Stans Energy Corp. — Interim / Quarterly Report 2021

Aug 31, 2021

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STANS ENERGY CORP.

Interim Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020 (Unaudited)

(Expressed in Canadian Dollars)

The accompanying unaudited interim condensed consolidated financial statements of Stans Energy Corp. for the three and six months period ended June 30, 2021 and 2020 have been prepared by management and approved by the Board of Directors of the Company. These statements have been not reviewed by the Company’s external auditors.

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Stans Energy Corp. Interim Condensed Consolidated Statements of Financial Position (Expressed in Canadian dollars) Unaudited

(Expressed in Canadian dollars) Unaudited
		June 30,	December 31,
		2021	2020
ASSETS
Current assets
Cash and cash equivalents		$ 4,708	$ 14,284
HST receivable		27,885	44,290
Prepaid expenses and other assets		9,804	12,403
Total current assets		$ 42,397	$ 70,977
Right of use assets	Note 6	43,377	59,644
Total assets		85,774	130,621
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$ 1,117,570	$ 1,020,475
Current portion of lease obligations	Note 6	36,279	34,100
Due to related parties	Note 14	870,484	748,203
Total current liabilities		2,024,333	1,802,778
Lease obligations	Note 6	12,995	31,799
Total liabilities		2,037,328	1,834,577
Equity
Common shareholders’ deficiency:
Share capital	Note 11a	43,987,163	43,987,163
Warrants	Note 11b	355,443	355,443
Contributed surplus		17,913,448	17,909,519
Accumulated other comprehensive income		333,544	320,359
Deficit		(64,541,152)	(64,276,440)
Total common shareholders’ deficiency		(1,951,554)	(1,703,956)
Total liabilities and shareholders’ deficiency		$ 85,774	$ 130,621

Going concern (Note 1) Segmented information (Note 7)

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

Approved by the Board of Directors on August 30, 2021.

“Gordon Baker”, DIRECTOR

“Albert Grenke”, DIRECTOR

“Douglas Underhill”, DIRECTOR

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Stans Energy Corp.

Interim Condensed Consolidated Statements of Income or Loss and Comprehensive Income or Loss For the period ended June 30, 2021 and 2020 (Expressed in Canadian dollars) Unaudited

		Three months ended	Three months ended	Six months	ended
	Note	June 30,	June 30,	June 30,	June 30,
		2021	2020	2021	2020
Expenses
General and Administrative
Office and administration	15	(29,337)	(63,445)	(95,288)	(153,002)
Consulting fees		(66,837)	(69,451)	(134,311)	(161,332)
Professional fees		(29,903)	(45,956)	(87,284)	(94,240)
Stock-based compensation	11c	-	(39,734)	(3,929)	(101,188)
Amortization of right of use assets		(8,134)	(8,134)	(16,267)	(16,267)
General and administrative
expenses		(134,211)	(226,720)	(337,079)	(526,029)
Gain on disposal of previously
impaired assets		9,154	39,522	13,842	40,347
Other income	10	-	15,276,054	50,757	15,276,054
Interest on lease obligations		(1,373)	(2,170)	(2,952)	(4,528)
Unrealized foreign exchange gain/(loss)		7,827	21,261	14,275	(23,271)
Interest expense		(2,055)	(1,500)	(3,555)	(3,000)
Income/(loss) for the period		(120,658)	15,106,447	(264,712)	14,759,573
Other comprehensive income
Foreign currency translation of
foreign operations		457	7,139	13,185	2,939
Comprehensive income/(loss) for
the period		(120,201)	15,113,586	(251,527)	14,762,512
Basic and diluted income/(loss) per share	16	$(0.00)	$ 0.08	$ (0.00)	$ 0.08
Weighted average number of common
shares
Basic and diluted		187,308,586	187,308,586	187,308,586	187,308,586

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

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Stans Energy Corp. Interim Condensed Consolidated Statements of Changes in Deficiency For the six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars) Unaudited

		June 30,	June 30,
		2021	2020
Share capital
Balance beginning of period		$ 43,987,163	$ 43,987,163
Balance at the end of the period		43,987,163	43,987,163
Warrants
Balance beginning of period		355,443	355,443
Balance at the end of the period		355,443	355,443
Contributed surplus
Balance beginning of period		17,909,519	17,771,784
Stock-based compensation	Note 11c	3,929	101,188
Balance at the end of the period		17,913,448	17,872,972
Accumulated other comprehensive income
Balance beginning of period		320,359	285,958
Foreign currency translation adjustment		13,185	2,939
Balance at the end of the period		333,544	288,897
Deficit
Balance beginning of period		(64,276,440)	(78,804,255)
Net income/(loss) attributed to common shareholders		(264,712)	14,759,573
Balance at the end ofthe period		(64,541,152)	(64,044,682)
Total common shareholders' deficiency		(1,951,554)	(1,540,207)

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

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Stans Energy Corp. Interim Condensed Consolidated Statements of Cash Flows For the period ended June 30, 2021 and 2020 (Expressed in Canadian dollars) Unaudited

	June 30,	June 30,
	2021	2020
Operating activities
Net income/(loss) for the period	$ (264,712)	$ 14,759,573
Items not affecting cash:
Loan	-	(15,165,469)
Stock-based compensation	3,929	101,188
Amortization of right of use assets (Note 6)	16,267	16,267
Interest on lease obligations (Note 6)	2,952	4,528
Unrealized foreign exchange (gain)/loss	(14,275)	23,271
Interest expense	3,555	3,000
Gain on disposal of previously impaired assets	(13,842)	(40,347)
	(266,126)	(297,989)
Net change in non-cash working capital:
Decrease in HST receivable	16,405	39,223
Increase in prepaid expenses and other assets	2,599	(2,889)
Increase in accounts payable and accrued liabilities	110,640	201,038
Increase/(Decrease) in due to related parties	122,281	99,987
Net cash used in operating activities	(14,201)	39,370
Financing activities
Repayment of lease obligations (Note 6)	(19,577)	(19,578)
Loan from related parties (Note 14)	27,200
Net cash from financing activities	7,623	(19,578)
Effect of exchange rate changes on cash	(2,998)	8,303
Change in cash and cash equivalents	(9,576)	28,095
Cash and cash equivalents, beginning of period	14,284	6,401
Cash and cash equivalents, end ofperiod	$ 4,708	$34,496

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

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

1. NATURE OF OPERATIONS AND GOING CONCERN

Stans Energy Corp. (the "Company" or "Stans") was incorporated on September 26, 2005 under the laws of the Province of Ontario. Stans Energy Corp. is a resource development company focused on advancing rare and specialty metals properties and processing technologies. Stans’ common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol HRE and on the OTCQB market under the symbol HREEF. The head office, principal address and records office of the Company are located at 1 Yonge St., Suite 1011, Toronto, ON, M5E 1E5.

These interim condensed consolidated financial statements ("Financial Statements") have been prepared on a going concern basis which assumes the Company will continue its exploration and development activities for the foreseeable future and will be able to discharge its liabilities in the normal course of business as they become due. As at June 30, 2021, the Company had an accumulated deficit of $64,541,152 (June 30, 2020 - $64,044,682), a working capital deficiency of $1,981,936 (2020 - $1,566,843) and cash of $4,708 (2020 - $34,496). The Company incurred a loss for the six months ended June 30, 2021 of $251,527 (2020 - income of $14,762,512, by extinguishing the loan liability (Note 9 and 10)).

The Company has no sources of revenue and has experienced losses and negative cash flows from operations since the 2011 fiscal year. The Company’s ability to continue as a going concern is uncertain and is dependent upon its ability to continue to raise adequate financing for new projects and successful proceeds from legal disputes with Kyrgyz government (Note 9 and 10). There can be no assurance that the Company will be successful in this regard, and therefore, there is doubt regarding the Company’s ability to continue as a going concern, and accordingly, the use of accounting principles applicable to a going concern. These Financial Statements do not reflect adjustments that would be necessary if the “going concern” assumption is not appropriate. If the “going concern” assumption is not appropriate, adjustments to the carrying values of the assets and liabilities, the expenses and the balance sheet classifications, which could be material, would be necessary.

The recoverability of expenditures on its resource properties is dependent upon the existence of resources that are economically recoverable, the ability of the Company to obtain necessary financing to complete the exploration and the development of the properties, and upon future profitable production or proceeds from disposition thereof.

On August 30, 2021, the Board of Directors approved the Financial Statements for the three and six months ended June 30, 2021.

2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE WITH IAS 34

These Financial Statements form part of the period covered by the Company’s International Financial Reporting Standards (“IFRS”) annual consolidated financial statements. These Financial Statements have been prepared in accordance with IAS 34 - Interim Financial Reporting and on the basis of IFRS standards and interpretations expected to be effective as at the Company’s IFRS annual reporting date, December 31, 2021.

These Financial Statements do not contain all the disclosures required by IFRS for annual financial statements and should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2020 prepared in accordance with International Accounting Standards as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) in effect as of June 30, 2021.

In the opinion of management, all adjustments considered necessary for fair presentation have been included in these Financial Statements. Operating results for the six months ended June 30, 2021 may not be indicative of the results that may be expected for the year ending December 31, 2021. Certain comparative figures included in the statement of cash flows have been reclassified to comply with the basis of presentation.

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of consolidation

These Financial Statements include the accounts of Stans and its subsidiaries. Subsidiaries are entities controlled by the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are included in the financial statements from the date control is obtained until the date control ceases. Where the Company’s interest in a subsidiary is less than 100%, the Company recognizes non-controlling interests. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have been eliminated on consolidation. Stans and all of its subsidiaries have a reporting date of December 31.

The following companies have been consolidated within these Financial Statements:

Company Subsidiaries	Property location	% of	Principal	Functiona
		ownership	activity	l currency
		and
		voting
		rights
Stans Energy Corp.	Canada	n/a	Corporate and	CAD
			holding
Kutisay Mining LLC	Kyrgyz Republic	100%	Exploration	USD
Kashka REE Plant Ltd.	Kyrgyz Republic	100%	Extraction	USD
SevAmRus CJSC	Russian Federation	100%	Research	RUB

4. ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

New Standards and Interpretations issued and adopted

At the date of authorization of these Financial Statements for the period ended June 30, 2021, the following standards which are applicable to the Corporation were issued.

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 Financial Statements of, nor is there expected to be any future impact to the Company.

Amendments to IFRS 16 Covid-19 Related Rent Concessions

On May 28, 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16 if the change were not a lease modification.

Accounting pronouncements issued but not yet adopted

At the date of approval of these Financial Statements for the six months ended June 30, 2021, there are no issued but unadopted standards which would have a material impact on the Company.

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. The areas involving significant judgment and estimates have been set out in Note 5 of the Company's annual audited consolidated financial statements for the year ended December 31, 2020. Certain comparative figures included in the statement of cash flows have been reclassified to comply with the basis of presentation.

6. LEASES

Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:

	Office space
Right of use assets
As at January 1, 2020	92,177
Amortizationexpense	32,533
As at December 31, 2020	59,644
Amortizationexpense	16,267
As at June 30, 2021	43,377

The Company leases office space. The remaining lease term is 1.3 years (2020: 2.3 years).

Set out below are the carrying amounts of lease liabilities and the movements during the period:

	2021 2020 65,899 96,768 2,952 4,528 (19,577) (19,578) 49,274 81,718 36,279 32,444 12,995 49,274 June 30, 2021 June 30, 2020 16,267 16,267 2,952 4,528 19,219 20,795
As at January 1 Interest on lease obligations Lease payments
As at June 30
Current Non current The following are the amounts recognized in profit or loss:
Amortization of right-of-use assets Interest on lease obligations
Total amount recognized inprofit or loss

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

Maturity analysis

	June 30, 2021 June 30, 2020 39,584 39,156 13,266 39,584 - 13,266 52,850 92,006 (3,576) (10,288) 49,274 81,718
Year 1 Year 2 Year3
Less: unearned interest

7. SEGMENTED INFORMATION

As at June 30, 2021 and December 31, 2020 the Company’s assets were located in the following countries:

	June 30,	December 31,
	2021	2020
Assets
Canada	$ 83,571	$ 119,779
Kyrgyz Republic	2,203	10,842
Total	$ 85,774	$ 130,621
Net income/(loss)
Canada	$(196,907)	$14,719,252
Kyrgyz Republic	(67,805)	(191,437)
Total	$(264,712)	$14,527,815

8. LEGAL PROCEEDINGS AND IMPAIRMENT

In June 2012, a committee of the Kyrgyz Parliament demanded that Stans’ Licence Agreement for Kutessay II be cancelled. During the year ended December 31, 2013, the Kyrgyz State Prosecutor’s Office initiated legal proceedings against the Company to revoke the mineral property licenses awarded to Stans by a government agency through an auction process held in December 2009.

In March 2014, the Inter District court of Bishkek ruled in favour of the Kyrgyz State Prosecutor’s Office. Stans appealed this decision in various courts in the Kyrgyz Republic and in 2015 the Kyrgyz Supreme Court dismissed Stans’ appeal. Consequently, Stans has no right for further appeal in the Kyrgyz Republic. In October 2013, Stans commenced arbitration against the Kyrgyz Republic in the Arbitration Court at the Moscow Chamber of Commerce and Industry (‘the MCCI Tribunal’) in connection with the legal proceedings by the Kyrgyz Republic against the Company. In June 2014, the MCCI Tribunal awarded Stans US$118 million as a recovery of damages from the Kyrgyz Republic. This award was subsequently challenged by the Kyrgyz Republic in the courts of the Russian Federation, and in January 2016, the Supreme Court of the Russian Federation in its final decision upheld the May 2015 ruling of a lower court to set aside the MCCI Tribunal award.

In May 2015 Stans commenced an arbitration against the Kyrgyz Republic under the 1976 rules of the United Nations Commission on International Trade Law (‘the UNCITRAL Rules’) claiming damages arising from the Kyrgyz Republic’s wrongful conduct toward the Company’s investments in Kyrgyzstan that culminated in the termination of the mining licenses for Kutessay II and Kalesay. Stans and the Kyrgyz Republic subsequently agreed that this arbitration (‘the UNCITRAL Arbitration’) would be administered by the secretariat of the Permanent Court of Arbitration in Hague with a judicial seat in London, England. After a

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

Tribunal was appointed in the UNCITRAL Arbitration, Stans filed a statement of claim on January 29, 2016 claiming US $219 million in damages and interest from the Kyrgyz Republic

Due to the above legal proceeding which resulted in Stans being unable to explore and develop its mineral properties and identify a feasible alternate source of rare earth elements that could be processed at the Kashka Rare Earth Processing Facility, the Company during the year ended December 31, 2013 recorded an impairment and wrote off its mineral interests and its Plant in the Kyrgyz Republic.

On August 21, 2019 the Company has received a copy of the decision from the arbitration Tribunal in ongoing dispute with the Kyrgyz Republic. The Tribunal determined that Stans prevailed on jurisdiction and on the merits of our claim, awarding Stans a sum of approximately US $24 Million inclusive of damages, interest, and costs in their legal dispute with the government of the Kyrgyz Republic in relation to its mineral property’s licenses (See Note 1).

9. LOAN

In June 2015, the Company entered into a Litigation Financing Agreement (‘the Agreement’) with a subsidiary of the Calunius Litigation Risk Fund 2 LP (“the Financer”).

The advances received under the Agreement have been accounted for as a non-monetary liability within the Financial Statements. In connection with the terms of the advances the Company does not have a present obligation to repay the amounts until such time as the litigation has been settled or an event of default has occurred. Any non-reciprocal benefits received by the Company will be recognized by the Company when the terms of the Agreement are satisfied. As the amounts represent income received in advance, the Company is accounting for the advances in a manner similar to deferred revenue whereby the amounts recognized on the statement of financial position are converted to the functional currency of the Company on the date of receipt of the advance and are not re-measured at the period end exchange rates.

Under the terms of the Agreement, the Financer has agreed to assist in the financing of the Company’s legal costs and to provide financing toward continuing corporate overhead costs, in relation to the international arbitration proceedings against the Kyrgyz Republic. As at December 31, 2020 and December 31, 2019 the amount of $9,890,093 was financed under the Agreement.

The Financer's fee under the Agreement becomes payable upon a final settlement of the arbitration claim and the value of the Financer's fee is dependent upon a number of variables, including the amounts advanced under the Agreement and the length of time taken to reach a settlement. The Agreement also provides that the amount of the Financer's fee, which includes amounts advanced, shall not exceed the amount of the aggregate proceeds of the arbitration claim. To the extent that the Company is not successful in the arbitration claim, the Company will not have to repay any amounts which were provided by the Financer.

On March 23, 2018, the Company entered into a new litigation finance agreement (“2018 Agreement”) with new funders: Gillham LLC and Lucille Investments LLC (“Funders”), to obtain additional incremental funding of Stans' legal costs, including related corporate overhead costs and to continue with the international arbitration proceedings against the Kyrgyz Republic on a non-recourse basis.

Under the terms of the 2018 Agreement, the Company has given certain warranties and non-financial covenants to the funder. The funding is secured by all real and personal property of the Company as collateral. In consideration for the provision of arbitration financing, Stans has agreed to pay to the funder a portion of any final settlement of the arbitration claim against the Defendant (the “Funder’s Fee”). The Funder’s Fee shall only become payable upon a final settlement of the arbitration claim and the value of the Funder’s Fee is dependent upon a number of variables including the value of any settlement and the length of time taken to reach a settlement. The agreement also provides that the amount of the Funder’s Fee, which includes amounts advanced, shall not exceed the amount of the aggregate proceeds of the arbitration claim under any circumstances. Entitlement to returns on amounts advanced is on a priority basis that is pari

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

passu with the rights of the pre-existing source of litigation financing to receive payment and/or distribution.

On March 19, 2019 the Company signed an addendum to the 2018 Agreement with the Funders for incremental financing for operating and legal proceedings.

As at December 31, 2020 and December 31, 2019 the amount of $5,275,376 was financed under the new Agreement.

Refer to Note 10 for a Cooperation agreement, signed on April 2, 2020, with Funders to secure financing for the Award recognition and enforcement proceedings.

10. OTHER INCOME

Other income comprised of the following:

Other income comprised of the following:
	June 30,	June 30,
	2021	2020
Gain on settlement of the loan (Note 9)	-	15,165,469
Monthly payments byFinanceProviders	50,757	110,585
Total amount recognized inprofit or loss	50,757	15,276,054

On April 2, 2020, the Company signed a Cooperation agreement with Gillham LLC and Lucille Investments LLC and Calunius Litigation Risk Fund 2 LP (“Finance Providers”) to secure financing for the Award recognition and enforcement proceedings (“2020 Agreement”). This Agreement is an extension of the existing Litigation funding agreement of March 2018 (Note 9), and its main terms provide for the following:

• Stans assigns all its rights to title to and interest in the Award and the Costs Order (by the High Court of Justice of England) to the Finance Providers.

• Parties to the Cooperation agreement will cooperate in all matters pertaining to recognition and enforcement proceedings relating to the Award and the Costs Order.

• The Finance Providers bear full responsibility for all collection activities with respect to the Award and the Costs Order. The assignment of all rights to title to and interest in the Award and the Costs Order (by the High Court of Justice of England) to the Finance Providers effectively eliminated Company’s liability to the Finance Providers.

Finance Providers agreed to pay the Company US$20,000 per month starting from March 2020 until February 2021. If the Finance Providers collect proceeds of the Award and the Cost Order, then Finance Providers shall pay the Company a success fee in an amount equal to US$500,000 less the payments made to the Company. As at June 30, 2021, the amount of $318,898 (US$240,000) was financed under the 2020 Agreement.

The Company recognized a benefit of $ 15,165,469 from this settlement, by extinguishing the loan liability in the income statement for the year ended December 31, 2020 (Note 9).

11. SHARE CAPITAL

(a) Common shares

The Company is authorized to issue an unlimited number of no par value common shares. The following table provides the details of changes in the number of issued common shares.

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

						Number	Amount
						#	$
Balance December	31,	2019				187,308,586	43,987,163
						-	-
Balance December	31,	2020	and June	30,	2021	187,308,586	43,987,163

(b) Warrants

On certain issuances of common shares, the Company grants warrants entitling the holder to acquire additional common shares of the Company, and the Company also grants warrants as consideration for services associated with the placement of such common share issues.

The following table provides the details of changes in the number of outstanding common share purchase warrants:

warrants:
						Number	Value
						#	$
Balance, December	31,	2019				14,590,000	$355,443
						-	-
Balance,December	31,	2020	and June	30,	2021	14,590,000	355,443

Number of warrants	Remaining contractual	Exercise price per	Expiry date
	life	warrant
6,050,000	0.36 years	$0.06	November 10, 2021
40,000	0.36 years	$0.06	November 10, 2021
2,400,000	1.45 years	$0.06	December 11, 2022
3,300,000	1.64 years	$0.06	February 22, 2023
2,800,000	3.01 years	$0.06	July 3, 2024
14,590,000

(c) Common share purchase options

The Company has a stock option plan for the benefit of directors, officers, key employees, and consultants. The total number of shares which may be reserved and set aside for issuance to eligible persons may not exceed 10% of the issued and outstanding common shares. As at June 30, 2021, 15,300,000 common shares were reserved for the exercise of stock options granted under the Company’s stock option plan (the “Plan”).

The following table provides the details of changes in the number of issued common share purchase options during the periods:

	Options	Weighted-
		average
		exercise price
	#	$
Outstanding at December 31, 2019	18,500,000	0.06
Expired, unexercised	(3,200,000)	0.07
Outstanding at December 31, 2020 and June 30, 2021	15,300,000	0.06
Options exercisable at June 30, 2021	15,300,000	0.06

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Stans Energy Corp.

Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

Number of	Number	Remaining	Exercise price
stock options	exercisable	contractual life	per share	Expiry date
7,100,000	7,100,000	0.68 years	$0.06	March 6, 2022
5,900,000	5,900,000	2.73 years	$0.05	March 22, 2024
2,300,000	2,300,000	3.04 years	$0.05	July 15, 2024
15,300,000	15,300,000

12. CAPITAL MANAGEMENT

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The Company includes equity, comprised of issued common shares, contributed surplus, share purchase warrants, accumulated other comprehensive income and deficit and loan financing in the definition of capital. Management adjusts the capital structure as necessary in order to support the acquisition, exploration and development of mineral properties. 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 team to sustain the future development of the business.

13. FINANCIAL RISK MANAGEMENT

Credit risk

Credit risk relates to cash and cash equivalents and HST receivable and arises from the possibility that any counterparty to an instrument fails to perform. The Company thoroughly examines the various financial risks to which it is exposed and assesses the impact and likelihood of those risks. Where material, these risks are reviewed and monitored by the Board of Directors. As at June 30, 2021, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents, and HST receivable.

The Company has no significant concentration of credit risk arising from operations. The Company’s cash and short-term investments are either on deposit with one of highly rated banking groups in Canada or invested in guaranteed investment certificates issued by one of highly rated Canadian banking groups. HST receivables consist of sales tax receivable from government authorities in Canada.

Liquidity risk

The Company’s exposure to liquidity risk is dependent on its ability to raise funds to meet purchase commitments and to sustain operations. The Company controls its liquidity risk by managing working capital and cash flows by litigation or alternative sources of financing. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. The Company is currently assessing all options to address its liquidity issues. It is not possible to determine with any certainty the success and adequacy of these initiatives . As at June 30, 2021, the Company had a cash balance of $3,708 (2020 - $33,496) and short term investments of $1,000 (2020 - $1,000) to settle current liabilities of $2,024,333 (2020 - $1,641,097). All of the Company’s financial liabilities with the exception of the litigation funding received, have contractual maturities of less than 12 months and are subject to normal trade terms.

Pandemic COVID-19 risk

On March 11, 2020 the World Health Organization declared the COVID-19 infectious virus a global pandemic, with resulting travel bans, physical distancing, closing of social, cultural and educational facilities and non-essential businesses. Global financial equity markets have declined considerably and remain volatile. The effect on the Company’s exploration projects in 2020 included difficulty in accessing exploration sites and hiring personnel for exploration programs, as well as in raising additional equity financing. The global shutdown, the isolation of the people and the availability of effective vaccines is showing progress in the decline of the rate of infection, but the timing to return to normal and the impact on the Company’s operations is difficult to project.

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

Market risk

a) Interest Rate Risk

The Company’s current policy is to invest excess cash in investment grade short-term deposit certificates issued by banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of the banks. The Company does not have any interest-bearing debt.

b) Foreign Currency Risk

In the normal course of operations, the Company is exposed to currency risk due to business transactions in foreign countries. Transactions related to the Company’s exploration and acquisition activities are mainly denominated in United States dollars (“USD”) and some in Kyrgystani SOM and Russian Rubles. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in the foreign exchange rate. The Company has not entered into any derivative contracts to manage this risk. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars (“CAD”) at the period-end exchange rates. As at June 30, 2021 and December 31, 2020, the CAD equivalent of the Company’s foreign financial instruments, primarily denominated in USD, is as follows:

	Canadian	Canadian
	dollar	dollar
	June 30,	December 31,
	2021	2020
Cash	$ 1,978	$ 7,273
Other receivables	226	5,425
	2,204	12,698
Accounts payable and accrued liabilities	(978,838)	(913,559)
Net liabilities exposure	$ (976,634)	$ (900,861)

Based on the above net exposures at June 30, 2021, a 10% depreciation or appreciation of the above currencies against the CAD dollar would result in an increase or decrease, respectively, in net loss by $88,425 (December 31, 2020 - $81,904).

14. RELATED PARTY TRANSACTIONS

Transactions with related parties were in the normal course of operations and were measured at the same value as if the transactions had occurred with non-related parties. The amount of consideration established and agreed to by the related party.

For the three and six months ended June 30, 2021 and 2020, the Company incurred related party expenses with key management personnel: President and Interim Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, and independent directors is as follows:

	Three	months ended	Six	months ended
	June 30,	June 30,	June 30,	June 30,
	2021	2020	2021	2020
Key management personnel compensation	$ 64,833	$ 74,000	$138,833	$148,000
Stock-based compensation	-	37,492	3,588	95,512
Director's fees	9,000	-	9,000	-
	$ 73,833	$111,492	$151,421	$243,512

As at June 30, 2021 the Company held cash loan from directors of the Company in the amount of $89,800 with accrued interest $10,322 based on borrowing rate 10% (2020 - $60,000 and $3,767).

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Stans Energy Corp. Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in Canadian dollars unless otherwise stated)

The following table provides the details of amounts due to these related parties as of June 30:

	Three	months ended	Six	months ended
	June 30,	June 30,	June 30,	June 30,
	2021	2020	2021	2020
Key management personnel compensation	$ 44,448	$ 31,230	$716,362	$537,541
Directors’ fees to independent directors	9,000	-	54,000	33,000
Loan from related parties	27,200	-	89,800	60,000
Interest charged	2,055	1,500	10,322	3,767
	$ 82,703	$ 32,730	$870,484	$634,308

15. OFFICE AND ADMINISTRATION EXPENSES

			Three months	ended	Six	months ended
			June 30,	June 30,	June 30,	June 30,
			2021	2020	2021	2020
Salaries, benefits	and director’s fees		$ 9,000	$ 38,864	$ 64,365	$ 88,682
Travel expenses			405	3,233	4,675	7,654
Other office	and	administration
expenses			19,932	21,348	26,248	56,666
			**$ 29,337 **	$ 63,445	$ 95,288	$153,002

16. EARNINGS PER SHARE

Earnings per share have been calculated using the weighted average number of common shares and common share equivalents issued and outstanding during the year. Stock options are reflected in diluted earnings per share by application of the treasury method.

The following table details the weighted average number of outstanding common shares for the purpose of computing basic and diluted earnings per common share for the following periods:

	Three	months ended	Six	months ended
	June 30,	June 30,	June 30,	June 30,
	2021	2020	2021	2020
Net income/(loss) attributable to
common shareholders	$(120,658)	$ 15,106,447	$(264,712)	$14,759,573
Basic and diluted weighted
average shares outstanding	187,308,586	187,308,586	187,308,586	187,308,586
Basic and diluted income/(loss)	$ (0.00)	$ 0.08	$ (0.00)	$ 0.08
per share

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