Enertopia Corp. 10-K

Item 8. Financial Statements and Supplementary Data 30 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Directors of Enertopia Corp. Opinion on the Financial Statements We have audited the accompanying balance sheets of Enertopia Corp. (the "Company") as of August 31, 2021 and 2020, and the related statements of stockholders' deficiency, operations, and cash flows for the years ended August 31, 2021 and 2020 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021 and 2020, and the results of its operations and its cash flows for the years ended August 31, 2021 and 2020 in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the entity has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion. 31 Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company's auditor since 2017. /s/ DAVIDSON & COMPANY LLP Vancouver, Canada Chartered Professional Accountants November 5, 2021 32 ENERTOPIA CORP. BALANCE SHEETS (Expressed in U.S. Dollars) August 31 August 31 2021 2020 ASSETS Current Cash $ 354,286 $ 45,528 Marketable securities (Note 4) 14,994 24,354 Accounts receivable 4,552 1,508 Prepaid expenses and deposit 41,263 14,824 Total Assets $ 415,095 $ 86,214 LIABILITIES AND STOCKHOLDERS' DEFICIENCY LIABILITIES Current Accounts payable $ 309,277 $ 290,336 Due to related parties (Note 7) 111,659 188,834 Total Liabilities 420,936 479,170 STOCKHOLDERS' DEFICIENCY Share capital Authorized: Issued and outstanding: 139,213 128,473 Additional paid-in capital (Note 8) 14,524,341 13,758,598 Deficit (14,669,395 ) (14,280,027 ) Total Stockholders' Deficiency (5,841 ) (392,956 ) Total Liabilities and Stockholders' Deficiency $ 415,095 $ 86,214 Commitments (Note 10) Subsequent Events (Note 13) The accompanying notes are an integral part of these financial statements 33 ENERTOPIA CORP. STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Expressed in U.S. Dollars) COMMON STOCK ADDITIONAL TOTAL PAID-IN STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT EQUITY Balance, August 31, 2019 127,471,700 $ 127,473 $ 13,730,801 $ (14,314,159 ) $ (455,885 ) Shares issued for LOI on October 28 1,000,000 1,000 10,489 - 11,489 Share based compensation - - 17,308 - 17,308 Comprehensive loss - - - 34,132 34,132 Balance, August 31, 2020 128,471,700 $ 128,473 $ 13,758,598 $ (14,280,027 ) $ (392,956 ) Shares issued for patent 2,000,000 2,000 67,000 - 69,000 Private placement 3,000,000 3,000 177,000 - 180,000 Stock options granted - - 297,691 - 297,691 Stock options exercised 3,020,000 3,020 92,972 - 95,992 Warrants exercised 2,720,000 2,720 131,080 - 133,800 Comprehensive loss - - - (389,368 ) (389,368 ) Balance, August 31, 2021 139,211,700 $ 139,213 $ 14,524,341 $ (14,669,395 ) $ (5,841 ) The accompanying notes are an integral part of these financial statements 34 ENERTOPIA CORP. STATEMENTS OF OPERATIONS (Expressed in U.S. Dollars) Year Ended August 31 August 31 2021 - Expenses Accounting and audit 44,655 48,314 Bank charges and interest expense 1,416 1,651 Consulting (Note 7) 85,338 26,822 Mineral exploration costs 7,888 16,732 Fees and dues 35,828 19,851 Insurance - 3,605 Investor relations 34,268 22,510 Legal and professional 83,307 8,688 Office and miscellaneous 4,708 990 Research and development 12,566 1,702 Rent 7,042 1,963 Stock-based compensation (Note 9) 297,691 17,308 Telephone 75 - Total expenses 614,782 170,136 Loss for the year before other items (614,782 ) (170,136 ) Other income (expense) Foreign exchange gain (loss) (3,394 ) 1,067 Gain on marketable securities 53,488 - Unrealized gain on marketable securities (5,680 ) 3,201 Write down of assets (Note 6) (69,000 ) - Income from royalty granted (Note 5) 250,000 200,000 Income (loss) and comprehensive income (loss) for the year $ (389,368 ) $ 34,132 Basic and diluted income (loss) per share $ (0.00 ) $ 0.00 Weighted average number of common shares outstanding - basic and diluted 134,809,673 128,313,230 The accompanying notes are an integral part of these financial statements 35 ENERTOPIA CORP. STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) Year Ended August 31 August 31 2021 2020 Cash flows used in operating activities (Loss)/Gain $ (389,368 ) $ 34,132 Changes to reconcile net loss to net cash used in operating activities Shares issued for exploration cost - 11,489 Interest expense on loan - 699 Stock-based compensation 297,691 17,308 Unrealized loss/ (gain) on marketable securities 5,680 (3,201 ) Gain on disposal of marketable securities (53,488 ) - Write down of assets 69,000 - Income from royalty grant (250,000 ) (200,000 ) Change in non-cash working capital items: Accounts receivable (3,044 ) 4,717 Prepaid expenses and deposit (26,439 ) 15,438 Accounts payable and accrued liabilities 18,941 6,696 Due to related parties (77,175 ) (14,387 ) Net cash used in operating activities (408,202 ) (127,109 ) Cash flows from investing activities Proceeds from sale of marketable securities 74,873 Purchase of marketable securities (17,705 ) (21,153 ) Proceeds from sale of royalty grant 250,000 200,000 Net cash from investing activities 307,168 178,847 Cash flows from financing activities Net proceeds from options exercised 95,992 - Net proceeds from warrants exercised 133,800 - Repayment of loan from related party - (15,968 ) Net proceeds from subscriptions received 180,000 - Net cash from / (used in) financing activities 409,792 (15,968 ) Increase in cash 308,758 35,770 Cash, beginning of year 45,528 9,758 Cash, end of year $ 354,286 $ 45,528 Supplemental information of cash flows Interest paid in cash $ - $ 666 The accompanying notes are an integral part of these financial statements 36 ENRTOPIA CORP. NOTES TO FINANCIAL STATEMENTS August 31, 2021 (Expressed in U.S. Dollars) 1. ORGANIZATION The Company was formed on November 24, 2004 under the laws of the State of Nevada and commenced operations on November 24, 2004. The Company was an independent natural resource company engaged in the exploration, development and acquisition of natural resources in the United States and Canada. In the fiscal year 2010, the Company shifted its strategic plan from its non-renewable energy operations to its planned renewable energy operations and natural resource acquisition and development. In late summer of 2013, the Company had another business sector in alternative health and wellness. During spring of 2016, the Company shifted its strategic plan to natural resource acquisitions and Lithium brine extraction technology. The Company's office is located in Kelowna, B.C., Canada. 2. GOING CONCERN UNCERTAINTY The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business for the foreseeable future. The Company had a working capital deficit of $5,841 as at August 31, 2021 (2020 - $392,956 deficit). As at August 31, 2021 the Company has incurred cumulative losses of $14,669,395 that raises substantial doubt about its ability to continue as a going concern. Management has been able, thus far, to finance the operations through equity financing and cash on hand. There is no assurance that the Company will be able to continue to finance the Company on this basis. In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, to receive the continued support of the Company's shareholders, and ultimately to obtain successful operations. There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations. There is significant uncertainty as to whether we can obtain additional financing. These financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements. Since March 2020, several measures have been implemented in Canada, the United States, and the rest of the world in response to the increased impact from the novel coronavirus ("COVID-19"). While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impact on our business operations cannot be reasonably estimated at this time. We anticipate this could have an adverse impact on our exploration plans, results of operations, financial position and cash flows. 3. SIGNIFICANT ACCOUNTING POLICIES a. Basis of Presentation The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles. 37 b. Mineral Properties Acquisition costs of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time proven or probable reserves are established for that project. Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Expenditures relating to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for that project, after which subsequent expenditures relating to development activities for that particular project are capitalized as incurred. Where proven and probable reserves have been established, the project's capitalized expenditures are depleted over proven and probable reserves using the units-of production method upon commencement of production. Where proven and probable reserves have not been established, the project's capitalized expenditures are depleted over the estimated extraction life using the straight-line method upon commencement of extraction. The Company has not established proven or probable reserves for any of its projects. The carrying values of the mineral rights are assessed for impairment by management on a quarterly basis and as required whenever indicators of impairment exist. An impairment loss is recognized if it is determined that the carrying value is not recoverable and exceeds fair value. c. Stock-Based Compensation The Company followed Accounting Standards Codification ("ASC") 718, "Compensation - Stock Compensation", to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. d. Accounting Estimates The preparation of financial statements in conformity with U.S GAAP requires us to make certain estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of the Company's accounting policies require us to make subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. These accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates used by the Company are reasonably likely to occur from time to time, which may have a material effect on the presentation of financial condition and results of operations. The Company reviews these estimates, judgments and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates. Significant accounting estimates and assumptions are used for, but not limited to: a) The Valuation of Deferred Tax Assets Judgement is required in determining whether deferred tax assets are recognized on the balance sheet. The recognition of deferred tax assets requires management to assess the likelihood that the Company will generate taxable income in future periods to utilize the deferred tax assets. Due to the Company's history of losses, deferred tax assets have not been recognized by the Company. 38 b) Value of Stock Options The Company provides compensation benefits to its employees, directors, officers, and consultants, through a stock option plan. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility assumption used in the model is based on the historical volatility of the Company's share price. The Company uses historical data to estimate the period of option exercises for use in the valuation model. The risk-free interest rate for the expected term of the option is based on the yields of government bonds. Changes in these assumptions, especially the share price volatility and the expected life determination could have a material impact on the Company's profit and loss for the periods presented. All estimates used in the model are based on historical data which may not be representative of future results. e. Earnings Per Share Loss per share is computed using the weighted average number of shares outstanding during the period. The Company has adopted ASC 220 "Earnings Per Share". Diluted loss per share is equivalent to basic loss per share because the potential exercise of the equity-based financial instruments was anti-dilutive. Basic earnings per share ("EPS") is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards. f. Foreign Currency Translations The Company's operations are located in the United States of America and has its office in Canada. The Company maintains its accounting records in U.S. Dollars, as follows: At the transaction date, each asset, liability, revenue and expense that was acquired or incurred in a foreign currency is translated into U.S. dollars by the using of the exchange rate in effect at that date. At the year end, monetary assets and liabilities are translated at the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. g. Financial Instruments ASC 820 "Fair Value Measurements and Disclosures" requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities; Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. The Company's financial instruments consist primarily of cash, marketable securities, accounts receivable, accounts payable, loan from related party and due to related parties. The carrying amounts of these financial instruments approximate their fair values due to their short maturities. Cash and marketable securities are in level 1 within the fair value hierarchy. The Company's operations are in United States of America and Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company's operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. 39 h. Income Taxes The Company has adopted ASC 740, "Income Taxes", which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized. i. Long-Lived Assets Impairment In accordance with ASC 360, "Accounting for Impairment or Disposal of Long Lived Assets", the carrying value of long lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. j. Asset Retirement Obligations The Company accounts for asset retirement obligations in accordance with the provisions of ASC 410, "Asset Retirement and Environmental Obligations". ASC 410 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Company does not believe it has any asset retirement obligation as of August 31, 2021 and 2020. k. Comprehensive Income The Company has adopted ASC 220, "Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statement of Stockholders' Deficiency. Comprehensive income comprises equity except those transactions resulting from investments by owners and distributions to owners. l. Concentration of credit risk The Company places its cash with high credit quality financial institution. m. Commitments and Contingencies In accordance with ASC 450-20, Accounting for Contingencies, the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information. Historically, the Company has not experienced any material claims. n. Research and Development Research and development costs are expensed as incurred. 40 o. Recently adopted Accounting Pronouncements In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of the standard did not have a significant impact on the Company's financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements to Fair Value Measurement. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The adoption of the standard did not have a significant impact on the Company's financial statements. p. New Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses". The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: ASU No. 2019-12 is effective as for public business entities, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This ASU removes specific exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles (GAAP). It eliminates the need for an organization to analyses whether the following apply in a given period: -Exception to the incremental approach for intra period tax allocation; -Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and -Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also improves financial statement preparers' application of income tax-related guidance and simplifies GAAP for: - Franchise taxes that are partially based on income; - Transactions with a government that result in a step up in the tax basis of goodwill; - Separate financial statements of legal entities that are not subject to tax; and - Enacted changes in tax laws in interim periods. 4. MARKETABLE SECURITIES Marketable securities consists of the Company's investment in shares of STEM INC acquired for net cost of $17,705. As at August 31, 2021, the movement in the Company's marketable securities is as follows: Balance, August 31, 2020 24,354 Additions - cost 17,705 Disposals-cost (21,385 ) Unrealized gain (5,680 ) Balance, August 31, 2021 14,994 41 5. MINERAL PROPERTY During the year ended August 30, 2017 the Company staked lode and placer claims on BLM lands in Esmerelda county Nevada covering approximately 160 Acres subject to adjustment. The Company has a 100% interest in the lands and is only responsible for the yearly maintenance fees to keep its 100% interest. The claims are in good standing until August 31, 2022. On October 28, 2019, the Company signed an LOI with Eagle Plains Resources Ltd. ("Eagle Plains") to earn up to 75% interest in the Pine Channel gold project in Saskatchewan, Canada (the "Pine Channel SK Property"). The terms of the LOI included periodic payments cash payments, exploration expenditures, as well as issuance of common shares of the Company. Upon signing the LOI, the Company issued 1,000,000 of its common shares to Eagle Plains, valued at $11,489. On December 13 th 2019 the Company dropped the LOI with Eagle Plains Resources Ltd. On February 11, 2020 the Company signed a 1% Royalty agreement with respect to any future commercial lithium production from the Company's Clayton Valley, Nevada claims in exchange for $200,000. The Company has a right of first refusal to repurchase the royalty upon any proposed sale by the royalty holder to a third party. On October 30, 2020 the Company signed a 1% Royalty agreement with respect to any future commercial lithium production from the Company's Clayton Valley, Nevada claims in exchange for $250,000. The Company has a right of first refusal to repurchase the royalty upon any proposed sale by the royalty holder to a third party. 6. PATENT On December 14, 2020 the Company signed Definitive Agreement to acquire 100% interest in United States Patent and Trademark Office ("USPTO") patent #6,024,086 - Solar energy collector having oval absorption tubes by issuing 1,000,000 common shares of the Company. The Company issued 1,000,000 additional common shares in escrow to be released upon the successful approval of patent pending work derived from patent #6,024,086. The shares were issued at a price of $0.0345 resulting in a purchase price of $69,000. The patent has since expired and was therefore written off. On May 25, 2021 the Company announced the filing of its first provisional patent application, Solar Heat Absorber technology. On May 26, 2021 the Company announced the filing of its second provisional patent application, Solar PV Heat Extraction Technology. On August 17, 2021 the Company announced the filing of its third provisional patent application, Enertopia Rainmaker Technology. 7. RELATED PARTY TRANSACTIONS For the year ended August 31, 2021, the Company was party to the following related party transactions with key management personnel, which consists of the President and Chief Executive Officer of the Company and its directors: Incurred $Nil (2020 - $10,500) to the President of the Company in consulting fees. As at August 31, 2021, the accounts payable to the President of the Company was $111,659 (2020: $188,834) The related party transactions are recorded at the exchange amount established and agreed to between the related parties. 42 8. COMMON STOCK On December 14, 2020 the Company issued 1,000,000 common shares and an additional 1,000,000 common shares in escrow in connection with the signed Definitive Agreement (Note 6). On January 14, 2021 the Company closed the final tranche of a private placement of 3,000,000 units at a price of $0.06 per unit for gross proceeds of $180,000. Each unit consists of one common share of the Company and one half (0.5) of a non-transferable share purchase warrant, each warrant entitling the holder to purchase one additional common share of the Company for a period of 12 months from the date of issuance at a purchase price of $0.09. During the year ended August 31, 2021 the Company also issued 3,020,000 common shares as a result of the exercise of stock options and 2,720,000 common shares as a result of the exercise of warrants (Note 9). As at August 31, 2021 the Company had 139,211,700 shares issued and outstanding (2020 - 128,471,700). 9. STOCK OPTIONS AND WARRANTS Stock Options On July 15, 2014, the shareholders approved and adopted at the Annual General Meeting the Company's 2014 Stock Option Plan. On April 14, 2011, the shareholders approved and adopted at the Annual General Meeting to consolidate the Company's 2007 Equity compensation plan and the Company's 2010 Equity Compensation Plan into a new Company 2011 Stock Option Plan. The purpose of these Plans is to advance the interests of the Corporation, through the grant of Options, by providing an incentive mechanism to foster the interest of eligible persons in the success of the Corporation and its affiliates; encouraging eligible persons to remain with the Corporation or its affiliates; and attracting new Directors, Officers, Employees and Consultants. For the year ended August 31, 2021, the Company recorded $297,691 (2020 - $17,308) stock-based compensation expense. A summary of the changes in stock options is presented below: Options Outstanding Weighted Average Number of Shares Exercise Price Balance, August 31, 2019 8,320,000 $ 0.07 Issued 2,000,000 0.02 Expired (1,000,000 ) 0.10 Balance, August 31, 2020 9,320,000 $ 0.06 Issued 5,150,000 0.10 Expired (1,100,000 ) 0.05 Exercised (3,293,224 ) 0.02 Balance, August 31, 2021 10,076,776 $ 0.08 The fair value of options granted has been estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions: 43 August 31, 2021 August 31, 2020 Expected volatility 91% - 149% 163% Risk-free interest rate 0.40% -0.68% 1.16% Expected life 5 years 2 years Dividend yield NIL NIL Estimated fair value per option $0.02 -$0.12 $0.01 The Company has the following options outstanding and exercisable. Issue Date Expiry Date Exercise Price Number of Options Remaining Life September 19, 2016 September 19, 2021 0.07 500,000 0.05 years January 20, 2017 January 20, 2022 0.07 1,200,000 0.39 years January 31, 2017 January 31, 2022 0.07 1,250,000 0.42 years May 2, 2017 May 2, 2022 0.10 500,000 0.67 years October 27, 2017 October 27, 2022 0.05 800,000* 1.16 years May 11, 2018 May 11, 2023 0.06 500,000* 1.69 years May 22, 2018 May 22, 2023 0.07 450,000 1.72 years February 25, 2020 February 25, 2022 0.02 226,776* 0.49 years December 14, 2020 December 14, 2025 0.05 2,100,000* 4.29 years January 28, 2021 January 28, 2026 0.14 2,000,000 4.41 years February 4, 2021 February 4, 2026 0.18 100,000 4.43 years February 5, 2021 February 5, 2026 0.18 300,000 4.44 years April 27, 2021 April 27, 2026 0.12 100,000 4.66 years May 28, 2021 May 28, 2026 0.12 50,000 4.74 years 0.08 10,076,776 2.40 years *As at August 31, 2021 the market price of the Company's common shares was $0.0629 per share. A total of 3,626,776 incentive stock options were in the money with an intrinsic value of $48,589. Warrants During the year ended August 31, 2021, the Company issued 1,500,000 warrants attached to units in private placements with no finders fees being paid. There were no warrants issued during the year ended August 31, 2020. A summary of warrants as at August 31, 2021 and August 31, 2020 is as follows: Weighted Average Number of warrants Exercise Price Balance, August 31, 2019 26,141,459 $ 0.06 Expired (12,904,590 ) 0.07 Balance, August 31, 2020 13,236,869 $ 0.05 Issued 1,500,000 0.09 Forfeited (2,300,000 ) 0.05 Exercised (2,720,000 ) 0.04 Balance, August 31, 2021 9,716,869 $ 0.05 44 The Company has the following warrants outstanding: August 31, 2021 Issue Date Expiry Date Exercise Price Number of Warrants* September 21, 2018 September 21, 2021 0.05 2,427,500 March 27, 2019 March 27, 2023 0.04 5,789,369 January 14, 2021 January 14, 2022 0.09 1,500,000 0.05 9,716,869 *Each warrant entitles a holder to purchase one common share. 10. COMMITMENTS The Company has a consulting agreement with the President of the Company for corporate administration and consulting services for $3,500 per month plus goods and services tax ("GST") on a continuing basis. The President voluntarily suspended and terminated accrual of these consulting fees commencing on December 1, 2019 and continuing until such time as the Company's financial condition permits a resumption of such cost. The Company has a rental agreement for a corporate office for $1,100 per month plus GST. The agreement expires December 31, 2021. 11. INCOME TAXES The following table reconciles the income tax benefit at the U.S. Federal statutory income tax rates to income tax benefit at the Company's effective tax rates at August 31, 2021 and 2020: August 31, 2021 August 31, 2020 Income (loss) before taxes $ (389,368 ) $ 34,132 Statutory tax rate 21.0% 21.0% Expected income tax expense (recovery) (81,767 ) 7,168 Non-deductible items 62,515 3,635 Change in enacted rates and other 3,952 4,441 Change in valuation allowance 15,300 (15,244 ) Income tax expense (recovery) $ - $ - Deferred taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at August 31, 2021 and 2020 are comprised of the following: 45 August 31, 2021 August 31, 2020 Net operating loss carry forwards $ 2,795,131 $ 2,776,534 Marketable securities 2,549 583 Financing costs - 2,195 Intangible assets - 4,725 Mineral property 50,987 49,330 Capital loss carry forwards 4,526 4,526 2,853,193 2,837,893 Valuation allowance 2,853,193 2,837,893 Deferred tax assets (liabilities) $ - $ - The Company has net operating loss carry forwards of approximately $13,310,000 (2020 - $13,220,000) which may be carried forward to 2025 and onwards to apply against future taxable income for US tax purposes, subject to the final determination by the taxation authority, expiring in the following years. Future tax assets have not been recognized because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom. 12. SEGMENTED INFORMATION As at August 31, 2021 and August 31, 2020, the Company is operating its business in one reportable segment: natural resource acquisitions. 13. SUBSEQUENT EVENTS On Sep 01, 2021 the Company granted 500,000 options to a consultant of the Company for 5yrs at $0.08 per common share. On Sep 02, 2021 the Company issued 100,000 common shares as a result of the exercise of 100,000 warrants exercised at $0.04 per common share and the Company issued 120,000 common shares as a result of the exercise of 120,000 warrants exercised at $0.05 per common share. On Sep 08, 2021 the Company issued 520,000 common shares as a result of the exercise of 520,000 warrants exercised at $0.04 per common share and the Company issued 155,000 common shares as a result of the exercise of 155,000 warrants exercised at $0.05 per common share. On Sep 13, 2021 the Company issued 96,000 common shares as a result of the exercise of 96,000 warrants exercised at $0.04 per common share and issued 100,000 common shares as a result of the exercise of 100,000 warrants exercised at $0.05 per common share. On Sep 17, 2021 the Company issued 1,550,000 common shares as a result of the exercise of 1,550,000 warrants exercised at $0.05 per common share. On Sep 21, 2021 the Company issued 50,000 common shares as a result of the exercise of 50,000 warrants exercised at $0.05 per common share. On Oct 29, 2021 the Company issued 100,000 common shares as a result of the exercise of 100,000 warrants exercised at $0.04 per common share. 46 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods, including the interim period up through the date the relationship ended.