Enertopia Corp. 10-K

Item 8. Financial Statements and Supplementary Data 25 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, 2022 and 2021, and the related statements of stockholder’s equity (deficiency), operations and comprehensive income (loss), and cash flows for the years ended August 31, 2022 and 2021 , 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, 2022 and 2021, and the results of its operations and its cash flows for the years ended August 31, 2022 and 2021, 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. 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. 26 Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. We have served as the Company's auditor since 2017. /s/ DAVIDSON & COMPANY LLP Vancouver, Canada Chartered Professional Accountants November 28, 2022 731 27 ENERTOPIA CORP. BALANCE SHEETS (Expressed in U.S. Dollars) August 31 August 31 2022 2021 ASSETS Current Cash $ 615,207 $ 354,286 Marketable securities (Note 4) 2,443,750 14,994 Accounts receivable 4,877 4,552 Prepaid expenses and deposit 139,307 41,263 Total current assets 3,203,141 415,095 Non-Current Mineral property (Note 5) 10,500 - Total Assets $ 3,213,641 $ 415,095 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) LIABILITIES Current Accounts payable $ 293,446 $ 309,277 Due to related parties (Note 8) 64,409 111,659 Total Liabilities 357,855 420,936 STOCKHOLDERS' EQUITY (DEFICIENCY) Share capital Authorized: 200,000,000 common shares with a par value of $ 0.001 per share Issued and outstanding: 155,116,088 common shares at August 31, 2022 and August 31, 2021: 139,211,700 155,117 139,213 Additional paid-in capital (Note 9) 15,395,657 14,524,341 Deficit ( 12,694,988 ) ( 14,669,395 ) Total Stockholders' Equity (Deficiency) 2,855,786 ( 5,841 ) Total Liabilities and Stockholders' Equity (Deficiency) $ 3,213,641 $ 415,095 Commitments (Note 11) Subsequent Event (Note 14) The accompanying notes are an integral part of these financial statements 28 ENERTOPIA CORP. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (Expressed in U.S. Dollars) COMMON STOCK TOTAL ADDITIONAL STOCKHOLDERS' SHARES AMOUNT PAID-IN CAPITAL DEFICIT EQUITY (DEFICIENCY) 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 ) Warrants exercised 2,791,000 2,791 128,599 - 131,390 Stock options granted - - 163,130 - 163,130 Shares issued for hydrogen technology 2,000,000 2,000 98,400 - 100,400 Shares issued for investment in battery management technology 10,000,000 10,000 440,000 - 450,000 Shares issued for services 1,000,000 1,000 41,300 - 42,300 Stock options exercised 113,388 113 ( 113 ) - - Comprehensive income - - - 1,974,407 1,974,407 Balance, August 31, 2022 155,116,088 $ 155,117 $ 15,395,657 $ ( 12,694,988 ) $ 2,855,786 The accompanying notes are an integral part of these financial statements 29 ENERTOPIA CORP. STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Expressed in U.S. Dollars) Year Ended August 31 August 31 2022 2021 Expenses Accounting and audit $ 43,770 $ 44,655 Bank charges and interest expense 6,251 1,416 Consulting (Notes 8 and 9 ) 262,880 367,579 Mineral exploration costs 212,348 7,888 Fees and dues 57,332 35,828 Investor relations 47,917 49,718 Legal and professional 67,257 83,307 Office and miscellaneous 22,525 4,708 R esearch and development (Note 6 and 7) 808,800 12,566 Rent 10,404 7,042 Telephone 19 75 Travel 26,732 - Total expenses 1,566,235 614,782 Loss for the year before other items ( 1,566,235 ) ( 614,782 ) Other income (expense) Foreign exchange gain (loss) 1,822 ( 3,394 ) Gain (loss) on marketable securities ( 7,641 ) 53,488 Unrealized loss on marketable securities ( 923,533 ) ( 5,680 ) Unrealized foreign exchange loss on marketable securities ( 62,388 ) - Write down of assets (Note 6) - ( 69,000 ) Income from royalty granted (Note 5) - 250,000 Gain from mineral property sale (Note 5) 4,532,382 - Income (loss) and comprehensive income (loss) for the year $ 1,974,407 $ ( 389,368 ) Income (loss) per share -Basic $ 0.01 $ ( 0.00 ) -Diluted 0.01 ( 0.00 ) Weighted average number of common shares outstanding -Basic 150,994,325 134,809,673 -Diluted 151,955,536 134,809,673 The accompanying notes are an integral part of these financial statements 30 ENERTOPIA CORP. STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) Year Ended August 31 August 31 2022 2021 Cash flows used in operating activities Net Income/(Loss) $ 1,974,407 $ ( 389,368 ) Changes to reconcile net loss to net cash used in operating activities Shares issued for consulting 42,300 - Shares issued for battery management system 450,000 - Shares issued for hydrogen technology 100,400 - Stock-based compensation 163,130 297,691 Unrealized loss on marketable securities 985,921 5,680 Loss (gain) on disposal of marketable securities 7,641 ( 53,488 ) Write down of assets - 69,000 Gain on mineral property sale ( 4,532,382 ) - Income from royalty grant - ( 250,000 ) Change in non-cash working capital items: Accounts receivable ( 325 ) ( 3,044 ) Prepaid expenses and deposit ( 98,044 ) ( 26,439 ) Accounts payable and accrued liabilities ( 15,831 ) 18,941 Due to related parties ( 47,250 ) ( 77,175 ) Net cash used in operating activities ( 970,033 ) ( 408,202 ) Cash flows from investing activities Proceeds from sale of marketable securities 10,064 74,873 Proceeds from mineral property sale 1,100,000 - Purchase of mineral property ( 10,500 ) - Purchase of marketable securities - ( 17,705 ) Proceeds from sale of royalty grant - 250,000 Net cash from investing activities 1,099,564 307,168 Cash flows from financing activities Net proceeds from options exercised - 95,992 Net proceeds from warrants exercised 131,390 133,800 Net proceeds from subscriptions received - 180,000 N et cash from financing activities 131,390 409,792 Increase in cash 260,921 308,758 Cash, beginning of year 354,286 45,528 Cash, end of year $ 615,207 $ 354,286 Supplemental cash flow information Cash paid for interest $ - $ - Cash paid for taxes $ - $ - The accompanying notes are an integral part of these financial statements 31 ENERTOPIA CORP. NOTES TO FINANCIAL STATEMENTS August 31, 2022 (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 is an independent natural resource company engaged in the exploration, development, and acquisition of natural resources in the United States. The Company is exploring the West Tonopah Lithium Project ("West Tonopah") in the Big Smokey Valley, Nevada The Company is also developing various renewable energy technologies. 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 of $ 2,845,286 as at August 31, 2022 (2021 - $ 5,841 deficit). As at August 31, 2022 the Company has incurred cumulative losses of $ 12,694,988 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 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. 32 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. 33 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. c) Fair value of shares issued in non cash transactions The Company at times grants common shares in lieu of cash to certain vendors for their services to the Company. The Company recognizes the associated cost in the same period and manner as if the Company paid cash for the services provided by calculating the fair value of the share offering at the cost of the service provided. 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". 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 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. 34 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, 2022 and 2021. 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 institutions. 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. 35 4. MARKETABLE SECURITIES On May 4, 2022 ("Closing Date"), the Company announced the sale of its Clayton Valley unpatented mining claims to Cypress Development Corporation ("Cypress") and as a result of this transaction received 3,000,000 shares of Cypress along with $ 1,100,000 in cash. The 3,000,000 shares have been restricted for trade: the Company may trade 1,000,000 of these shares six months and one day after the Closing Date and thereafter may trade 1,000,000 shares in each three-month period following the Closing Date. Given the lock up conditions, the Company believes that there is a Lack of Marketability ("LOM") related to these shares and thus recorded the shares using a discounting factor. The discounting factor was also used in fair valuing the shares as at the year end date of August 31, 2022. Marketable securities as at August 31, 2022 consist of the Company's investment in 3,000,000 shares of Cypress. As at August 31, 2022, the movement in the Company's marketable securities is as follows: Balance, August 31, 2020 $ 24,354 Additions 17,705 Proceeds from disposals ( 21,385 ) Unrealized loss ( 5,680 ) Balance, August 31, 2021 $ 14,994 Additions 1 3,432,382 Unrealized loss ( 923,533 ) Unrealized foreign exchange loss ( 62,388 ) Proceeds from disposal ( 10,064 ) Loss on disposal ( 7,641 ) Balance, August 31, 2022 $ 2,443,750 1 Company recorded the 3,000,000 shares received from Cypress on May 4, 2022 as an investment and valued the investment using the closing rate of CAD 1.63 per share and a discount rate of 10 % due to LOM. The shares were subsequently revalued as at the year end date of August 31, 2022 using the closing rate of CAD 1.20 per share and a discount rate of 11 %, with the resulting changes in fair value being recorded as part of other profit or loss. 5. MINERAL PROPERTY Clayton Valley During the year ended August 31, 2017 the Company staked lode and placer claims on Bureau of Land Management 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. 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. On May 4, 2022, the Company closed the Clayton Valley property sale and disposed of the unpatented mining claims for consideration consisting of $ 1,100,000 in cash and 3,000,000 shares of Cypress Development Corp (Note 4). The royalty liabilities from the project were transferred to Cypress Development Corp. West Tonopah On February 25, 2022, the Company staked 1,760 acres of unpatented mineral claims in Esmeralda County, Nevada for cash consideration of $ 10,500 . 36 6. TECHNOLOGY DEVELOPMENT 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 provisional patent #3, known as Enertopia Rainmaker TM . On December 6, 2021, The Company entered into a Definitive Purchase and Sale Agreement to acquire 100 % ownership and rights to the hydrogen technology (“Hydrogen Technology”). By acquiring this Hydrogen Technology, the Company is currently researching the opportunity to create process gas that can be used in commercial, industrial and mining applications by splitting the hydrogen from water via electrolysis. The Company paid $ 25,000 in cash and issued 1,000,000 shares in consideration for acquiring the Hydrogen Technology, with an additional 1,000,000 common shares issued and held in escrow pending successful patenting of the intellectual property. The Company has recorded the consideration for the purchase of the Hydrogen Technology as research and development expense in the statement of operations for the year ended August 31, 2022, as follows: Consideration for Purchase of Hydrogen Technology Amount $ 2,000,000 shares at FV 0.0502 (Adjusted closing price on the date of the issuance) 100,400 Cash Payment 25,000 Total 125,400 The technology is still in research and development phase and is not commercially feasible as at the year end date of August 31, 2022. The Company has incurred $ 168,016 as research and development costs for the hydrogen technology, in addition to the $ 125,400 acquisition related costs for the year ended August 31, 2022. 7. BATTERY MANAGEMENT TECHNOLOGY ("BMT") On December 17, 2021, The Company entered into a Definitive Purchase and Sale Agreement to acquire 100 % ownership and rights to their Provisional Patent Pending BMT. The Company created a Joint Venture ("JV") with 51 % controlling interest in CapNTrack to run the commercial and industrial operations related to the BMT and has paid $ 30,000 in cash and issued 10,000,000 shares ( 5,000,000 shares of which are in escrow) valued at $ 450,000 for purchase of the BMT. As at the year ended date of August 31, 2022, there have been no operations in the JV and it is a dormant entity. The BMT is still in research and development phase and has not obtained commercial or operational feasibility as at the year end date of August 31, 2022. The Company has recorded the entire consideration of $ 480,000 for the ownership of the BMT as research and development expense in the statement of operations for the year ended August 31, 2022. 8. RELATED PARTY TRANSACTIONS For the year ended August 31, 2022, the Company was party to the following related party transactions with key management personnel, which consists of the President and Chief Financial Officer of the Company and its Directors: Incurred $ 38,000 (2021 - $ 0 ) to the President of the Company in consulting fees. As at August 31, 2022, the accounts payable to the President of the Company was $ 64,409 (2021: $ 111,659 ). On December 6, 2021 the Company issued 250,000 stock options valued at $ 12,205 to the President of the Company (Note 10). Incurred $ 769 (2021 - $ 0 ) to the Chief Financial Officer of the Company in consulting fees. As at August 31, 2022, the accounts payable to the Chief Financial Officer of the Company was $ 0 (2021: $ 0 ). ). On August 18, 2022, the Company issued 1,000,000 stock options valued at $ 40,543 to the Chief Financial Officer of the Company (Note 10). On August 18, 2022 the Company issued a total of 1,000,000 stock options valued at $ 40,543 to the Directors of the Company. On December 6, 2021, the Company issued a total of 250,000 stock options valued at $ 12,205 to the president of the Company. 37 The related party transactions are recorded at the exchange amount established and agreed to between the related parties. 9. 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 10). During the year ended August 31, 2022 the Company issued 113,388 common shares as a result of the exercise of stock options and 2,791,000 common shares as a result of the exercise of warrants (Note 10). On December 6, 2021 the Company issued 1,000,000 common shares and an additional 1,000,000 common shares in escrow in connection with the purchase of Hydrogen Technology (Note 6). On December 17, 2021 the Company issued 5,000,000 common shares and an additional 5,000,000 common shares in escrow in connection with the purchase of JV (Note 7). On February 25, 2022, the Company issued 1,000,000 shares to one consultant of the Company. As at August 31, 2022 the Company had 155,116,088 shares issued and outstanding (2021 - 139,211,700 ). As at August 31, 2022 the Company had 7,000,000 (2021 - 1,000,000 ) shares held in escrow. 10. 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. 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. The aggregate number of Common Shares that may be reserved, allotted and issued pursuant to Options shall not exceed 17,400,000 shares of common stock, less the aggregate number of shares of common stock then reserved for issuance pursuant to any other share compensation arrangement. For greater certainty, if an Option is surrendered, terminated or expires without being exercised, the Common Shares reserved for issuance pursuant to such Option shall be available for new Options granted under this Plan. The options are deemed as vested and exercisable on issuance and the maximum life of the options granted under this Plan may not exceed 5 years. On November 12, 2020, the Company issued 500,000 stock options to one of the consultants of the Company with an exercise price of $ 0.05 vested immediately, expiring November 12, 2025 . On December 14, 2020, the Company issued 2,100,000 stock options to consultants and officers of the Company with an exercise price of $ 0.05 vested immediately, expiring December 14, 2025 . On January 28, 2021, the Company issued 2,000,000 stock options to one of the consultants of the Company with an exercise price of $ 0.14 vested immediately, expiring January 28, 2026 . On February 4, 2021, the Company issued 100,000 stock options to one of the consultants of the Company with an exercise price of $ 0.18 vested immediately, expiring February 4, 2026 . On February 5, 2021, the Company issued 300,000 stock options to three of the consultants of the Company with an exercise price of $ 0.18 vested immediately, expiring February 5, 2026 . On April 27, 2021, the Company issued 100,000 stock options to one of the consultants of the Company with an exercise price of $ 0.12 vested immediately, expiring April 27, 2026 . On May 28, 2021, the Company issued 50,000 stock options to one of the consultants of the Company with an exercise price of $ 0.12 vested immediately, expiring May 28, 2026 . On August 18, 2022, the Company issued 2,000,000 stock options with an exercise price of $ 0.06 vesting immediately, expiring August 18, 2027 . 1,000,000 to the Chief Financial Officer and 500,000 each to two Directors of the Company (Note 8). O n December 6, 2021, the Company issued 250,000 stock options to the president of the Company with an exercise price of $ 0.07 vested immediately, expiring December 6, 2026 . On December 6, 2021, the Company issued 500,000 stock options to one of the consultants of the Company with an exercise price of $ 0.07 vested immediately, expiring December 6, 2026 . On December 6, 2021, the Company issued 250,000 stock options to one of the consultants of the Company with an exercise price of $ 0.07 vested immediately, expiring December 6, 2026 . On September 9, 2021, the Company issued 500,000 stock options to one of the consultants of the Company with an exercise price of $ 0.08 vested immediately, expiring September 9, 2026 . The fair value of the options granted during the year ended August 31, 2022 and 2021 was estimated on the date of the grant using the Black-Scholes options pricing model, with the following weighted average assumptions: 2022 2021 Expected dividend yield 0.00 % 0.00 % Expected stock volatility 202 % 98 % Risk-free interest rate 2.26 % 0.41 % Expected life of options (years) 5.00 5.00 Expected forfeiture rate 0.00 % 0.00 % Grant date fair value per option $ 0.05 $ 0.06 During the year ended August 31, 2022, the Company recorded $ 163,130 (August 31, 2021 $ 297,691 ) as stock-based compensation expense. In addition, the Company issued 113,388 (August 31, 2021: 3,293,224 ) common shares of the Company as a result of exercise of 226,776 cashless stock options and a total of 3,450,000 stock options expired without being exercised (August 31, 2021: 1,100,000 ). 38 A summary of the changes in stock options is presented below: Options Outstanding Weighted Average Number of Shares Exercise Price 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 ) 0.04 Balance, August 31, 2021 10,076,776 $ 0.08 Issued 3,500,000 0.07 Expired ( 3,450,000 ) 0.07 Exercised ( 226,776 ) 0.04 Balance, August 31, 2022 9,900,000 $ 0.08 The Company has the following options outstanding and exercisable as at August 31, 2022: Issue Date Expiry Date Exercise Price Number of Options Remaining Life October 27, 2017 October 27, 2022 0.05 800,000 0.16 years May 11, 2018 May 11, 2023 0.06 500,000 0.69 years May 22, 2018 May 22, 2023 0.07 450,000 0.72 years December 14, 2020 December 14, 2025 0.05 2,100,000 3.29 years January 28, 2021 January 28, 2026 0.14 2,000,000 3.41 years February 4, 2021 February 4, 2026 0.18 100,000 3.43 years February 5, 2021 February 5, 2026 0.18 300,000 3.44 years April 27, 2021 April 27, 2026 0.12 100,000 3.66 years May 28, 2021 May 28, 2026 0.12 50,000 3.74 years September 01, 2021 September 01, 2026 0.08 500,000 4.01 years December 06, 2021 December 06, 2026 0.07 1,000,000 4.27 years August 18, 2022 August 18, 2027 0.06 2,000,000 4.97 years Balance outstanding and exercisable 0.08 9,900,000 3.30 years *As at August 31, 2022 the market price of the Company's common shares was $ 0.048 per share. The intrinsic value of the stock options was $ 0 . 39 Warrants There were no warrants issued during the year ended August 31, 2022. During the year ended August 31, 2021, the Company issued 1,500,000 warrants attached to units in private placements. A summary of warrants as at August 31, 2022 and August 31, 2021 is as follows: Weighted Average Number of warrants Exercise Price 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 Forfeited ( 1,952,500 ) 0.08 Exercised ( 2,791,000 ) 0.05 Balance, August 31, 2022 4,973,369 $ 0.04 The Company has the following warrants outstanding as at August 31, 2022: Issue Date Expiry Date Exercise Price Number of Warrants * March 27, 2019 March 27, 2023 0.04 4,973,369 0.04 4,973,369 *Each warrant entitles a holder to purchase one common share. 11. COMMITMENTS The Company has a consulting agreement with the President of the Company for corporate administration and consulting services for $ 9,500 per month plus goods and services tax ("GST") on a continuing basis. The Company has a consulting agreement with the CFO of the Company for corporate administration and consulting services for $ 5,000 per quarter plus goods and services tax ("GST") on a continuing basis. 40 The Company has a rental agreement for a corporate office for CAD$ 1,100 per month plus GST. The agreement expires December 31, 2022. 12. 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, 2022 and 2021: August 31, 2022 August 31, 2021 Income (loss) before taxes $ 1,974,407 $ ( 389,368 ) Statutory tax rate 21.0 % 21.0 % Expected income tax expense (recovery) 414,625 ( 81,767 ) Non-deductible items 34,257 62,515 Change in enacted rates and other ( 26,649 ) 3,952 Change in valuation allowance ( 422,234 ) 15,300 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, 2022 and 2021 are comprised of the following: August 31, 2022 August 31, 2021 Net operating loss carry forwards $ 2,154,456 $ 2,795,131 Marketable securities 207,613 2,549 Mineral property 64,364 50,987 Capital loss carry forwards 4,526 4,526 2,430,960 2,853,193 Valuation allowance 2,430,960 2,853,193 Deferred tax assets (liabilities) $ - $ - The Company has net operating loss carry forwards of approximately $ 10,259,316 (2021 - $ 14,266,681 ) a portion of which may be carried forward up to 20 years 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. The expiry of the Company’s non-capital tax loss carryforwards are as follows: Expiry Year Amount 2030 $ 1,057,783 2031 - 2032 611,284 2033 379,241 2034 4,641,005 2035 1,207,633 2036 525,587 2037 801,509 2038 650,398 2039 343 2040 - 2041 384,533 Balance – August 31, 2022 $ 10,259,316 41 13. SEGMENTED INFORMATION The Company’s operations involve the development of natural resources and green technologies. The Company is centrally managed and its chief operating decision maker, being the CEO, uses the consolidated and other financial information to make operational decisions and to assess the performance of the Company. The Company has increased its reportable segments from one to three during the year ended August 31, 2022. The decision for this change was made keeping in mind the Company’s strategic direction and the need to better report the results for each of the identified three reportable segments: Natural Resources, Technology and Corporate, none of which are revenue generating as at the year ended date of August 31, 2022. Long term Assets Amount United States of America $ 10,500 Balance – August 31, 2022 $ 10,500 August 31, 2022 Natural Resources Technology Corporate Total Operating expenses $ ( 212,348 ) $ ( 808,800 ) $ ( 545,087 ) $ 1,566,235 Other income (expenses) (Note 4, 5, 6) 4,532,382 - ( 991,740 ) 3,540,642 Segment income (loss) $ 4,320,034 $ ( 808,800 ) $ ( 1,536,827 ) $ 1,974,407 Total Assets (Note 4, 5) $ 10,500 $ - $ 3,203,141 $ 3,213,641 42 14. SUBSEQUENT EVENTS Management has evaluated subsequent events through the date these financial statements were issued. Based on our evaluation the are no material events have occurred that require disclosure. 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.