Spectre Capital Corp. — Audit Report / Information 2021

Dec 29, 2021

SPECTRE CAPITAL CORP.

FINANCIAL STATEMENTS AUGUST 31, 2021 AND 2020

(EXPRESSED IN CANADIAN DOLLARS)

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Crowe MacKay LLP

1100 - 1177 West Hastings St. Vancouver, BC V6E 4T5 Main +1 (604) 687-4511 Fax +1 (604) 687-5805 www.crowemackay.ca

Independent Auditor's Report

To the Shareholders of Spectre Capital Corp.

Opinion

We have audited the financial statements of Spectre Capital Corp. ("the Company"), which comprise the statements of financial position as at August 31, 2021 and August 31, 2020 and the statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2021 and August 31, 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

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

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements which describes the material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises:

• Management's Discussion and Analysis

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

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the other information prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

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

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

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

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

Auditor's Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

• 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 Diana Huang.

"Crowe MacKay LLP"

Chartered Professional Accountants Vancouver, Canada December 17, 2021

SPECTRE CAPITAL CORP. Statements of Financial Position As at August 31, 2021 and 2020 (Expressed in Canadian Dollars)

		2021		2020
ASSETS
Current assets
Cash	$	7,138	$	346,614
GST receivable		9,085		5,127
Prepaid expense		27		-
Loan receivable (Note 9)		260,500		-
Total assets	$	276,750	$	351,741
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	28,020	$	19,176
SHAREHOLDERS’ EQUITY
Share capital (Note 4)		463,900		463,900
Reserve		60,120		60,120
Deficit		(275,290)		(191,455)
Total shareholders’equity		248,730		332,565
Total liabilities and shareholders’ equity	$	276,750	$	351,741

Nature and continuance of operations – (Note 1)

APPROVED ON BEHALF OF THE BOARD:

“Geoff Balderson”

Director “Stephen Ross Gatensbury”

Director

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

5

SPECTRE CAPITAL CORP. Statements of Loss and Comprehensive Loss For the years ended August 31, 2021 and 2020 (Expressed in Canadian Dollars)

		2021		2020
Expenses
Consulting fees	$	24,000	$	24,000
Listing and transfer agent fees		23,603		16,956
Office expenses		67		1,858
Professional fees		36,165		30,674
Share-based payments (Notes 4 and 7)		-		50,120
Loss and comprehensive loss for theyear	$	(83,835)	$	(123,608)
Basic and diluted lossper share	$	(0.02)	$	(0.07)
Weighted average number of shares outstanding– basic and diluted		3,410,000		1,788,852

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

6

SPECTRE CAPITAL CORP.

Statements of Changes in Shareholders’ Equity For the years ended August 31, 2021 and 2020 (Expressed in Canadian Dollars)

	Number		Share
	of Shares		Capital		Reserve		Deficit		Total
Balance, August 31, 2019	3,750,001	$	187,500	$	-	$	(67,847)	$	119,653
Cash
Initial public offering	2,000,000		200,000		-		-		200,000
Private placement	1,410,000		141,000		-		-		141,000
Share issue cost	-		(54,600)		-		-		(54,600)
Agent’s warrants	-		(10,000)		10,000		-		-
Share-based payments	-		-		50,120		-		50,120
Loss and comprehensive loss for the
year	-		-		-		(123,608)		(123,608)
Balance, August 31, 2020	7,160,001	$	463,900	$	60,120	$	(191,455)	$	332,565
Balance, August 31, 2020	7,160,001	$	463,900	$	60,120	$	(191,455)	$	332,565
Loss and comprehensive loss for the
year	-		-		-		(83,835)		(83,835)
Balance,August 31,2021	7,160,001	$	463,900	$	60,120	$	(275,290)	$	248,730

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

7

SPECTRE CAPITAL CORP. Statements of Cash Flows For the years ended August 31, 2021 and 2020 (Expressed in Canadian Dollars)

		2021		2020
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the year	$	(83,835)	$	(123,608)
Items not affecting cash:
Share-based payments		-		50,120
Change in non-cash working capital item:
GST receivable		(3,958)		(3,390)
Prepaid expense		(27)		-
Accounts payable and accrued liabilities		8,844		(2,762)
Net cash used in operating activities		(78,976)		(79,640)
INVESTING ACTIVITY
Loan receivable		(260,500)		-
Net cash used in investing activity		(260,500)		-
FINANCING ACTIVITIES
Shares issued for cash		-		341,000
Share issue cost–cash		-		(29,600)
Net cash provided by financing activities		-		311,400
Change in cash for the year		(339,476)		231,760
Cash, beginning of year		346,614		114,854
Cash, end ofyear	$	7,138	$	346,614
Cashpaid for interest during theyear	$	-	$	-
Cashpaid for income taxes during theyear	$	-	$	-

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

8

SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

1 Nature and continuance of operations

Spectre Capital Corp. (the "Company") was incorporated as a private company by Certificate of Incorporation issued pursuant to the provisions of the British Columbia Business Corporations Act on May 24, 2018. On October 17, 2018, the Company changed its name to Spectre Capital Corp.

On August 22, 2019, the Company filed its final prospectus and received final approval on August 26, 2019. Since the Company did not complete its Initial Public Offering (“IPO”) in the allotted time, on February 12, 2020, the Company filed with and was “accepted by the TSX Venture Exchange (“TSX-V” or the “Exchange”) an amended and restated final prospectus with the securities. The Company completed its IPO on February 21, 2020, and is classified as a Capital Pool Company as defined in the TSX-V Policy 2.4. The Company was listed on February 21, 2020 and commenced trading on February 25, 2020 under the trading symbol “SOO.P”.

The Company’s head office and registered and records office address is Suite 1000 – 409 Granville Street, Vancouver, British Columbia, Canada, V6C 1T2.

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.

During March 2020, there was a global pandemic outbreak of COVID-19. The actual and threatened spread of the virus globally has had a material adverse effect on the global economy and, specifically, the regional economies in which the Company operates. The pandemic could continue to have a negative impact on the stock market, including trading prices of the Company’s shares and its ability to raise new capital. These factors, amongst others, could have a significant impact on the Company’s operations.

The Company’s continuing operations are dependent upon its ability to identify, evaluate and negotiate an agreement to acquire an interest in a material asset or business (the “Qualifying Transaction”) with 24 months of listing on the TSX-V. Any acquisition or investment proposed by the Company will be subject to regulatory approval. The above material uncertainty raises significant doubt about the Company’s ability to continue as a going concern.

2 Basis of preparation

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

These financial statements have been prepared on an accrual basis, except for cash flow information, and are based on historical costs except for certain financial instruments which are measured at fair value. The financial statements are presented in Canadian dollars which is the Company’s functional currency.

The financial statements were authorized for issue by the Board of Directors on December 17, 2021.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

2 Basis of preparation – (cont’d)

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these 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 assessment of the Company’s ability to continue as a going concern (note 1) and the recoverability of the loan receivable involve significant judgment.

The determination of the fair value related to share-based payments are subject to estimate. The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating 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 share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 4.

3 Significant Accounting Policies

The accounting policies set out below have been applied consistently in the financial statements.

Financial instruments

Non-Derivative Financial Assets

Cash and loan receivable are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition these financial assets are measured at amortized cost using the effective interest method.

The Company assesses on a forward-looking basis the expected credit loss associated with financial assets measured at amortized cost. The Company will, at a minimum, recognize 12-month expected losses in profit or loss, calculated as the difference between its carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition.

10

SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

3 Significant Accounting Policies – (cont’d)

Financial instruments – (cont’d)

Non-Derivative Financial Liabilities

Financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Financial liabilities that are not designated at FVTPL are initially measured at fair value plus or minus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method. Financial assets and liabilities are offset and the net amount presented in the statement 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 derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

Accounts payable and accrued liabilities are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest method.

Income taxes

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

Deferred income 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 or loss; and

• 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 income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and 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 assets and unused tax losses can be utilized, except

• where the deferred income 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; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income taxes 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.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

3 Significant Accounting Policies – (cont’d)

Income taxes – (cont’d)

The carrying amount of deferred income tax assets is reviewed at each Statement of Financial Position date and recognized to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the Statement of Financial Position date.

Loss per share

Loss per share is computed by dividing the net loss by the weighted average number of outstanding shares in issue during the reporting period. Diluted loss per share is computed similar to basic loss except that the weighted average number of outstanding shares include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods. In a loss reporting period, potentially dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive.

Share-based payments

Equity-settled share-based payments for directors, officers and employees are measured at fair value at the date of grant using the Black-Scholes valuation model and recorded as compensation expense in profit or loss, with a corresponding increase to reserves. The fair value determined at the grant date of the equity-settled share based payments is expensed on a graded vesting basis over the vesting period based on the Company’s estimate of stock options that will eventually vest. Any consideration paid by directors, officers, employees and consultants on exercise of equity-settled share-based payments, along with the amounts reflected in reserves, is credited to share capital. Shares are issued from treasury upon the exercise of the equity-settled share based instruments.

Compensation expense on stock options granted to non-employees is measured at the earlier of the completion of performance and the date the options are vested using the fair value method and is recorded as an expense in the same period as if the Company had paid cash for the goods or services received. 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 the use of the Black-Scholes 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. Expected volatility was determined based on comparison to similar companies as the Company does not have enough history.

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 or loss over the remaining vesting period.

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

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

3 Significant Accounting Policies – (cont’d)

Share-based payments – (cont’d)

Where a grant of options is cancelled and 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 interest 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. Amount recorded in reserves for share options which expire unexercised remain in reserves.

4 Share Capital

a) Authorized

Unlimited common shares, without par value.

b) Issued

There were no shares issued during the year ended August 31, 2021.

During the year ended August 31, 2020:

On February 21, 2020, the Company closed its IPO for the issuance of 2,000,000 common shares of the Company at $0.10 per share for gross proceeds of $200,000. The Company paid the agent a cash commission of $20,000 and issued to the Agents broker warrants to purchase 200,000 common shares at $0.10 per share until February 20, 2022. The Company recorded a fair value of the agent’s warrants of $10,000 utilizing the Black-Scholes option pricing model with the following assumptions – Share price on grant date of $0.10; Risk-free interest rate of 1.32%; Dividend yield of Nil; Expected volatility of 100%; Expected life of 2 years and forfeiture rate of 0%. The Company also pay the Agent corporate finance fee of $20,000 plus GST and paid expenses related to the offering, including legal fees and disbursements totalling $14,600.

On February 21, 2020, the Company completed a private placement of 1,410,000 common shares at $0.10 per share for gross proceeds of $141,000.

c) Escrow Agreement

The shares issued in August 2019 are held in escrow. Under the escrow agreement, 10% of the shares will be released on the issuance of the Final Exchange Bulletin (the Exchange’s acceptance of the Qualifying Transaction) and an additional 15% will be released on each of the dates which are 6 months, 12 months, 18 months, 24 months, 30 months and 36 months following the initial release. As these shares are considered contingently issuable until the Company completes the Qualifying Transaction, they are not considered to be outstanding shares for the purposes of loss per share calculations. Consequently, basic and diluted loss per share and weighted average number of shares disclosures have been reduced by 3,750,001.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

4. Share Capital – (cont’d)

• d) Stock Option

The Company adopted a stock option plan under which it is authorized to grant options to officers, directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. The options can be granted for a maximum of ten years and vest as determined by the Board of Directors. The exercise price of each option granted may not be less than the fair market value of the common shares.

On February 21, 2020, the Company granted stock options to directors and officers of the Company for the right to purchase 716,000 common shares at a price of $0.10 per share exercisable to February 20, 2025. These stock options vest immediately at the date of grant. The Company recorded share-based payment of $50,120 on these stock options. The fair value of the options was determined using the Black Scholes option pricing model with the following assumptions – Share price on grant date of $0.10; Risk-free interest rate of 1.21%; Dividend yield of NIL; Expected volatility of 100%; Expected life of 5 years and forfeiture rate of 0%. Volatility was determined based on comparison to similar companies as the Company does not have enough history.

Details of stock options activities for the years ended August 31, 2021 and 2020 is as follows:

			Weighted
		Number of	Average
		options	Exercise Price
Balance,	August 31, 2019	-	$ -
Granted		716,000	0.10
Balance	outstanding, August 31, 2020 and 2021	716,000	$0.10

The weighted average remaining life of the 716,000 stock options is 3.48 years.

As at August 31, 2021, the Company had 716,000 stock options outstanding exercisable at $0.10 per share expiring on February 20, 2025.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

4. Share Capital – (cont’d)

• e) Agent’s Warrants

Details of agents warrants activities for the years ended August 31, 2021 and 2020 is as follows:

						Weighted
						Average
					Number of	Exercise
					Warrants	Price
Balance, August	31,	2019			-	$-
Issued					200,000	0.10
Balance, August	31,	2020	and	2021	200,000	$0.10

The weighted average remaining life of the 200,000 Agents warrants is 0.47 years.

As at August 31, 2021, there were 200,000 Agents warrants exercisable at $0.10 per share expiring on February 20, 2022.

• f) Reserves

The Company’s equity reserves are comprised of share-based payments and fair value of agents warrants.

5. Financial Instruments

Determination of Fair Value:

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Fair Value Hierarchy:

Financial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:

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

• Level 2 – Applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly such as quoted prices for similar assets or liabilities in active markets or indirectly such as quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions.

• Level 3 – Applies to assets or liabilities for which there are unobservable market data.

The fair value hierarchy level at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

5. Financial Instruments – (cont’d)

Financial risk factors

The Company’s risk exposures and the impact on the Company’s financial statements are summarized below.

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and loan receivable. The Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company is exposed to credit risk with respect to the loan receivable, and the maximum exposure is its carrying amount on the statements of financial position.

Interest rate risk

The Company is exposed to interest rate risk to the extent that the cash maintained at the financial institutions is subject to floating rate of interest. The interest rate risks on cash and on the Company’s obligations are not considered significant.

Liquidity risk

All of the Company’s financial liabilities are classified as current and are anticipated to mature within the next fiscal period. At present, the Company’s operations do not generate cash flow. The Company’s primary source of funding has been the issuance of equity securities. Despite previous success in acquiring financing, there is no guarantee of obtaining future financings.

Foreign currency risk

The Company may be exposed to foreign currency risk on fluctuations related to cash and loan receivable, and accounts payable and accrued liabilities that are denominated in a foreign currency. As August 31, 2021, the Company did not have any accounts in foreign currencies and considers foreign currency risk insignificant.

6. Capital Management

Capital is comprised of the Company’s shareholders’ equity. As at August 31, 2021, the Company’s shareholders’ equity was $248,730 and there was no long term debt outstanding. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital.

The proceeds from the issuance of share capital raised by the Company, both prior to the Company’s IPO and from the IPO itself, may only be used to identify and evaluate assets or businesses for future investments, with the lesser of 30% of the gross proceeds or $210,000 may be used to cover prescribed costs of issuing the common shares or administrative and general expenses of the Company. These restrictions apply until completion of a Qualifying Transaction by the Company as defined under the policies of the Exchange.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

7. Related Party Transactions

Related party transactions are comprised of services rendered by directors and/or officers of the Company or by a company with a director in common. Related party transactions are in the ordinary course of business and are measured at the exchange amount.

	Relationship		2021			2020
Share-based payments
Geoff Balderson	CEO, CFO and Director	$		-	$	26,390
Robert Shewchuk	Director			-		20,650
Stephen Ross Gatensbury	Director			-		3,080
		$		-	$	50,120

Key management personnel compensation

The Company considers its President, Chief Executive Officer, Chief Financial Officer, and the directors of the Company to be key management. During the years ended August 31, 2021 and 2020, there were no compensations paid except for share-based payments as noted in the above table.

8. Income Taxes

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

		2021		2020
Loss before income taxes	$	(83,835)	$	(123,608)
Statutory income tax rates		27%		27%
Expected tax recovery	$	(22,600)	$	(33,300)
Permanent difference		-		14,000
Tax benefits not recognized		22,600		19,300
Total current and deferred income tax recovery	$	-	$	-

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

8. Income Taxes – (cont’d)

Significant components of the Company’s deferred tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:

		2021		2020
Deferred income tax asset (liability)
Non-capital loss carry-forwards	$	66,700	$	41,100
Undeducted finance cost		9,000		12,000
		75,700		53,100
Unrecognized deferred tax assets		(75,700)		(53,100)
Deferred income tax asset,net	$	-	$	-

As at August 31, 2021, the Company had non-capital losses of approximately $247,000 which may be carried forward to reduce taxable income in future years. The non-capital loss starts to expire in 2038.

9. Proposed Qualifying Transaction

On September 8, 2020, the Company entered into a letter of intent (“LOI”) with Hemptown Organics Corp. (“Hemptown”) pursuant to which the Company will acquire all of the issued and outstanding shares of Hemptown (the “Transaction”) which is intended to constitute the Company’s Qualifying Transaction. Upon execution of this LOI, the Company and Hemptown will enter into a Definitive Agreement which will supersede this LOI.

In accordance with the terms of the LOI, it is anticipated that each common share of Hemptown outstanding at the time of the completion of the Transaction be exchanged for one (the “common share exchange ratio”) fully paid and non-assessable common share of the Company and that each Class A share of Hemptown outstanding at the time of the completion of the Transaction, be exchanged for one (the “Class A share exchange ratio”) full paid and non-assessable class A share of the Company and each stock option or warrants of Hemptown for common share and Class A outstanding will thereafter be exercisable into securities of the Company, as adjusted for the Common share exchange ratio and Class A share exchange ratio respectively.

The Company provided a bridge loan of $225,000 to Hemptown, which is non-interest bearing and is secured by a general security agreement on the assets of Hemptown and a promissory note. The loan will be forgiven upon closing of the Transaction or otherwise be repayable on demand. The Company also advanced $35,500 to creditors on behalf of Hemptown. These amounts are included in loan receivable as at August 31, 2021.

Immediately prior to the completion of the transaction, the Company will undertake a consolidation on the basis of 2.5 old common shares for every 1 new common share.

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SPECTRE CAPITAL CORP. Notes to the Financial Statements August 31, 2021 and 2020 (Expressed in Canadian Dollars)

9. Proposed Qualifying Transaction – (cont’d)

The completion of the Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including but not limited to (i) the completion of a financing into the Company or Hemptown; (ii) court approval of the Arrangement, (iii) the approval by the board of directors of the Company to complete the Transaction, (iv) the completion of the share consolidation and creation of new Class A shares; (v) the absence of any material adverse change, material litigation, claims, investigations or other matters, including any subsidiaries or related companies of Hemptown; and (vi) receipt of all requisite regulatory, stock exchange, court or governmental authorizations and consents, including the Exchange. There can be no assurance that the Transaction will be completed on the terms proposed above or at all.

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