Volt Carbon Technologies Inc. — Annual Report 2019

Feb 29, 2020

SAINT JEAN CARBON INC.

Audited Financial Statements

for the years ended October 31, 2019 and October 31, 2018

MANAGEMENT’S REPORT TO THE SHAREHOLDERS

The accompanying financial statements have been prepared by management and approved by the Board of Directors of the Company. Management is responsible for the information and representations contained in these financial statements and the accompanying Management’s Discussion and Analysis. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The significant accounting policies followed by the Company are set out in Note 3 to the financial statements.

To assist management in discharging these responsibilities, the Company maintains a system of procedures and internal controls which are designed to provide reasonable assurance that its assets are safeguarded, that transactions are executed in accordance with management’s authorization, and that the financial records form a reliable base for preparation of accurate and timely financial information.

The Company’s external auditors are appointed by the shareholders. They independently perform the necessary tests of accounting records and procedures to enable them to report their opinion as to the fairness of the financial statements and their conformity with IFRS.

The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control. The Board of Directors exercises this responsibility through an Audit Committee. The Audit Committee has reviewed and discussed the financial statements, including the notes thereto, with management and the external auditors. The financial statements have been approved by the Board of Directors on the recommendation of the Audit Committee.

“ ” Paul Ogilvie __ Paul Ogilvie Chief Executive Officer

“ Anna Lentz ” Anna Lentz

Chief Financial Officer

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Independent Auditors’ Report

To: The Shareholders of Saint Jean Carbon Inc.

Opinion

We have audited the financial statements of Saint Jean Carbon Inc. (the “Company”), which comprise the statements of financial position as at October 31, 2019 and 2018 and the statements of operations 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 October 31, 2019 and 2018, 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 Auditors' 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 2(b) to the financial statements which indicate that at October 31, 2019 the Company has incurred a loss from operations of $831,744, has a working capital deficit of $1,053,673, negative cash flow from operations of $185,019 and an accumulated deficit of $19,436,691. This condition, along with other matters as set forth in Note 2(b), indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Our opinion is not qualified in respect of this matter.

Other Matter

The financial statements of the Company for the year ended October 31, 2018, were audited by another auditor who expressed an unmodified opinion on those statements on February 26, 2019.

Information Other than the Financial Statements and Auditors' Report Thereon

Management is responsible for the other information. The other information comprises the information included in 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 Management's Discussion and Analysis prior to the date of this auditors' report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditors' report. We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, 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.

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Independent Auditors’ Report (continued)

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.

Auditors’ 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 auditors' 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 judgement 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 auditors’ 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 auditors’ 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 Auditors' report is Roland A. Bishop, CPA, CA.

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February 28, 2020 Calgary, Alberta

Chartered Professional Accountants

SAINT JEAN CARBON INC.

STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian Dollars)

ASSETS Current Cash and equivalents Accounts receivable_(Note 6_) Prepaid expenses	October 31, October 31, 2019 2018
	7,723 $ 30,000 $ 27,070 63,943 50,078 46,337
Restricted cash(Note 14) Equipment(Note 7) Mineral exploration and evaluation assets(Note 8) Other assets	84,871 140,280 41,000 41,000 484,411 612,134 3,907,664 3,907,664 534 -
	4,518,480 $ 4,701,078 $
LIABILITIES Current Accounts payable and accrued liabilities_(Note 9) Notes payable(Note 10)_ Interestpayable	1,099,676 $ 618,174 $ 38,000 - 868 -
SHAREHOLDERS' EQUITY Share capital_(Note 11)_ Contributed surplus Deficit	1,138,544 618,174 21,011,573 20,882,797 1,805,054 1,805,054 (19,436,691) (18,604,947)
	3,379,936 4,082,904
	4,518,480 $ 4,701,078 $

Going concern (Note 2(b)) and Contingent liability (Note 19)

See accompanying notes

On behalf of the Board of Directors

"Paul Ogilvie"

CEO, Director

"Anna Lentz"

CFO, Director

SAINT JEAN CARBON INC. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

Processing revenue	Year ended October 31, 2019 115,205 $	Year ended October 31, 2018
		408,870 $
Direct costs	115,205 25,363	408,870 84,500
Administrative costs Amortization Automotive Bad debts Bank and loan interest Business development Consulting fees Filing fees General meetings Internet and website Investor relations Management fees Mill operating expense Office expense Payroll expense Professional fees Property evaluation Research expenses Sales and marketing Telecommunications Transfer agent Travel and promotion Write-down of mineral property interest_(Note 8)_	89,842 131,223 $ 14,245 26,470 4,545 1,663 81,798 8,147 912 - 13,275 390,947 95,406 45,244 - 32,553 - - 62,250 5,976 1,722 5,923 -	324,370 78,293 $ 13,149 - 2,033 1,000 63,958 13,390 14,426 1,915 64,970 399,837 51,913 86,677 930 124,952 2,128 218,750 309,000 5,146 11,137 3,847 1,045,039
Interest income Recognition of flow-throughpremium liability	922,299 713 -	2,512,490 478 -
Loss before income taxes Deferred income tax provision (recovery)	(831,744) -	(2,187,642) -
Loss and comprehensive loss for theyear	(831,744)	(2,187,642)
Loss per share - basic and diluted(Note 11(b))	(0.011) $	(0.030) $
Weighted average number of shares outstanding - basic and diluted	73,738,648	73,607,287

SAINT JEAN CARBON INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in Canadian Dollars)

							Equity
	Number of				Contributed		component of
	shares		Share Capital		Surplus		debenture		Deficit		Total
Balance at November 1, 2017	238,770,130		20,034,138		1,805,054		-		(16,417,305)		5,421,887
Private placements (pre-consolidation)	10,100,000		505,000		-		-		-		505,000
Shares issued pursuant to property
agreement (pre-consolidation)	250,000		8,750		-		-		-		8,750
Cancelled due to 4:1 consolidation	(186,840,098)		-		-		-		-		-
Share issuance costs	-		(110,091)		-		-		-		(110,091)
Private placements (post-consolidation)	8,300,000		415,000		-		-		-		415,000
Shares issued pursuant to property
agreement (post consolidation)	750,000		30,000		-		-		-		30,000
Net loss and comprehensive loss for
theperiod	-		-		-		-		(2,187,642)		(2,187,642)
Balance, October 31, 2018	71,330,032	$	20,882,797	$	1,805,054	$	-	$	(18,604,947)	$	4,082,904
Private placements	4,562,500		159,688								159,688
Share issuance costs	-		(30,912)								(30,912)
Net loss and comprehensive loss for
theperiod	-		-		-		-		(831,744)		(831,744)
Balance, October 31, 2019	75,892,532	$	21,011,573	$	1,805,054	$	-	$	(19,436,691)	$	3,379,936

See accompanying notes

SAINT JEAN CARBON INC. STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)

Cash flows from (used in) the Operating Activity Net and comprehensive loss for the year Items not involving cash: Amortization Impairment of mineralproperties	Year ended October 31, 2019 (831,744) $ 131,223 -	Year ended October 31, 2018
		(2,187,642) $ 78,293 1,045,039
Changes in non-cash working capital items: Accounts receivable Corporate income tax receivable Prepaid expenses Accounts payable and accrued liabilities Interestpayable	(700,521) 36,873 - (3,741) 481,502 868	(1,064,310) 1,158 3,004 19,289 93,952 -
	(185,019)	(946,907)
Cash flow from (used in) financing activities Issuance of share capital Share issuance costs Restricted cash Advance from notespayable	159,688 (30,912) - 38,000	920,000 (110,091) (5,000) -
	166,776	804,909
Cash flows from (used in) investing activities Purchase of capital assets Acquisition of other assets Exploration and evaluation expenditures	(3,500) (534) -	(383,178) - (526,260)
	(4,034)	(909,438)
Increase in cash and cash equivalents Cash and cash equivalents, beginning of year	(22,277) 30,000	(1,051,436) 1,081,436
Cash and equivalents, end of year	7,723 $	30,000 $
Cash and equivalents is comprised of: Cash Short-term investments	7,723 $ -	30,000 $ -
	7,723 $	30,000 $
Supplemental cash flow disclosure: Interestpaid	- $	- $

See accompanying notes

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

1. CORPORATE INFORMATION AND NATURE OF OPERATIONS

Saint Jean Carbon Inc. (formerly Torch River Resources Ltd.) incorporated provincially in Alberta, and extra provincially Saskatchewan, Manitoba, Quebec and British Columbia has shares listed on the TSX Venture Exchange.

The Company is in the process of exploring its mineral properties and has not determined whether these properties contain ore reserves which are economically recoverable.

To date, the Company has not earned significant revenues and is considered to be in the exploration stage.

During the prior year the Company added a new business division to include the processing of raw materials.

2. BASIS OF PRESENTATION AND GOING CONCERN

A) Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Reporting Interpretations Committee (“IFRIC”). These financial statements were approved by the Board of Directors on February 28, 2020.

B) Going concern

These financial statements have been prepared on a going-concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business for the foreseeable future. Accordingly, it does not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and liquidate its liabilities in other than normal course of business and at amounts which may differ from those shown in the financial statements.

As at October 31, 2019, the Company has incurred a loss from operations of $831,744, has a working capital deficit of $1,053,673, negative cash flow from operations of $185,019 and an accumulated deficit of $19,436,691. The Company has increasing losses and negative cash flow from operations. The Company’s ability to continue as a going concern is contingent on its ability to obtain additional equity financing.

C) Measurement basis

These financial statements are prepared on the historical cost basis except for certain financial instruments, which are measured at fair value as explained in the accounting policy set out in Note 15. The Company’s presentation and functional currency is Canadian dollars.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these financial statements.

a) Mineral exploration and evaluation assets

The Company is in the exploration stage with respect to its investment in mineral properties. Expenditures incurred before the entity has obtained the legal rights to explore a specific area are expensed.

All costs directly associated with property acquisition and exploration activities are capitalized as exploration and evaluation assets. Costs that are capitalized are limited to costs related to the acquisition and exploration activities that can be associated with finding specific mineral resources, and do not include costs related to production, administrative expenses and other general indirect costs.

Costs related to the acquisition of mining properties and exploration and evaluation expenditures are capitalized by property until the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, exploration and evaluation assets are reclassified as mining assets under development. Exploration and evaluation assets are assessed for impairment before reclassification, and any impairment loss is then recognized.

The Company may occasionally enter into farm-out arrangements, whereby the Company will transfer part of a mineral interest, as consideration, for an agreement by transferee to meet certain exploration and evaluation expenditures which would have otherwise been undertaken by the Company. The Company does not record any expenditures made by the farmee on its behalf. Any cash consideration received from the agreement is credited against the costs previously capitalized to the mineral interest given up by the Company, with any excess cash accounted for as a gain on disposal.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

b) Impairment of non-financial assets

Non-financial assets are regularly assessed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

For the purposes of determining impairment the Company considers each property to be a cash-generating unit. When assessing for a possible impairment the Company considers whether any of the following facts and circumstances apply to a specific property: the rights to explore the property have expired (or are about to expire), no further substantive expenditure or further exploration of the property is planned, the exploration conducted on the property has not led to the discovery of commercially viable quantities of mineral resources and the Company has decided to discontinue such activities, or sufficient data exists to indicate that development of the property is likely to proceed but the carrying amount of the property is unlikely to be recovered in full from successful development or by sale.

The recoverable amount is the greater of fair value less costs to sell and value in use of the asset. When the recoverable amount of an exploration and evaluation asset is less than the carrying amount, the carrying amount of the asset is reduced to its recoverable amount by recording an impairment loss.

c) Cash and equivalents

Cash equivalents consist of cash or highly liquid investments which are readily convertible into cash and subject to an insignificant risk of change in value.

d) Property and equipment

Property and equipment is recorded at cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated at the following annual rates and basis:

Leasehold improvements	Straight line -Lease term
Mill equipment	20% Declining balance
Furniture, fixtures and office equipment	20 – 55% Declining balance

One-half of the above rates are used in the year of acquisition.

e) Revenue recognition

Revenue from graphite processing services rendered is recognized when the services are performed.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Income taxes

Income tax expense represents current tax and deferred tax. The Company records current tax based on the taxable profits for the period which is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred income taxes are accounted for using the liability method. The liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference based on currently enacted or substantively enacted tax rates that are expected to be in effect when the underlying items of income or expense are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as non-capital loss carry forwards, are recognized to the extent it is probable that taxable profit will be available against which the asset can be utilized.

g) Provisions

Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. At each financial position reporting date presented the Company has not incurred any decommissioning costs related to the exploration and evaluation of its mineral properties and accordingly no provision has been recorded for such site reclamation or abandonment.

h) Share capital

The Company records proceeds from share issuances net of issue costs. When unit issuances include warrants the excess of proceeds over fair value of shares is credited to contributed surplus.

Shares issued for consideration other than cash are valued at the quoted price on the TSX-V on the date the shares are issued unless the fair value of goods and services is readily determinable.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

i) Share-based payments

The Company has a stock option plan that is described in Note 11.

Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The fair value is determined by the Black-Scholes Option Pricing Model with assumptions for: weighted average risk-free interest rates; dividend yields; weighted-average volatility factors of the expected market price of the Company’s Common Shares; and a weighted average expected life of the options.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.

Where equity instruments are used to purchase mineral properties the value of these sharebased payments is calculated using the closing price of the shares on the date of issue as determined by the public exchange upon which they are listed as this is the most readily determinable value.

j) Basic and diluted loss per share

Basic loss per share is computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to Common Shares. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. Fully diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.

– k) Share capital flow through shares

The Company finances a portion of its exploration activities through the issue of flow-through shares.

The Company provides certain share subscribers with a flow-through component for tax incentives available on qualifying Canadian exploration expenditures. The Company renounces the qualifying expenditures upon issuance of the respective flow-through common shares and accordingly is not entitled to the related taxable income deductions for such expenditures.

The shares issued require that the Company make certain qualifying expenditures for tax purposes on or before December 31, the deduction of which flow through to the shareholders.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company may incur liabilities in the event that it has not incurred sufficient qualifying expenditures or has renounced expenses to investors that do not meet the definition of a qualifying expenditure for tax purposes.

The proceeds from issuing flow-through shares are allocated between the offering of shares and the sale of tax benefits. The allocation is based on the difference (“premium”) between the quoted price of the Company’s existing shares and the amount the investor pays for the actual flow-through shares. A liability is recognized for the premium (“other liability”), and is reversed into the statement of loss as a deferred tax recovery when the eligible expenditures are incurred. If the flow-through shares are not issued at a premium, a liability is not recorded.

l) Financial instruments

Recognition

Financial assets and financial liabilities are recognized on the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Classification

Financial assets are classified as subsequently measured at amortized cost or fair value through profit or loss on the basis of both the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. The classification of subsequently measured at amortized cost is used when the objective of the business model is to hold assets and collect contractual cash flows, and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company’s cash and equivalents, accounts receivable, and restricted cash are classified as financial assets subsequently measured at amortized cost.

Financial liabilities are classified as subsequently measured at amortized cost, unless they meet the criteria for measurement at fair value or other prescribed measurement. The Company’s accounts payable and accrued liabilities, notes payable and interest payable are classified as financial liabilities subsequently measured at amortized cost.

Measurement

Financial assets and financial liabilities classified as subsequently measured at amortized cost are initially measured at fair value plus or minus transaction costs that are directly attributable to the acquisition of the financial asset or issue of the financial liability. Subsequently, the financial assets and liabilities are measured at amortized cost using the effective interest rate method.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment

Financial assets classified as subsequently measured at amortized cost or fair value through other comprehensive income reflect the Company’s assessment of expected credit losses. Expectations reflect historical credit losses, adjusted for forward looking factors. The expected credit loss provision is based on expectations for the next twelve months unless there has been a significant increase in the customer’s credit risk, resulting in the provision being based on expectations for the remaining lifetime of the asset.

4. APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS

The standards issued and adopted by the Company in the current year’s financial statements are listed below.

IFRS 9 Financial Instruments

On November 1, 2018, the Company adopted the new rules under IFRS 9 Financial Instruments which includes a principle-based approach for the classification and measurement of financial assets and a forward-looking ‘expected credit loss’ model. The standard was adopted retrospectively. The comparative financial statements have not been restated as the adoption had no impact on amounts previously recognized in the statements of comprehensive income and financial position.

The following table outlines the classification of financial instruments under the previous standard and the new classification under IFRS 9.

		New classification
Financial asset/liability	Previous classification	under IFRS 9
Cash	Fair value through profit and loss	Amortized cost
Accounts receivable	Amortized cost	Amortized cost
Restricted cash	Amortized cost	Amortized cost
Accounts payable and accrued	Amortized cost	Amortized cost
liabilities
Interest payable	Amortized cost	Amortized cost
Notes payable	Amortized cost	Amortized cost

IFRS 15 Revenue from Contracts with Customers

On November 1, 2018 the Company adopted the new rules under IFRS 15 Revenue from contracts with customers. Under the new standard revenue is recognized from the perspective of when a transfer of control to the customer is complete. Adoption of the standard had no impact on amounts previously recognized in the statements of net and comprehensive income and financial position.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

4. APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS (continued)

The standard issued but not yet effective up to the date of issuance of the Company’s financial statements is listed below.

IFRS 16 Leases

In January 2016, The IASB issued IFRS “Leases”, which replaces IAS 17 “Leases,” and provides that a single recognition and measurement model for leases would apply, with required recognition of assets and liabilities for most leases. For lessees, IFRS 16 removes the classification of leases as either operating or finance leases, effectively treating all leases as finance leases. Certain short-term leases (less than 12 months) and leases of low-value assets are exempt from the requirements, and may continue to be treated as operating leases.

The Company will adopt the standard for the fiscal year commencing October 1, 2019. The standard will be adopted retrospectively by recognizing the cumulative impact of initial adoption in opening retained earnings. Under the standard, the Company will recognize a right-of-use asset under property and equipment (P&E) and a corresponding liability for the lease associated with the Company’s warehouse space. Previously, the Company recognized the lease charge associated with this facility as an operating lease expense on a straight-line basis over the term of the lease. The nature of the expenses related to this lease will change since the Company will recognize a depreciation charge for the right-of-use asset and an interest expense on the related lease liability. Consistent with the guidance, the Company will not apply this standard to short-term leases and leases for which the underlying asset is of low value.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Information about critical judgments in applying accounting policies that have the most significant risk to cause material adjustment to the carrying amounts of assets and liabilities recognized in these financial statements within the next financial year are discussed below:

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

Mineral exploration and evaluation assets

Impairment of exploration and evaluation assets are assessed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. The assessment requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance.

Title to mineral property interests

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

6. ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE
	2019	2018
Trade receivables	$ 5,000	$ 35,830
GST receivable	22,070	28,113
	$ 27,070	$ 63,943

7. PROPERTY AND EQUIPMENT

			Furniture,
		Leasehold	fixtures and
Cost	Mill equipment	improvements	office equipment	Total
At November 1, 2017	$ 277,505	$ 19,710	$ 11,148	$ 308,363
Additions	350,436	28,706	4,036	383,178
At October 31, 2018	$ 627,941	$ 48,416	$ 15,184	$ 691,541
Additions	2,050	1,450	-	3,500
At October 31, 2019	$ 629,991	$ 49,866	$ 15,184	$ 695,041
			Furniture,
Accumulated		Leasehold	fixtures and
depreciation	Mill equipment	improvements	office equipment	Total
At November 1, 2017	$ -	$ -	$ 1,115	$ 1,115
Depreciation	62,794	12,930	2,569	78,293
At October 31, 2018	$ 62,794	$ 12,930	$ 3,684	$ 78,408
Depreciation	113,234	15,458	2,531	131,223
At October 31, 2019	$ 176,028	$ 28,388	$ 6,215	$ 210,631

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

7. PROPERTY AND EQUIPMENT (continued)

			Furniture,
		Leasehold	fixtures and
Net book value	Mill equipment	improvements	office equipment	Total
At October 31, 2018	$ 565,147	$ 35,486	$ 11,501	$ 612,134
At October 31, 2019	$ 453,963	$ 21,478	$ 8,970	$ 484,411

8. MINERAL EXPLORATION AND EVALUATION ASSETS

The Company has acquired certain mineral properties and rights. The property acquisition costs are as follows:

	High
	Rock and		Mount	Walker				Buckingham	Lochaber
	Climpy	Red Bird	Copeland	mine	Clot	Bell	Whabouchi	/Kendall	Montpellier	Total
At November 1,
2017	$ 15,000	$420,000	$331,779	$607,699	$178,820	$76,133	$117,391	$44,123	$ -	$1,790,945
Additions	-	-	-	-	8,750	-	-	-	455,000	463,750
Impairment	(15,000)	(280,000)	(110,593)	-	-	-	(117,391)	-	-	(522,984)
At October 31,
2018	$ -	$140,000	$221,186	$607,699	$187,570	$76,133	$ -	$44,123	$455,000	$1,731,711
Additions	-	-	-	-	-	-	-	-	-	-
Impairment	-	-	-	-	-	-	-	-	-	-
Transfer	-	-	-	-	-	-	-	-	-	-
At October 31,
2019	$ -	$140,000	$221,186	$607,699	$187,570	$76,133	$ -	$44,123	$455,000	$1,731,711

The deferred exploration costs are as follows:

	High Rock
	and	Red	Mount	Walker				Buckingham	Lochaber
	Climpy	Bird	Copeland	mine	Clot	Bell	Whabouchi	/Kendall	Montpellier	Total
At November 1,
2017	$ 85,335	$50,045	$692,572	$654,467	$302,084	$588,234	$ 172,389	$51,622	$ -	$2,596,748
Additions	110	-	-	(9,098)	13,080	47,517	-	-	49,651	101,260
Impairment	(85,445)	(33,364)	(230,857)	-	-	-	(172,389)	-	-	(522,055)
Transfer	-	-	-	-	-	-	-	-	-	-
At October 31,
2018	$ -	$16,681	$461,715	$645,369	$315,164	$635,751	$ -	$51,622	$49,651	$2,175,953
Additions	-	-	-	-	-	-	-	-	-	-
Impairment	-	-	-	-	-	-	-	-	-	-
At October 31,
2019	$ -	$16,681	$461,715	$645,369	$315,164	$635,751	$ -	$51,622	$49,651	$2,175,953
	The totalpropertyacquisition costs and				deferred	exploration costs are as follows:
	High Rock
	and	Red	Mount	Walker				Buckingham	Lochaber
	Climpy	Bird	Copeland	mine	Clot	Bell	Whabouchi	/Kendall	Montpellier	Total
At October 31,
2018	$ -	$156,681	$682,901	$1,253,068	$502,734	$711,884	$ -	$95,745	$504,651	$3,907,664
At October 31,
2019	$ -	$156,681	$682,901	$1,253,068	$502,734	$711,884	$ -	$95,745	$504,651	$3,907,664

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

8. MINERAL EXPLORATION AND EVALUATION ASSETS (continued)

A. High Rock and Climpy

The High Rock property and the Climpy property are gold prospects in northeast Manitoba. The Company has acquired a 100% interest in the property. During the current year the Company has recorded a write down in the carrying value of this property of $Nil ($100,445 – 2018).

B. Red Bird

The Red Bird molybdenum property consists of three mineral claims situated in the Skeena Mining Division of west central British Columbia. The Company has acquired a 25% undivided interest in the property. During the current year the Company has recorded a write down in the carrying value of this property of $Nil ($313,364 – 2018).

C. Mount Copeland

The Mount Copeland molybdenum property is situated in British Columbia. The Company has acquired a 100% interest in the Mount Copeland property. During the current year the Company has recorded a write down in the carrying value of this property of $Nil ($341,450 – 2018).

D. Walker mine

The Walker property includes a past producing graphite mine and is situated in Quebec. The Company has acquired a 100% interest in the Walker property.

E. Clot

The Clot graphite property is situated in Quebec. The Company has acquired a 100% interest in the property.

F. Bell

The Bell graphite property is situated in Quebec. The Company has acquired a 100% interest in the property.

G. Whabouchi

The Whabouchi lithium property is situated in Quebec. The Company has acquired a 100% interest in the property. During the current year the Company has recorded a write down in the carrying value of this property of $Nil ($289,780 – 2018).

H. Buckingham/Kendall

The Buckingham/Kendall graphite property is situated in Quebec. The Company has acquired a 100% interest in the property.

I. Lochaber/Montpellier

In May 2018, the Company acquired a 100% ownership of the historical graphite mining property known as the Lochaber claims located in South Western Quebec.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

9. ACCOUNTS PAYABLE

ACCOUNTS PAYABLE
		2019		2018
Trade payables	$	638,992	$	532,600
Tradepayables – relatedparties		460,684		85,574
	**$ **	1,099,676	$	618,174

Included in accounts payable are amounts due to related parties; further details are as follows:

Amounts due to	Nature of relationship	Service for	2019	2018
Private corporation	Company controlled by CEO	Management fees	$ 241,820	$ 39,550
Unincorporated business	Key Management personnel	Management fees	-	43,000
Private corporation	Key Management personnel	Management fees	126,086	-
Private corporation	Key Management personnel	Management fees	90,400	-
Limited liability partnership	Partnershipof which CFO is apartner	Management fees	2,378	3,024
			$ 460,684	$ 85,574

All related party payables are due on demand, non-interest bearing and are unsecured.

10. NOTES PAYABLE

NOTES PAYABLE
	2019	2018
Unsecured promissory notes payable, due upon demand,	$ 13,000	$ -
bearing interest at 10% per annum.
Unsecured promissory notes payable, due upon demand,	25,000
bearinginterest at 12%per annum.
	$ 38,000	$ -

11. SHARE CAPITAL

(a) Authorized:

The authorized share capital of the Company is:

An unlimited number of voting common shares without par value. An unlimited number of non-voting first preferred shares.

An unlimited number of non-voting second preferred shares.

(b) Issued and outstanding:

See the Statement of Changes in Shareholders’ Equity. The number of the shares outstanding presented in the statements of changes in shareholders’ equity refers only to voting common shares. Diluted loss per share did not include the effect of 1,055,172 options (3,703,922 – 2018, adjusted for 4:1 consolidation) and 16,850,750 warrants and broker warrants (16,845,750 – 2018, adjusted for 4:1 consolidation) as they are anti-dilutive.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

11. SHARE CAPITAL (continued)

Effective June 12, 2018, the Company’s common shares were consolidated on the basis of one post-consolidation common share for every four pre-consolidation common shares (the “Consolidation”). The Consolidation was approved by the Company’s shareholders at the Annual and Special Meeting of the shareholders of the Company held on May 25, 2018 and was accepted by the TSX Venture Exchange. The Company had 249,120,130 common shares outstanding and, following the Consolidation, had approximately 62,280,032 common shares outstanding. No fractional common shares of the Company were issued.

(c) Private placements:

On November 8, 2017, the Company issued 250,000 Common shares (on a pre-consolidation basis) in the Capital of the Company at a deemed price of $0.035 per Common shares as part of the payment of the purchase price of the acquisition of the Clot Graphite Project.

On January 25, 2018 the Company closed the first tranche of a private placement for 2,600,000 units (on a pre-consolidation basis) at a price of $0.05 per unit for gross proceeds of $130,000. Each unit consisted of one common share and warrant. Each full warrant entitles the holder to purchase one common share at an exercise price of $0.05 for a period of thirty-six months.

On February 8, 2018 the Company closed the second tranche of a private placement for 7,500,000 units (on a pre-consolidation basis) at a price of $0.05 per unit for gross proceeds of $375,000. Each unit consisted of one common share and warrant. Each full warrant entitles the holder to purchase one common share at an exercise price of $0.05 for a period of thirty-six months.

On June 28, 2018 the Company closed the first tranche of a private placement for 2,000,000 units at a price of $0.05 per unit (on a post-consolidation basis) for gross proceeds of $100,000. Each unit consisted of one common share and warrant. Each full warrant entitles the holder to purchase one common share at an exercise price of $0.075 for a period of thirty-six months.

On June 28, 2018 the Company closed the first tranche of a private placement for 400,000 flowthrough units (on a post-consolidation basis) at a price of $0.05 per unit for gross proceeds of $20,000. Each unit consisted of one common share and warrant. Each full warrant entitles the holder to purchase one common share at an exercise price of $0.075 for a period of thirty-six months.

On July 5, 2018 the Company closed the second tranche of a private placement for 4,800,000 flow-through units (on a post-consolidation basis) at a price of $0.05 per share for gross proceeds of $240,000. Each unit consisted of one common share.

On July 18, 2018 the Company closed the third tranche of a private placement for 1,100,000 flow-through units (on a post-consolidation basis) at a price of $0.05 per unit for gross proceeds of $55,000. Each unit consisted of one common share and warrant. Each full warrant entitles the holder to purchase one common share at an exercise price of $0.075 for a period of thirtysix months.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

11. SHARE CAPITAL (continued)

On April 18, 2019 the Company closed the first tranche of a private placement for 4,277,500 units at a price of $0.035 per unit for gross proceeds of $149,713. Each unit consisted of one common share and warrant.

On June 10, 2019 the Company closed on the final tranche of a private placement for 285,000 units at a price of $0.035 per unit for gross proceeds of $9,975. Each unit consisted of one common share and warrant.

(d) Stock options

The Company has established a stock based compensation plan pursuant to which options to purchase common shares may be granted to certain officers, directors, and contractors of the Company as well as persons providing ongoing services to the Company. Exercise price of options equals at least the market price of the Company’s stock on the date of grant. Stock options are exercisable on the day of grant and are for a two or five-year term in accordance with TSX Venture Exchange policy.

On January 19, 2017, the Company issued 3,600,000 options (on a pre-consolidation basis) to directors and officers of the Company with an exercise price of $0.05. The options expire on January 13, 2022.

A summary of the status of the Company’s incentive stock option plan as at October 31, 2019 and 2018 is as follows:

		Weighted Average
	Number of options	Exercise Price
Balance October 31, 2017	17,815,689	$0.05
Cancelled due to 4:1 consolidation	(13,361,767)	$0.05
Granted	-	-
Expired (post-consolidation)	(750,000)	$0.20
Exercised	-	-
Balance October 31, 2018	3,703,922	$0.20
Granted	-	-
Expired (post-consolidation)	(2,648,750)	$0.20
Exercised	-	-
Balance October 31, 2019	1,055,172	$0.20

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

11. SHARE CAPITAL (continued)

Options Granted

A summary of options granted as at October 31, 2019, adjusted for 4:1 share consolidation, is as follows:

:
Number of Shares	Exercise	Expiry
Under Option	Price	Date
832,672	$0.20	June 16, 2020
150,000	$0.20	April 5, 2021
35,000	$0.20	November 8, 2021
37,500	$0.20	January 13, 2022
1,055,172

The Black-Scholes option valuation model was used to estimate the fair value of the options with the following assumptions.

	Dividend		Risk free		Grant date value
	Yield	Volatility	interest rate	Expected life	(per option)
Options granted November 9, 2016	0%	133.05%	0.82%	5 years	$0.04
Options granted December 12, 2016	0%	137.29%	0.92%	3 years	$0.07
Options granted January 13, 2017	0%	137.99%	1.14%	5 years	$0.06

(e) Share purchase warrants

A summary of outstanding warrants as at October 31, 2019 and 2018 is as follows:

	Number of	Weighted Average
	Warrants	Exercise Price
Balance, October 31, 2017	42,590,000	$0.06
Granted (pre-consolidation)	10,793,000	$0.05
Cancelled due to 4:1 consolidation	(40,037,250)	$0.06
Granted (post-consolidation)	3,500,000	$0.075
Expired	-	-
Exercised	-	-
Balance October 31, 2018	16,845,750	$0.19
Granted (post-consolidation)	4,562,500	$0.05
Expired	(4,557,500)	$0.23
Exercised	-	-
Balance October 31, 2019	16,850,750	$0.14

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

11. SHARE CAPITAL (continued)

A summary of warrants granted as at October 31, 2019, adjusted for 4:1 share consolidation, is as follows:

:
	Exercise	Expiry
Number of Warrants	Price	Date
3,222,500	$0.22	December 12, 2020
695,500	$0.20	January 25, 2021
2,002,750	$0.20	February 8, 2021
1,705,000	$0.22	May 17, 2021
1,162,500	$0.22	May 29, 2021
2,400,000	$0.075	June 28, 2021
1,100,000	$0.075	July 18, 2021
4,277,500	$0.05	April 18, 2022
285,000	$0.05	June 10, 2022
16,850,750

12. INCOME TAXES

The effective rate on the Company’s earnings before income tax differs from the expected amount that would arise using the combined Canadian Federal and Provincial statutory income tax rates. A reconciliation of the difference is as follows:

Year ended October 31, 2019 2018	Year ended October 31, 2019 2018
Net loss before income taxes 831,744 Statutoryincome tax rate 26.50%	2,187,642 27.00%
Tax recovery 220,412 Non-deductible expenses - Share issue costs 8,192 Other (9,190) Change in rates (78,351) Unrecognized deferred tax asset (141,063)	590,663 (21,139) 38,246 26,987 - (634,757)
Deferred income tax recovery (expense) -	-

Deferred Tax Assets and Liabilities

Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following represents the components of the net unrecognized deferred income tax asset:

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

12. INCOME TAXES (continued)

Year ended October 31, 2019 2018	Year ended October 31, 2019 2018
Non-capital losses 3,369,155 Mineral exploration and evaluation assets 820,083 Property and equipment 29,057 Share issue costs 71,248 Unrecognized deferred tax asset (4,289,543)	3,168,138 885,380 (5,825) 100,787 (4,148,480)
Deferred tax asset (liability) -	-

As at October 31, 2019 the Company has non-capital losses for Canadian income tax purposes totaling $12,713,791 carried forward for tax purposes and are available to reduce taxable income of future years. These losses expire as follows:

	Non-Capital Year Losses 2026 $ 548,829 2027 563,645 2028 600,405 2029 320,201 2030 211,839 2031 287,654 2032 226,298 2033 2,212,787 2034 2,003,660 2035 563,909 2036 639,744 2037 1,348,008 2038 2,350,953 2039 835,859 $ 12,713,791
	2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039

13. RELATED PARTY TRANSACTIONS

Key management personnel include the board of directors, chief executive officer, chief financial officer and chief technology officer. Key management personnel compensation comprised:

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

13. RELATED PARTY TRANSACTIONS (continued)

Key management compensation

Key management compensation
	Year ended October 31,
	2019	2018
Retainers, wages and benefits	$ 390,947	$ 373,438
Mineral exploration and evaluation costs	-	12,500
Equipment additions	-	15,000
Cost of goods sold	5,000	18,750
Expense reimbursement	788	61,868
	$396,735	$481,556
	Year ended October 31,
Services and reimbursement of expenses	2019	2018
Company controlled by the CEO	$ 179,000	$ 275,000
Partnership of which the CFO is a partner	40,747	28,688
Company controlled by the President	96,200	-
Company controlled by a senior Officer	80,000	-
Company controlled by the former CFO	-	81,000
Business controlled by the former President	-	35,000
Reimbursement of expenses	788	61,868

14. RESTRICTED CASH

Term deposits of $36,000 have been pledged as security to the Scotia Bank for their irrevocable letter of credit in favor of the Province of British Columbia, Ministry of Energy and Mines. A term deposit of $5,000 has been pledged as security to the Scotia Bank to secure the Company credit card.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The disclosures in the notes to these financial statements describe how the categories of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognized.

Financial instruments recognized at fair value on the statements of financial position must classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurement. The fair value hierarchy levels are as follows:

• Level 1: Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2: Valuation techniques based on inputs that are other than Level 1 quoted prices that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices).

• Level 3: Valuation techniques with unobservable market inputs (involves assumptions and estimates by management).

As at October 31, 2019, the classification of the financial instruments, as well as their carrying values and fair values, with comparative figures for October 31, 2018 are shown in the table below:

		October 31, 2019	October 31, 2019	October	31, 2018
		Fair value	Carrying value	Fair value	Carrying value
	Financial assets
	Cash and equivalents	7,723	7,723	30,000	30,000
	Accounts receivable_(1)_	5,000	5,000	35,830	35,830
	Financial liabilities
	Accounts payable and
	accrued liabilities	1,099,676	1,099,676	618,174	618,174
(1)	Excluding taxes receivable

The fair values of the Company’s financial instruments measured at October 31, 2019, constitute Level 1 measurements for its cash and equivalents within the fair value hierarchy.

The Company recognized interest income during the year ended October 31, 2019, totaling $713 (2018 $478) which represents interest income from the Company’s held-for-trading investments. This balance represents interest income from all sources.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations. The Company’s maximum exposure to credit risk as at October 31, 2019 date under its financial instruments is summarized as follows:

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

	October 31, 2019	October 31, 2018
Accounts and other receivables -
Currently due	5,000	-
Past due by 90 days or less, not impaired	-	-
Past due by greater than 90 days,not impaired	-	35,830
	5,000	35,830
Cash and equivalents	7,723	30,000
	12,723	65,830

All of the Company’s cash and cash equivalents are held with major financial institutions in Canada, and management believes the exposure to credit risk with such institutions is not significant. The Company considers the risk of material loss to be significantly mitigated due to the financial strength of the major financial institutions where cash and term deposits are held. As at October 31, 2019, no material provision has been recorded in respect of impaired receivables. The Company’s maximum exposure to credit risk as at October 31, 2019, is the carrying value of its financial assets.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support normal operation requirements as well as the growth and development of its mineral property interests. The Company coordinates this planning and budgeting process with its financing activities through the capital management process described in Note 16 , in normal circumstances. Due to the lack of liquidity, management has increased its focus on liquidity risk given the impact of the current economic climate on the availability of finance. Further information regarding liquidity risk is set out in Note 2 (b) .

The Company’s financial liabilities are comprised of its accounts payable and accrued liabilities and notes payable and are currently due.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Market risk

The significant market risks to which the Company is exposed include commodity price risk, interest rate risk and foreign exchange risk.

• Commodity price risk The Company’s ability to raise capital to fund exploration or development activities is subject to risk associated with fluctuations in the market prices of graphite, molybdenum, copper and gold and the outlook for these metals, as the Company’s ability to raise capital is affected by the commodity that the Company is exploring for on its mineral property interests. The Company does not have any hedging or other derivative contracts respecting its operations.

• Interest rate risk

• The Company has no significant exposure at October 31, 2019, to interest rate risk through its financial instruments.

Currency risk

• The Company has no significant exposure at October 31, 2019 to currency risk as all cash and cash equivalents are held in Canadian funds.

16. MANAGEMENT OF CAPITAL

The Company’s objective in managing capital is to maintain adequate levels of funding to safeguard its ability to continue as a going concern in order to pursue the development of its mineral property interests.

The Company considers the items included in shareholders’ equity to be capital. The Company relies on equity financing in order to fund future exploration and development and makes adjustments to the Company’s capital structure based on financing needs, as well as in response to economic conditions and the risk characteristics of the underlying assets.

Management makes adjustments to its capital structure through share issuances and the acquisition or disposition of assets.

As the Company is in the exploration stage it endeavors to manage its capital structure in a manner that provides sufficient funding for operational activities through funds primarily secured through equity capital obtained in private placements. There can be no assurances that the Company will be able to continue raising capital in this manner.

The Company facilitates the management of capital though the preparation of annual expenditure budgets and cash forecasts that are updated as necessary. The Company does not have any externally imposed capital requirements.

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

16. MANAGEMENT OF CAPITAL (continued)

The Company’s managed capital is as follows:

	October 31, 2019	October 31, 2018
Share capital	21,011,573	20,882,797
Equity component of
convertible debentures	-	-
Contributed surplus	1,805,054	1,805,054
Deficit	(19,436,691)	(18,604,947)
	3,379,936	4,082,904

17. SEGMENTED INFORMATION

The Company has two operating segments. These two operating segments have been differentiated based on the type of services provided and equipment requirements. The mineral exploration and development segment focuses on the acquisition and exploration of property interests that are considered potential sites of economic mineralization. The research and development segment focuses on the scientific study and technology applications for graphite and graphene. All of the Company’s operations are in Canada. The following tables provide financial results by segment:

Year ended	Mineral exploration	Research and
October 31, 2019	and development	development	Total
	$	$	$
Revenue	713	115,205	115,918
Depreciation and impairment of equipment	2,531	128,692	131,223
Total expenses	671,731	275,931	947,662
Capital expenditures	-	3,500	3,500
Total assets at October 31,2019	4,015,969	502,511	4,518,480
Year ended	Mineral exploration	Research and
October 31, 2018	and development	development	Total
	$	$	$
Revenue	478	408,870	409,348
Depreciation and impairment of equipment	2,569	75,724	78,293
Total expenses	2,384,853	212,137	2,596,990
Capital expenditures	4,037	379,141	383,178
Total assets at October 31,2018	4,100,444	600,634	4,701,078

SAINT JEAN CARBON INC. Notes to the financial statements (Expressed in Canadian Dollars) October 31, 2019 and 2018

18. OPERATING LEASES

The Company is committed to payments under three operating leases until 2022. Two of the Company’s operating leases relate to buildings and the third lease relates to a vehicle. The Company’s operating lease commitments are as follows:

	October 31, 2019	October 31, 2018
Less than one year	$ 67,063	$ 84,951
Between one and five years	60,014	66,046
More than fiveyears	-	-
	$ 127,077	$ 150,997

19. CONTINGENT LIABILITY

During the prior year the Company’s tax filings related to flow-through shares were audited by the Canada Revenue Agency (CRA). As a result of this audit an assessment was charged to the Company. The Company disagrees with the CRA’s audit filings and has appealed the assessment. As it is not probable that a future outflow of resources will be required be settle this obligation and because the amount of the obligation cannot be measured reliably no liability has been recognized in the statements of financial position. The estimated range of the potential obligation is $0 to $160,000.