	66,681	$	-	$	23,102	$	42,111	$	24,916	$	156,810
Carrying value	Safe-T-Sensor		Development		Trademarks			Patents		Website		Total
October 1,2018	$	-	$	-	$	43,129	$	7,300	$	26,893	$	77,322
October 1,2019	$	-	$	-	$	30,190	$	5,110	$	37,452	$	72,752
September 30, 2020	$	-	$	141,919	$	21,133	$	3,577	$	34,468	$	201,097

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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11. SHARE CAPITAL

a) Authorized

Unlimited number of voting common shares and non‐voting series 1 preferred shares that are issuable in series. The series 1 preferred shares can be redeemed, at the sole discretion of the Company, upon payment to the holder of $0.06 per preferred share (a maximum aggregate redemption price of $1,231,988) and are not entitled to dividends. The statement of changes in equity details the number and value of the common shares and series 1 preferred shares outstanding as at the reporting date.

b) Stock option plan

The Company has a stock option plan in place under which the Board of Directors may grant options to acquire common shares of the Company to qualified directors, officers, employees and other service providers. The stock options vest according to the provisions of the underlying directors’ resolution approving the issuance and have a maximum life of five years. The plan allows for the issuance of up to 11,208,349 (2019 ‐ 10,330,163) common shares of the Company.

At September 30, 2020, the Company had 4,063,349 (2019 – 3,392,663) stock options available for issuance.

c) Contributed surplus

Contributed surplus is comprised of the following:

		2020		2019
Stock options	$	1,956,930	$	1,931,207
Broker warrants		129,512		129,512
	$	2,086,442	$	2,060,719

Stock option activity for the years ended September 30, 2020 and 2019 were as follows:

	Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Number of Options 2019 2020
Balance, beginning of year Transactions during the year	0.55 $ 3,815,000 0.53 $ 5,539,000 0.14 $ 3,425,000 - $ - - $ - - $ - 0.89 $ (95,000) 0.95 $ (700,000) - $ - 0.15 $ (1,024,000)
Granted(i) Exercised Forfeited Expired
Outstanding,end ofyear	0.30 $ 7,145,000 0.55 $ 3,815,000
Exercisable, end ofyear	0.30 $ 6,995,000 0.55 $ 3,815,000

(i) On February 24, 2020, Pioneering granted 3,425,000 options to directors, officers, employees and consultants of the Company, exercisable at $0.14 per common share through February 21, 2025. 1,650,000 of these options vested immediately, with the balance vesting through 2021 based on certain vesting dates.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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11. SHARE CAPITAL (CONT’D)

c) Contributed surplus (cont’d)

The following table provides additional information about the outstanding stock options as at September 30, 2020 and 2019:

		2020			2019
		Weighted			Weighted
	Number of	Average		Number of	Average
Exercise	Options	Remaining	Number of	Options	Remaining	Number of
Price	Outstanding	Life(Years)	Exercisable	Outstanding	Life(Years)	Exercisable
$0.14(i)	3,825,000	4.40	3,675,000	-	-	-
$0.22	1,870,000	0.50	1,870,000	1,890,000	1.50	1,890,000
$0.29	200,000	0.62	200,000	200,000	1.62	200,000
$0.33	300,000	0.36	300,000	300,000	1.36	300,000
$1.07(i)	950,000	1.91	950,000	1,425,000	2.92	1,425,000
	7,145,000	2.77	6,995,000	3,815,000	2.02	3,815,000

• (i) During the year, Pioneering amended the expiry date and exercise price of 400,000 options that were previously issued to consultants and employees in August 2017. The expiry date of the options was extended from August 29, 2022 to February 21, 2025. The exercise price was decreased from $1.07 per option to $0.14 per option. In accordance with IFRS 2, Pioneering calculated the fair value of the options immediately before and after the modification. The resulting increase in fair value was $9,056. As the options were fully vested prior to the modification, the full amount was recorded in current year stock based compensation.

Using the Black‐Scholes valuation method, the following assumptions were used to determine the value of the options granted and modified during 2020:

		Granted		Modified
Risk-free interest rate		1.21%		1.21%
Estimated life of options (years)		5.00		5.00
Expected volatility		122%		122%
Market price of shares at date of issuance	$	0.040	$	0.040
Exercise price of options	$	0.140	$	0.140
Dividend yield		0%		0%
Fair value of optionsgranted	$	0.028	$	0.028

As all options issued prior to 2020 were fully vested, stock‐based compensation expense related to options issued in 2020, and vesting in 2020 and 2021, was allocated to the financial statements on the basis of where the optionee’s compensation is recorded as follows:

		2020		2019
Administration	$	63,166	$	15,716
Sales and marketing		36,169		71,657
Research and development		3,674		(15,801)
	$	103,009	$	71,572

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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11. SHARE CAPITAL (CONT’D)

c) Contributed surplus (cont’d)

During 2019, 250,000 unvested options were forfeited. The cumulative stock‐based compensation expense of $129,914 relating to the unvested options was recognized in previous year income as follows:

		2019
Administration	$	66,402
Sales and marketing		25,405
Research and development		38,107
	$	129,914

d) Private placement

On March 22, 2017 and April 20, 2017, the Company completed a private placement of 5,995,631 common shares and 2,997,815 warrants for total gross proceeds of $6,595,194 . Each warrant entitles the holder to purchase one common share at a price of $1.80 for a period of 24 months following closing of the offering, provided that if, at any time after 12 months following the closing date of the offering, the volume weighted average trading price of the common shares on the TSXV over any 15 consecutive trading day period is at least $2.50, the Company will have the right to accelerate the expiry date of the warrants to a date that is 15 calendar days after the date on which the Company issues a press release announcing the accelerated expiry date.

The underwriter received (i) a cash commission equal to 7.0% of the gross proceeds raised in the offering, and (ii) non‐transferrable broker warrants ("Broker Warrants") equal to 7.0% of the aggregate number of units issued pursuant to the offering. Each Broker Warrant is exercisable into one unit at the issue price for a period of 24 months following closing of the offering.

For the warrants issued in this 2017 private placement, the following assumptions were used to calculate the derivative liability resulting from each warrants placement on the date of issuance and the fair value of the derivative liability as of September 30, 2020 and 2019:

		2020		2019		2017
Risk-free interest rate		1.47%		1.47%		0.77%
Estimated life of options (years)		0.47		1.47		2.00
Expected volatility		154%		100%		115%
Market price of shares at date of issuance	$	0.1000	$	0.0400	$	1.0000
Exercise price of options	$	1.8000	$	1.8000	$	1.8000
Dividend yield		0%		0%		0%
Fair value of warrants	$	0.0004	$	0.0001	$	0.5303

In 2017, 201,097 broker warrants were issued as compensation for services rendered by the broker on the private placement. Each broker warrant is exercisable for one share of the Company at an exercise price of $1.80. The fair value of the services provided was recorded as an increase in share issuance cost and contributed surplus in equity for $105,832.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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11. SHARE CAPITAL (CONT’D)

d) Private placement (cont’d)

The warrants issued in the Company’s private placement are classified as financial liabilities on the statement of financial position because the Company’s warrants, that were issued to subscribers as part of the private placement, do not meet the criteria in IAS 32, Financial Instruments: Presentation (“IAS 32”) for classification as equity. The fair value movement in future reporting periods are to be recognized in the statement of income (loss) and comprehensive (loss) income.

On March 15, 2019, the Company extended the expiry date of 2,997,815 warrants issued to subscribers pursuant to the private placement which closed on March 22 and April 20, 2017. The expiry date of the warrants was extended from March 22 and April 20, 2019 until March 22 and April 20, 2021. The exercise price of $1.80 per share and all other terms of the warrants will remain unchanged for the extended exercise period.

e) Warrants

During the year ended September 30, 2020, nil (2019 ‐ nil) warrants were exchanged for common shares. As at September 30, 2020, 2,997,815 warrants were outstanding (2019 – 2,997,815). The fair value movement is recognized in the statement of loss and comprehensive loss.

12. COMMITMENTS AND CONTINGENCIES

Pioneering leases its premises under a non‐cancellable operating lease that expires in July 2028. Under the terms of the lease, the Company is responsible for its proportionate share of common area maintenance costs, including realty taxes.

In the ordinary course of business activities, the Company may be contingently liable for litigation and claims with customers, suppliers and former employees. Management believes that adequate provisions have been recorded in the accounts where required. During 2016, a former supplier has commenced an action against the Company relating to a contractual dispute. The Company intends to vigorously defend itself against such claim. As at year‐end, no provision has been recorded in connection with this claim. Subsequent to year end, a claim has been filed against the Company relating to an unpaid invoice for certain product in inventory. As the claim is in the preliminary stage, and the Company intends to defend itself, the ultimate outcome to the Company cannot be determined at the date of these financial statements; therefore no provision for loss in respect of this matter has been reflected in these financial statements.

13. INCOME TAXES

The significant components of income tax expense are as follows:

		2020		2019
Current income tax	$	-	$	-
Deferred tax:
Origination and reversal of temporary differences		11,478		(141,768)
Change in unrecognized deferred tax assets		(11,478)		1,341,768
	$	-	$	1,200,000

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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13. INCOME TAXES (CONT’D)

The Company’s income tax provision differs from the amount resulting from the application of the Canadian statutory income tax rate. A reconciliation of the combined Canadian federal and provincial income tax rates with the Company’s effective tax rate is included in the following table.

		2020		2019
Loss before income taxes	$	(883,267)	$	(2,655,738)
Combined basic Canadian corporate income tax rate		26.5%		26.5%
Income tax expense (recovery) based upon the above rate		(234,066)		(703,771)
Income tax on stock-based compensation		27,297		18,967
Non-deductible expenses and other		13,980		5,882
Recognition of previously unrecognized deductible temporary differences		-		6,608
Change in unrecognized deductible temporarydifferences		192,789		1,872,314
	$	-	$	1,200,000

The Canadian statutory income tax rate of 26.5% (2019 – 26.5%) comprises the federal income tax rate at approximately 15% (2019 – 15%) and the provincial income tax rate of approximately 11.5% (2019 – 11.5%).

Significant components of the Company’s deferred income tax assets and liabilities comprise the following:

		2020		2019
Deferred income tax assets
Operating losses carried forward	$	2,811,923	$	2,607,657
Share issuance costs		35,190		79,365
Deferred lease inducement		-		100,830
Depreciable capital assets		187,714		47,288
Allowances and reserves		39,854		47,433
Other		4,846		4,165
		3,079,527		2,886,738
Less: Unrecognized temporarydifferences		(3,079,527)		(2,886,738)
Net deferred tax assets	$	-	$	-

The Company offsets tax assets and tax liabilities if and only if it has a legal enforceable right to set off current tax assets and current tax liabilities or the deferred tax assets and deferred tax liabilities and they relate to taxes levied by the same tax authority.

The benefit of the following temporary differences has not been recognized in the financial statements:

		2020		2019
Non-capital losses	$	10,611,029	$	9,840,217
Reserves and other		1,009,822		1,053,135
Total unrecognized temporarydifferences	$	11,620,851	$	10,893,352

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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13. INCOME TAXES (CONT’D)

As at September 30, 2020, the Company has accumulated non‐capital losses for income tax purposes which can be carried forward to be applied against future taxable income for income tax purposes. Tax losses for which no deferred tax asset was recognized expire as follows:

2027	$	313,370
2028		1,424,300
2029		579,685
2031		106,628
2032		813,981
2033		1,269,404
2034		854,465
2038		2,462,781
2039		2,015,608
2040		770,807
	$	10,611,029

14. TRADE AND OTHER RECEIVABLES

The Company’s trade and other receivables are from: trade receivables and customer sales, Canada emergency wage subsidy and Harmonized Services Tax (“HST”) receivable due from government taxing authorities. The Company held no collateral for any receivable amounts outstanding as at September 30, 2020. The following comprises trade and other receivables:

		2020		2019
HST recoverable	$	18,327	$	38,179
Canada emergency wage subsidy (note 18)		104,327		-
Trade accounts receivable,net of allowance		1,108,518		385,636
	$	1,231,172	$	423,815

Trade receivables greater than 30 days are considered past due. An aging analysis of the trade receivables is as follows:

		2020		2019
Less than 1 month	$	775,754	$	295,036
31-60 days		26,817		75,903
61-90 days		80,875		9,101
Over 90 days		230,072		10,596
Total trade accounts receivable		1,113,518		390,636
Less: Expected credit losses		5,000		5,000
Net trade accounts receivable	$	1,108,518	$	385,636

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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15. TRADE PAYABLES AND ACCRUED LIABILITIES

Trade and other payables are principally comprised of amounts outstanding for trade purchases relating to products sold and for amounts relating to operating activities. The following comprises trade and accrued liabilities:

		2020		2019
Trade payables	$	1,142,205	$	286,180
Other accrued liabilities		589,683		718,497
	$	1,731,888	$	1,004,677

The standard maturity terms of the Company’s trade payables are 30 to 60 days.

16. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION

Related party transactions and balances are as follows:

		2020		2019
Type of payment:
Key management salaries and contingent compensation	$	425,750	$	438,317
Value of key management stock options		39,476		70,072
Value of director stock options		19,738		-
Other		-		49,175
Key management compensation	$	484,964	$	557,564
Amounts due to relatedparties atyear end	$	7,500	$	6,980

The amounts due to related parties are included in the trade payables and accrued liabilities. The Company defines Key Management as its CEO, CFO, COO and its Board of Directors.

17. SEGMENTED INFORMATION

The Company operates in one business segment being the development, manufacture and sale of products intended to save energy and offer consumer convenience and safety. In addition, the Company operates in only one geographical segment, Canada, although it does service its U.S. clients by shipping and invoicing from its facilities in Mississauga, Ontario. Some deliveries are routed through an independent warehouse in the United States. The breakdown of the Company’s revenues by geographic areas for the years ended September 30, 2020 and 2019 are as follows:

	2020	2019
Canada	4%	10%
United States	96%	90%
	100%	100%

The Company’s long‐lived assets are located in Canada.

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Pioneering Technology Corp. Notes to the Financial Statements For the years ended September 30, 2020 and 2019 (Expressed in Canadian Dollars)

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18. COVID‐19 PANDEMIC & GOVERNMENT GRANTS

The outbreak of COVID‐19 has resulted in worldwide emergency measures to combat the spread of the virus. These measures, including significant restrictions on commercial activity, have caused massive disruption to businesses globally, resulting in a broad‐based and global economic slowdown.

The Company has also introduced its own measures, procedures, and protocols to foster the health and safety of its employees, vendors, and customers. These measures are based on the Company’s health and safety policies as well as the recommendations from public health authorities. These enhanced protocols include travel restrictions, workplace hygiene practices, employee case tracking, additional personal protective equipment, limited access to facilities, and alternative work options for employees where possible.

The Company’s operations are exposed to a variety of business and financial risks as a result of a public threat, such as COVID‐19. These risks include but are not limited to, decline in customer demand, increase in operating costs, interruption of project work, credit risk associated with customer non‐payment, access to financing and change in the timing of cash flows.

During the year ended September 30, 2020, the Company’s operations were significantly impacted. The extent to which COVID‐19 may further impact the Company’s operations, its financial position, and performance remains uncertain, and will depend on further developments, including the duration and spread of the outbreak, its impact on the Company’s customers, suppliers and employees and actions taken by governments. Management continues to closely monitor the situation in the jurisdictions in which the Company operates.

Canada Emergency Wage Subsidy (“CEWS”)

In April 2020, the Government of Canada announced CEWS in order to help employers keep and/or return Canadian‐ based employees to payrolls in response to challenges posed by the COVID‐19 pandemic.

During 2020, management determined that it met the employer eligibility criteria and applied for CEWS for the program between March and September 2020. During the year ended September 30, 2020, the Company recognized $175,475 in government grants under the payroll support program which has been allocated to the financial statements as follows:

		2020		2019
Administration	$	50,136	$	-
Sales and marketing		100,271		-
Research and development		25,068		-
	$	175,475	$	-

As at September 30, 2020, $104,327 of the amount recognized was recorded as a receivable within trade and other receivables (note 14).

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