Base Carbon : Audited Annual Financial Statements, February 3, 2021 to December 31, 2021

Base Carbon Inc.

(formerly 1287411 B.C. LTD.)

FINANCIAL STATEMENTS

FOR THE PERIOD FROM THE DATE OF INCORPORATION

ON FEBRUARY 3, 2021 TO DECEMBER 31, 2021

(Expressed in Canadian Dollars)

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Base Carbon Inc. (formerly 1287411 B.C. Ltd.):

Opinion

We have audited the financial statements Base Carbon Inc. (formerly 1287411 B.C. Ltd.) (the "Company"), which comprise the statement of financial position as at December 31, 2021 and the statement of loss and comprehensive loss, statement of changes in shareholders' deficit and statement of cash flows for the period from the date of incorporation on February 3, 2021 to December 31, 2021, 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 December 31, 2021, and its financial performance and its cash flows for the period from the date of incorporation on February 3, 2021 to December 31, 2021, 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 Auditor's 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 1 in the financial statements, which describes the events and conditions indicating that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis filed with the relevant Canadian securities commissions.

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 and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's 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 the 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.

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. Page 2 of 15

Auditor's 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 auditor's 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 judgment 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 auditor's 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 auditor's 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 auditor's report is John C. Sinclair.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

March 31, 2022

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

STATEMENT OF FINANCIAL POSITION

As at December 31, 2021

(Expressed in Canadian Dollars)

			December
	Note		31, 2021
ASSETS
Current assets
Cash		$	9,970
Share subscription receivable	4		250
Due from a related party	3, 4		75
Total assets		$	10,295
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities		$	62,394
			62,394
SHAREHOLDERS' DEFICIT
Share capital	4		10,625
Deficit			(62,724)
			(52,099)
Total liabilities and shareholders' deficit		$	10,295

Nature of operations and going concern (Note 1)
Approved and authorized on behalf of the Board of Directors:
Director	Michael Costa (signed)	Director	Andrew Fedak (signed)

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

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

STATEMENT OF LOSS AND COMPREHENSIVE LOSS

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

			From February 3, 2021
			(date of incorporation)
	Note		to December 31, 2021
EXPENSES
Accounting and corporate secretarial fees		$	2,500
General and administrative			3,372
Professional fees			54,194
Regulatory and filing fees			2,658
NET LOSS AND COMPREHENSIVE LOSS FOR THE
PERIOD		$	(62,724)
NET LOSS PER SHARE - BASIC AND DILUTED		$	(0.13)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING	4		494,554

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

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

	Number of	Share
	Shares	Capital	Deficit	Total
	#	$	$	$
Balance at incorporation on February 3, 2021	-	-	-	-
Issued under plan of arrangement	556,100	300	-	300
Shares issued	185,367	325	-	325
Options exercised	18,537	10,000	-	10,000
Net loss and comprehensive loss for the period	-	-	(62,724)	(62,724)
Balance, December 31, 2021	760,004	10,625	(62,724)	(52,099)

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

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

STATEMENT OF CASH FLOWS

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

		For the period from
		February 3, 2021 (date of
		incorporation) to December
		31, 2021
Operating activities:
Net loss for the period	$	(62,724)
Changes in non-cash working capital:
Accounts payable and accrued liabilities		62,394
Net cash used in operating activities		(330)
Financing activities:
Proceeds from options exercised		10,000
Proceeds from issuance of shares		300
Net cash from financing activities		10,300
Change in cash during the period		9,970
Cash - beginning of the period		-
Cash - end of the period	$	9,970

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

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

Base Carbon Inc. (formerly 1287411 B.C. Ltd.), (the "Company") was incorporated under the Business Corporations Act of British Columbia on February 3, 2021. The Company is engaged in the exploration and development of mineral properties in Canada. The Company's head office is located at 1200 Waterfront Centre, 200 Burrard Street, Vancouver, BC, V6C 3L6.

Plan of arrangement

On April 21, 2021, 1289625 B.C. Ltd. ("625 BC") completed the plan of arrangement whereby 625 BC spun off each of its subsidiaries including the Company.

Under the statutory plan of arrangement ("Plan of Arrangement"), each 625 BC Shareholder received 18,537 common shares (pre-consolidation - 100,000 common shares) in exchange for each existing common share of 625 BC (the "Distributed Securities"). This resulted in total shares issued under the plan of arrangement of 556,100.

As a result of completing the Plan of Arrangement, the Company became a separate reporting issuer and 625 BC holds no interest in the Company.

Going concern

These financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At December 31, 2021, the Company had accumulated a loss of $62,724 since its inception. The continuation of the Company is dependent upon obtaining necessary financing to meet its ongoing operational levels of corporate overhead.

In addition, the Company began operations after the World Health Organization categorized COVID-19 as a pandemic. Financial markets around the world have been extremely volatile due to events and conditions resulting from this pandemic and as a result, the volatility could also impact the Company's ability to continue its operations as a going concern.

These events and conditions indicate material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern and, therefore, that it may be unable to discharge its liabilities in the normal course of business. Additional funds will be required to enable the Company to continue its operations and there can be no assurance that financing will be available on terms which are acceptable to the Company. These financial statements do not give effect to any adjustments to the amounts and classifications of assets and liabilities which might be necessary should the Company be unable to continue its operations as a going concern.

Reverse take over

Subsequent to December 31, 2021, the Company completed a reverse takeover transaction with Base Carbon Corp. ("Base Carbon"). See note 7 for details of the transaction. As part of the transaction the Company changed its name to Base Carbon Inc. and completed a share consolidation.

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES

1. Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and related IFRS Interpretations Committee ("IFRIC's") as issued by the International Accounting Standards Board ("IASB"). These financial statements were approved by the board of directors for issue on March 31, 2022.

1. Basis of presentation

These financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. In addition, these financial statements are prepared using the accrual basis of accounting, aside from cash flow information.

1. Foreign currencies

These financial statements are presented in Canadian dollars, which is also the functional currency of the Company. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All gains and losses on translation of these foreign currency transactions are charged to profit or loss.

1. Financial instruments

Recognition and classification

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument.

The Company classifies its financial instruments in the following categories: at fair value through profit or loss ("FVTPL"), at fair value through other comprehensive income ("FVTOCI") or at amortized cost. The Company determines the classification of financial instruments at initial recognition. The classification of financial instruments is driven by the Company's business model for managing the related financial assets and liabilities and their contractual cash flow characteristics.

Equity investments that are held for trading are classified as FVTPL. For other equity investments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at

FVTPL.

Measurement

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in profit or loss in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company's own credit risk will be recognized in other comprehensive income

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Base Carbon Inc. (formerly 1287411 B.C. LTD.)

NOTES TO THE FINANCIAL STATEMENTS

For the period from the date of incorporation on February 3, 2021 to December 31, 2021 (Expressed in Canadian Dollars)

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the credit risk on financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in profit or loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets, is recognized in profit or loss.

1. Share capital

Equity instruments are contracts that give a residual interest in the net assets of the Company. The Company's common shares and options are classified as equity instruments.

Costs directly identifiable with the raising of share capital financing are charged against share capital. Share issuance costs incurred in advance of share subscriptions are recorded as deferred assets. Share issuance costs related to uncompleted share subscriptions are charged to operations.

1. Loss per share

Basic loss per share represents the loss for the period, divided by the weighted average number of common shares outstanding during the period. Diluted loss per share represents the loss for the period, divided by the weighted average number of common shares outstanding during the period plus the weighted average number of dilutive shares resulting from the exercise of stock options, warrants and other similar instruments where the inclusion of these would not be anti-dilutive.

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