Real Luck Group Ltd. — Audit Report / Information 2019

Apr 23, 2020

Financial Statements of: Elephant Hill Capital Inc. Years ended December 31, 2019 and 2018

INDEPENDENT AUDITORS' REPORT

To the Shareholders and the Board of Directors of Elephant Hill Capital Inc.

Opinion on the Financial Statements

We have audited the accompanying financial statements of Elephant Hill Capital Inc. (the "Company"), which comprise the statements of financial position as at December 31, 2019 and 2018, and the statements of loss and comprehensive loss, changes in equity and cash flows for the periods ended December 31, 2019 and 2018, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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 reports. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 in the financial statements which describes matters and conditions that indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information, which comprises the information included in the Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and do not and will 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 and remain alert for indicators that the other information 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 these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, 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.

INDEPENDENT AUDITOR'S REPORT (Continued)

Auditor's Responsibilities for the Financial Statements

Our responsibility is to obtain reasonable assurance about whether the financial statements 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, not 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 the 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.

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 Joseph Bonvillain.

CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, British Columbia March 20, 2020

Elephant Hill Capital Inc. Statements of Financial Position (Expressed in Canadian dollars)

As at December 31	2019	2018
ASSETS
Current assets
Cash and cash equivalents (Note 5)	$378,271	$431,257
Other receivables	3,042	128
TOTAL ASSETS	$381,313	$431,385
LIABILITIES
Current liabilities
Accounts payable and other liabilities	$15,832	$14,797
SHAREHOLDERS' EQUITY
Share capital (Note 6)	$455,489	$455,489
Reserves (Note 7)	92,082	92,082
Deficit	(182,090)	(130,983)
TOTAL SHAREHOLDERS' EQUITY	365,481	416,588
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$381,313	$431,385

Going concern (Note 2)

Approved on behalf of the Board on March 20, 2020:

_________________________________ Director "Mo Fazil" (Signed)

_________________________________ Director "Eamon Hurley" (signed)

Elephant Hill Capital Inc. Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars)

	YearendedDecember31,2019		January15 toDecember31,2018
EXPENSES
General and administration	$12,944	$	22,195
Professional fees	24,451		31,242
Share-based payments(Note 7 and 9)	-		59,922
Travel	16,754		17,624
Other income	(3,042)		-
Net loss and comprehensive loss(note 8)	$51,107	$	130,983
Weighted average number of
common shares outstanding	5,000,000		2,842,857
Basic and diluted loss per common
share	$(0.01)	$	(0.05)

Elephant Hill Capital Inc. Statements of Changes in Shareholders' Equity (Expressed in Canadian dollars)

For the period from incorporation on January 15, 2018 to December 31, 2018

	Number ofcommonshares	Sharecapital	Reserves	Deficit	Totalshareholder'sequity
Balance at January 15, 2018	-
		$-	$-	$-	$-
Private placement	2,000,000	100,000	-	-	100,000
Initial public offering	5,000,000	500,000	-	-	500,000
Share issuance costs					(112,351)
	-	(144,511)	32,160	-
Share-based payments	-	-	59,922	-	59,922
Net loss for the period	-	-	-	(130,983)	(130,983)
Balance at December 31, 2018	7,000,000	$455,489	$ 92,082	$ (130,983)	$416,588
For the year ended December 31, 2019
Balance at January 1, 2019Net loss for theyear	7,000,000	$455,489-	$92,082-	$ (130,983)(51,107)	$416,588(51,107)
Balance atDecember 31, 2019	7,000,000	$455,489	$92,082	$(182,090)	$365,481

Elephant Hill Capital Inc.

Statements of Cash Flows

(Expressed in Canadian dollars)

		For the year endedDecember 31, 2019		January 15 toDecember 31, 2018
OPERATING ACTIVITIES
Netloss	$	(51,107)	$	(130,983)
Adjustment for non-cash items
Share-based payments		-		59,922
Changes in non-cash workingcapital
Other receivables		(2,914)		(128)
Accounts payable andotherliabilities		1,035		14,797
Cash used in operating activities		(52,986)		(56,392)
FINANCINGACTIVITIES
Share issuance		-		600,000
Share issuancecosts		-		(112,351)
Cash provided by financing activities		-		487,649
NET CHANGE IN CASH		(52,986)		431,257
CASH AND CASH EQUIVALENTS, BEGINNING		431,257		-
CASH AND CASH EQUIVALENTS, END ING	$	378,271	$	431,257

Elephant Hill Capital Inc. Notes to the Financial Statements (Express in Canadian dollars) For the years ended December 31, 2019 and 2018

1. NATURE OF BUSINESS

Elephant Hill Capital Corp. (the "Company") was incorporated under the Business Corporations Act of Alberta on January 15, 2018 and is classified as a Capital Pool Company ("CPC"), as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange"). The principal business of the Company is the identification and evaluation of a Qualifying Transaction ("QT"). Once identified or evaluated, the Company will negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities and complete a QT within 24 months of listing on the Canadian stock exchange. The head office, principal address and registered office of the Company are located at 1250, 639-5 Avenue SW, Calgary, Alberta T2P 0M9.

On June 15, 2018, the Company announced the completion of its initial public offering (the "IPO") of 5,000,000 common shares at the price of $0.10 per common share. The common shares of the Company commenced trading on June 20, 2018 under the trading symbol EH.P.

These financial statements were authorized for issue by the board of directors of the Company on March 20, 2020.

2. GOING CONCERN

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

The proposed business of the Company, and the completion of a QT, involves a high degree of risk. There is no assurance that the Company will identify an appropriate business for acquisition or investment, and even if so identified and warranted, it may not be able to finance such an acquisition or investment within the requisite time period. Additional funds will be required to enable the Company to pursue such an initiative, and the Company may be unable to obtain such financing on terms which are satisfactory to it. Furthermore, there is no assurance that the business will be profitable. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Should the Company be unable to continue as a going concern, the net realizable value of its assets may be materially less than the amounts on its statement of financial position.

These financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern assumption was not appropriate for these financial statements, adjustments would be necessary to the statement of financial position. Such adjustments could be material

3. BASIS OF PRESENTATION

Statement of Compliance

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

Basis of Presentation

These financial statements have been prepared on a historical cost basis and are presented in Canadian dollars which is the functional currency of the Company. All amounts are rounded to the nearest dollar. The financial statements of the Company have been prepared on an accrual basis, except for cash flow information.

Critical Accounting Estimates and Judgments

The preparation of these financial statements require management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and income and expenses. Significant estimates and judgments made by the Company that have the most significant risk of causing material misstatement to the carrying amounts of assets and liabilities are discussed below. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ.

Estimates:

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

The accounting estimates for share based payments is based on the Black-Scholes option valuation model which was developed for use in estimating the fair value of traded options which were fully tradable with no vesting restrictions. This option valuation model requires the input of highly subjective assumptions including the expected stock price volatility. Since the Corporation's stock options have characteristics significantly different from those of traded options and since changes in the subjective input assumptions can materially affect the calculated fair value, such value is subject to measurement uncertainty.

3. BASIS OF PRESENTATION (cont'd)

Critical Accounting Estimates and Judgments (cont'd)

Judgments:

Critical judgments exercised in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the assessment of the Company's ability to continue as a going concern.

Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company's current understanding of the tax law in the relevant jurisdiction. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. The Company recognizes deferred tax assets only to the extent it is probable that future taxable profit will be realized against which a deferred tax asset can be applied.

4. SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

Cash is comprised of cash on hand, cash held in trust accounts and demand deposits. Cash equivalents are short-term, highly liquid investments with maturities within one year when acquired. Included in the Company's cash equivalents is a 1-year cashable $350,000 GIC with a maturity of May 10, 2020, refer to note 5.

Financial instruments

Recognition, classification and measurement

Financial assets are classified and measured based on the business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. IFRS 9 contains three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit and loss. Financial assets are recognized in the statements of financial position if the Company has a contractual right to receive cash or other financial assets from another entity. Financial assets are derecognized when the rights to receive cash flows from the asset have expired or were transferred and the Company has transferred substantially all risks and rewards of ownership.

All financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instruments. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial instruments are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

4. SIGNIFICANT ACCOUNTING POLICIES (cont'd)

**Financial instruments (cont'd)**The Company has classified its other receivables, accounts payable and other liabilities as financial assets and liabilities measured at amortized cost. Such assets and liabilities are recognized initially at fair value inclusive of any directly attributable transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment losses. The Company has classified its cash and cash equivalents as a financial asset measured at fair value through profit and loss.

Financial assets and financial liabilities are offset and the net amount presented in the statements of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Company's derivatives are carried at fair value and are reported as assets when they have a positive fair value and as liabilities when they have a negative fair value. Changes in the fair values of derivative financial instruments are reported in the statements of loss and comprehensive loss.

Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. Loss allowances for accounts receivables are always measured at an amount equal to lifetime expected credit losses if the amount is not considered fully recoverable. A financial asset carried at amortized cost is considered credit-impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Individually significant financial assets are tested for credit-impairment on an individual basis. The remaining financial assets are assessed collectively.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate.

In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

Losses are recognized in the statements of comprehensive loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the statements of comprehensive loss.

4. SIGNIFICANT ACCOUNTING POLICIES (cont'd) Accounts receivable

Accounts receivable, net of allowances, are stated at the amount the Company expects to collect. When required, an allowance for doubtful accounts is recorded based on information on the collectability of specific accounts. Accounts are considered past due or delinquent based on contractual terms and how recently payments have been received and the Company's judgment of collectability. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from shareholders' equity, net of tax.

Share-based payments

The Company grants stock options to acquire common shares of the Company to directors, officers, employees, and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee. The fair value of stock options granted to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized over the vesting period. Share-based payments are initially recorded to reserves. Subsequently, consideration paid for the shares on the exercise of share-based payments is credited to share capital.

In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing the net income or loss attributable to the common shareholders of the Company by the weighted average number of common shares outstanding and reduced by any shares held in escrow during the reporting period. Diluted earnings (loss) per share is calculated by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding, all additional common shares that would have been outstanding if potentially dilutive instruments were converted and reduced by any shares held in escrow. Seed shares which are held in escrow are contingently cancellable pursuant to polices of the TSX for CPCs and are therefore excluded from the calculation of EPS.

4. SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Income taxes

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used are those that are substantively enacted by the end of the reporting date.

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

The change in the net deferred income tax asset or liability is included in income except for deferred income tax relating to equity items which is recognized directly in equity. The income tax effects of differences in the periods when revenue and expenses are recognized, in accordance with Company accounting practices, and the periods they are recognized for income tax purposes are reflected as deferred income tax assets or liabilities. Deferred income tax assets and liabilities are measured using the substantively enacted statutory income tax rates which are expected to apply to taxable income in the years in which the assets are realized or the liabilities settled. A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.

Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity and are intended to be settled on a net basis.

The determination of current and deferred taxes requires interpretations of tax legislation, estimates of expected timing of reversal of deferred tax assets and liabilities, and estimates of future earnings.

Recently Adopted Accounting Standards

IFRS 16 'Leases':

IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. Under IFRS 16, lessees assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to use an identified asset for a period of time in exchange for consideration. With the exception of leases with a lease term of 12 months or less and leases of low value assets, IFRS 16 requires the recognition of a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee.

The Company is classified as a CPC with a limited number of transactions and has not entered into any agreements which are leases as defined in IFRS 16. As a result, the adoption of IFRS 16 on January 1, 2019 had no material impact on the financial statements of the Company.

5. CASH AND CASH EQUIVALENTS

On May 10, 2019, the Company opened a one-year cashable Guaranteed Investment Certificate ("GIC") for $350,000. The GIC has a maturity date of May 10, 2020, with an interest rate of 1.35% per annum. As at December 31, 2019, accrued interest of $3,042 is included in other receivables (2018 - $128).

6. EQUITY INSTRUMENTS

(a) Common shares

Year ended December 31, 2019

The Company did not issue any common shares during the year ended December 31, 2019.

Period from incorporation on January 15, 2018 to December 31, 2018

On January 15, 2018, the Company issued 2,000,000 common shares at the price of $0.05 per common share.

On June 15, 2018, the Corporation issued 5,000,000 common shares at the price of $0.10 per common share pursuant to the IPO for gross proceeds of $500,000.

(b) Share issuance costs

Share issuance costs for the period from incorporation January 15, 2018 to December 31, 2018 were $144,511 in relation to the initial public offering ("IPO") which occurred on June 15, 2018. Included in $144,511 in share issuance costs was $32,160 in fair value of 500,000 non-transferable options issued to the agent of the IPO (see below).

(c) Stock options

The Company has a stock option plan to purchase the Company's common shares, under which it may grant stock options of up to 10% of the Company's total number of shares issued and outstanding on a non-diluted basis. The stock option plan provides for the granting of stock options to directors, officers, and employees, and to persons providing investor relations or consulting services, the limits being based on the Company's total number of issued and outstanding shares per year. The stock options vest on the date of grant. The option price must be greater than or equal to the discounted market price on the grant date, and the option term cannot exceed five years from the grant date.

6. EQUITY INSTRUMENTS (cont'd)

A summary of changes in stock options were as follows:

	Numberof options	Weighted averageexercise price
		$
Outstanding, January 15, 2018	-	-
Granted	1,200,000	0.10
Exercised	-	-
Outstandingand exercisable,December 31, 2018	1,200,000	0.10
Granted	-	-
Exercised	-	-
Outstandingand exercisable,December 31, 2019	1,200,000	$0.10

At December 31, 2019, the following stock options were outstanding:

Numbers of options
outstanding	Exercise price	Expiry date
500,000	$0.10	June15, 2020
700,000	$0.10	June15, 2023
1,200,000

At December 31, 2019, the weighted average remaining contractual life of the outstanding options is 2.21 years.

The fair value of options granted was determined based on the Black-Scholes Option Pricing Model using the weighted average assumptions set out as follows:

Assumptions	Granted	June 15, 2018	June 15, 2018
Option volume		500,000	700,000
Risk-free interest rate		1.88%	1.86%
Expected volatility		128%	128%
Dividend yield		0%	0%
Expected life		2years	5years
Share price		$0.10	$0.10
Fair valueof optionat grant date		$0.10	$0.10

Elephant Hill Capital Inc. Notes to the Financial Statements (Express in Canadian dollars) For the years ended December 31, 2019 and 2018

7. RESERVES

	December 31,	December 31,
	2019	2018
Balance, beginning of period	$92,082	$-
Share-based payments	-	59,922
Broker options issued for the IPO	-	32,160
Balance, end of period	$92,082	$92,082

During the period from incorporation on January 15, 2018 to December 31, 2018, the Company granted 500,000 non-transferable options to the agent on the IPO offering and 700,000 options to directors and officers of the Company with a fair value of $32,160 and $59,922, respectively.

8. LOSS PER SHARE

The following reflects the loss and unit data used in the basic and diluted loss per share computations:

	For the year ended		January 15 to
		December 31, 2019	December 31, 2018
Issued common shares at open		7,000,000	-
Effect of common shares issued during the period		-	4,842,857
Effect of escrowed shares		(2,000,000)	(2,000,000)
		5,000,000	2,842,857
Net loss	$	51,107	$130,983
Loss per share–basic and diluted	$	(0.01)	$(0.05)

Basic loss per share amounts are calculated by dividing net loss for the period attributable to ordinary equity holders of the Company by the weighted average number of common shares outstanding during the period. The Company has excluded common share purchase warrants and potential common share equivalents, comprised of incremental shares from stock options calculated using the treasury method from the loss per share calculation, as they were anti-dilutive.

Removed from the effect of the per share amounts are shares held in escrow. The Company's shareholders are subject to the TSX's Capital Pool Companies Policy 2.4 whereby all 7,000,000 shares issued are held in escrow until the issuance of the Final Exchange Bulletin. Under the Seed Share Escrow Agreement, 10% of the escrowed Seed Shares will be released from escrow on the issuance of the Final Exchange Bulletin (the "Initial Release") and an additional 15% will be released on the dates 6 months, 12 months, 18 months, 24 months, 30 months and 36 months following the Initial Release

9. RELATED PARTY DISCLOSURES

Key management personnel compensation

All related party transactions are carried out in the normal course of operation.

The Company has identified its directors and certain officers as its key management personnel. There was no key management compensation or other related party transactions during the year ended December 31, 2019.

For the period from incorporation on January 15, 2018 to December 31, 2018, the Company incurred $59,922 in share-based payments related to stock options issued as total compensation to directors and officers of the Company.

9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, other receivables, accounts payables and other liabilities. Cash and cash equivalents are measure at FVTPL. The fair value of the financial assets and financial liabilities are included at the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Other receivables and accounts payable and other liabilities approximate their carrying amounts due to the short-term maturities of these instruments.

Fair values of quoted instruments are based on price quotations at the reporting date. The fair value of unquoted instruments and other financial liabilities are estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk, and maturities.

Fair value hierarchy

As at December 31, 2019, the Company held the following financial instruments measured at fair value: cash and cash equivalents (level 1).

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)

During the year ended December 31, 2019, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Corporation's financial assets consist of cash and cash equivalents and other receivables. The Company's maximum exposure to credit risk, as at period-end, is the carrying value of its financial assets. The company mitigates credit risk by holding financial instruments within financial institutions of high creditworthiness.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2019, the Company had cash and cash equivalents of $378,271 to satisfy accounts payable and other liabilities of $15,832.

Other risks

None of the Company's future cash flows of financial instruments are subject to change from other price changes and currency risks.

11. Capital Management

The Company's objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue its operations and to maintain a flexible capital structure, which optimizes the costs of capital at an acceptable risk. The Company considers its capital for this purpose to be its equity.

The Company's primary source of capital is through the issuance of common shares. The Company manages and adjusts its capital structure when changes in economic conditions occur. To maintain or adjust the capital structure, the Company may seek additional funding. The Company may require additional capital resources to meet its administrative overhead expenses in the long term. The Company believes it will be able to raise capital as required in the long term but recognizes there will be risks involved that may be beyond its control. There are no external restrictions on the management of capital.

12. INCOME TAXES

The following table reconciles the amount of income tax recoverable on application of the statutory Canadian federal and provincial income tax rates:

	2019$	2018$
Loss before tax per financial statements	(51,107)	(130,983)
Canadian statutory income tax rate	27%	27%
Income tax recoverable at statutory ratesPermanent differencesChange in unrecognized tax assets	13,799720(13,079)	35,36513,852(49,217)
Income tax recoverable	–	–

The tax effects of temporary differences that give rise to significant portions of the potential deferred tax assets are as follows:

	2019	2018
	$	$
Deferred income tax assets
Non-capital losses carried forward	44,095	24,949
Share issuance costs	18,201	24,268
Unrecognized deferred tax assets	(62,296)	(49,217)
Net deferred income tax assets	–-	–-

In assessing the realizability of deferred tax assets, management considers whether it is probable that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The amount of deferred tax asset considered realizable could change materially in the near term based on future taxable income during the carry forward period.

The Company has losses carried forward of approximately $163,316 available to reduce income taxes in future years which begin to expire starting in 2038.