ReGen III Corp. — Annual Report 2020

May 1, 2021

Gen III Oil Corporation

Consolidated Financial Statements For the Year Ended December 31, 2020 (Expressed in Canadian dollars)

For the Year Ended December 31, 2020	Page
Management's Report	3
Independent Auditor's Report	4
Consolidated Statements of Financial Position	7
Consolidated Statements of Loss and Comprehensive Loss	8
Consolidated Statements of Changes in Deficit	9
Consolidated Statements of Cash Flows	10
Notes to the Consolidated Financial Statements	11 - 37

The accompanying consolidated financial statements of Gen III Oil Corporation (the "Company") are the responsibility of management and have been approved by the Board of Directors. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as outlined in Part 1 of the Chartered Professional Accountants of Canada Handbook - Accounting, and include some amounts that are based on management's estimates and judgment.

The Board of Directors carries out its responsibility for the consolidated financial statements principally through its Audit Committee. The Audit Committee reviews the Company's annual consolidated financial statements and recommends its approval to the Board of Directors. The Company's auditors have full access to the Audit Committee, with and without management being present. These consolidated financial statements have been audited by Ernst & Young LLP, Chartered Professional Accountants.

(Signed) Greg Clarkes (Signed) Rick Low Chief Executive Officer Chief Financial Officer

Vancouver, British Columbia, Canada April 30, 2021

	December 31, 2020	December 31, 2019
	\$	\$
ASSETS
Current
Cash and cash equivalents	1,356,241	732,686
Accounts receivable (note 10)	146,661	80,787
Prepaid expenses	73,840	124,900
Investment in sublease (note 4)	-	23,944
	1,576,742	962,317
Deferred transaction costs (note 5)	-	318,207
Property (note 6)	8,328	8,328
Investments (note 7)	49,759	26,794
Right-of-use assets (note 8)	9,663,345	9,649,864
Total assets	11,298,174	10,965,510
LIABILITIES AND DEFICIT
Current
Accounts payable and accrued liabilities (note 10)	863,456	680,474
Lease liabilities (note 8)	3,877,816	2,148,642
Accrued tax provision	231,000	211,000
	4,972,272	3,040,116
Non-current
Lease liabilities (note 8)	10,457,194	10,039,482
Term loan (note 9)	36,216	-
Total liabilities	15,465,682	13,079,598
Shareholders' Deficit
Share capital (note 11)	82,312,392	79,954,317
Contributed surplus	9,208,376	8,900,467
Accumulated deficit	(95,738,035)	(90,995,666)
Accumulated other comprehensive income
Unrealized gain on investments (note 7)	49,759	26,794
Total shareholders' deficit	(4,167,508)	(2,114,088)
	11,298,174	10,965,510

Subsequent events (note 17)

Approved on behalf of the Board of Directors:

"Greg Clarkes" "Larry Van Hatten"

Greg Clarkes, Director Larry Van Hatten, Director

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

______________________________ __________________________

Gen III Oil Corporation Consolidated Statements of Loss and Comprehensive Loss For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

	2020	2019
	\$	\$
Expense Amortization of right-of-use assets (note 8)	667,866	663,736
General and administration	411,606	589,289
Investor relations	49,635	109,370
Professional fees	351,245	917,927
Salaries and benefits (note 10)	1,031,628	1,472,736
Share-based payments (note 11)	293,140	665,249
Travel and accommodation	4,177	178,844
	2,809,297	4,597,151
Other (income) expense
Interest income	(3,277)	(26,889)
Government grant (note 9)	(4,772)	-
Rent income	(21,551)	(43,103)
Finance income from lease – head office premises (note 4)	(686)	(6,057)
Finance cost for lease – plant site (note 8)	1,600,117	1,411,963
Finance costs of lease – head office premises (note 8)	60,376	15,532
Foreign exchange (gain) loss	(5,439)	16,478
Transaction costs (note 5)	308,304	-
	1,933,072	1,367,924
Net loss for the year	4,742,369	5,965,075
Other comprehensive loss Unrealized gain on investments (note 7)	(22,965)	-
Total comprehensive loss for the year	4,719,404	5,965,075
Loss per share – basic and diluted	0.06	0.08
Weighted average number of shares outstanding - basic and diluted	84,840,746	73,938,496

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

	Share capital	Contributed surplus	Accumulated deficit	Unrealized gain on investments	Total
	\$	\$	\$	\$	\$
Balance as at January 1, 2019	77,106,600	8,546,950	(85,030,591)	26,794	649,753
Issuance of share capital (note 11)	3,167,344	(463,094)	-	-	2,704,250
Issuance of warrants (note 11)	(109,075)	109,075	-	-	-
Share issuance costs – share capital (note 11)	(168,265)	-	-	-	(168,265)
Share issuance costs – broker warrants (note 11)	(42,287)	42,287	-	-	-
Share-based payments (note 11)	-	665,249	-	-	665,249
Loss for the year	-	-	(5,965,075)	-	(5,965,075)
Balance as at December 31, 2019	79,954,317	8,900,467	(90,995,666)	26,794	(2,114,088)
Issuance of share capital (note 11)	2,483,737	(50,313)	-	-	2,433,424
Issuance of units (note 11)	(50,800)	50,800	-	-	-
Share issuance costs – share capital and units (note 11)	(60,580)	-	-	-	(60,580)
Share issuance costs – broker warrants (note 11)	(14,282)	14,282	-	-	-
Share-based payments (note 11)	-	293,140	-	-	293,140
Loss for the year	-	-	(4,742,369)	-	(4,742,369)
Other comprehensive gain	-	-	-	22,965	22,965
Balance as at December 31, 2020	82,312,392	9,208,376	(95,738,035)	49,759	(4,167,508)

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

Gen III Oil Corporation Consolidated Statements of Cash Flows For year ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

	2020	2019
	\$	\$
Operating activities
Net loss for the year	(4,742,369)	(5,965,075)
Adjustments for items not involving cash
Amortization of right-of-use assets (note 8)	667,866	663,736
Share-based payments (note 11)	293,140	665,249
Government grant (note 9)	(3,784)	-
Lease interest – plant site (note 8)	1,600,117	1,411,963
Lease interest – head office premises (note 8)	60,376	15,532
	(2,124,654)	(3,208,595)
Net change in non-cash working capital
Accounts receivable	(65,874)	54,469
Prepaid expenses	20,170	20,508
Accounts payable and accrued liabilities	501,189	(350,258)
Accrued tax provision	20,000	28,400
Net cash flows used in operating activities	(1,649,169)	(3,455,476)
Financing activities
Deferred transaction costs (note 5)	-	(318,207)
Payment of lease liabilities (note 8)	(164,064)	(198,639)
Term loan (note 9)	40,000	-
Issuance of share capital (note 11)	2,433,424	2,704,250
Share issuance costs (note 11)	(60,580)	(168,265)
Net cash flows from financing activities	2,248,780	2,019,139
Investing activities
Investment in sublease (note 4)	23,944	53,055
Net cash flows from investing activities	23,944	53,055
Increase (decrease) in cash and cash equivalents during the year	623,555	(1,383,282)
Cash and cash equivalents, beginning of the year	732,686	2,115,968
Cash and cash equivalents, end of the year	1,356,241	732,686

Supplemental cash flow information (note 15)

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

1. NATURE OF OPERATIONS AND GOING CONCERN

Gen III Oil Corporation (the "Company" or "Gen III Oil") was incorporated under the laws of British Columbia and continued its incorporation into Alberta on December 6, 2017. The Company holds patents to the ReGenTM technology and plans to use the technology to re-refine used motor oil into high quality base lubricating oils. The Company's address is Suite 1750 - 400 Burrard St. Vancouver, B.C., V6C 3A6, Canada.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assumes that the Company will continue its operations and will be able to realize its assets and discharge its liabilities in the normal course of operations for the foreseeable future. At December 31, 2020, the Company had a working capital deficit of \$3,395,530 had not yet achieved profitable operations and expects to incur further losses in the development of its business. For the year ended December 31, 2020, the Company reported a net loss of \$4,742,369 and comprehensive loss of \$4,719,404 and as at December 31, 2020, had an accumulated deficit of \$95,738,035. The Company has not generated revenues from operations. The Company is dependent on debt and equity financings to fund its operations. Management of the Company believes that the current level of funds is not sufficient to pay for expected cash expenditures over the next 12 months. The recoverability of the underlying value of the Company's assets is entirely dependent on the Company's ability to obtain the necessary financing to complete development of the ReGenTM technology, and future profitable production. The Company's ability to obtain financing may be subject to additional risks brought on by the current Covid-19 pandemic such as, but not limited to, temporary business closures, travel restrictions, quarantines, the general market uncertainty and reduced economic activity. These material uncertainties may cast significant doubt upon the Company's ability to continue as a going concern. The Company's consolidated financial statements for the year ended December 31, 2020 do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary should the going concern assumption be inappropriate, and such adjustments could be material.

Covid-19 Pandemic

In March 2020, the World Health Organization declared a global pandemic related to the virus known as Covid-19. The expected impacts on global commerce has been and are anticipated to be far reaching. To date, the movement of people and goods has become restricted.

As the duration of the Covid-19 pandemic and its continuing effect on the economy is unknown at this time, the Company continues to gather information and assess the impact of this pandemic on the future of its development plans.

2. BASIS OF PREPARATION

Statement of Compliance

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

These consolidated financial statements have been prepared on a historical cost basis, except investments that have been measured at fair value.

These financial statements for the year ended December 31, 2020 were approved and authorized for issue by the Board of Directors on April 30, 2021.

Certain comparative figures have been reclassified to conform with the basis of presentation adopted in the current period.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, and its wholly owned subsidiary, Gen III Oil (Alberta) Inc., a corporation incorporated under the provincial laws of Alberta on November 1, 2017.

(b) Foreign Currency Translation

The presentation and functional currency of the Company is the Canadian dollar.

The functional currency of the Company and its subsidiary is determined based on the currency of the primary economic environment in which that entity operates.

Transactions and balances:

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the period in which they arise.

(c) Cash and cash equivalents

Cash and cash equivalents include cash on hand and deposits with financial institutions that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

(d) Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation and accumulated impairment losses or at the lower of their carrying value and estimated recoverable amount. The cost of an item consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item.

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

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

The residual values, useful lives, and methods of depreciation are reviewed at each reporting period and adjusted prospectively if appropriate.

(e) Impairment of Non-Financial Assets

At each reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the assets belong. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount, net of amortization, that would have been determined had no prior impairment loss been recognized for the asset.

(f) Financial Instruments

Financial Assets

All financial assets are initially recorded at fair value and designated upon inception into one of the following three categories: amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL").

Financial assets classified as amortized cost are initially measured at fair value and are subsequently measured at amortized cost. The Company's cash and cash equivalents and accounts receivable are classified as amortized cost.

Financial assets classified as FVTPL are initially measured at fair value with unrealized gains and losses recognized through profit and loss. Regular way purchases and sales of FVTPL financial assets are accounted for at trade date, as opposed to settlement date. The Company has not classified any financial assets as FVTPL.

Financial assets classified as FVOCI are initially measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) except for recognition of credit impairment gains and losses, foreign exchange gains and losses, and interest revenue which are recorded in profit or loss. The Company's investment in the shares of Coppermoly Ltd. is classified as FVOCI. The Company made an election to continue to measure the fair value changes in other comprehensive loss.

Transactions costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

Financial Liabilities

All financial liabilities are initially recorded at fair value and designated upon inception as amortized cost or FVTPL.

Financial liabilities classified as amortized cost are initially recognized at fair value and are subsequently measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period of maturity. The effective interest rate is the rate that exactly discounts estimated future cash payments to the carrying value through the expected life of the financial liability, or, where appropriate, a shorter period. The Company's accounts payable and accrued liabilities are classified as amortized cost.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Fair value changes on financial liabilities classified as FVTPL are recognized through profit and loss. The Company has not classified any financial liabilities as FVTPL.

A financial liability is derecognized when the associated obligation is discharged, cancelled or expired.

Impairment of Financial Assets

The Company assesses at each reporting date whether a financial asset is impaired.

(f) Financial Instruments (continued)

If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is then reduced by the amount of the impairment. The amount of the loss is recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent reversal of an impairment loss is recognized in profit or loss.

(g) Rehabilitation Provision

The Company is subject to various government laws and regulations relating to environmental disturbances caused by construction activities. The Company records the present value of the estimated costs of legal and constructive obligations required to restore the sites in the period in which the obligation is incurred. The nature of the rehabilitation activities includes restoration, reclamation and re-vegetation of the affected sites.

The rehabilitation provision generally arises when the environmental disturbance is subject to government laws and regulations. When the liability is recognized, the present value of the estimated costs is capitalized by increasing the carrying amount of the related asset. Over time, the discounted liability is increased for the changes in present value based on current market discount rates and liability specific risks. Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to the corresponding assets and rehabilitation liability in the period in which they occur.

Provisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of past transactions, including legal or constructive obligations. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date. As at December 31, 2020 the Company has not incurred any legal or constructive obligations that require a rehabilitation provision.

• (h) Income Taxes
• (i) Current income tax

Current income tax assets and liabilities for the current period 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, at the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive loss or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations where applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

(ii) Deferred tax

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

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• · Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit (tax loss).
• · In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the parent, investor or venturer and it is probable that the temporary differences will not reverse in the foreseeable future.

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

• · Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
• · In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available, against which the temporary differences can be utilized.

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

(h) Income Taxes (continued)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to 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 by the end of the reporting period.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Such deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive loss or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognized subsequently if new information about facts and circumstances arises. The adjustment is either treated as a reduction to goodwill (as long as it does not exceed goodwill) if it occurred during the measurement period or recognized in profit or loss thereafter.

(i) Share Capital

Instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company's common shares, options and share warrants are classified as equity instruments.

Incremental costs directly attributable to the issue of new shares, options, or warrants are shown in equity as a deduction, net of tax, from the proceeds.

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in private placements was determined to be the more easily measurable component and the common shares were valued at their fair value, as determined by the closing trading price on the issuance date. The balance, if any, was allocated to the attached warrants.

In situations where share capital is issued, or received, as non-monetary consideration and the fair value of the asset or services received, or given up is not readily determinable, the fair market value (as defined) of the shares is used to record the transaction. The fair market value of the shares issued, or received, is based on the trading price of those shares on the appropriate Exchange on the date the shares are issued.

(j) Loss Per Share

Basic loss per share is computed by dividing the net loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period.

Diluted loss per common share is computed by dividing the net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common

(j) Loss Per Share (continued)

shares that would have been outstanding, if potentially dilutive instruments were converted.

Basic and diluted loss per share are the same, as under the treasury stock method, the effect of common shares issuable upon the exercise of stock options would be anti-dilutive.

(k) Share-based Payments

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to profit and loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit and loss over the remaining vesting period.

When equity instruments are granted to non-employees, they are recorded at the fair value of the goods and services received, unless the fair value of the goods and services received cannot be reasonably measured, in which case they are measured at the fair value of the equity instruments issued. Expenses are recorded in the statement of loss and comprehensive loss.

When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid.

Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity instrument except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

(l) Segmented Reporting

The Company operates in one segment, being the used motor oil re-refinery business.

(m) Leases

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, Standing Interpretations Committee ("SIC")-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company elected to calculate lease liabilities and right-of-use assets on the application date and not at inception of the leases.

The Company applied the available practical expedients wherein it:

• I. Used a single discount rate to leases with reasonably similar characteristics.
• II. Relied on its assessment of whether leases are onerous immediately before the date of initial application.
• III. Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.
• IV. Accounted for the lease component and associated non-lease component in lease payments as a single lease component.
• V. Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application
• VI. Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Company has office leases and a plant lease for the Bowden plant. Before the adoption of IFRS 16, the Company classified each of its leases at the inception date as an operating lease. In an operating lease, the leased property was not capitalized and the lease payments were recognized as rent expense in profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognized under prepaid expenses and accounts payable and accrued liabilities, respectively. Upon adoption of IFRS 16, the Company applied a single recognition and measurement approach for all leases.

The Company recognized investment in sublease, right-of-use assets and lease liabilities for those leases previously classified as operating leases. The right-of-use assets for most leases were recognized based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-of-use assets were recognized based on the amount equal to the lease liabilities, adjusted for deferred rent liability previously recognized. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

(m) Leases (continued)

The effect of adopting IFRS 16 as at January 1, 2019 (increase/(decrease)) is as follows:

	\$
Assets
Investment in sublease – current portion	53,055
Investment in sublease – long-term portion	28,870
Right-of-use-assets	10,313,600
Total Assets	10,395,525
Liabilities
Lease liabilities – current portion	803,888
Lease liabilities – long-term portion	9,591,637
Total liabilities	10,395,525

· Right-of-use assets

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over a range of one and 19 years, which is the shorter of their estimated useful life and the lease term. Right-of-use assets are subject to impairment.

· Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

• (m) Leases (continued)
• · Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

(n) Significant Accounting Estimates and Judgments

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to the valuation of equity instruments.

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

The Company evaluates its going concern by estimating future expenditures using actual historical expenditures and current and estimated future commitments. Historical trends may not be an accurate indicator of future performance and circumstances for commitments may change.

At each reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). In estimating the recoverable amount of the asset, the Company uses market values or estimated cash flows based on historical trends and expected future cash flows. Historical trends may not be an accurate indicator of future performance and actual results may differ significantly from estimates.

(n) Significant Accounting Estimates and Judgments

Significant accounting judgements for Leases

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has the option, under some of its leases to lease the assets for additional terms. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

The Company applies significant judgments in determining its incremental borrowing rate used in calculating the present value of lease payments. The Company takes into account factors such as interest rates in borrowings that are similar in nature and term to its leases. The Company compares its incremental borrowing rate to the rate incurred by similar market participants.

(o) New and amended standards and interpretations

Amendments to IAS 1 and IAS 8 Definition of Material

The amendments provide a new definition of material that states, "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Company.

4. INVESTMENT IN SUBLEASE

Set out below, are the carrying amounts of the Company's investment in sublease and the movements during the year:

	\$
As at January 1, 2019	81,925
Prepaid rent	(4,926)
Interest accretion	6,057
Lease payments received	(59,112)
As at December 31, 2019	23,944
Interest accretion	686
Lease payments received	(24,630)
As at December 31, 2020	-

5. DEFERRED TRANSACTION COSTS

Deferred transaction costs consist of consulting costs incurred to evaluate potential financing for a plant in Alberta. These costs have been expensed for the year ended December 31, 2020 as the Company is now negotiating financing with other parties other than the party to which the deferred transaction costs relate.

6. PROPERTY AND EQUIPMENT

The Company owns land with a carrying value of \$8,328 as at December 31, 2020 and 2019.

7. INVESTMENTS

The Company holds 3,827,646 shares of Coppermoly Ltd. ("COY"), initially valued at \$440,102. Changes in fair value, based on the market price on the Australian Stock Exchange, are recorded in other comprehensive income. Changes in fair value are shown in the table below.

	\$
December 31, 2019	26,794
Unrealized gain	22,965
December 31, 2020	49,759

8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

The Company has recorded the plant site and head office leases as a right-of-use assets and lease liability in the statement of financial position as at December 31, 2019. On January 1, 2019, the lease liability was measured at the present value of the future lease payments that were not paid at that date. These lease payments are discounted using a discount rate of 12%, which is the Company's incremental borrowing rate.

Set out below, are the carrying amounts of the Company's right-of-use assets and lease liabilities and the movements during the year:

	Right-of-Use-Assets	Lease Liabilities
	\$	\$
Balance, as at January 1, 2019	10,395,525	10,395,525
Unpaid rent	-	600,000
Prepaid rent	-	(36,257)
Investment in sublease	(81,925)	-
Amortization	(663,736)	-
Interest accretion – plant site	-	1,411,963
Interest accretion – head office premises	-	15,532
Lease payments	-	(198,639)
Balance, as at December 31, 2019	9,649,864	12,188,124
New operating lease	681,347	681,347
Prepaid rent	-	(30,890)
Amortization	(667,866)	-
Interest accretion – plant site	-	1,600,117
Interest accretion – head office premises	-	60,376
Lease payments	-	(164,064)
Balance, as at December 31, 2020	9,663,345	14,335,010

8. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)

	Right-of-Use-Assets \$	Lease Liabilities \$
Current portion of lease liabilities	-	3,877,816
Long-term portion of lease liabilities	-	10,457,194
Head office premises	567,789	-
Plant site	9,095,556	-
Balance, as at December 31, 2020	9,663,345	14,335,010

On June 17, 2019, the Company entered into a lease agreement for the lease of its office premises for an initial term of five years commencing on March 1, 2020. The Company has recorded this lease as a right-of-use asset and lease liability on March 1, 2020. As at March 1, 2020, the total future lease payments of \$896,169 over the initial lease term was discounted at the Company's incremental borrowing rate of 12% and the Company recorded a lease liability and right-of-use-asset of \$681,347.

The Company's outstanding lease payments on a calendar year basis as at December 31, 2020 are shown in the table below.

	2021 \$	2022 \$	2023 \$	2024 \$	2025 \$	Thereafter \$
Total office lease payments	165,385	169,203	188,813	192,978	2,082	-
Plant site lease payments	4,933,000	1,200,000	1,288,000	1,296,000	1,296,000	17,256,672
Total lease payments	5,098,385	1,369,203	1,476,813	1,488,978	1,298,082	17,256.672

During the year ended December 31, 2020, the Company made \$73,535 (2019 - \$102,861) of variable lease payments consisting of property maintenance expenses. In addition to basic rent, the Company pays monthly property maintenance expenses during the term of the office leases. All of these costs are recognized in general and administrative expenses.

During the year ended December 31, 2020, the Company made \$49,028 (2019 - \$58,190) of short-term lease payments. The lease expired on July 31, 2020. After the expiry date, it was leased on a month-to-month basis. The lease was terminated on October 31, 2020.

The plant site lease agreement commenced on February 1, 2018 and is for an initial term of 20 years. The Company and landlord may mutually agree to extend the lease term for an additional two terms, one for 10 years and the other for five years. Annual basic rent is \$1,200,000 with an increase of the greater of 2% or the Alberta Consumer Price Index on each fifth anniversary of the lease term. Currently, the landlord may cancel the lease agreement if rent payments are in arrears and if the Company does not rectify after receiving 30 days written notice. According to the lease agreement, rent payments are in arrears. However, the landlord has not completed certain pre-construction work nor given written notice of the rent arrears. The Company has recorded the rent payment arrears, plus interest accretion, as current liabilities. However, the Company and the landlord are in communication to rectify the situation to the satisfaction of both parties. The lease agreement requires the Company to decommission the existing Bowden plant facility before construction of the new oil re-refinery plant, provided that the landlord completes certain pre-construction work, which to-date has not been completed. The Company estimates that the cost of this decommission work to be approximately \$3.5 million. In addition, the Company is required to provide a security deposit of \$2 million before commencement of any work on the Bowden facility, which to-date has not commenced.

9. TERM LOAN

On June 11, 2020, the Company obtained an unsecured and interest free \$40,000 term loan from the Government of Canada that is available for drawdown until December 31, 2020. On June 11, 2020, the Company drew down \$40,000 of the LOC. As the LOC was not repaid by December 31, 2020, the LOC was converted to a 2-year unsecured and interest free term loan to be repaid by December 31, 2022. On December 31, 2022, the Company has the option to convert the loan into a 3-year unsecured term loan at an annual interest rate of 5%. The remaining balance is to be paid in full no later than December 31, 2025. The balance of the loan may be repaid less a 25% forgiveness if repaid in full by December 31, 2022.

As the loan is interest free, the Company recorded the present value of loan using a discount rate of 5%, which is the implicit interest rate of the loan. Accordingly, on June 11, 2020, the Company recorded \$35,228 as the estimated fair value of the loan and recognized \$4,772 as government grant. Interest on the loan will be accreted using the effective interest method with an interest rate of 5%. During the year ended December 31, 2020, the Company recognized \$988 of accreted interest. If the Company repays the loan by December 31, 2022, the Company will recognize the difference between the carrying value of the loan and the amount repaid as government grant.

10. RELATED PARTY TRANSACTIONS

Transactions with related parties are measured at the exchange amount established and agreed to by the related parties. Key Management personnel include the Chief Executive Officer, the President, the former Executive Vice President, the Chief Operating Officer, the Executive Vice President Corporate Finance, the Chief Financial Officer and the Directors.

	Year ended December 31,
	2020	2019
	\$	\$
Salaries to Key Management personnel	854,385	1,035,077
Fees for consulting services to a company controlled by the former
Executive Vice President	-	5,000
Professional fees to a company controlled by a Director	70,000	65,500
Share-based payments to Key Management personnel	197,147	595,439
Total	1,121,532	1,701,016

Included in salaries to Key Management personnel for the year ended December 31, 2020, is \$15,885 in bonuses paid (2019 - \$13,000) for achieving private placement financing milestones.

Included in accounts payable and accrued liabilities as at December 31, 2020 is \$322,500 (December 31, 2019 - \$330,000) of accrued directors' fees, \$213,800 (December 31, 2019 - \$4,935) of wages and professional fees payable to officers and directors and \$7,777 (December 31, 2019 - \$12,735) of accrued expense reimbursements payable to officers and directors.

Included in accounts receivable as at December 31, 2020 is \$14,566 (December 31, 2019 - \$18,166) of withholding taxes paid on behalf of directors.

On February 13, 2019 the Company announced the unanimous uptake of all 3,075,000 stock options priced at \$0.17 per option, in advance of their expiry on February 8, 2019. Of these, 2,700,000 options were exercised by directors of the Company. The exercise resulted in the issuance of 3,075,000 common shares and gross proceeds to the Company of \$522,750.

10. RELATED PARTY TRANSACTIONS (continued)

On September 30, 2019, members of the Company's board of directors purchased an aggregate of 900,000 units of the Company's non-brokered private placement at \$0.20 per unit for gross proceeds of \$180,000. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable at a price of \$0.30 per share until September 30, 2020, which was subsequently extended to December 30, 2020. Cash commission of \$94,605 was paid and 473,025 broker warrants were issued to one of the finder companies in which an officer of the Company is a director.

On May 29, 2020, the Company completed a non-brokered private placement and issued an aggregate of 2,773,659 shares at a price of \$0.15 per share for gross proceeds of \$416,049. The Company paid finder's fees of \$25,973 in cash and issued 173,156 share purchase warrants to one of the finder companies in which an officer of the Company is a director.

On September 17, 2020, the Company completed a non-brokered private placement of 2,540,000 units at a price of \$0.20 per unit for gross proceeds of \$508,000. Each unit consists of one common share in the capital of the Company and one-half of one non-transferable common share purchase warrant. Each whole warrant is exercisable to acquire one share at an exercise price of \$0.30 per share until September 17, 2021. A member of the Company's board of directors purchased an aggregate of 250,000 units of the private placement for gross proceeds of \$50,000.

On November 24, 2020, the Company proposed to settle \$200,250 of accrued directors' fees, net of statutory deductions, in exchange for 513,460 common shares at a deemed price of \$0.39 per share. The shares for debt proposal was approved by the TSX Venture Exchange, settled and recorded by the Company on February 3, 2021 at a price of \$0.39 per share.

Debt Amount	Number of Shares	Nature of Debt
\$171,375	439,423	33 months of directors' fees less statutory deductions
\$ 28,875	74,037	33 months of committee fees less statutory deductions
\$200,250	513,460	Total

In December 2020, the Company issued 250,000 shares and 125,000 shares to a member and a former member of the Company's board of directors respectively, on the exercise of warrants at an exercise price of \$0.30 per share for gross proceeds of \$112,500.

In addition to the related party transactions noted above, the Company reimbursed all these related parties for out-of-pocket direct costs incurred on behalf of the Company. Such costs include travel, postage, courier charges, printing and telephone charges.

11. SHARE CAPITAL

(a) Authorized: Unlimited common shares without par value Unlimited number of preferred shares without par value

(b) Issued and outstanding:

	Number of
	common shares	\$
December 31, 2018	68,309,256	77,106,600
Private placements (note 10)	10,907,500	2,181,500
Issuance of warrants (note 10)	-	(109,075)
Exercise of options (note 10)	3,075,000	985,844
Share issuance costs – share capital	-	(168,265)
Share issuance costs – broker warrants	-	(42,287)
December 31, 2019	82,291,756	79,954,317
Issuance of share capital (note 10)	2,773,659	416,049
Issuance of units (note 10)	2,540,000	457,200
Exercise of warrants (note 10)	5,031,250	1,559,688
Share issuance costs – share capital and units	-	(60,580)
Share issuance costs – broker warrants	-	(14,282)
December 31, 2020	92,636,665	82,312,392

On September 30, 2019, the Company closed a non-brokered private placement at \$0.20 per unit for gross proceeds of \$2,181,500. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable at a price of \$0.30 per share until September 30, 2020, which was subsequently extended to December 30, 2020. The Company paid finders' fees consisting of cash fees in the aggregate of \$135,105 and 665,525 broker warrants exercisable at a price of \$0.30 per share until September 30, 2020. Cash commission of \$94,605 was paid and 473,025 broker warrants were issued to one of the finder companies in which an officer of the Company is a director. Members of the Company's board of directors purchased an aggregate of 900,000 units (note 10). In December 2020, the Company issued 250,000 shares and 125,000 shares to a member and a former member of the Company's board of directors respectively, on the exercise of warrants at an exercise price of \$0.30 per share for gross proceeds of \$112,500.

On May 29, 2020, the Company completed a non-brokered private placement (the "Offering"). In connection with the closing of the Offering, the Company issued an aggregate of 2,773,659 shares (the "Shares") at a price of \$0.15 per Share for gross proceeds of \$416,049. The Company paid aggregate finder's fees of \$26,873 and issued 173,156 Share purchase warrants (the "Finder's Warrants") in connection with subscriptions from subscribers introduced to the Offering by the finders. Each Finder's Warrant is exercisable to acquire one Share in the capital of the Company at an exercise price of \$0.15 per Share until May 29, 2021, which is 12 months from the date of issuance. The Company paid finder's fees of \$25,973 in cash and issued 173,156 Finder's Warrants to one of the finder companies in which an officer of the Company is a director (note 10).

On September 17, 2020, the Company completed a non-brokered private placement of 2,540,000 units at a price of \$0.20 per unit for gross proceeds of \$508,000. Each unit consists of one common share in the capital of the Company and one-half of one non-transferable common share purchase warrant. Each whole warrant is exercisable to acquire one share at an exercise price of \$0.30 per share until September 17, 2021. The Company paid cash finder's fee of \$3,000. A member of the Company's board of directors purchased an aggregate of 250,000 units of the private placement for gross proceeds of \$50,000 (note 10).

(c) Stock Options and Share-Based Payments

Stock options granted during the year ended December 31, 2020 and 2019 to the Company's officers, directors, employees and consultants were as follows:

Date of	Number of	Exercise	Expiry	Terms
grant	options	price	date
	granted
2019-January-10	250,000	\$0.70	2021-January-10	Stock options granted to a consultant. 125,000 options vested on April
				10, 2019. 62,500 options will vest upon the Company securing letters of
				intent with used UMO suppliers amounting to 117,000,000 US Gallons
				of UMO in the aggregate. 62,500 options will vest upon commencement
				and commissioning of the Bowden facility.
2019-April-01	3,750,000	\$0.40	2021-April-01	Stock options granted to directors, officers, employees and consultants
				of the Company. The options fully vested on April 1, 2019.
2019-July-19	200,000	\$0.40	2021-July-19	Stock options granted to an employee. All of the options vested 120 days
				from the date of grant.
2020-February-04	600,000	\$0.25	2022-February-04	Stock options granted to an employee of which 300,000 vest on May 31,
				2020 and 300,000 vest upon commissioning of the Bowden plant.
2020-June-02	600,000	\$0.20	2022-June-02	Stock options granted to an employee of which 300,000 vest on June 2,
				2020 and 300,000 vest upon financing of the Company's first re-refinery
				plant.
2020-September-30	750,000	\$0.20	2022-September-30	Stock options granted to a director that vests on December 29, 2020.
2020-November-18	1,000,000	\$0.30	2022-May-18	Stock options granted to a consultant for providing non-exclusive
				financial advisory services for a monthly fee with an initial term expiring
				December 31, 2021.

The aggregate fair value of the stock options granted during the year ended December 31, 2020 was \$182,794 (2019 - \$503,952). The fair value of the stock options granted to employees was estimated at the grant date using the Black-Scholes Option Pricing Model. The fair value of the stock options granted to Blue Deer Capital Partners, a non-employee, was recorded at the fair value of the goods and services received based on the reduction in the rate that Blue Deer Capital Partners charged to the Company. The Company is unable to reliably estimate the fair value of the goods and services received for stock options granted to other non-employees because the fees charged by those non-employees are at market rates with no allowance for stock options granted. Accordingly, the Company estimated the fair value of the stock options granted to those non-employees using the Black-Scholes Option Pricing Model. The inputs for the Black-Scholes Option Pricing Model are as follows:

	Year ended December 31,
Inputs	2019
Risk free interest rate	0.25% - 1.58%	1.37% - 1.88%
Expected dividend yield	nil	nil
Expected annual volatility	109% - 121%	97% - 108%
Expected life	2 years	2 years
Forfeiture rate	0% - 20%	0% - 23%

(c) Stock Options and Share-Based Payments (continued)

A summary of the status of the Company's stock options as at December 31, 2020 and changes during the year are as follows:

	Number of options	Weighted average exercise price \$
Outstanding – December 31, 2018	5,722,500	0.41
Options granted	4,200,000	0.42
Options exercised	(3,075,000)	0.17
Options expired	(105,000)	0.72
Outstanding – December 31, 2019	6,742,500	0.52
Options granted	2,950,000	0.24
Options - forfeited	(62,500)	0.70
Options expired	(2,300,000)	0.58
Outstanding – December 31, 2020	7,330,000	0.39

The following stock options were outstanding as at December 31, 2020:

Number of options	Exercise price per option \$	Expiry date
250,000	0.70	January 10, 2021
1,080,000	0.70	March 13, 2021
3,050,000	0.40	April 1, 2021
600,000	0.25	February 4, 2022
600,000	0.20	June 2, 2022
750,000	0.20	September 30, 2022
1,000,000	0.30	May 18, 2022
7,330,000

The Company has the following stock options outstanding and exercisable:

		2020
	Options Outstanding		Options Exercisable
	Weighted Average			Weighted
Number of	Remaining	Weighted	Number of	Average
options at	Contractual Life	Average Exercise	options at	Exercise
December 31,			December 31,
2020	(Years)	Price \$	2020	Price \$
7,330,000	0.71	0.39	5,525,000	0.34

(c) Stock Options and Share-Based Payments (continued)

		2019
	Options Outstanding		Options Exercisable
	Weighted Average			Weighted
Number of	Remaining	Weighted	Number of	Average
options at	Contractual Life	Average Exercise	options at	Exercise
December 31,			December 31,
2019	(Years)	Price \$	2019	Price \$
6,742,500	1.04	0.52	4,775,000	0.45

(d) Warrants

On September 30, 2019, the Company closed a non-brokered private placement at \$0.20 per unit for gross proceeds of \$2,181,500. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant is exercisable at a price of \$0.30 per share until September 30, 2020, which was subsequently extended to December 30, 2020. The Company used the residual value method to allocate the cash consideration received. Of the total proceeds received, \$2,072,425 was allocated to the shares being the fair value of the shares (\$0.19 per share) and the residual of \$109,075 was allocated to the warrants. In connection with the September 30, 2019 private placement, the Company issued 665,525 broker warrants exercisable at a price of \$0.30 per share until September 30, 2020. The fair value of \$42,287 for the broker warrants was estimated at the grant date using the Black-Scholes Option Pricing Model. In December 2020, the Company issued 5,031,250 shares for the exercise of an aggregate of 5,031,250 warrants at an exercise price of \$0.30 per share for gross proceeds of \$1,509,375 and 422,500 of the remaining warrants expired unexercised.

On May 29, 2020, the Company completed the Offering. In connection with the closing of the Offering, the Company issued an aggregate of 2,773,659 Shares at a price of \$0.15 per Share for gross proceeds of \$416,049. The Company paid aggregate finder's fees of \$26,873 and issued 173,156 Finder's Warrants in connection with subscriptions from subscribers introduced to the Offering by the finders. Each Finder's Warrant is exercisable to acquire one Share in the capital of the Company at an exercise price of \$0.15 per Share until May 29, 2021, which is 12 months from the date of issuance. The fair value of \$14,282 for the Finder's warrants was estimated at the grant date using the Black-Scholes Option Pricing Model.

On September 17, 2020, the Company completed a non-brokered private placement of 2,540,000 units at a price of \$0.20 per unit for gross proceeds of \$508,000. Each unit consists of one common share in the capital of the Company and one-half of one non-transferable common share purchase warrant. Each whole warrant is exercisable to acquire one share at an exercise price of \$0.30 per share until September 17, 2021. The Company used the residual value method to allocate the cash consideration received. Of the total proceeds, \$457,200 was allocated to the shares being the fair value of the shares (\$0.18 per share) and the residual of \$50,800 was allocated to the warrants.

(d) Warrants (continued)

The inputs for the Black-Scholes Option Pricing Model are as follows:

Inputs	May 29, 2020	September 30, 2019
Risk free interest rate	0.26%	1.59%
Expected dividend yield	nil	nil
Expected annual volatility	127%	120%
Expected life	1 year	1 year
Forfeiture rate	0%	0%

A summary of the status of the Company's warrants as at December 31, 2020 and changes during the year are as follows:

	Number of Warrants outstanding	Weighed average exercise price \$
Outstanding – December 31, 2018	7,093,723	0.91
Warrants granted	6,119,275	0.30
Warrants expired	(4,891,598)	1.00
Outstanding – December 31, 2019	8,321,400	0.41
Warrants granted	1,443,156	0.28
Warrants exercised	(5,031,250)	0.30
Warrants expired	(3,290,150)	0.57
Outstanding – December, 2020	1,443,156	0.28

On September 30, 2020, 665,525 warrants expired unexercised.

On November 5, 2019, the Company extended the expiry dates of the 1,883,375 warrants to November 16, 2020 from November 16, 2019 and the 318,750 warrants to December 5, 2020 from December 5, 2019, all of which expired unexercised. The extension of these warrants did not result in any incremental value of the warrants.

On September 28, 2020, the Company extended the expiry date of the 5,453,750 warrants to December 30, 2020 from September 30, 2020, 422,500 of which expired unexercised. The extension of these warrants did not result in any incremental value of the warrants.

The 1,443,156 warrants outstanding as at December 31, 2020 consist of the following:

Number of warrants	Exercise price per warrant \$	Expiry date
173,156	0.15	May 29, 2021
1,270,000	0.30	September 17, 2021
1,443,156

11. SHARE CAPITAL

(e) Reserves

Contributed surplus

Share-based payments and warrant values, if any, are recognized in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount in contributed surplus is reclassified to share capital, adjusted for any consideration paid.

Cumulative translation adjustments

Unrealized gain on investments classified as fair value changes through other comprehensive income Financial assets classified as fair value changes through other comprehensive income are measured at fair value with unrealized gains and losses being recognized in other comprehensive loss.

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair Value of Financial Instruments

The Company's financial instruments at December 31, 2020 include cash and cash equivalents, accounts receivable, investments, accounts payable and accrued liabilities, accrued tax provision and term loan.

The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximates their carrying value due to their immediate or short-term nature, unless otherwise noted. The fair value of investments was based on the closing prices of COY shares on Australian Stock Exchange.

Fair Value Hierarchy

Financial instruments recorded at fair value on the Consolidated Statement of Financial Position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Fair values of financial instruments are determined by valuation methods depending on hierarchy levels as defined below:

Level 1 – Quoted market price in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included in level 1 that are observable for the assets or liabilities, either directly (i.e. observed prices) or indirectly (i.e. derived from prices)

Level 3 – Inputs for the assets or liabilities are not based on observable market data

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the highest level of the hierarchy for which a significant input has been considered in measuring fair value. The following table presents the financial instruments recorded at fair value in the Consolidated Statement of Financial Position, classified using the fair value hierarchy described above:

	Level 1	Level 2	Level 3
Asset	\$	\$	\$
December 31, 2020:
Cash and cash equivalents	1,356,241	-	-
Investments (note 7)	49,759	-	-
Term loan (note 9)	-	-	36,216
December 31, 2019:
Cash and cash equivalents	732,686	-	-
Investments (note 7)	26,794	-	-

The Company's risk exposures and the impact on the Company's financial instruments are summarized below:

Credit risk – is the risk of a financial loss to the Company if a counterparty fails to meet its contractual obligations. The Company's cash and cash equivalents is largely held in a Canadian financial institution and management believes that the credit risk with respect to financial instruments recorded on the Consolidated Statement of Financial Position at December 31, 2020 is minimal. The Company's accounts receivable consists of amounts receivable from government and directors. Management believes that the credit risk with respect to accounts receivable is minimal.

Currency risk – currency risk arises due to fluctuations in the exchange rates. The Company's equity financings are sourced in Canadian dollars and the normal day-to-day expenditures are incurred in Canadian dollars. As at December 31, 2020, the Company's holdings in foreign currencies are not material and exposure to currency risk is minimal.

Interest rate risk – is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's interest income is subject to bank deposit interest rates. During 2020, the Company received \$3,261 of interest income from banks. A 1% change in interest rate would affect loss before tax of approximately \$14,000. The Company's term loan does not carry an interest rate.

Liquidity risk – is the risk that the Company will be unable to meet its obligations as they become due. The Company manages its liquidity risk by implementing a budget, forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. As at December 31, 2020, the Company had \$1,356,241 in cash and cash equivalents, \$4,972,272 in current liabilities and \$10,493,410 in noncurrent liabilities.

The Company's current liabilities arose as a result of corporate expenses and accruals. Payment due dates for corporate expenses varies from invoice date to between 30 and 60 days from date of the invoices.

Price risk – the Company is exposed to price risk with respect to commodity and equity pricing, and the investment in COY. The Company is exposed to changes in market prices and a sensitivity analysis suggests that a 10% change in COY share prices would affect other comprehensive income or loss by approximately \$5,000 before tax.

13. CAPITAL MANAGEMENT

The Company manages its capital structure, being its share capital, and makes adjustments to it, based on the funds available to the Company, in order to support future business opportunities. The Company had share capital of \$82,312,392 and \$10,493,410 of non-current liabilities as at December 31, 2020. 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. Planning, annual budgeting, cash flow forecasting and implementing controls over major investment decisions are primary tools used to manage the Company's capital.

The Company's investment policy is to hold cash and cash equivalents in interest bearing bank accounts and highly liquid short-term interest-bearing investments with maturities of three months or less which can be liquidated at any time without penalties.

The Company currently has no source of revenues. As such, the Company is dependent upon external financings to fund activities. In order to carry future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

14. COMMITMENTS

On September 12, 2017, the Company entered into a purchase and sale agreement ("PSA") with Elbow River Marketing Ltd. ("Elbow River") for the majority of the Company's finished products from a proposed rerefinery in Bowden, Alberta. Under the terms of the PSA, Elbow River will purchase the majority of the Company's Bowden plant production and provide rail and truck transportation from the Bowden plant to Elbow River's customers. The agreement is for an initial term of five years from commencement of commercial operations as defined in the agreement. As of June 1, 2018, the agreement may be terminated by Elbow River acting reasonably by notice in writing. No notice has been received to date. Under the agreement, the Company has undertaken to reimburse reasonable set up costs incurred by Elbow River should the Company fail to deliver product by the projected commercial operations date that had been advised to Elbow River. As construction of the Bowden plant has not started, the Company has not yet advised Elbow River of such date and due to the nature and timing of these costs, it is not practicable to estimate such reimbursable costs at this time.

The Company is, from time to time, involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any pending or threatened proceedings related to any matter, or any amount which it may be required to pay by reason thereof, will have a material effect on the financial condition or future results of operations of the Company.

15. SUPPLEMENTAL CASH FLOW INFORMATION

	Year ended December 31,
	2020 2019
	\$	\$
Operating activities
Interest income received from banks	3,261	29,376
Total lease payments paid	237,599	301,501
Total lease receipts	35,887	86,128
Interest paid on lease liabilities	60,376	15,532

16. INCOME TAX

(a) The reconciliation of the Canadian statutory income tax rates to the effective tax rates are as follows:
	Year ended	Year ended
	December 31, 2020	December 31, 2019
Canadian statutory tax rate	23.99%	26.50%
Loss for the year before tax	\$ (4,742,369)	\$ (5,965,075)
Income tax recovery at statutory rates	(1,137,694)	(1,580,744)
Non-deductible (taxable) items	84,248	191,968
Deferred tax assets not recognized - change	1,358,649	1,181,920
Adjustment in respect of prior years	(204,293)	177,864
Effects of change in tax rates	(104,012)	28,992
Other	3,102	-
Income tax recovery (expense)	\$ -	\$ -

On June 29, 2019, the Alberta government reduced the corporate income tax rate from 12% to 8% as follows: 11% effective July 1, 2019; 8% effective July 1, 2020. As a result, the current year statutory tax rate decreased to 23.99%

(b) Deferred tax assets are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. The ability to realize the tax benefits is dependent upon numerous factors, including the future profitability of operations in the jurisdictions in which the tax benefits arose.

The Company did not recognize deferred tax assets for the following deductible temporary differences:

	December 31, 2020	December 31, 2019
Non-capital losses Capital losses	\$ 34,862,839 43,829,653	\$ 30,178,437 43,829,653
Other	5,521,622	5,041,991
	\$ 84,214,114	\$ 79,050,081

16. INCOME TAX (continued)

(c) The Company has approximately \$2,723,000 of unclaimed resource expenses for Canadian income tax purposes which can be carried forward indefinitely and used to reduce taxable income in Canada.

The above noted capital losses have indefinite expiry period.

As at December 31, 2020, the Company has the following net operating losses, expiring in various years to 2040 and available to offset future taxable income in Canada.

2031	\$ 1,446,000
2032	2,268,000
2033	2,412,000
2034	2,039,000
2035	1,868,000
2036	1,516,000
2037	4,654,000
2038	9,474,000
2039	4,913,000
2040	4,272,000
	\$ 34,862,000

17. SUBSEQUENT EVENTS

(a) The Company received gross proceeds of \$2,476,972 for the following.

Date	Gross	Shares	Exercise price	Description
	proceeds	issued	per share
	received
2021-January	\$25,973	173,156	\$0.15	Exercise of 173,156 warrants.
8
2021-January	\$1,999,999	5,714,284	N/A	Shares issued at price of \$0.35 per from a private
11				placement.
2021-	\$220,000	550,000	\$0.40	Exercise of 550,000 stock options.
February &
March
2021- March	\$150,000	750,000	\$0.20	Exercise of 750,000 stock options.
2021- March	\$6,000	20,000	\$0.30	Exercise of 20,000 warrants.
2021-April	\$75,000	250,000	\$0.30	Exercise of 250,000 warrants

(b) The Company granted 3,150,000 stock options to the following.

Date of	Number of	Exercise	Expiry	Terms
grant	options	price per	Date
	granted	share
2021-February-2	2,200,000	\$0.63	2023-February-2	Stock options granted to directors that fully vest on
				the grant date.
2021-March-19	750,000	\$0.85	2023-March-19	Stock options granted to a new director. The stock
				options vest 90 days from date of grant.
2021-March-23	200,000	\$0.80	2023-March-23	Stock options granted to a consultant. The stock
				options vest 90 days from date of grant.

17. SUBSEQUENT EVENTS (continued)

• (c) On February 1, 2021, the board of directors approved the amendment of the vesting date for 1,080,000 stock options granted on March 13, 2018 with an exercise price of \$0.70 per share to vest immediately on February 1, 2021 from a contingent vesting. On March 8, 2021, the expiry date of these stock options was extended to March 13, 2023 from March 13, 2021.
• (d) On March 29, 2021, TSX Venture Exchange approved the extension of the expiry date of 2,500,000 stock options, originally granted on April 1, 2019, from April 1, 2021, to April 1, 2023, and to reprice the exercise price from \$0.40 per option to \$0.80 per option.
• (e) At the Company's annual general meeting on April 30, 2021, the shareholders approved the Company's name change to ReGen III Corp.