Squatex Energy and Resources Inc. — Management Reports 2021

Jul 28, 2021

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MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED

MARCH 31, 2021

Prepared by:

SQUATEX ENERGY AND RESSOURCES INC 7055 Boul. Taschereau, Suite 500 Brossard, Quebec, J4Z 1A7

July 27, 2021

Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March, 31, 2021

INTRODUCTION

The following management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Squatex Energy and Ressources Inc (“Squatex” or the “Company”) constitutes the management’s review of factors that affected the Company’s financial performance for the year ended on March 31, 2021 in comparison with data from the same period last year. This MD&A has been prepared in compliance with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations, and should be read in conjunction with the audited annual financial statements for the year ended on March 31, 2021. The Company’s audited financial statements for the year ended on March 31, 2021 are prepared in accordance with International Financial Reporting Standards as published by the International Accounting Standards Board (“IFRS”) including comparative figures. Results are reported in Canadian dollars.

FORWARD-LOOKING STATEMENTS

This report contains statements that are to be considered forward-looking statements. Such statements relate to future events or future economic performance of Squatex and involve risks, uncertainties and other known and unknown factors that may appreciably affect the results, performance or achievements against this or implications Squatex statements. Actual events or results could differ. Forward-looking statements include words or phrases such as "anticipates", "believes", "plans" or other words or phrases suggesting future outcomes of the infringement. Squatex disclaims any intention and undertakes no obligation to update such statements unless otherwise required by law.

DESCRIPTION OF BUSINESS

Squatex is incorporated under the Canada Business Corporations Act Corporations and its shares has been listed on the Canadian Stock Exchange ("CSE") under the symbol "SQX". The exploration and development of oil and gas properties in the territory of Quebec are the major activities of the Company. As part of achieving its objectives, the Company is required to enter into partnership agreements to reduce the risks and costs of its projects.

Squatex favors exploring territories with the highest chance of success in order to ensure its profitability in the short term. In recent years, his activities have focused on his exploration licenses in the Lower St. Lawrence-Gaspé to explore the rocks of the Silurian-Devonian and the Ordovician in order to search for conventional accumulations of oil and gas. Squatex also has an exploration territory in the St. Lawrence Lowlands for unconventional search of shale gas in the Utica/Lorraine.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March, 31, 2021

HIGHLIGHTS

The management of Ressources Energy and Ressources Inc, in conjunction with its partner Petrolympic Ltd (“Petrolympic”), has presented in 2019, through its attorneys, a lawsuit against the Government of Quebec which was filed in Superior Court, judicial district of Quebec. This action is still ongoing. Other legal proceedings could be envisaged against the Government with the aim of enforcing the rights of Squatex. In fact, government and ministerial action in recent years has greatly harmed oil and gas exploration and exploitation activities in Quebec by reducing its financing capacity on the markets. The management of Squatex is taking all necessary measures to maintain the functioning of the company during this litigation.

During the fiscal year ended March 31, 2021, Squatex did the necessary follow-up on its files, but did not carry out field exploration work on its permits. The new regulations that came into force in September 2018 which, among other things, establish the principle of banning drilling in water environments and within one kilometer from such an environment, call into question the work that was planned by Squatex in the Lower St. Lawrence. As Squatex had already identified a dozen target locations for drilling, the new regulations impose a complete reassessment of geological data and seismic profiles to determine the possibilities of relocating these planned sites.

Exploration license holders, including Squatex, have been exempt since 2011 by the government from statutory work obligations. Squatex nevertheless continued its exploration program by drilling three additional wells between 2011 and 2015.

So far in the Lower St. Lawrence region, Squatex focused the exploration of its permits on the calcareous sequences of Silurian-age rocks. Numerous geological and geophysical surveys and a series of shallow stratigraphic coreholes made it possible to target an interesting petroleum potential in 2010. From 2011, deeper holes were drilled to target AVO (Amplitude vs Offset) seismic anomalies showing the possibility of naturally fractured porous zones. This is how Squatex made the discovery of gas in 2013 in the Massé No.1 well in very porous hydrothermal dolomites of the Sayabec Formation near the contact with the Val Brillant. In 2014, a drilling 1970 meters deep, Massé No.2, on the same structure confirmed and substantially increased the initial discovery. In this well, nearly 1000 meters of porous zones with the presence of gas and oil were encountered. The Massé Structure indicates, according to the 2016 independent expertise of Sproule and Associates, the probability of a potential presence in place of 53.6 BCF of gas and 52.2 million barrels of oil over a probable average area of 5.2 km[2] .

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March, 31, 2021

TRENDS

While general economic conditions continue to stagnate in the oil sector and that disruptions are highly possible in the financial markets, significant uncertainty still persists over the future of oil exploration Quebec. The sanction of the new Hydrocarbons Act in 2016 initially gave hope for an imminent resumption of work. However, since September 2018, some regulations of the new Act have created additional difficulties in allowing oil operations. The Management and the Board of Directors will closely monitor developments in this area and see their implications for the operation of Squatex.

SUMMARY OF LAND POSITIONS

As of March 31, 2021, Squatex owns 36 licenses totaling 6,560.93 km[2] (1,621,205 acres) for oil and gas exploration in the Quebec Appalachian Basin over the St. Lawrence Lowlands and the St. Lower St. Lawrence-Gaspé areas(See map). The Company's properties in the St. Lawrence Lowlands consist of 2,249.33 km[2] (555,809 acres) of licenses that constitute a significant position in the Utica-Lorraine's unconventional targets. Squatex also owns properties in the Lower St. Lawrence-Gaspé region that consist of 4,311.60 km2 (1,065,396 acres) of licenses between Rimouski and Rivière-du-Loup that are prospective for oil and gas in Silurian reef targets and in areas of hydrothermal dolomites.

Squatex has as its exploration partner Petrolympic Ltd (30% interest) on all of its 36 exploration licenses. Canbriam Ltd earned a 60% interest over an area of 80.0 km2 (19,768 acres) straddling two Squatex licenses in the St. Lawrence Lowlands.

The following tables present the licenses in force as of March 31, 2021 on which Squatex has an interest. For the location of the license, refer to the map.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March, 31, 2021

ST. LAWRENCE LOWLANDS PERMITS

Permit Number	Issue Date	Area (km2)
2009RS287	01/09/2009	208,71
2009RS288	01/09/2009	179,90
2009RS289	01/09/2009	209,09
2009RS290	01/09/2009	72,48
2009RS291	01/09/2009	224,47
2009RS292	01/09/2009	188,27
2009RS293	01/09/2009	145,80
2009RS294	01/09/2009	216,64
2009RS295	01/09/2009	193,16
2009RS296 (part)	01/09/2009	203,39*
2009RS297	01/09/2009	163,42
2009RS298 (part)	01/09/2009	244,00*
Subtotal		2 249,33

* A 60% interest between the surface and the Top of Trenton over a 80,00 km[2] block have been transferred jointly by Squatex and Petrolympic under the Agreement to Canbriam.

PERMITS PARTIALLY AT 28% IN THE ST. LAWRENCE LOWLANDS (FROM SURFACE TO TOP TRENTON):

Permit Number	Issue Date	Area (km2)
2009RS296 (part)	01/09/2009	203,39
2009RS298 (part)	01/09/2009	244,00
Subtotal		80,00 of 447,39

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Squatex Energy and Ressources Inc

Management's Discussion and Analysis, year ended on March, 31, 2021

LOWER ST. LAWRENCE/GASPE PERMITS

Permit Number	Issue Date	Area (km2)
2009RS299	01/09/2009	189,75
2009RS300	01/09/2009	207,04
2009RS301	01/09/2009	171,36
2009PG552	01/09/2009	102,67
2009PG553	01/09/2009	230,68
2009PG554*	01/09/2009	151,50
2009PG555	01/09/2009	164,38
2009PG556*	01/09/2009	236,66
2009PG557	01/09/2009	98,94
2009PG558	01/09/2009	194,20
2009PG559	01/09/2009	187,37
2009PG560	01/09/2009	198,17
2009PG561	01/09/2009	244,35
2009PG562	01/09/2009	198,47
2009PG563	01/09/2009	225,73
2009PG564	01/09/2009	143,77
2009PG565	01/09/2009	153,70
2009PG566	01/09/2009	214,54
2009PG567	01/09/2009	206,31
2009PG568	01/09/2009	206,68
2009PG569	01/09/2009	134,97
2009PG570	01/09/2009	76,08
2009PG571	01/09/2009	209,51
2009PG572	01/09/2009	164,77
Subtotal		4 311,60

* Gaspé area

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March, 31, 2021

SQUATEX'S EXPLORATION PERMITS LOCATION MAP

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

EXPLORATION ACTIVITIES

LOWER ST. LAWRENCE-GASPE PERMITS

The compilation and integration in 2012 of all the encouraging results achieved by Squatex's exploratory work in the region, particularly those of the last two drillings in 2011, led to the decision to continue the coring of new targets of interest. In September 2012, a deeper core hole was spudded in the northeastern portion of the Lower St. Lawrence permit block on the Massé structure.

The Massé No.1 stratigraphic well was equipped with a BOP mounted on a cemented casing over a length of 150 meters. Drilling, supervised by a team of five engineers and geologists, began in highly disturbed beds of the St- Leon Formation, then went through sequences similar to the reefal carbonates of Sayabec and/or West Point at about 800 meters, followed by overlapping basal Silurian sequences showing a 15 meters thick porous dolomites sequence in Sayabec reefs. Both of these reef sequences showed evidence of gas and condensate.

Squatex continued its operations on the well in the spring of 2013 to drill through a deeper AVO seismic anomaly showing a possibility of fluids or porosity. This objective was met between 1750 m and 1874 m by giving strong indices of natural gas (89% Methane) in a very porous and permeable dolomite of the base of the Sayabec as well as in a sandstone of the Val Brilliant. Porosity zones are between 1790 m and 1874 m. Cores from 1847 m show a thickness over 10 meters containing porosities reaching 20.8% with a permeability of 1624 mD. Drilling ended at 1874 m, then was cemented over its entire length without being tested. Squatex issued a press release indicating the discovery in Massé No.1 of a reservoir that could contain a significant amount of natural gas in a conventional trap.

During the same year, the Sayabec No.1 well was spudded near the eastern limit of the permits. It was aimed at a possible dolomitization in the Sayabec Formation limestones shown by a seismic amplitude anomaly over a stratigraphic wedge. A porous dolomitized zone was actually encountered near the Base of Sayabec giving oil and gas shows. The well reached a total depth of 759 m in Cambrian-Ordovician rocks of the Quebec Group before being cemented.

The results of these new deep cores have enabled a reinterpretation of data accumulated by Squatex since 2001 over the Lower St. Lawrence/Gaspé area to delineate regions that could have similar hydrocarbon potential as Massé and to target future drilling locations. In this review, Squatex had seismic data covering more than 300 km2 near the Massé structure specially reprocessed (AVO) by a Calgary firm to highlight possible levels of porosity in Sayabec limestone strata. Interpretation of these results identified nine additional drilling sites with AVO characteristics similar to that found in the Massé structure.

In September 2014, Squatex spudded the deep stratigraphic Massé No.2 well after running a 210 m cemented surface casing with a BOP to protect the groundwater environment.. In addition, drilling equipment has been modified to use a closed sludge circulation circuit to facilitate operations, increase safety and ensure compliance with environmental standards.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

Operations on the Squatex Massé No.2 stratigraphic well were conducted smoothly and were completed at a depth of 1970 m on 28 November 2014 after meeting numerous porous zones with oil and gas shows (nearly 1000 m of primary and secondary porosity reported) in the StLeon, Sayabec and Val Brillant formations before reaching the Cambrian-ordovician rocks. A full suite of logs was recorded in the hole and the wellhead was secured and equipped with safety instruments and measures to suspend drilling. Squatex plans to evaluate the hydrocarbon zones by drill stem production tests. Squatex issued press releases in February and July 2015 relating to the interesting results of Massé No.2.

Squatex called on the independent expertise of Sproule and Associates in February 2016 to verify and validate the results obtained on the Massé Structure. The results of Sproule's report were the subject of a Squatex's press release in May 2016. The study indicates that logs in the Massé No.2 well are significant and show an unproven potential for the presence in place of 53.6 BCF of gas and 52.2 million barrels of oil over a likely average area of 5.2 km2. In order to be able to prove the quantities of hydrocarbons that could be exploited commercially on the structure, the Massé No.2 well will have to be re-opened to test the level of production of porous zones with hydrocarbon shows encountered.

ST. LAWRENCE LOWLANDS PERMITS

Squatex with its partners do not foresee short-term field exploration activities on its Lowland permits since the new Hydrocarbons Act and regulations came into force in September 2018. Canbriam Energy proceeded in 2015 to the abandonment of the Canbriam Farnham No. 1 well as stipulated by the law and regulations.

EXPLORATION EXPENSES INCURRED

The Company relies on the professional expertise of its team of geologists to manage and supervise its exploration programs. Management assesses the legitimacy of proposed exploration programs and approves expenses judged useful and appropriate in order to progress knowledge in a prudent and necessary way. For the year ended March 31, 2021, Squatex spent $ 166,939 ($ 172,209 for the year ended March 31, 2020) on its exploration permits. Of these amounts, Squatex expects to receive tax credits relating to resources of $ 9,265 ($ 10,082 for the year ended March 31, 2021), which represents net exploration and evaluation expenses of $ 157,674 for the year ended March 31, 2021 and $ 162,127 for the year ended March 31, 2020.

TECHNICAL DISCLOSURE

The technical disclosures appearing under the title "Highlights" and "Exploration Activities" were prepared by Paul Laroche, P. Eng, M. Sc., who is a qualified person under National Instrument 51-101.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

EXEMPTIONS FROM OBLIGATIONS

Since 2011, the period of validity of the exploration licenses of any exploration licensee is suspended, including the period of validity of the Company's licenses. The Company contests the enforceability of the annual fees by the Ministry of Energy and Natural Resources. In addition, exploration licensees, including Squatex, are exempt from statutory work obligations.

The regulations describe the annual fees as follows:

• 1 ° For the first period of validity of the licence, $52 per km[2] ;

• 2 ° The renewal of the licence made pursuant to section 49, of $105 the km[2] ;

• 3 ° The renewal of the licence made pursuant to section 50, of $262 the km[2] .

The regulations provide for the following minimum amounts of work:

• 1 ° for the first year of validity of the licence, the highest between $ 102 per km[2] or $ 6,103

• 2 ° for the second year of validity of the licence, the highest between $ 203 per km[2] or $ 12,206

• 3 ° for the third year of validity of the licence, the highest between $ 305 per km[2 ] or $ 18,310

• 4 ° for the fourth year of validity of the licence, the highest between $ 407 per km[2] or $ 24,413

• 5 ° for the fifth year of validity of the licence, the highest between $ 509 per km[2] or $ 30,516

• 6 °from the first renewal of the licence made pursuant to article 49, the highest between $ 509 per km[2] or $ 40,688.

Additional statutory expenditure credits to the minimum required are granted by the Government and will be used to reduce subsequent obligations.

ENVIRONMENTAL RESPONSIBILITY

The Company is subject to government environmental protection laws and regulations. Environmental consequences are very difficult to identify in terms of results, time and impacts. To the best of its knowledge, Squatex conducts its operations in a manner that is consistent with government environmental legislation and regulations.

RISKS AND UNCERTAINTIES

There are many risks associated with oil and gas development. Squatex's long-term commercial success depends on its ability to find, acquire, develop and commercially exploit oil and natural gas reserves. The future increase in Squatex's reserves will depend not only on its ability to prospect and develop properties it may hold from time to time, but also on its ability to select and acquire properties. productive areas and appropriate potential productive areas. In addition, even if such acquisition or equity opportunities are identified, Squatex may decide that, depending on current market conditions, acquisition and participation or pricing arrangements result in acquisitions or stakes are unprofitable.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

UNCERTAINTY AS OF THE ESTIMATED RESERVES OF NATURAL GAS AND CRUDE OIL

Estimating oil and gas reserves is a complex process based on a considerable number of decisions and assumptions to assess the geological, geophysical, engineering and economic data available. for each tank. As a result, such estimates are imprecise in nature. Actual data on future oil and gas production, oil and gas revenues and expenditures can vary significantly. Any significant fluctuation in these assumptions could have a significant impact on the estimated quantities and present value of reserves. In addition, these reserves may be subject to upward or downward revisions based on production history, results that will be achieved during exploration and future development, current oil and gas prices, and several of which are beyond Squatex's control. It is highly likely that actual production and revenues, taxes, development and operating expenses for reserves will vary from established estimates and these variations could be significant.

REGULATORY IMPACT

The oil and gas industry is subject to elaborate controls and regulations put in place by the various levels of government for prices, royalties, land holdings, production quotas, imports and export of oil and gas and environmental protection.

The oil and natural gas industry is currently subject to environmental regulation pursuant to various federal and provincial laws. The laws include restrictions and prohibitions on the issue or the release of various substances produced or used for certain operations of the oil and gas industry, which have impact on well and facilities location and the extent to which the exploration and development are allowed. In addition, the legislation requires the resignation and revaluation of wells and facilities to be carried out to the satisfaction of provincial authorities. Violation of these laws can result in fines and penalties, suspension or revocation of permits and authorizations necessary for the operation of a business and liability for damage caused by pollution. In Quebec, environmental compliance matters are governed, since September 21, 1972, by law, entitled Environmental Quality Act (the “Quebec Act Environmental Protection“). The Quebec law on environmental protection imposes requirements of environmental protection, information and surveillance. In addition, it sets up a process of impact assessment and wider public consultation on matters of environmental assessment and enforcement.

FUTURE FUNDING NEEDS AND GOING CONCERN

The Company will need additional financing in the future to continue its activities, especially its exploration programs and development. If financing is obtained by issuing new shares, control of Squatex may be affected and shareholders may suffer additional dilution. To the extent that financing is not available, this could affect the commitments of work which could result in the inability of the Company to pursue, in totality or partly, its planned exploration and development program, property rights or revenue opportunities loss for the Company.

DEPENDENCE OF KEY PERSONNEL

The success of the Company depends largely on the quality of management. The loss of these people, or inability to interest equivalent qualified people could have a material adverse impact on operations and business prospects of the Company.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

MARKETING

The Company operates in a competitive environment where raw materials prices depends of many factors that are beyond control of the Company. The prices of oil and natural gas have fluctuated greatly in the past. Oil prices are based on supply and demand at international level and political events, including the Middle East, may have an important influence on oil prices and supply globally. Any decrease in the price of oil and natural gas could have a material adverse effect on future operations and financial position of the Company and the level of expenses for acquisition of future supplies of oil and gas. In addition, the marketing of production of the Company depends on the availability and capacity of gathering systems and pipelines, of the consequences of federal and provincial regulations and on the general economic conditions. All these factors are beyond control of the Company.

The price of natural gas sold in interprovincial and international trade is determined by negotiation between buyers and sellers. The price received by a natural gas producer depends, partly, on the prices of competing fuels, like natural gas produced, the access to downstream transport, the length of contracts, the climatic conditions and the balance of supply and demand.

LAND CLAIMS

None of the properties in which the Company holds an interest is currently subject to any official land claims by Aboriginal nations. No assurance can be given, however, to the effect that this will not be the case in the future.

AVAILABILITY OF DRILLING EQUIPMENT AND ACCESS

Oil and gas exploration and production activities depend on the ability to have access to drilling equipment and other related equipment especially in areas where these activities are exercised. Limited demand for such equipment or restrictions on land access may impact the Company’s ability to acquire and use such equipment and may delay exploration activities or the eventual production of the resource.

GROWTH MANAGEMENT

The Company may be subject to risks associated to its growth, including restraints and pressure on its internal systems and controls. The ability of the Company to conduct an effective growth management will require to implement and continuously improve its operating systems and financial reporting and to enhance, develop and manage his basic labor. The inability of the Company to face growth could have a material adverse impact on its business, operations and prospects.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

SELECTED FINANCIAL INFORMATION

FOR THE YEAR ENDED MARC 31, 2021, 2020 AND 2019

	2021	2020	2019
EXPLOITATION	$	$	$
Net exploration and evaluation expenses	157,674	162,127	205,364
Net loss and total comprehensive loss	- 942,413	- 437,381	- 723,956
Net and comprehensive loss per basic	- 0.0076	- 0.0035	- 0.0062
and diluted share

ANALYSIS OF OPERATING RESULTS

REVENUE

During the year ended March 31, 2021, no activity generated by Squatex has produced income.

NET PROFIT

The net and comprehensive loss increased from $ 437,381 for the year ended March 31, 2020 to $ 942,413 for the year ended March 31, 2021. This increase in the loss of $ 505,032 is explained by, without prejudice to legal proceedings with the Ministry of Energy and Natural Resources (MELCC), Squatex recorded during the last financial year a provision for the annual fees claimed by the MELCC for the year 2020-2021 and the interest relating to the payment of annual fees to the MELCC. However, this provision was lower in the previous year due to an expected reimbursement of previous annual fees. The specific provision, as of March 31, 2021, amounts to $ 663,179, of which $ 198,954 would be receivable from its partner Petrolympic if the amounts were paid by Squatex. However, this account receivable has been written down in full as at March 31, 2021. This increases the loss by $ 251,749 during the year ended March 31, 2021. As a result, settlement and permit fees have increased by $ 181,609 between the year ended on March 31, 2021 and 2020, as well as the interest recorded on these provisions for an amount of $ 24,157. This therefore explains an increase in the loss of $ 457,515. In addition, legal fees related to this lawsuit were recorded during the fiscal year ended March 31, 2021, for a total of $ 38,420 ($ 19,173 in 2020), as well as legal fees in connection with an opposition file with the tax authorities, for an amount of $ 20,313 (none during the fiscal year ended on March 31, 2020). The increase in interest on the due to a company under common control of $ 17,159, which is a necessary expense to secure the financing of the company, ends the explanation for the increase in the loss.

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Management's Discussion and Analysis, year ended on March 31, 2021

Squatex Energy and Ressources Inc

QUARTERLY INFORMATIONS

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----- Start of picture text -----

Year ended on March 31, 2021 Year ended on March 31, 2020
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
$ $ $ $ $ $ $ $
Revenue — — — — — — — —
Net results -$342 311 -$382 935 -$101 817 -$115 350 -$178 309 -$67 612 -$77 806 -$113 654
Total assets $89 137 $319 705 $434 068 $423 763 $413 894 $145 611 $120 081 $97 750
Total liabilities $1 672 964 $1 597 220 $1 364 648 $1 288 526 $1 199 307 $788 715 $731 573 $667 436
Basic and diluted
-$0,0028 -$0,0031 -$0,0008 -$0,0009 -$0,0015 -$0,0005 -$0,0006 -$0,0009
earnings per share
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ANALYSIS OF QUARTERLY OPERATING RESULTS

REVENUE

During the quarter ended March 31, 2021, no activity generated by Squatex generated any revenue.

NET PROFIT

Regarding the results for the quarter ended March 31, 2021, the net loss increased from $ 178,309 for the quarter ended March 31, 2020 to $ 342,311, an increase of $ 164,002 which is explained by the loss caused by the depreciation of the account receivable from partner Pétrolympic of $ 251,749 and offset by the decrease in expenses to the strict minimum given the current situation of the company. In addition, during the last quarter of 2020, a specific provision for the 2019-2020 annual pensions was recorded, reduced by the recognition of the 2018-2019 annual entitlements receivable. The specific provision for pensions for 2020-2021 having been recorded in a previous quarter, this has an effect on the variation of the quarterly results.

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Squatex Energy and Ressources Inc

Management's Discussion and Analysis, year ended on March 31, 2021

		ON		ON		ON
		MARCH 31,		MARCH 31,		MARCH 31,
		2021		2020		2019
STATEMENT OF
FINANCIAL POSITION
Working capital	-	1583,826	-	785,413	-	196,433
(negative)
Total assets		89,137		413,894		112,869
Total liabilities		1,672,964		1,199,307		604,901
Shareholder’s deficiency	-	1,583,826	-	785,413	-	492,032

STATEMENT OF FINANCIAL POSITION

The Company's working capital deteriorated by $ 798,413 between March 31, 2021 and March 31, 2020. Although Squatex cashed in the reimbursement of annual fees receivable ($ 255,616), a portion of the due to a company under common control was reimbursed (reimbursement of $ 215,000 offset by additional advances of $ 297,000 during the year ended March 31, 2021) and a new provision was recorded for the 2020-2021 annual fees. In addition, a provision for depreciation of $ 251,249 was recorded for an account receivable from partner Pétrolympic given the existence of significant indications of depreciation. Trade and other payables increase due to the accumulation of interest payable on the due to the company under common control. Provisions also increase due to the accumulation of interest on disputed refundable tax credits, as well as interest on accrued annual fees.

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Squatex Energy and Ressources Inc

Management's Discussion and Analysis, year ended on March 31, 2021

YEAR ENDED	MARCH 31, 2021	MARCH 31, 2020	MARCH 31, 2019
CASH FLOW
Cash flows from operating activities	- 25,850	-159,890	-468,393
Cash flows from investing activities	-	-	-
Cash flows from financing activities	82,000	145,000	485,600

LIQUIDITY

As at March 31, 2020, the Company had $ 13,373 in cash. As at March 31, 2021, the Company had $ 69,523 in cash, an increase of $ 56,150. The increase in liquidity is mainly due to the fact that a company under common control waives payment for its services and that a company under common control grants advances to Squatex allowing the Company to maintain a positive cash balance, while by assuming regular expenses. Cash flow from operating activities is negative as at March 31, 2021, but to a lesser extent than March 31, 2020, mainly due to the collection of the reimbursement of annual duties receivable that occurred during the year ended March 31, 2021.

GOING CONCERN

These financial statements have been prepared in accordance with IFRS and on the basis of the going concern assumption, meaning the Company will be able to realize its assets and discharge its liabilities in the normal course of operations. To determine whether the principle of going concern is valid, management takes into account all the information at its disposal concerning the Company's prospects for at least the next 12 months following the end of the period of its financial information presentation.

The Company has not yet found an oil and gas property containing deposits that are economically recoverable, the Company has not yet generated any income or cash flows from its operations. As at March 31, 2021, the Company had a negative working capital of $ 1,583,826 and a cumulated deficit of $ 9,440,879.

Furthermore, there is uncertainty about the future of oil and gas exploration in Quebec. Since 2011, a moratorium on shale gas exploration has been imposed in Quebec. This moratorium could have been lifted when the new Hydrocarbons Law (the "Law") was put in place in September 2018. However, certain regulations of this new law cause additional difficulties for oil and gas operations.

The Company's ability to continue as a going concern is dependent upon its ability to raise additional financing to further explore its oil and gas properties and the continued support from its suppliers. While management has been successful in securing financing in the past, there can be no assurance that such sources of funding or initiatives will be available to the Company.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

These material uncertainties cast a significant doubt regarding the Company's ability to continue its operations, and accordingly, the appropriateness of the use of IFRS applicable to a going concern.

In addition, in March 2020, the World Health Organization declared a global pandemic following the emergence and rapid spread of a new strain of coronavirus ("COVID-19"). The epidemic and subsequent measures to limit the pandemic have contributed to significant declines and the volatility of the financial markets. The pandemic has affected global business activity, including by significantly reducing global demand for crude petroleum. The full extent of COVID-19's impact on the Company's business and future financial performance is currently unknown, but may be material. The Company monitors developments in order to be able to take appropriate measures if necessary.

The carrying amounts and classification of assets, liabilities, revenues and expenses presented in the financial statements and the statement of financial position have not been adjusted as would be required if the going concern assumption was not appropriate. These adjustments could be material.

FUNDING SOURCES

The main source of funding comes from the investment of the equity holders, the due to a company under common control, the waiver, by a company under common control, of its fees for a total period of 8 years as at March 31, 2021 and the refundable tax credit for resources.

OFF-STATEMENT ARRANGEMENT

As of March 31, 2021, the Company does not have any off-balance sheet settlement other than significant commitments related to statutory obligations for exploration licences it hold.

TRANSACTIONS WITH RELATED PARTY

The related parties of the Company include key executives and companies controlled by them, as explained below.

Unless otherwise specified, none of the transactions include special characteristics or conditions and no guarantees were given or received.

Transactions with key management

Key management includes directors (members of the management committee or not) and senior executives. There is no compensation paid or payable to key management for services as employees. The fees charged by them or by a company controlled by them, for the nine-month period ended on March 31 are presented below:

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Management's Discussion and Analysis, year ended on March 31, 2021

Squatex Energy and Ressources Inc

	2021	2020
	$	$
Net exploration and evaluation expenses for tax	156,834	159,019
credits
Professional services	33,717	37,800
Management fees	24,000	24,000
Financial expenses	74,814	57,655

As at March 31, 2021, there is an outstanding balance of $15,636 ($48,053 at March 31, 2020) resulting from these operations plus interest payable of $144,119 ($69,305 as at March 31, 2020). In addition, the due to a company under common control of $522,600 ($440,600 as at March 31, 2020) is a transaction with related party.

A company under common control waived payment of its services, which are services for the President, for the year ended March 31, 2021. The value of these services is a total of $144,000 ($144,000 in 2020) and was recognized in contributed surplus.

PROVISIONS

Tax credits receivable and payable

On October 23, 2015, the Company received notices of assessment from a tax authorities for the years ended March 31, 2012, 2013 and 2014, refusing expenditures in the calculation of the resource credits. The assessment for these three years totals $208,805, including $26,163 in interest. The Company disagrees with the notice of assessment and initiated an objection to justify its claims. All without prejudice as to the entire objection process and judicial proceedings that may ensue, the Company believes that the maximum claim of refundable tax credits relating to resources already cashed by the Company would be an approximate total amount of $189,992 for the years covered by the notices of assessment, excluding any applicable interest if the expenditure referred to in the notice of assessment are ultimately rejected.

As at March 31, 2021, the Company recorded a specific provision of $302,963 ($276,759 as at March 31, 2020) in the statement of financial position, which includes expenses deemed inadmissible by the tax authority for the years following the notices of assessment, as well as an estimate of the interest to be paid on the notices of assessment and this, despite its disagreement with the assessment since the tax credits for the periods presented have been collected by the Company.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

Annual fees of 2019-2020 and 2020-2021

On July 26, 2019, the Company received a notice of payment of the annual fees from the MELCC. These fees would amount to a total amount of $339,305 for the period from September 1st, 2019 to August 31, 2020 and would be shared with the partner Pétrolympic. On October 31, 2020, the Company received a notice of payment of the 2020-2021 annual fees from the MELCC. These annual fees would amount to to a total of $342,599 and would also be shared with the partner Pétrolympic. In November 2020, teh Company paid a part of the 2020-2021 annual fees to the MELCC. On March 31, 2021, the Company received a statement of account showing the annual fees for 2019-2020 and for 2020-2021 and interests relating to the late payment of these fees. The Company is contesting this MELCC payment notice and the statements of account and has filed legal proceedings to enforce its rights.

Without prejudice to this legal procedure, the Company has registered, as a provision in the statement of financial position, the annual fees claimed by the MELCC for the year 2019-2020 and for the year 2020-2021 (net of the payment made in November 2020). As at March 31, 2021, the Company recorded a specific provision of $663,179, ($339,305 as at March 31, 2020) of which $198,954 ($101,791 as of March 31, 2020) would be receivable from its partner if the Company paid these amounts.

ADOPTION OF ACCOUNTING STANDARDS

Amendment to IAS 1 Presentation of Financial Statements

The IASB has made changes to IAS 1 Presentation of Financial Statements that standardize the definition of materiality in all IFRS and the Conceptual Framework for Financial Reporting, clarify when information is material, and incorporate some of the guidance. IAS 1 on non-material information. Specifically, the amendments clarify that information is material if the omission, misrepresentation, or obfuscation can reasonably influence the decisions that primary users of general purpose financial statements make based on those financial statements. Materiality depends on the nature or extent of the information, or both. An entity assesses whether information, individual or in combination with other information, is significant in the context of its financial statements taken as a whole. The Company adopted IAS 1 on April 1, 2020, but it did not have a material impact on the disclosures to be provided in the financial statements.

FUTURE ACCOUNTING CHANGES

At the approval date of these financial statements, new standards and interpretations to existing standards and new modifications have been issued but are not yet in force, and the Company has not adopted them early. Management anticipates that all of the positions will be adopted in the Company's accounting policies during the first fiscal year beginning after their effective date.

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Squatex Energy and Ressources Inc Management's Discussion and Analysis, year ended on March 31, 2021

CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS AND ASSUMPTIONS

Refer to note 5 to the audited financial statements for the year ended March 31, 2021.

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

Refer to note 10 to the audited financial statements for the year ended March 31, 2021.

OUTSTANDING SHARES AND SECURITIES

The following table shows the number of outstanding shares as at July 27, 2021 and the total number of outstanding securities:

Common shares	123,850,656
Stock options	300,000

ADDITION REQUIREMENTS FOR EMERGING ISSUERS WITHOUT SIGNIFICANT OPERATING PRODUCTS

The principal activity of the Company is oil and gas exploration and the assessment of work conducted by the Company is presented in the 51-101 report which can be found on SEDAR.

ADDITIONAL INFORMATION

This MD&A is dated July 27, 2021. This same report and more information on the Company is available on SEDAR at www.sedar.com.

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